☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number: 000-28837
NEW JERSEY MINING COMPANY
(Exact name of registrant as specified in its charter)
| | | | | | For the quarterly period ended June 30, 2022 | OR | ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | | | For the transition period from _____________ to ____________ |
Commission File No. 000-28837 IDAHO STRATEGIC RESOURCES, INC | (Name of small business issuer in its charter) |
Idaho | | 82-0490295 | (State or other jurisdiction of incorporation or organization) | | (I.R.S. employer identification No.) | (I.R.S. employer identification No.)
|
201 N. Third Street, Coeur d’Alene, ID 83814 (Address of principal executive offices) (zip code)
(208) 625-9001 Registrant’s telephone number, including area code
Indicate by check markSecurities registered pursuant to Section 12(g) of the Act:
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | Common Stock, $0.00 par value | IDR | NYSE American |
Check whether the registrantissuer (1) has filed all reports required to be filed by Section 13 or 15(D)15(d) of the Securities Exchange Act of 1934 during the precedingpast 12 months (or for such shorter period asthat the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐ Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “small“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.Act:
| | Large Accelerated Filer. | ☐ | Accelerated Filer. | ☐ | Non-AcceleratedNon-accelerated Filer.
| Smaller reporting company X .☒
| Small Reporting Company | ☒ | Emerging growth company ___
| | Emerging Growth Company | ☐ |
IndicateIndicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒
Yes [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
On November
At August 1, 2017, 111,477,0372022, 11,985,747 shares of the registrant’s common stock were outstanding.
NEW JERSEY MINING COMPANYIDAHO STRATEGIC RESOURCES, INC
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBERJUNE 30, 20172022
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PART I-FINANCIAL INFORMATION
3
ItemITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
3
Idaho Strategic Resources, Inc Consolidated Balance Sheets (Unaudited) | | | | June 30, 2022 | | | December 31, 2021 | | ASSETS | | | | | | | Current assets: | | | | | | | Cash and cash equivalents | | $ | 3,133,623 | | | $ | 1,976,518 | | Gold sales receivable | | | 734,594 | | | | 408,187 | | Inventories | | | 646,302 | | | | 213,722 | | Joint venture receivable | | | 2,909 | | | | 4,442 | | Other current assets | | | 561,694 | | | | 334,443 | | Total current assets | | | 5,079,122 | | | | 2,937,312 | | | | | | | | | | | Property, plant and equipment, net of accumulated depreciation | | | 8,553,696 | | | | 8,255,961 | | Mineral properties, net of accumulated amortization | | | 6,319,404 | | | | 5,843,186 | | Investment in Buckskin | | | 333,399 | | | | 332,728 | | Investment in joint venture | | | 435,000 | | | | 435,000 | | Reclamation bond | | | 321,120 | | | | 103,320 | | Deposits | | | 140,222 | | | | 11,694 | | Total assets | | $ | 21,181,963 | | | $ | 17,919,201 | | | | | | | | | | | LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | Current liabilities: | | | | | | | | | Accounts payable and accrued expenses | | $ | 713,517 | | | $ | 647,218 | | Accrued payroll and related payroll expenses | | | 217,622 | | | | 174,110 | | Notes payable related parties, current portion | | | 11,376 | | | | 10,543 | | Notes payable, current portion | | | 743,589 | | | | 664,153 | | Small Business Administration loan, current portion | | | 1,813 | | | | 2,469 | | Total current liabilities | | | 1,687,917 | | | | 1,498,493 | | | | | | | | | | | Asset retirement obligation | | | 254,596 | | | | 172,348 | | Notes payable related parties, long term | | | 84,727 | | | | 106,068 | | Convertible debt | | | 0 | | | | 1,950,000 | | Notes payable, long term | | | 1,106,230 | | | | 961,748 | | Small Business Administration loan, long term | | | 160,393 | | | | 166,742 | | Total long-term liabilities | | | 1,605,946 | | | | 3,356,906 | | | | | | | | | | | Total liabilities | | | 3,293,863 | | | | 4,855,399 | | | | | | | | | | | Commitments (Note 11) | | | 0 | | | | 0 | | | | | | | | | | | Stockholders’ equity: | | | | | | | | | Preferred stock, no par value, 1,000,000 shares authorized; no shares issued or outstanding | | | 0 | | | | 0 | | Common stock, no par value, 200,000,000 shares authorized; June 30, 2022-11,985,747 and December 31, 2021- 10,940,969 shares issued and outstanding | | | 32,133,342 | | | | 26,004,756 | | Accumulated deficit | | | (17,107,155 | ) | | | (15,832,955 | ) | Total Idaho Strategic Resources, Inc stockholders’ equity | | | 15,026,187 | | | | 10,171,801 | | Non-controlling interest | | | 2,861,913 | | | | 2,892,001 | | Total stockholders' equity | | | 17,888,100 | | | | 13,063,802 | | | | | | | | | | | Total liabilities and stockholders’ equity | | $ | 21,181,963 | | | $ | 17,919,201 | |
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
14
Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
19
Item 4: CONTROLS AND PROCEDURES
19
PART II - OTHER INFORMATION
20
Item 1. LEGAL PROCEEDINGS
20
Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
20
Item 3. DEFAULTS UPON SENIOR SECURITIES
20
Item 4. MINE SAFETY DISCLOSURES
20
Item 5. OTHER INFORMATION
20
Item 6.EXHIBITS
20
PART I-FINANCIAL INFORMATION
Item 1: CONSOLIDATED FINANCIAL STATEMENTS
| | | | | New Jersey Mining Company Consolidated Balance Sheets September 30, 2017and December 31, 2016 | ASSETS | | | September 30, 2017 | | December 31, 2016 | | | (Unaudited) | | | Current assets: | | | | | Cash and cash equivalents | $ | 249,263 | $ | 154,833 | Milling receivables | | 16,950 | | 31,450 | Gold sales receivable | | 378,612 | | 54,319 | Concentrate inventory | | 193,452 | | 175,157 | Joint venture receivables | | 7,727 | | 2,888 | Note receivable | | | | 58,386 | Other current assets | | 86,593 | | 52,717 | Total current assets | | 932,597 | | 529,750 | | | | | | Property, plant and equipment, net of accumulated depreciation | | 5,854,845 | | 5,788,362 | Mineral properties, net of accumulated amortization | | 2,104,906 | | 2,046,900 | Investment in joint venture | | 435,000 | | 435,000 | Reclamation bond | | 103,320 | | 58,000 | Total assets | $ | 9,430,668 | $ | 8,858,012 | | | | | | LIABILITIES AND STOCKHOLDERS’ EQUITY | Current liabilities: | | | | | Accounts payable | $ | 313,452 | $ | 243,123 | Accrued payroll and related payroll expenses | | 36,728 | | 37,861 | Notes and interest payable related parties, current portion | | 207,760 | | 567,580 | Notes payable, current portion, net of discount | | 335,805 | | 623,185 | Forward gold contracts, current portion | | 649,411 | | 845,198 | Total current liabilities | | 1,543,156 | | 2,316,947 | | | | | | Asset retirement obligation | | 102,142 | | 72,218 | Notes and interest payable related parties, long term | | 697,985 | | 513,715 | Notes payable, long term | | 170,661 | | 268,158 | Forward gold contracts, long term | | 452,486 | | 541,030 | Total long term liabilities | | 1,423,274 | | 1,395,121 | | | | | | Total liabilities | | 2,966,430 | | 3,712,068 | | | | | | Commitments (Note 2) | | | | | | | | | | Stockholders’ equity: | | | | | Preferred stock, no par value, 1,000,000 shares authorized; no shares issued or outstanding | | - | | - | Common stock, no par value, 200,000,000 shares authorized; September 30, 2017-108,893,704 shares and December 31, 2016-97,193,704 shares issued and outstanding | | 15,549,941 | | 14,293,105 | Accumulated deficit | | (12,207,538) | | (12,289,473) | Total New Jersey Mining Company stockholders’ equity | | 3,342,403 | | 2,003,632 | Non-controlling interests | | 3,121,835 | | 3,142,312 | Total stockholders' equity | | 6,464,238 | | 5,145,944 | | | | | | Total liabilities and stockholders’ equity | $ | 9,430,668 | $ | 8,858,012 |
The accompanying notes are an integral part of these consolidated financial statements.
| | | | | | | | | | New Jersey Mining Company Consolidated Statements of Operations (Unaudited) For the Three and Nine Month Periods Ended September 30, 2017 and 2016 | | | September 30, 2017 | | September 30, 2016 | | | Three Months | | Nine Months | | Three Months | | Nine Months | Revenue: | | | | | | | | | Gold Sales | $ | 1,266,139 | | 3,218,147 | $ | 45,854 | $ | 123,518 | Milling income | | | | | | 6,500 | | 21,114 | Total revenue | | 1,266,139 | | 3,218,147 | | 52,354 | | 144,632 | | | | | | | | | | Costs and expenses: | | | | | | | | | Production | | 813,785 | | 2,118,138 | | 51,241 | | 146,428 | Pre-development expenses | | 59,769 | | 159,102 | | 199,821 | | 199,821 | Exploration | | 9,220 | | 45,200 | | 37,772 | | 112,829 | Depreciation and amortization | | 40,597 | | 100,588 | | | | 3,214 | Management | | 35,678 | | 128,317 | | 45,923 | | 102,074 | Accounting and legal services | | 33,232 | | 131,754 | | 32,776 | | 87,766 | General and administrative expenses | | 51,135 | | 192,616 | | 42,520 | | 98,285 | Total operating expenses | | 1,043,416 | | 2,875,715 | | 405,053 | | 750,417 | Operating income (loss) | | 222,723 | | 342,432 | | (352,699) | | (605,785) | Other (income) expense: | | | | | | | | | Royalties and other income | | | | | | | | (200) | Timber income | | | | | | (52,252) | | (52,252) | Timber expense | | | | 5,304 | | | | 428 | Interest income | | (7,745) | | (8,604) | | (1,483) | | (4,532) | Interest expense | | 16,070 | | 53,243 | | 20,760 | | 60,837 | Change in fair value of forward gold contracts | | 76,865 | | 218,461 | | 466,783 | | 466,783 | Amortization of discount on note payable | | 8,925 | | 35,200 | | 42,249 | | 67,157 | Total other expense | | 94,115 | | 303,604 | | 476,057 | | 538,221 | | | | | | | | | | Net income (loss) | | 128,608 | | 38,828 | | (828,756) | | (1,144,006) | Net income (loss) attributable to non-controlling interest | | (15,799) | | (43,107) | | 9,702 | | 23,311 | Net income (loss) attributable to New Jersey Mining Company | $ | 144,407 | $ | 81,935 | $ | (838,458) | $ | (1,167,317) | | | | | | | | | | Net income (loss) per common share-basic and diluted | $ | Nil | $ | Nil | $ | Nil | $ | Nil | Weighted average common shares outstanding-basic | | 108,893,704 | | 105,707,990 | | 94,855,670 | | 94,485,652 | Weighted average common shares outstanding-diluted | | 109,805,242 | | 106,461,364 | $ | 94,855,670 | | 94,485,652 |
Idaho Strategic Resources, Inc Consolidated Statements of Operations (Unaudited) For the Three and Six-Month Periods Ended | | | | June 30, 2022 | | | June 30, 2021 | | | | Three Months | | | Six Months | | | Three Months | | | Six Months | | | | | | | | | | | | | | | Revenue: | | | | | | | | | | | | | Sales of products | | $ | 2,358,492 | | | $ | 4,402,909 | | | $ | 2,180,232 | | | $ | 3,766,859 | | Total revenue | | | 2,358,492 | | | | 4,402,909 | | | | 2,180,232 | | | | 3,766,859 | | | | | | | | | | | | | | | | | | | Costs of Sales: | | | | | | | | | | | | | | | | | Cost of sales and other direct production costs | | | 2,109,129 | | | | 3,617,195 | | | | 1,622,606 | | | | 3,097,841 | | Depreciation and amortization | | | 241,906 | | | | 472,115 | | | | 195,377 | | | | 378,173 | | Total costs of sales | | | 2,351,035 | | | | 4,089,310 | | | | 1,817,983 | | | | 3,476,014 | | Gross profit | | | 7,457 | | | | 313,599 | | | | 362,249 | | | | 290,845 | | | | | | | | | | | | | | | | | | | Other operating expenses: | | | | | | | | | | | | | | | | | Exploration | | | 386,781 | | | | 782,905 | | | | 208,170 | | | | 925,877 | | Management | | | 53,484 | | | | 108,373 | | | | 55,331 | | | | 256,391 | | Professional services | | | 136,035 | | | | 216,018 | | | | 43,430 | | | | 166,081 | | General and administrative | | | 273,977 | | | | 475,289 | | | | 136,007 | | | | 649,842 | | Loss on disposal of equipment | | | 3,901 | | | | 3,901 | | | | 0 | | | | 0 | | Total other operating expenses | | | 854,178 | | | | 1,586,486 | | | | 442,938 | | | | 1,998,191 | | Operating loss | | | (846,721 | ) | | | (1,272,887 | ) | | | (80,689 | ) | | | (1,707,346 | ) | | | | | | | | | | | | | | | | | | Other (income) expense: | | | | | | | | | | | | | | | | | Equity income on investment in Buckskin | | | (339 | ) | | | (670 | ) | | | 0 | | | | 0 | | Timber revenue net of costs | | | 0 | | | | 0 | | | | (735 | ) | | | (4,338 | ) | Gain on forgiveness of SBA loan | | | (10,000 | ) | | | (10,000 | ) | | | 0 | | | | 0 | | Interest income | | | (31 | ) | | | (556 | ) | | | (32 | ) | | | (123 | ) | Interest expense | | | 15,898 | | | | 63,657 | | | | 60,846 | | | | 100,287 | | Total other expense | | | 5,528 | | | | 52,431 | | | | 60,079 | | | | 95,826 | | | | | | | | | | | | | | | | | | | Net loss | | | (852,249 | ) | | | (1,325,318 | ) | | | (140,768 | ) | | | (1,803,172 | ) | Net loss attributable to non-controlling interest | | | (33,651 | ) | | | (51,118 | ) | | | (31,580 | ) | | | (47,497 | ) | Net loss attributable to Idaho Strategic Resources, Inc | | $ | (818,598 | ) | | $ | (1,274,200 | ) | | $ | (109,188 | ) | | $ | (1,755,675 | ) | | | | | | | | | | | | | | | | | | Net loss per common share-basic and diluted | | $ | (0.07 | ) | | $ | (0.11 | ) | | $ | (0.01 | ) | | $ | (0.18 | ) | | | | | | | | | | | | | | | | | | Weighted average common shares outstanding-basic and diluted | | | 11,801,664 | | | | 11,496,352 | | | | 9,929,715 | | | | 9,881,835 | |
The accompanying notes are an integral part of these consolidated financial statements.
| | | | | | New Jersey Mining Company Consolidated Statements of Cash Flows (Unaudited) For the Nine Month Periods Ended September 30, 2017 and 2016 | | September 30, | | 2017 | 2016 | Cash flows from operating activities: | | | | | Net income (loss) | $ | 38,828 | $ | (1,144,006) | Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: | | | | | Depreciation and amortization | | 100,588 | | 3,214 | Amortization of discount on note payable | | 35,200 | | 67,157 | Accretion of asset retirement obligation | | 6,327 | | 3,968 | Stock based compensation | | 115,836 | | 55,815 | Change in fair value of forward gold contracts | | 218,461 | | 466,783 | Change in: | | | | | Milling receivables | | 14,500 | | (34,632) | Joint venture receivables | | (4,839) | | 2,794 | Gold sales receivables | | (324,293) | | | Concentrate inventory | | (18,295) | | | Timber receivables | | | | (4,977) | Other current assets | | (33,876) | | (16,250) | Accounts payable | | 70,329 | | 115,477 | Accrued payroll and related payroll expense | | (1,133) | | 16,462 | Interest payable related parties | | 14,152 | | 14,479 | Net cash provided (used) by operating activities | | 231,785 | | (453,716) | | | | | | Cash flows from investing activities: | | | | | Purchases of property, plant and equipment | | (89,458) | | (90,838) | Purchase of mineral property | | (14,522) | | (88,842) | Proceeds from option payment on property | | 15,000 | | 10,000 | Purchase of investment in joint venture | | | | (225,000) | Acquisition of GF&H, net of gain recognized as equity transaction | | | | 41,333 | Payment received on note receivable | | 58,386 | | | Purchase of reclamation bond | | (45,320) | | (58,000) | Net cash (used) by investing activities | | (75,914) | | (411,347) | | | | | | Cash flows from financing activities: | | | | | Sales of common stock and warrants, net of issuance costs | | 1,041,000 | | | Proceeds from forward gold contracts | | | | 1,240,306 | Borrowings on notes payable, related parties | | | | 475,000 | Payments on forward gold contracts in cash | | (270,755) | | | Gold purchased for payments on forward gold contracts | | (232,037) | | | Principal payments on notes payable | | (532,577) | | (402,838) | Principal payments on note payables, related parties | | (89,702) | | (28,422) | Contributions from non-controlling interest | | 22,630 | | 1,856 | Net cash provided (used) by financing activities | | (61,441) | | 1,285,902 | Net change in cash and cash equivalents | | 94,430 | | 420,839 | Cash and cash equivalents, beginning of period | | 154,833 | | 62,275 | Cash and cash equivalents, end of period | $ | 249,263 | $ | 483,114 | | | | | | Non-cash investing and financing activities | | | | | Shares of common stock and warrants issued for payment of note and interest payable, related party | $ | 100,000 | | | Shares of common stock issued for investment in joint venture | | | $ | 210,000 | Shares of common stock issued for acquisition of GF&H | | | $ | 26,364 | Note payable for equipment purchase | $ | 112,500 | | |
Idaho Strategic Resources, Inc Consolidated Statement of Changes in Stockholders' Equity (Unaudited) For the Three and Six-Month Periods Ended June 30, 2022 and 2021 | | | | Common Stock Shares | | | Common Stock Amount | | | Accumulated Deficit Attributable to Idaho Strategic Resources, Inc | | | Non-Controlling Interest | | | Stockholders’ Equity | | | | | | | | | | | | | | | | | | Balance January 1, 2021 | | | 9,826,665 | | | $ | 20,986,062 | | | $ | (12,672,786 | ) | | $ | 2,950,888 | | | $ | 11,264,164 | | Contribution from non-controlling interest in Mill JV | | | - | | | | 0 | | | | 0 | | | | 2,469 | | | | 2,469 | | Issuance of common stock for services | | | 714 | | | | 2,300 | | | | 0 | | | | 0 | | | | 2,300 | | Options issued to management, directors, and employees | | | - | | | | 604,571 | | | | 0 | | | | 0 | | | | 604,571 | | Options issued for services | | | - | | | | 9,860 | | | | 0 | | | | 0 | | | | 9,860 | | Issuance of common stock for cashless option exercise | | | 28,196 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Net loss | | | - | | | | 0 | | | | (1,646,487 | ) | | | (15,917 | ) | | | (1,662,404 | ) | Balance March 31, 2021 | | | 9,855,575 | | | $ | 21,602,793 | | | $ | (14,319,273 | ) | | $ | 2,937,440 | | | $ | 10,220,960 | | | | | | | | | | | | | | | | | | | | | | | Contribution from non-controlling interest in Mill JV | | | - | | | $ | 0 | | | $ | 0 | | | $ | 17,459 | | | $ | 17,459 | | Issuance of common stock for services | | | 1,071 | | | | 4,200 | | | | 0 | | | | 0 | | | | 4,200 | | Issuance of common stock for warrants exercised | | | 19,841 | | | | 50,000 | | | | 0 | | | | 0 | | | | 50,000 | | Issuance of common stock for cashless option exercise | | | 3,571 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Conversion of convertible debt to common stock | | | 291,667 | | | | 735,000 | | | | 0 | | | | 0 | | | | 735,000 | | Net loss | | | - | | | | 0 | | | | (109,188 | ) | | | (31,580 | ) | | | (140,768 | ) | Balance June 30, 2021 | | | 10,171,725 | | | $ | 22,391,993 | | | $ | (14,428,461 | ) | | $ | 2,923,319 | | | $ | 10,886,851 | | | | | | | | | | | | | | | | | | | | | | | Balance January 1, 2022 | | | 10,940,969 | | | $ | 26,004,756 | | | $ | (15,832,955 | ) | | $ | 2,892,001 | | | $ | 13,063,802 | | Contribution from non-controlling interest in Mill JV | | | - | | | | 0 | | | | 0 | | | | 2,828 | | | | 2,828 | | Issuance of common stock for cash, net of offering costs | | | 360,134 | | | | 2,701,000 | | | | 0 | | | | 0 | | | | 2,701,000 | | Issuance of common stock for services | | | 3,572 | | | | 32,326 | | | | 0 | | | | 0 | | | | 32,326 | | Issuance of common stock for warrants exercised | | | 23,057 | | | | 68,006 | | | | 0 | | | | 0 | | | | 68,006 | | Issuance of common stock for cashless option exercise | | | 28,981 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Conversion of convertible debt to common stock | | | 392,866 | | | | 1,950,000 | | | | 0 | | | | 0 | | | | 1,950,000 | | Net loss | | | - | | | | 0 | | | | (455,602 | ) | | | (17,467 | ) | | | (473,069 | ) | Balance March 31, 2022 | | | 11,749,579 | | | $ | 30,756,088 | | | $ | (16,288,557 | ) | | $ | 2,877,362 | | | $ | 17,344,893 | | | | | | | | | | | | | | | | | | | | | | | Contribution from non-controlling interest in Mill JV | | | - | | | $ | 0 | | | $ | 0 | | | $ | 18,202 | | | $ | 18,202 | | Issuance of common stock for cash, net of offering costs | | | 138,665 | | | | 980,107 | | | | 0 | | | | 0 | | | | 980,107 | | Issuance of common stock for warrants exercised | | | 70,919 | | | | 397,147 | | | | 0 | | | | 0 | | | | 397,147 | | Issuance of common stock for cashless option exercise | | | 26,584 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Net loss | | | - | | | | 0 | | | | (818,598 | ) | | | (33,651 | ) | | | (852,249 | ) | Balance June 30, 2022 | | | 11,985,747 | | | $ | 32,133,342 | | | $ | (17,107,155 | ) | | $ | 2,861,913 | | | $ | 17,888,100 | |
The accompanying notes are an integral part of these consolidated financial statements.
Idaho Strategic Resources, Inc Consolidated Statements of Cash Flows (Unaudited) For the Six-Month Periods Ended June 30, 2022 and 2021 | | | | June 30, | | | | 2022 | | | 2021 | | Cash flows from operating activities: | | | | | | | Net loss | | $ | (1,325,318 | ) | | $ | (1,803,172 | ) | Adjustments to reconcile net loss to net cash used by operating activities: | | | | | | | | | Depreciation and amortization | | | 472,115 | | | | 378,173 | | Loss on disposal of equipment | | | 3,901 | | | | 0 | | Accretion of asset retirement obligation | | | 5,069 | | | | 5,035 | | Stock based compensation | | | - | | | | 614,431 | | Issuance of common stock for services | | | 32,326 | | | | 6,500 | | Gain on forgiveness of SBA loan | | | (10,000 | ) | | | 0 | | Equity income on investment in Buckskin | | | (671 | ) | | | 0 | | Change in operating assets and liabilities: | | | | | | | | | Gold sales receivable | | | (326,407 | ) | | | 1,194 | | Inventories | | | (432,580 | ) | | | 108,896 | | Joint venture receivable | | | 1,533 | | | | 1,712 | | Other current assets | | | (227,251 | ) | | | (35,042 | ) | Accounts payable and accrued expenses | | | 69,295 | | | | (49,864 | ) | Accrued payroll and related payroll expenses | | | 43,512 | | | | 9,555 | | Net cash used by operating activities | | | (1,694,476 | ) | | | (762,582 | ) | | | | | | | | | | Cash flows from investing activities: | | | | | | | | | Purchases of property, plant, and equipment | | | (229,763 | ) | | | (249,328 | ) | Deposits on equipment | | | (32,528 | ) | | | (21,829 | ) | Purchase of reclamation bonds | | | (217,800 | ) | | | 0 | | Additions to mineral property | | | (408,913 | ) | | | (2,063,742 | ) | Net cash used by investing activities | | | (889,004 | ) | | | (2,334,899 | ) | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | Proceeds from sale of common stock and warrants net of issuance cost | | | 3,681,107 | | | | 0 | | Proceeds from exercise of common stock warrants | | | 465,153 | | | | 50,000 | | Principal payments on notes payable | | | (406,197 | ) | | | (249,449 | ) | Principal payments on notes payable, related parties | | | (20,508 | ) | | | (18,262 | ) | Issuance of convertible debt | | | - | | | | 1,750,000 | | Contributions from non-controlling interest | | | 21,030 | | | | 19,928 | | Net cash provided by financing activities | | | 3,740,585 | | | | 1,552,217 | | | | | | | | | | | Net change in cash and cash equivalents | | | 1,157,105 | | | | (1,545,264 | ) | Cash and cash equivalents, beginning of period | | | 1,976,518 | | | | 2,539,945 | | Cash and cash equivalents, end of period | | $ | 3,133,623 | | | $ | 994,681 | | | | | | | | | | | Non-cash investing and financing activities: | | | | | | | | | | | | | | | | | | Deposit on equipment applied to purchase | | $ | 96,000 | | | | 0 | | Notes payable for equipment and land purchase | | $ | 630,115 | | | $ | 1,130,143 | | Conversion of convertible debt to common stock | | $ | 1,950,000 | | | $ | 735,000 | |
The accompanying notes are an integral part of these consolidated financial statements.
5
New Jersey Mining CompanyIdaho Strategic Resources, Inc
Notes to Consolidated Financial Statements (Unaudited)
1. The Company and Significant Accounting Policies:Policies
These unaudited interim consolidated financial statements have been prepared by the management of New Jersey Mining CompanyIdaho Strategic Resources, Inc (IDR) (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentationstatement of the interim consolidated financial statements have been included.
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of the Company's financial position and results of operations. Operating results for the threethree- and nine monthsix-month periods ended SeptemberJune 30, 20172022, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2017.2022.
On December 6, 2021, New Jersey Mining Company changed its name to Idaho Strategic Resources Inc. and also finalized a 1 for 14 reverse stock split of its common stock as previously approved by shareholders at a Special Meeting of the Shareholders held on October 6, 2021. On the date of the reverse stock split, every fourteen (14) shares of New Jersey Mining Company were automatically converted into one issued and outstanding share of Idaho Strategic Resources, Inc. common stock without any change in the par value per share. For further information refer to the financial statements and footnotes thereto in the Company’s audited consolidated financial statements for the year ended December 31, 20162021, as filed with the Securities and Exchange Commission.
Principles of Consolidation At September 30, 2017 and December 31, 2016, the
The consolidated balance sheet includesfinancial statements include the accounts of the Company and its majority-owned subsidiary, the New Jersey Mill Joint Venture (“NJMJV”). The consolidated statements of operations and cash flows for the period ended September 30, 2017 includes the same companies.
Intercompany accounts and transactions are eliminated. The portion of entities owned by other investors is presented as non-controlling interests on the consolidated balance sheets and statements of operations.
Revenue Recognition Gold Revenue Recognition and Receivables-Sales of gold sold directly to customers are recorded as revenues and receivables upon completion of the performance obligations and transfer of control of the product to the customer. For concentrate sales, the performance obligation is met, the transaction price can be reasonably estimated, and revenue is recognized generally at the time of shipment at estimated forward prices for the anticipated month of settlement. Due to the time elapsed from shipment to the customer and the final settlement with the customer, prices at which sales of our concentrates will be settled are estimated. Previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement by the customer. For sales of doré and metals from doré, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of control of the agreed-upon metal quantities to the customer by the refiner. Sales and accounts receivable for concentrate shipments are recorded net of charges by the customer for treatment, refining, smelting losses, and other charges negotiated with the customers. Charges are estimated upon shipment of concentrates based on contractual terms, and actual charges typically do not vary materially from estimates. Costs charged by customers include fixed costs per ton of concentrate and price escalators. Refining, selling, and shipping costs related to sales of doré and metals from doré are recorded to cost of sales as incurred. See Note 4 for more information on our sales of products. Other Revenue Recognition-Revenue from harvest of raw timber is recognized when titlethe performance obligation under a contract and risktransfer of ownershipcontrol of metals or metal bearing concentratethe timber have passed and collection is reasonably assured. Revenue fromboth been completed. Sales of timber found on the saleCompany’s mineral properties are not a part of metals may be subject to adjustment upon final settlement of estimated metal prices, weights and assays, andnormal operations. Inventories Inventories are recorded as adjustments to revenue in the period of final settlement of prices, weights and assays; such adjustments are typically not material in relation to the initial invoice amounts. Revenues from mill operations and custom milling are recognized in the period in which the milling is completed, concentrates are shipped, and collection of payment is deemed probable.
Pre-Development Activities
Pre-development activities involve cost incurred that may ultimately benefit production, such as underground ramp development, pumping, and open pit development, which are expensed due to the lack of evidence of economic development, which is necessary to demonstrate future recoverability of these expenses. These costs are charged to operations as incurred.
Inventory
Inventory is stated at the lower of full cost of production or estimated net realizable value based on current metal prices. Costs consist of mining, transportation, and milling costs including applicable overhead, depreciation, depletion, and amortization relating to the operations. Costs are allocated based on the stage at which the ore is in the production process. Supplies inventory is stated at the lower of cost or estimated net realizable value.
Idaho Strategic Resources, Inc Notes to Consolidated Financial Statements (Unaudited) 1. The Company and Significant Accounting Policies (continued) Mine Exploration and Development Costs The Company expenses exploration costs as such in the period they occur. The mine development stage begins once the Company identifies ore reserves which is based on a determination whether an ore body can be economically developed. Expenditures incurred during the development stage are capitalized as deferred development costs and include such costs for drift, ramps, and infrastructure. Costs to improve, alter, or rehabilitate primary development assets which appreciably extend the life, increase capacity, or improve the efficiency or safety of such assets are also capitalized. The development stage ends when the production stage of ore reserves begins. Amortization of deferred development costs is calculated using the units-of-production method over the expected life of the operation based on the estimated recoverable mineral ounces. Fair Value Measurements When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period that are included in earnings that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date.
6
New Jersey Mining Company
Notes to Consolidated Financial Statements (Unaudited)
At SeptemberJune 30, 20172022, and December 31, 2016,2021, the Company determinedhad no assets or liabilities that required measurement at fair value on a recurring basis as follows:basis.
| | | | | | | | | September 30, 2017 | December 31, 2016 | Fair Value Hierarchy | Forward gold contracts-liability (Note 11) | $ | 1,101,897 | $ | 1,386,228 | 2 |
Concentration
During the fourth quarter 2016 and through the nine months ended September 30, 2017, the Company has sold all of its gold concentrate product to a concentrate broker, H&H Metals Corp.
Reclassifications
Certain prior period amounts have been reclassified to conform to the 2017 financial statement presentation. Reclassifications had no effect on net loss, stockholders’ equity, or cash flows as previously reported.
2.
Going Concern
The Company’s cash flow is directly related to revenues generated from production and milling activities. The Company has experienced operating losses and negative operating cash flows prior to and during the ramp up of production activities at the Golden Chest Mine. In addition to cash flow from operations, ongoing operations are dependent on the Company’s ability to obtain public equity financing by the issuance of capital and to generate profitable operationsAccounting for Investments in the future.
The Company is currently producing from the open-pit at the Golden Chest Mine and began underground operations in early November 2017. In addition, during the first three quarters of 2017, production has generated positive cash flow of $231,785 and planned production for the next 18 months indicates the trend to improve. The Company has also been successful in raising required capital to commence production and fund ongoing operations, completing a forward gold sale of $1.2 million in 2016 and closing private placements of $1.4 million in the first quarter of 2017. The Company also completed a private placement on October 20, 2017 using the proceeds to reduce debt and pay off the remaining balance on the Golden Chest Mine project.
As a result of its planned production, equity sales and ability to restructure debt, management believes cash flows from operations and existing cash are sufficient to conduct planned operations and meet contractual obligations for the next 12 months.
3.
Related Party Notes Payable
At September 30, 2017 and December 31, 2016, the Company had the following notes and interest payable to related parties:
| | | | | | | September 30, 2017 | | December 31, 2016 | Mine Systems Design (“MSD”), a company in which our Company’s Vice President owns 10.4%, 12% interest, monthly payments of $4,910 through October 2018 | $ | 80,729 | $ | 115,868 | John Swallow, Company president, 5% interest, monthly payments of $5,834 with balloon payment of $416,295 in February 2019 | | 465,446 | | 520,010 | John Swallow, Company president, 5% interest, principal and interest due February 2019 | | 245,516 | | 341,250 | Margaret Bathgate, shareholder, 5% interest, principal and interest due January 2018 | | 100,000 | | 100,000 | | | 891,691 | | 1,077,128 | Accrued interest payable | | 14,054 | | 4,167 | Total | | 905,745 | | 1,081,295 | Current portion | | 207,760 | | 567,580 | Long term portion | $ | 697,985 | $ | 513,715 |
7
New Jersey Mining Company
Notes to Consolidated Financial Statements (Unaudited)
Related Party interest expense for the three and nine month periods ending September 30, 2017 and 2016 is as follows:
| | | | | | | | September 30, 2017 | September 30, 2016 | 3 months | 9 months | 3 months | 9 months | $ | 13,001 | $ | 41,970 | $ | 16,806 | $ | 45,770 |
During the quarter ended March 31, 2017 in conjunction with a private placement (Note 9), the Company issued 1,000,000 units of its common stock and warrants with a combined value of $100,000 in exchange for $95,734 in principal and $4,266 in accrued interest on a note payable due to John Swallow, the Company’s president.
On August 8, 2017, notes with Mr. Swallow were amended to extend the balloon payments on both notes to February 2019.
4.
Joint Ventures and Equity Method Investments
Investment in Joint Ventures For joint ventures in whichwhere the Company holds more than 50% of the voting interest and has significant influence, the joint venture is consolidated with the presentation of non-controlling interest. In determining whether significant influence exists, the Company considers its participation in policy-making decisions and its representation on the venture’s management committee. For joint ventures in which the Company does not have joint control or significant influence, the cost method is used. For those joint ventures in which there is joint control between the parties, and the Company has significant influence, the equity method is utilized.utilized whereby the Company’s share of the ventures’ earnings and losses is included in the statement of operations as earnings in joint ventures and its investments therein are adjusted by a similar amount. The Company periodically assesses its investments in joint ventures for impairment. If management determines that a decline in fair value is other than temporary it will write-down the investment and charge the impairment against operations.
Equity Method Investments Investments in companies and joint ventures in which the Company has the ability to exercise significant influence, but do not control, are accounted for under the equity method of accounting. In determining whether significant influence exists, the Company considers its participation in policy-making decisions and representation on governing bodies. Under the equity method of accounting, our share of the net earnings or losses of the investee are included in net income (loss) in the consolidated statements of operations. We evaluate equity method investments whenever events or changes in circumstance indicate the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period. At SeptemberJune 30, 20172022, and December 31, 2016,2021, the Company's 37% common stock holding of Buckskin Gold and Silver, Inc. is accounted for using the equity method (Note 10). At June 30, 2022 and December 31, 2021, the Company’s percentage ownership and method of accounting for each joint venture and equity method investment is as follows:
| | September 30, 2017 | December 31, 2016 | | June 30, 2022 | | December 31, 2021 | | Joint Venture | % Ownership | Significant Influence? | Accounting Method | % Ownership | Significant Influence? | Accounting Method | | % Ownership | | | Significant Influence? | | Accounting Method | | % Ownership | | | Significant Influence? | | Accounting Method | | New Jersey Mill Joint Venture(“NJMJV”) | 65% | Yes | Consolidated | 65% | Yes | Consolidated | | NJMJV | | | 65 | % | | Yes | | Consolidated | | 65 | % | | Yes | | Consolidated | | Butte Highlands Joint Venture (“BHJV”) | 50% | No | Cost | 50% | No | Cost | | 50 | % | | No | | Cost | | 50 | % | | No | | Cost | | Buckskin Gold and Silver | | | 37 | % | | Yes | | Equity | | 37 | % | | Yes | | Equity | |
Reclassifications Certain prior period amounts have been reclassified to conform to the 2022 financial statement presentation. Reclassifications had no effect on net loss, stockholders’ equity, or cash flows as previously reported. Idaho Strategic Resources, Inc Notes to Consolidated Financial Statements (Unaudited) 1. The Company and Significant Accounting Policies (continued) New Accounting Pronouncement Accounting Standards Updates Adopted-In August 2020, the FASB issued ASU No.2020-06Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The update is to address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. The update is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years and with early adoption permitted. The adoption of this update on January 1, 2022, did not have a material impact on our consolidated financial statements. 2. Going Concern The Company is currently producing from both the open-pit and underground at the Golden Chest Mine. In the past, the Company has been successful in raising required capital from sale of common stock, forward gold contracts, and debt. As a result of its planned production, equity sales and potential debt borrowings or restructurings, management believes cash flows from operations and existing cash are sufficient to conduct planned operations and meet contractual obligations for the next 12 months. 3. Inventories At June 30, 2022 and December 31, 2021, the Company’s inventories consisted of the following: | | June 30, 2022 | | | December 31, 2021 | | Concentrate inventory | | | | | | | In process | | $ | 208,774 | | | $ | 41,082 | | Finished goods | | | 14,125 | | | | 97,074 | | Total concentrate inventory | | | 222,899 | | | | 138,156 | | | | | | | | | | | Supplies inventory | | | | | | | | | Mine parts and supplies | | | 244,363 | | | | 54,998 | | Mill parts and supplies | | | 103,139 | | | | 20,568 | | Core drilling supplies and materials | | | 75,901 | | | | - | | Total supplies inventory | | | 423,403 | | | | 75,566 | | | | | | | | | | | Total | | $ | 646,302 | | | $ | 213,722 | |
The carrying value of inventory is determined each period based on the lower of cost or net realizable value. At June 30, 2022 and December 31, 2021 gold concentrate is carried at cost. 4. Sales of Products Our products consist of both gold flotation concentrates which we sell to a single broker (H&H Metal), and an unrefined gold-silver product known as doré which we sell to a precious metal refinery. At June 30, 2022, metals that had been sold but not final settled thus exposed to future price changes totaled 2,568 ounces of gold. The Company has received provisional payments on the sale of these ounces with the remaining amount due reflected in gold sales receivable. Sales of products by metal type for the three and six-month periods ended June 30, 2022, and 2021 were as follows: | | June 30, 2022 | | | June 30, 2021 | | | | Three Months | | | Six Months | | | Three Months | | | Six Months | | Gold | | $ | 2,547,096 | | | $ | 4,730,119 | | | $ | 2,296,378 | | | $ | 4,010,102 | | Silver | | | 3,517 | | | | 6,958 | | | | 9,103 | | | | 13,424 | | Less: Smelter and refining charges | | | (192,121 | ) | | | (334,168 | ) | | | (125,249 | ) | | | (256,667 | ) | Total | | $ | 2,358,492 | | | | 4,402,909 | | | $ | 2,180,232 | | | | 3,766,859 | |
Sales by significant product type for the three and six-month periods ended June 30, 2022, and 2021 were as follows: | | June 30, 2022 | | | June 30, 2021 | | | | Three Months | | | Six Months | | | Three Months | | | Six Months | | Concentrate sales to H&H Metal | | $ | 2,054,876 | | | $ | 4,099,293 | | | $ | 2,180,232 | | | $ | 3,690,351 | | Dore sales to refinery | | | 303,616 | | | | 303,616 | | | | 0 | | | | 76,508 | | Total | | $ | 2,358,492 | | | $ | 4,402,909 | | | $ | 2,180,232 | | | $ | 3,766,859 | |
At June 30, 2022 and December 31, 2021, our gold sales receivable balance related to contracts with customers of $734,594 and $408,187, respectively, consist only of amounts due from H&H Metal. There is no allowance for doubtful accounts. Idaho Strategic Resources, Inc Notes to Consolidated Financial Statements (Unaudited) 5. Related Party Transactions At June 30, 2022 and December 31, 2021, the Company had the following note payable to related parties: | | June 30, 2022 | | | December 31, 2021 | | Ophir Holdings LLC, a company owned by two officers of the Company, 3.99% interest, monthly payments of $1,250 with a balloon payment of $76,887 in February 2024. | | $ | 96,103 | | | $ | 116,611 | | Total | | | 96,103 | | | | 116,611 | | Current portion | | | (11,376 | ) | | | (10,543 | ) | Long term portion | | $ | 84,727 | | | $ | 106,068 | |
As of June 30, 2022 and December 31, 2021, there was no accrued interest payable to related parties. Related party interest expense for the three and six-months ended June 30, 2022 and 2021 is as follows. June 30, 2022 | | | June 30, 2021 | | Three Months | | | Six Months | | | Three Months | | | Six Months | | $ | 1,027 | | | $ | 2,157 | | | $ | 2,133 | | | $ | 4,402 | |
The Company leases office space from certain related parties on a month-to-month basis. $1,500 per month is paid to NP Depot, a company owned by the Company’s president, John Swallow. Payments under these short-term lease arrangements are included in general and administrative expenses on the Consolidated Statement of Operations and are as follows: June 30, 2022 | | | June 30, 2021 | | Three Months | | | Six Months | | | Three Months | | | Six Months | | $ | 6,217 | | | $ | 12,434 | | | $ | 6,210 | | | $ | 12,427 | |
6. Joint Ventures New Jersey Mill Joint Venture Agreement
The Company owns 65% of the New Jersey Mill Joint Venture (JV) and has significant influence in its operations. Thus, the venture is included in the consolidated financial statements along with presentation of the non-controlling interest. At SeptemberJune 30, 20172022 and December 31, 2016,2021, an account receivable existed with Crescent Silver, LLC, the other joint venture participant (“Crescent”), for $7,727$2,909 and $2,888,$4,442, respectively, for shared operating costs as defined in the JV agreement.
Crescent’s non-controlling interest in the JV changed from December 31, 2016 to September 30, 2017 as follows:
| | | Balance December 31, 2016 | $ | 3,142,312 | Contribution from non-controlling interest | | 22,630 | Net loss attributable to non-controlling interest | | (43,107) | Balance September 30, 2017 | $ | 3,121,835 |
Butte Highlands JV, LLC (“BHJV”) On January 29, 2016, the Company purchased a 50% interest in Butte Highlands JV, LLC (“BHJV”) from Timberline Resources Corporation for $225,000 in cash and 3,000,000 restricted shares of the Company’s common stock valued at $210,000 for a total consideration of $435,000. Highland Mining, LLC (“Highland”) is the other 50% owner and manager of the joint venture. Under the agreement, Highland will fund all future project exploration and mine development costs. The agreement stipulates that Highland is manager of BHJV and will manage BHJV until such time as all mine development costs, less $2 million are distributed to Highland out of the proceeds from future mine production. The Company has determined that because it does not currently have significant influence over the joint venture’s activities, it accounts for its investment on a cost basis. The Company purchased the interest in the BHJV to provide additional opportunities for exploration and development and expand the Company’s mineral property portfolio.
8
New Jersey Mining Company
Notes to Consolidated Financial Statements (Unaudited)
5.
7. Earnings per Share
For the three month period ending September 30, 2017, stock options of 2,750,000 and warrants of 1,200,000 are included in the calculation of diluted income per share. For the nine month period ended September 30, 2017, stock options of 3,250,000 and warrants of 1,200,000 warrants are included in the calculation of diluted income per share. Excluded from the diluted earnings per share calculations for both the three and nine months ending September 30, 2017 were 2,725,000 stock options and 6,387,500 warrants. These stock options and warrants were excluded because the exercise prices were greater than the average trading prices of the Company’s common stock for the periods.
For the three and nine monthsix-month periods ending Septemberended June 30, 2016, all2022, and 2021, potentially dilutive shares including outstanding stock options (Note 14), warrants (Note 13), and warrantsconvertible debt (Note 15) were excluded from the computation of diluted loss per share asbecause they were anti-dilutive due to net losses forin those periods. For the three and six-month periods would cause their conversionended June 30, 2022 and exercise to have no effect on2021, potentially dilutive common stock equivalents excluded from the calculation of lossdiluted earnings per share.share as their effect would have been anti-dilutive are as follows:
| | June 30, 2022 | | | June 30, 2021 | | Stock options | | | 405,384 | | | | 394,643 | | Stock purchase warrants | | | 562,263 | | | | 406,947 | | Convertible debt | | | - | | | | 432,540 | | Total | | | 967,647 | | | | 1,234,130 | |
6.Idaho Strategic Resources, Inc
Notes to Consolidated Financial Statements (Unaudited) 8. Property, Plant, and Equipment
Property, plant and equipment at SeptemberJune 30, 20172022 and December 31, 20162021 consisted of the following:
| | | September 30, 2017 | | December 31, 2016 | | June 30, 2022 | | | December 31, 2021 | | Mill | | | | | | | | | | Land | $ | 225,289 | $ | 225,289 | | $ | 225,289 | | $ | 225,289 | | Building | | 536,193 | | 536,193 | | 536,193 | | 536,193 | | Equipment | | 4,192,940 | | 4,192,940 | | | 4,192,940 | | | | 4,192,940 | | | | 4,954,422 | | 4,954,422 | | 4,954,422 | | 4,954,422 | | Less accumulated depreciation | | (391,895) | | (307,302) | | | (1,173,429 | ) | | | (1,085,730 | ) | Total mill | | 4,562,527 | | 4,647,120 | | | 3,780,993 | | | | 3,868,692 | | | | | | | | | | | | Building and equipment at cost | | 612,155 | | 434,897 | | Building and equipment | | | | | | | Buildings | | | 337,859 | | 324,075 | | Equipment | | | | 5,374,798 | | | | 5,042,915 | | | | | 5,712,657 | | 5,366,990 | | Less accumulated depreciation | | (234,446) | | (223,264) | | | (2,217,709 | ) | | | (1,847,191 | ) | Total building and equipment | | 377,709 | | 211,633 | | | 3,494,948 | | | | 3,519,799 | | | | | | | | | | | | Land | | | | | | | | | | Bear Creek | | 266,934 | | 266,934 | | 266,934 | | 266,934 | | Little Baldy | | 47,139 | | 62,139 | | BOW | | 230,449 | | 230,449 | | 230,449 | | 230,449 | | Eastern Star | | 250,817 | | 250,817 | | 250,817 | | 250,817 | | Gillig | | 79,137 | | 79,137 | | 79,137 | | 79,137 | | Highwater | | 40,133 | | 40,133 | | 40,133 | | 40,133 | | Salmon Building | | | | 410,285 | | | | 0 | | Total land | | 914,609 | | 929,609 | | | 1,277,755 | | | | 867,470 | | Total | $ | 5,854,845 | $ | 5,788,362 | | $ | 8,553,696 | | | $ | 8,255,961 | |
7.An office/warehouse building was purchased in Salmon, Idaho in the second quarter of 2022 for $100,000 in cash and a note payable in the amount of $310,285 for use by the Company as it explores its rare earth properties in the area.
9. Mineral Properties
Mineral properties at SeptemberJune 30, 20172022 and December 31, 20162021 consisted of the following:
| | | | | | June 30, 2022 | | | December 31, 2021 | | | | September 30, 2017 | | December 31, 2016 | | Golden Chest | | | | | | | Mineral Property | | | $ | 1,590,525 | | $ | 1,577,669 | | Infrastructure | | | | 1,441,542 | | | | 1,056,037 | | Total Golden Chest | | | 3,032,067 | | 2,633,706 | | New Jersey | $ | 215,127 | $ | 215,127 | | 336,020 | | 248,289 | | McKinley | | 250,000 | | 250,000 | | Golden Chest | | 1,649,142 | | 1,586,324 | | Toboggan | | 5,000 | | 5,000 | | McKinley-Monarch | | | 200,000 | | 200,000 | | Butte Potosi | | | 274,440 | | 274,440 | | Alder Gulch | | | 2,473,066 | | 2,473,066 | | Park Copper | | | 78,000 | | 78,000 | | Less accumulated amortization | | (14,363) | | (9,551) | | | (74,189 | ) | | | (64,315 | ) | Total | $ | 2,104,906 | $ | 2,046,900 | | $ | 6,319,404 | | | $ | 5,843,186 | |
For the three and six-month periods ended June 30, 2022 and 2021, interest expense was capitalized in association with the ramp access project at the Golden Chest as follows.
9
June 30, 2022 | | | June 30, 2021 | | Three Months | | | Six Months | | | Three Months | | | Six Months | | $ | 7,914 | | | $ | 20,917 | | | $ | 16,330 | | | $ | 26,516 | |
New Jersey Mining CompanyIdaho Strategic Resources, Inc
Notes to Consolidated Financial Statements (Unaudited)
10. Investment in Buckskin
8.
Notes Payable
At September 30, 2017 and December 31, 2016, notes payable are as follows:
| | | | | | September 30, 2017 | December 31, 2016 | Property with shop 36 month note payable, 4.91% interest rate payable monthly, remaining principal of note due in one payment at end of term in June 2019, monthly payments of $474 | $ | 36,413 | $ | 39,021 | Property 120 month note payable, 11.0% interest rate payable monthly, remaining principal of note due in one payment at end of term in March 2021, collateralized by property, monthly payments of $1,122 | | 93,083 | | 98,559 | Tailings pump, 35 month note payable, 17.5% interest rate payable monthly through May of 2018, monthly payments of $3,268, collateralized by equipment | | 23,542 | | 48,035 | Haul Truck, 20 month note payable, 10.0% interest rate payable monthly through May of 2019, monthly payments of 6,020, collateralized by equipment | | 112,500 | | - | Mineral property, 10 quarterly payments, 0.0% interest rate discounted at 10%, collateralized by property, quarterly payments of $125,000 through May of 2018 | | 250,000 | | 750,000 | Total notes payable | | 515,538 | | 935,615 | Due within one year | | 344,877 | | 664,787 | Due after one year | $ | 170,661 | $ | 270,828 |
Future principal payments of debt and related discount amortization at September 30, 2017 are as follows:
| | | | | | | | | Note | | Discount | | Net | 1 year | $ | 344,877 | $ | (9,072) | $ | 335,805 | 2 years | | 84,818 | | - | | 84,818 | 3 years | | 4,260 | | - | | 4,260 | 4 years | | 81,583 | | - | | 81,583 | Total | $ | 515,538 | $ | (9,072) | $ | 506,466 |
9.
Stockholders’ Equity
TheIn August 2021, the Company began a private placement in the fourth quarter 2016 which ran through the first quarter of 2017. Each unit consisted of twoexchanged 45,940 shares of the Company’s common stock for 22% of Buckskin Gold and one stock purchase warrant with each warrant exercisable for oneSilver Inc. The Company’s closing share price on the date of the Company’s stock at $0.20 through February 2020. As of December 31, 2016, 537,500 units were sold consisting of 1,075,000 shares and 537,500 warrantsagreement (August 18, 2021) was recorded as the cost basis for net proceeds of $92,500 after deducting the 10% commission and other related placement fees.property. In October 2021 the first quarter of 2017Company exchanged an additional 3,200,000 shares and 1,600,000 warrants were sold for net proceeds in 2017 of $291,000 after deducting the 10% commission. At closing of the private placement in March 2017, the total units for the private placement were 2,137,500 units consisting of 4,275,000 shares and 2,137,500 warrants, net proceeds of the private placement in total were $383,500.
The Company offered an additional private placement in March of 2017. The private placement was for 4,250,000 units, each unit consisting of two30,358 shares of the Company’s common stock and one stock purchase warrant with each warrant exercisable for onean additional 15% of Buckskin. The Company’s closing share price on the date of the Company’s stock at $0.20 through April 2020. No commissionexchange (October 15, 2021) was paid with this private placement. Proceeds were $750,000recorded as the cost basis for the investment addition. This investment in cashBuckskin is being accounted for using the equity method and resulted in recognition of equity income on the investment of $339 and $671 for the three- and six-month periods ending June 30, 2022. The Company makes an annual payment of $12,000 to Buckskin per a $100,000 payment on a notelease covering 218 acres of patented mining claims. As of June 30, 2022, the Company holds 37% of Buckskin’s outstanding shares.
11. Notes Payable At June 30, 2022 and interestDecember 31, 2021, notes payable to the Company’s president, John Swallow. The Company’s concentrate broker, H&H Metals Corp., who purchases all of the Company’s gold concentrate product, participated in this private placement purchasing 1,250,000 units for $250,000.are as follows:
| | June 30, 2022 | | | December 31, 2021 | | Building in Salmon, Idaho, 60-month note payable, 7.00% interest payable monthly through June 2027, monthly payments of $2,500 with a balloon payment of $260,886 in July 2027 | | $ | 310,285 | | | $ | 0 | | Resimin Muki Bolter, 36-month note payable, 7.00% interest payable monthly through January 2025, monthly payments of $827 | | | 23,398 | | | | 0 | | Paus 2 yrd. LHD, 48-month note payable, 4.78% interest rate payable through September 2024, monthly payments of $5,181 | | | 136,994 | | | | 164,422 | | Paus 2 yrd. LHD, 60-month note payable, 3.45% interest rate payable through July 2024, monthly payments of $4,847 | | | 116,754 | | | | 143,547 | | Compressor, 48-month note payable, 5.25% interest rate payable monthly through January 2022, monthly payments of $813 | | | 0 | | | | 410 | | CarryAll transport, 36-month note payable, 4.5% interest rate payable monthly through June 2024, monthly payments of $627 | | | 14,360 | | | | 17,752 | | CarryAll transport, 36-month note payable, 4.5% interest rate payable monthly through February 2024, monthly payments of $303 | | | 5,835 | | | | 7,501 | | Atlas Copco loader, 60-month note payable, 10.5% interest rate payable monthly through June 2023, monthly payments of $3,550 | | | 40,264 | | | | 58,866 | | Sandvik LH203 LHD, 36-month note payable, 4.5% interest payable monthly through May 2027, monthly payments of $10,352 | | | 227,707 | | | | 283,955 | | Doosan Compressor, 36-month note payable, 6.99% interest payable monthly through July 2024, monthly payments of $602 | | | 13,997 | | | | 17,064 | | Caterpillar 306 excavator, 48-month note payable, 4.6% interest payable monthly through November 2024, monthly payments of $1,512 | | | 41,410 | | | | 49,421 | | Caterpillar 938 loader, 60-month note payable, 6.8% interest rate payable monthly through August 2023, monthly payments of $3,751 | | | 50,346 | | | | 70,734 | | Caterpillar R1600 LHD, 48-month note payable, 4.5% interest rate payable through January 2025, monthly payments of $17,125 | | | 500,249 | | | | 590,535 | | Caterpillar AD22 underground truck, 48-month note payable, 6.45% interest rate payable through June 2023, monthly payments of $12,979 | | | 150,160 | | | | 221,694 | | 2022 Dodge Ram, 75-month note payable, 5.99% interest rate payable monthly through June 2028, monthly payments of $1,152 | | | 69,539 | | | | 0 | | 2016 Dodge Ram, 75-month note payable, 5.99% interest rate payable monthly through June 2028, monthly payments of $1,190 | | | 71,808 | | | | 0 | | Two CarryAll transports, 36-month note payable, 6.3% interest rate payable monthly through May 2025, monthly payments of $1,515 | | | 48,366 | | | | 0 | | CarryAll transport, 36-month note payable, 6.3% interest rate payable monthly through June 2025, monthly payments of $866 | | | 28,347 | | | | 0 | | Total notes payable | | | 1,849,819 | | | | 1,625,901 | | Due within one year | | | 743,589 | | | | 664,153 | | Due after one year | | $ | 1,106,230 | | | $ | 961,748 | |
10Idaho Strategic Resources, Inc
New Jersey Mining Company
Notes to Consolidated Financial Statements (Unaudited)
11. Notes Payable (continued)
Stock Purchase Warrants Outstanding
The activityAll notes are collateralized by the property or equipment purchased in stock purchase warrants isconnection with each note. Future principal payments of notes payable at June 30, 2022 are as follows:
| | | | | | | Number of Warrants | | Exercise Prices | Balance December 31, 2015 | | 10,200,000 | $ | 0.10-0.20 | Issued in connection with private placement | | 537,500 | | 0.20 | Balance December 31, 2016 | | 10,737,500 | | 0.10-0.20 | Expired | | (9,000,000) | | (0.15-0.20) | Issued in connection with private placement | | 5,850,000 | | 0.20 | Balance September 30, 2017 | | 7,587,500 | | 0.10-0.20 |
12 months ended June 30, | | | | 2023 | | $ | 743,589 | | 2024 | | | 530,561 | | 2025 | | | 215,942 | | 2026 | | | 34,689 | | 2027 | | | 297,825 | | 2028 | | | 27,213 | | Total | | $ | 1,849,819 | |
These warrants expire as follows:12. Small Business Administration Loan and Grant
| | | Shares | Exercise Price | Expiration Date | 1,200,000 | $0.10 | August 11, 2019 | 2,137,500 | $0.20 | February 28, 2020 | 4,250,000 | $0.20 | April 30, 2020 |
10.
Stock Options
In the fourth quarter of 2016, the Company granted 2,750,000 options to management, directors, consultants, and employees of the Company. Of these options 1,225,000 vested in the fourth quarter of 2016 and the remaining 1,525,000 vest in 2017. The options had a fair value of $268,032 which is being recognized ratably over the vesting period. Compensation costs of $151,143 were recognized in the fourth quarter of 2016. Compensation costs of $33,504 and $100,512 was recognized in the three and nine month periods ended September 30, 2017, respectively. The remaining unrecognized compensation cost of $16,377 is expected to be recognized in the fourth of 2017.
In the second quarter of 2017,2020, the Company granted 400,000 optionsreceived a loan of $149,900 pursuant to consultantsthe Small Business Act Section 7(b). The loan which was in the form of a Note dated May 16, 2020, matures May 16, 2050, and employeesbears interest at a rate of 3.75% per annum. Payments of $731 are due monthly and will begin in November 2022. At June 30, 2022, and December 31, 2021 accrued interest on the Company. These options vestloan was $12,306 and $9,311, respectively and is included in the Small Business Administration Loan balance on the consolidated balance sheet. In the second quarter of 2022, it was determined that an additional $10,000 also received in the second quarter of 2018.2020 was a grant that was forgiven as part of the Covid-19 relief program. This $10,000 was recorded as a gain on forgiveness of the SBA loan in the statement of operations during the current quarter. 13. Stockholders’ Equity Stock issuance activity In the first quarter of 2021 the Company issued 714 shares of common stock at $3.22 per share for for a total value of $2,300. In the second quarter of 2021 the Company issued 1,071 shares of common stock at $3.92 per share for services provided for a total value of $4,200. The Company closed a private placement in February 2022. Under the private placement, the Company sold 360,134 units at $7.50 per unit for net proceeds of $2,701,000. Each unit consisted of one share of the Company’s common stock. In the first quarter of 2022, the Company issued 3,572 shares of common stock at $9.05 per share for services provided for a total value of $32,326. In the second quarter of 2022, the Company sold 138,665 shares of common stock for net proceeds of $980,107. Stock Purchase Warrants Outstanding In the second quarter of 2021 19,841 shares were issued in exchange for outstanding warrants for net proceeds of $50,000. In the first quarter of 2022, 23,057 shares were issued in exchange for outstanding warrants for net proceeds of $68,006. In the second quarter of 2022, 70,919 shares were issued in exchange for outstanding warrants for net proceeds of $397,147. The activity in stock purchase warrants is as follows: | | Number of Warrants | | | Exercise Prices | | Balance December 31, 2020 | | | 426,788 | | | $ | 2.52-5.60 | | Issued | | | 289,294 | | | $ | 5.60-7.00 | | Exercised | | | (46,615 | ) | | $ | 2.52 | | Balance December 31, 2021 | | | 669,467 | | | $ | 2.52-7.00 | | Expired | | | (13,228 | ) | | $ | 2.52 | | Exercised | | | (93,976 | ) | | $ | 2.52-5.60 | | Balance June 30, 2022 | | | 562,263 | | | $ | 5.60-7.00 | |
These warrants expire as follows: | | Shares | | | Exercise Price | | | Expiration Date | | | | | 272,969 | | | $ | 5.60 | | | August 28, 2022 | | | | | 235,722 | | | $ | 5.60 | | | October 14, 2023 | | | | | 53,572 | | | $ | 7.00 | | | November 12, 2023 | | | | | 562,263 | | | | | | | |
Idaho Strategic Resources, Inc Notes to Consolidated Financial Statements (Unaudited) 14. Stock Options In February 2021, the board granted 283,936 stock options had ato officers, board members, and employees. These options vested immediately and are exercisable at $5.60 for 3 years. Total stock-based compensation recognized on these options was $604,571. In March 2021, the Company granted 3,572 stock options to an individual for services rendered to the Company. These options vested immediately and are exercisable at $5.60 for 3 years. Total stock-based compensation recognized on these options was $9,860 during the six months ended June 30, 2021. No options were granted in the second quarter of 2021 or the first six months of 2022. The fair value of $36,777 which is being recognized ratably overstock option awards granted, and the vesting period. Compensation costkey assumptions used in the Black-Scholes valuation model to calculate the fair value of $9,194 and $15,324the options are as follows: | | February 11, 2021 | | | March 15, 2021 | | Fair value | | $ | 604,572 | | | $ | 9,860 | | Options issued | | | 283,936 | | | | 3,572 | | Exercise price | | $ | 5.60 | | | $ | 5.60 | | Expected term (in years) | | | 3.0 | | | | 3.0 | | Risk-free rate | | | 0.19 | % | | | 0.33 | % | Volatility | | | 97.9 | % | | | 99.3 | % |
In the first quarter of 2021, 44,643 options were exercised in exchange for 28,196 shares at $5.32 per share in a cashless warrant exercise. In the second quarter of 2021, 7,143 options were exercised in exchange for 3,571 shares at $3.92 per share in a cashless warrant exercise. In the first quarter of 2022, 51,789 options were exercised in exchange for 28,981 shares at an average price of $9.72 per share in a cashless warrant exercise. In the second quarter of 2022, 42,859 options were exercised in exchange for 26,584 shares at an average price of $9.44 per share in a cashless warrant exercise. No stock-based compensation was recognized during the six months ended June 30, 2022. Activity in the three and nine month periods ended September 30, 2017, respectively. The remaining unrecognized compensation cost of $21,453Company’s stock options is expected to be recognized in the remainder of 2017 and the first half of 2018.as follows:
| | Number of Options | | | Weighted average exercise prices | | Balance December 31, 2020 | | | 150,000 | | | $ | 1.83 | | Granted | | | 469,674 | | | $ | 5.53 | | Exercised | | | (101,786 | ) | | $ | 1.87 | | Forfeited | | | (10,713 | ) | | $ | 5.60 | | Balance December 31, 2021 | | | 507,175 | | | $ | 5.25 | | Exercised | | | (94,648 | ) | | $ | 1.71 | | Forfeited | | | (7,143 | ) | | $ | 1.96 | | Balance June 30, 2022 | | | 405,384 | | | $ | 5.67 | | Outstanding and exercisable at June 30, 2022 | | | 405,384 | | | $ | 5.67 | |
Stock based compensation costs are included in management, production, exploration, and general and administrative expenses where applicable.
| | | | | | | Number of Options | | Exercise Prices | Balance January 1, 2016 | | 5,750,000 | $ | 0.10-0.15 | Exercised | | (500,000) | | 0.10 | Issued | | 2,750,000 | | 0.15 | Expired | | (500,000) | | 0.11 | Balance December 31, 2016 | | 7,500,000 | $ | 0.10-0.15 | Expired | | (500,000) | | 0.10 | Issued | | 400,000 | | 0.15 | Balance September 30, 2017 | | 7,400,000 | $ | 0.10-0.15 | | | | | | Exercisable at September 30, 2017 | | 5,475,000 | $ | 0.10-0.15 |
At SeptemberJune 30, 2017, the2022, outstanding stock options have an intrinsic value of approximately $192,500 and have a weighted average remaining term of 2.5 years.
11
New Jersey Mining Company
Notes to Consolidated Financial Statements (Unaudited)
11.
Forward Gold Contracts
On July 13, 2016, the Company entered into a forward gold contract with Ophir Holdings LLC ("Ophir"), a company owned by threeapproximately 2.3 years and an intrinsic value of approximately $919,800. Intrinsic value of the Company’s officers, for net proceeds of $467,500 to fund startup costs at the Golden Chest. The contract callsoptions exercised for the Company to deliver a total of 500 ounces of gold to the purchasers with quarterly payments equivalent to $25,000 in ounces starting February 1, 2017 until all other investors in forward gold contracts are paid in full at which time the quarterly payments will increase to the equivalent of $75,000 in ounces until the remaining balance is paid in full as gold is produced from the Golden Chest Mine and New Jersey Mill. During the first nine months of 2017, the Company paid the equivalent of 60.5 gold ounces to Ophir. At Septembersix-month period ended June 30, 2017, future gold deliveries are 439.5 ounces due.2022, was $255,993.
On July 29, 2016, the Company entered into forward gold contracts through GVC Capital LLC (“GVC”) for net proceeds of $772,806 to fund startup costs at the Golden Chest. The agreement calls for the Company to deliver a total of 904 ounces of gold to the purchasers in quarterly payments starting December 1, 2016 for a period of two years as gold is produced from the Golden Chest Mine and New Jersey Mill. During the first nine months of 2017, the Company paid the equivalent of 337.5 gold ounces to GVC. At September 30, 2017, future gold deliveries are 113 ounces due in the remainder of 2017 and 339 ounces due in 2018.15. Convertible Debt
The gold to be delivered does not need to be produced from the Golden Chest property. In addition, the counterparties can request cash payment insteadbalance of gold ounces for each quarterly payment. The cash payments are based on average gold prices for the applicable quarter. The contracts are accounted for as derivatives requiring their value to be adjusted to fair value each period end. The change in balance for the forward gold contracts for the nine months ended September 30, 2017 and 2016 is as follows:
| | | | | | | 2017 | | 2016 | Beginning balance | $ | 1,386,228 | | - | Proceeds from contracts | | - | $ | 1,240,306 | Payments: | | | | | In cash | | (270,755) | | - | In gold purchased by the Company | | (232,037) | | - | | | | | | Change in fair value | | 218,461 | | 466,783 | Ending balance | | 1,101,897 | | 1,707,089 | Current | | 649,411 | | 887,943 | Long term | $ | 452,486 | $ | 819,146 |
The fair value was calculated using the market approach with Level 2 inputs for forward gold contract rates and a discount rate of 10%.
12.
Asset Retirement Obligation
The Company has established asset retirement obligations associated with the ultimate closing of its mineral properties where there has been or currently are operations. Activity for the nine months ended September 30, 2017 and the year endedconvertible debt at December 31, 2016 is as follows:
| | | | | | Nine Months Ended | Year Ended | | September 30, 2017 | December 31, 2016 | | | | | | Balance at beginning of period | $ | 72,218 | $ | 28,656 | Accretion expense | | 6,327 | | 5,291 | Incurred on Golden Chest mining operations | | 23,597 | | 38,271 | Balance at end of period | $ | 102,142 | $ | 72,218 |
12
New Jersey Mining Company
Notes2021 consisted of $200,000 convertible to Consolidated Financial Statements (Unaudited)
During 2016, the Company established an asset requirement obligation for its Golden Chest mine. At September 30, 2017, management estimated that the cost to reclaim the property based upon disturbance to be $70,087. The estimated reclamation costs were discounted using credit adjusted, risk-free interest rate of 5.0% from the time the obligation was incurred to the time management expects to pay the retirement obligation.
13.
Subsequent Events
In October 2017, the Company completed a private placement consisting of a total of 1,291,667 units soldCommon shares at a price of $0.24$5.60 per unit, which resulted in gross proceedsshare (35,715 shares) and $1,750,000 convertible to the Company of $250,000 and a debt reduction of $60,000. No commissions will be paid on the sale. Each unit consisted of twoCommon shares of the Company’s common stock and one common stock purchase warrant exercisable at a price of $0.20 for a period$4.90 per share (357,151 shares). All of 36 months (ending October 20, 2020). H&H Metals Corp. purchased 1,041,667 units, comprised of 2,083,334this debt was converted to Common shares and 1,041,667 warrants, for a total of $250,000. John Swallow converted $60,000 of debt owed to him and was issued 250,000 units comprised of 500,000 shares and 250,000 warrants. In total,as provided in the Company issued an aggregate of 1,291,667 units, comprised of 2,583,334 common shares and 1,291,667 warrants.respective agreements in March 2022.
In October 2017, the Company utilized proceeds of the private placement to pay the remaining debt due on the Golden Chest property of $250,000.
ItemITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
When we use the terms "New Jersey Mining Company," the "Company," "we," "us," or "our," we are referring to New Jersey Mining Company (the “Company”) and its subsidiaries, unless the context otherwise requires.
Cautionary Statement about Forward-Looking Statements
This Quarterly Report on Form 10-Q and the exhibits attached hereto contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements concern the Company’s anticipated results and developments in the Company’s operations in future periods, planned exploration and development of its properties, plans related to its business and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. These statements include, but are not limited to, comments regarding:
·
the establishment and estimates of mineralization;
·
the grade of mineralization;
·
anticipated expenditures and costs in our operations;
·
planned exploration activities and the anticipated outcome of such exploration activities;
·
plans and anticipated timing for obtaining permits and licenses for our properties;
·
expected future financing and its anticipated outcome;
·
anticipated liquidity to meet expected operating costs and capital requirements;
·
our ability to obtain joint ventures partners and maintain working relationships with our current joint venture partners;
·
our ability to obtain financing to fund our estimated expenditure and capital requirements; and
·
factors expected to impact our results of operations.
Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or “intends”, or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation:
·
risks related to our limited operating history;
·
risks related to our history of losses and our expectation of continued losses;
·
risks related to our properties being in the exploration or development stage;
·
risks related our mineral operations being subject to government regulation;
·
risks related to future legislation and administrative changes to mining laws;
·
risks related to future legislation regarding climate change;
·
risks related to our ability to obtain additional capital or joint venture partners;
·
risks related to land reclamation requirements and costs;
·
risks related to mineral exploration and development activities being inherently dangerous;
·
risks related to our insurance coverage for operating risks;
·
risks related to cost increases for our exploration and development projects;
·
risks related to a shortage of equipment and supplies adversely affecting our ability to operate;
·
risks related to mineral estimates;
·
risks related to the fluctuation of prices for precious and base metals, such as gold and silver;
·
risks related to the competitive industry of mineral exploration;
·
risks related to our title and rights in our mineral properties and mill;
·
risks related to joint venture partners and our contractual obligations therewith;
·
risks related to potential conflicts of interest with our management;
·
risks related to our dependence on key management;
·
risks related to the New Jersey Mill operations, management, and milling capacity;
·
risks related to our business model;
·
risks related to evolving corporate governance standards for public companies; and
·
risks related to our shares of common stock.
This list is not exhaustive of the factors that may affect our forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the sections titled “Description of Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, filed on March 28, 2016. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated, or expected. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as required by law.
Plan of Operation
New Jersey Mining CompanyIdaho Strategic Resources, Inc is an emerginga gold producer focused on diversifying and building its asset base and cash flows through a portfolio of mineral properties located in historic producing gold districts in Idaho and Montana.
The Company’s plan of operation is to generate positive cash flow, while reducing debt and growingincrease its gold production and asset base over time while being mindful of corporate overhead. ManagementThe Company’s management is focused on utilizing its in-house skillsetsskills to identify, acquire and/or develop quality assets that have productionbuild a portfolio of producing mines and resource potential, preferably having considerable prior investmentmilling operations with a primary focus on gold and development.exploration for Rare Earth elements (REE).
The Company’s properties include: the Golden Chest Mine (currently in production), the New Jersey Mill (majority ownership interest), and a 50% carried to production interest in the past producing Butte Highlands Mine located in Montana. In addition to its producing and near-term production projects, New Jersey Mining CompanyIdaho Strategic Resources, Inc. has additional gold exploration prospects, including the McKinleyMcKinley-Monarch and Eastern Star located in Central Idaho, and additional holdings near the Golden Chest in the Murray Gold Belt. Recently, the Company added two rare earth element properties in Idaho to its portfolio of exploration properties in an effort to diversify its holdings towards the anticipated demand for these elements in the electrification of motorized vehicles.
Highlights duringCOVID-19 Coronavirus Pandemic Response and Impact
Following the first nine months of 2017 include:
·
For the three and nine months ended September 30, 2017 approximately 8,314 and 21,840 tonnes of ore, respectively, from the open pit have been processed though the New Jersey Mill. For the three month period ending September 30, 2017 the average head grade was 4.29 grams per tonne (gpt) gold with average gold recoveries of 83.1% and 952 ounces were recovered. For the nine month period ending September 30, 2017 the average head grade was 4.55 gpt gold with average gold recoveries of 84.6% and 2,700 ounces were recovered.
·
Dewateringoutbreak of the underground mineCOVID-19 coronavirus global pandemic ("COVID-19") in early 2020, in March 2020 the U.S. Centers for Disease Control issued guidelines to mitigate the spread and installationhealth consequences of permanent mining equipmentCOVID-19. The Company implemented changes to its operations and ventilationbusiness practices to follow the guidelines and minimize physical interaction, including using technology to allow employees to work from home when possible and altering production procedures and schedules, asset maintenance, and limiting discretionary spending. As long as they are required, the operational practices implemented could have an adverse impact on our operating results due to deferred production and revenues or additional costs. The negative impact of COVID-19 remains uncertain, including on overall business and market conditions. There is complete with undergrounduncertainty related to the potential additional impacts COVID-19 could have on our operations scheduled to commenceand financial results for the year.
Critical Accounting Estimates We have, besides our estimates of the useful lives of our assets, two critical accounting estimates. The ounces of gold contained in November.
·
Identified expansion potential of open pit areaour process and concentrate inventory is based on assays taken at the Golden Chest Mine.
·
Closed private placementstime the ore is processed and the ounces of $1.14 million with participation from management and strategic shareholders including the Company’sgold contained in shipped concentrate broker H&H Metals Corp.
·
Acquired additional equipment in support of underground operationswhich is based upon assays taken prior to shipment however subject to final assays at the Golden Chest Mine.refinery, these shipments are also subject to the fluctuation in gold prices between our shipment date and estimated and actual final settlement date. Also, the reclamation bond obligation on our balance sheet is based on an estimate of the future cost to recover and remediate our properties as required by our permits upon cessation of our operations and may differ when we cease operations.
·
Total liabilities reduced $745,638Our concentrate sales sometimes involve variable consideration, as comparedthey can be subject to December 31, 2016.
·
changes in metals prices between the time of shipment and their final settlement. However, we are able to reasonably estimate the transaction price for the concentrate sales at the time of shipment using forward prices for the estimated month of settlement, and previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement for financial reporting purposes. The embedded derivative contained in our concentrate sales is adjusted to fair value through earnings each period prior to final settlement. It is unlikely a significant reversal of revenue for any one concentrate lot will occur. As such, we use the expected value method to price the concentrate until the final settlement date occurs, at which time the final transaction price is known. At June 30, 2022, metals that had been sold but not final settled thus exposed to future price changes totaled 2,568 ounces of gold. The Company has made a varietyreceived provisional payments on the sale of equipment purchasesthese ounces with the remaining amount due reflected in 2017gold sales receivable. The asset retirement obligation and asset on our balance sheet is based on an estimate of the future cost to recover and remediate our properties as required by our permits upon cessation of our operations and may differ when we cease operations. At June 30, 2022 we reviewed our December 31, 2021 estimate that the open pit continuescost of the machine and man hours probable to evolve and preparations are made for underground production. Included in these equipment purchases was a Wagner 14-ton underground haul truck purchased in September 2017 for $125,000 of which $112,500 was financed with a 20 month note payable and $6,020/month payments.
Results of Operations
There was $1,266,139 and $3,218,147 in revenuebe needed to put our properties in the threecondition required by our permits once we cease operations. As of June 30, 2022 we added $107,000 to our New Jersey Mine and nine-month periods respectively ending SeptemberMill for a tailing impoundment expansion. The June 30, 2017 compared to $52,354 and $144,6322022 estimated costs would be $103,906 for the comparable periods in 2016. The revenue in 2017 was from mining and milling of ore from the Golden Chest Mine whereas minimal activity occurred in the first nine months of 2016. The net income attributable to the Company of $144,407 and $81,935 for the three and nine month periods ending September 30, 2017 compared to the net loss of ($838,458) and ($1,167,317) in the comparable periods of 2016 are a result of operations at the Golden Chest property and $203,600 for the New Jersey millMine and Mill. For purposes of the estimate, we evaluated the expected life in 2017.years and costs that, initially, are comparable to rates that we would incur at the present. We are adding to the liability each year, and amortizing the asset over the estimated life, which decreases our net income in total each year. We make periodic reviews of the remaining life of the mine and other operations, and the estimated remediation costs upon closure, and adjust our account balances accordingly. At this time, we think that an adjustment in our asset recovery obligation is not required, and an adjustment in future periods would not have a material impact in the year of adjustment but would change the amount of the annual accretion and amortization costs charged to our expenses by an undetermined amount.
Critical Accounting Policies
The Company began ramp up, production, and milling of ore from the Golden Chest property open pit in the fourth quarter of 2016 and continued production throughout the first nine months of 2017.SEC has requested that all registrants address their most critical accounting policies. The Company plans to continue mining the open pit and add production from the underground workings in the fourth quarter of 2017.
Gold Sales
Gold sales income increased by $1,220,285 and $3,094,629 in the three and nine month periods, respectively of 2017 comparedSEC has indicated that a “critical accounting policy” is one which is both important to the equivalent periods in 2016 as a result processing ore from the Golden Chest
Milling Income
Milling income decreased in 2017 compared to 2016 as a result of terminationrepresentation of the Skookum lease in September 2015.
Production
Production costs increased in 2017 compared to 2016 as a result of production at the Golden Chestregistrant’s financial condition and the associated milling.
Predevelopment expenses
Predevelopment expenses decreased in 2017 compared to 2016 as costs related to pumpingresults and other activities being done in preparation for underground mining which is to commence in the fourth quarter near completion.
Exploration
Exploration cost decreased in 2017 compared to 2016 as a result the Company’s focus on development in support of production at the Golden Chest.
Depreciation
Depreciation increased in 2017 compared to 2016 as a result of units of production depreciation calculations as the mill and Golden Chest as production of ore proceeds in 2017.
Accounting and Legal Services
Accounting and legal services expenses were higher in the nine month periods of 2017 compared to the comparable period of 2017 as a result of increased activity including seeking a listing on the Canadian Stock Exchange and services related to collection of debt owed the company by Premium Exploration.
General and Administrative Expenses
General and administrative expenses were higher in 2017 compared to the comparable period of 2016 as a result of increased activity.
Timber Income
No timber was harvested from the Company’s property in 2017.
Interest Income
Interest income increased in 2017 as compared to 2016requires management’s most difficult, subjective, or complex judgments, often as a result of the collectionneed to make estimates about the effect of debt owedmatters that are inherently uncertain. We base our estimates on past experience and on various other assumptions our management believes to be reasonable under the Company by Premium Exploration.circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results will differ and may differ materially from these estimates under different assumptions or conditions. Additionally, changes in accounting estimates could occur in the future from period to period. Our management has discussed the development and selection of our most critical financial estimates with the Audit and Finance Committee of our Board of Directors. The following paragraphs identify our most critical accounting policies:
Change inDetermination of Fair Value of Forward Gold ContractsValues
Change in
Management determines the fair value of forwarda financial instrument based on the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value is calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities includes consideration of non-performance risk, including the party’s own credit risk. Impairment of Mineral Rights and Properties, Plant and Equipment The Company assesses its mineral rights and properties, plant, and equipment for possible impairment whenever events or changes in circumstances indicate the carrying value of the assets may not be recoverable. Such indicators include changes in the Company’s business plans, changes in precious metal prices and significant downward revisions of estimated mineralization quantities. If the carrying value of an asset exceeds the future undiscounted cash flows expected from the asset, an impairment charge is recorded for the excess of carrying value of the asset over its estimated fair value. Determination as to whether and how much an asset is impaired involves management estimates on highly uncertain matters such as future commodity prices, the effects of inflation and technology improvements on operating expenses, and the outlook for global or regional demand conditions for gold contractsand silver. However, the impairment reviews and calculations are based on assumptions that are consistent with the Company’s business plans and long-term investment decisions. Management does not believe there are impairments present in mineral rights and properties, plant, and equipment. Reclamation and Remediation Obligations Reclamation costs are allocated to expense over the life of the related assets and are periodically adjusted to reflect changes in the estimated present value resulting from the passage of time and revisions to the estimates of either the timing or amount of the reclamation and remediation costs. Reclamation obligations are based on when the spending for an existing environmental disturbance will occur. We review, on at least an annual basis, the reclamation obligation at each mine site in accordance with guidance for accounting for asset retirement obligations. Reclamation obligations for inactive mines are accrued based on management’s best estimate of the costs expected to be incurred at a site. Such cost estimates include, where applicable, ongoing care, maintenance, and monitoring costs. Changes in estimates at inactive mines are reflected in earnings in the period an estimate is lowerrevised. Accounting for reclamation and remediation obligations requires management to make estimates unique to each mining operation of the future costs we will incur to complete the reclamation and remediation work required to comply with existing laws and regulations. Actual costs incurred in 2017 comparedfuture periods could differ from amounts estimated. Additionally, future changes to 2016environmental laws and regulations could increase the extent of reclamation and remediation work required. Any such increases in future costs could materially impact the amounts charged to earnings for reclamation and remediation. Income Taxes Our income tax expense and deferred tax assets and liabilities reflect management’s best assessment of estimated future taxes to be paid. Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In projecting future taxable income, we develop assumptions including the amount of future state and federal pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates that we are using to manage the underlying businesses. Valuation allowances are recorded as reserves against net deferred tax assets by the Company when it is determined that net deferred tax assets are not likely to be realized in the foreseeable future. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations. Income tax positions must meet a resultmore-likely-than-not recognition threshold to be recognized. Highlights during the second quarter of a lower debt balance2022 include: Rare Earth Elements/Thorium | · | In May the Company announced Idaho Strategic Resources Adds the Lemhi Pass Project – The Largest Known Concentration of Thorium Resources in the United States. The Lemhi Pass District is “listed as the largest concentration of Thorium resources in the United States”, per the U.S. Geological Survey (USGS) and the Idaho Geological Survey (IGS). The addition of this land package not only compliments IDR’s nationally ranked ‘Technology Metals’ Rare Earth Element (REE) holdings; by adding this Thorium land package to its portfolio, the Company’s entrance into the ‘Energy Metals’ sector has been realized and a major U.S. Thorium/REE area is secured. | | | | | · | Also in May, the Company announcedIdaho Strategic Resources Announces Addition of the Lemhi Pass Rare Earth Element Project in Central Idaho. This land package consists of 25 unpatented claims, covering an area of approximately 425 acres in the northeastern part of the Lemhi Pass District. The northeastern portion of Lemhi Pass contains the greatest concentration of veins where the large Lemhi Pass, Bull Moose, and Dan Patch faults either intersect or approach one another. | | | | | · | In June the Company received final approval for its Diamond Creek drill program and announced the purchase of a company office building in Salmon, Idaho. |
Golden Chest/Murray Gold Belt | · | At the Golden Chest, ore mined from underground stopes totaled approximately 8,540 tonnes from the 815, 830, and 833 stopes. Development waste tonnage totaled 1,070 tonnes as the Main Access Ramp (MAR) was extended at depth. Additionally, 4,021 cubic meters of backfill was placed during the quarter which was a 40% increase over the first quarter as the mining crews increased the efficiency of the backfill cycle. | | | | | · | Open pit mining was completed in the Klondike pit and another small pit was started on a high-grade hangingwall vein exposure called the Jumbo vein. Average daily mining production on the surface was 816 tonnes per day with about 3,100 tonnes of ore mined during the quarter. | | | | | · | For the quarter ended June 30, 2022, a total of 11,624 dry metric tonnes (dmt) were processed at the Company’s New Jersey mill with a flotation feed head grade of 4.58 grams per tonne (gpt) with gold recovery of 90.1% | | | | | · | The Company drilled 1,700 meters during the quarter in nine holes spread out amongst the Skookum, Golden Chest, and Paymaster Shoots at the Golden Chest mine. Assay results are pending. At the end of the quarter the Company drill rig was moved to the Argus exploration property to drill the first holes ever drilled on the Company’s Murray Gold Belt properties. | | | | | · | In early June, the Company began an exploration crosscut on the 941 Level in the northern end of the Golden Chest mine in an area known as the Klondike. The target of the crosscut the target is one of the vein intercepts in GC 21-207 (11.8 gpt gold over 1.9 meters) previously reported (Idaho Strategic Resources Continues to Drill Gold-Quartz Veins at Klondike and Paymaster December 13, 2021). The crosscut hit the vein in early August and drifting on the vein will commence to determine the grade and continuity of the new vein. |
Results of Operations Our financial performance during the quarter is summarized below: | · | The Company had a gross profit of $7,457 and $313,599 in the three- and six-month periods ending June 30, 2022 compared to a gross profit of $362,249 and $290,845 for the comparative periods in. Gross profit decreased in the second quarter of 2022 because of lower gold prices, increased costs of consumables, and a gold inventory adjustment. | | | | | · | Cash costs per ounce and AISC increased for the three-month period but decreased for the six-month periods ended June 30, 2022.The Company increased underground production of higher-grade ore and experienced lower gold prices in the second quarter of 2022 compared to 2021. The AISC per ounce six month decrease in cost was also a result of utilizing the Company’s in house core drilling only in 2022. In 2021 the Company used both in-house drilling and a contract driller for drilling in the Paymaster/Joe Dandy in 2021. |
| · | Revenue was $2,358,492 and $4,402,909, respectively for the three and six-month periods ended June 30, 2022, compared to $2,180,232 and $3,766,859 for the comparable periods of 2021. The increase was mostly the result of increased production. | | | | | · | An operating loss of $846,721 and $1,272,887 for the three and six-month periods ended June 30, 2022, compared to an operating loss of $80,689 and $1,707,346 in the comparable periods of 2021. Some of the changes were a result of increased exploration, costs associated with the Company’s NYSE original listing application, a portion of the annual listing fee and legal expenses, fees associated with the Company’s S-3 Registration Statement filed with the SEC, contract core drilling in the Paymaster/Joe Dandy, and expense for stock options granted in the first quarter of 2021. | | | | | · | Net loss of $852,249 and $1,352,318 for the three and six-periods ended June 30, 2022, compared to net loss of $140,768 and 1,803,172 in the comparable periods ended June 30, 2021. The reasons for these changes are the same as those for the operating loss described above. | | | | | · | Exploration costs increased for the three-month period and decreased for the six-month period ending June 30, 2022 compared to 2021 because of increased drilling by the in-house drill, an increase in exploration on the Rare Earth properties in the second quarter of 2022, and the use of contract core drilling for the Paymaster/Joe Dandy in the first quarter of 2021. | | | | | · | Reasons for changes in management, professional services, and general and administrative expenses between the comparable periods in 2022 and 2021 include costs associated with the Company’s NYSE original listing application fee and SEC filings as mentioned above in the second quarter of 2022 and options being granted to management, directors, and employees for a total cost of $604,571 in the first quarter of 2021. | | | | | · | Timber revenue decreased in 2022. No logging on the Company’s property occurred in 2022. | | | | | · | The consolidated net loss for the six-months ended June 30, 2022, and 2021 included non-cash charges as follows: depreciation and amortization of $472,115 ($378,173 in 2021), loss on disposal of equipment of $3,901 (none in 2021), accretion of asset retirement obligation of $5,069 ($5,035 in 2021), stock-based compensation of none in 2022 ($614,431 in 2021), the issuance of common stock for services $32,326 ($6,500 in 2021), gain on forgiveness of SBA loan of $10,000 (none in 2021), and equity income on investment in Buckskin $671 in 2022 (None in 2021). |
Cash Costs and All-In Sustaining Costs Reconciliation to GAAP-Reconciliation of cost of sales and other direct production costs and depreciation, depletion, and amortization (GAAP) to cash cost per ounce and all-in sustaining costs (AISC) per ounce (non-GAAP). The table below presents reconciliations between the most comparable GAAP measure of cost of sales and other direct production costs and depreciation, depletion, and amortization to the non-GAAP measures of cash cost per ounce and all in sustaining costs per ounce for the Company’s gold production in the three and six-month periods ended June 30, 2022, and 2021. Cash cost per ounce is an important operating measure that requires adjustmentwe utilize to market valuemeasure operating performance. AISC per ounce is an important measure that we utilize to assess net cash flow after costs for pre-development, exploration, reclamation, and sustaining capital. Current GAAP measures used in 2017.the mining industry, such as cost of goods sold do not capture all of the expenditures incurred to discover, develop, and sustain gold production.
| | 2022 | | | 2021 | | | | Three Months | | | Six Months | | | Three Months | | | Six Months | | Cost of sales and other direct production costs and depreciation and amortization | | $ | 2,351,035 | | | $ | 4,089,310 | | | $ | 1,817,983 | | | $ | 3,476,014 | | Depreciation and amortization | | | (241,906 | ) | | | (472,115 | ) | | | (195,377 | ) | | | (378,173 | ) | Change in concentrate inventory | | | (40,229 | ) | | | (432,580 | ) | | | 11,936 | | | | 108,896 | | Cash Cost | | $ | 2,068,900 | | | $ | 3,184,615 | | | $ | 1,634,542 | | | $ | 3,206,737 | | Exploration | | | 386,781 | | | | 782,905 | | | | 208,170 | | | | 925,877 | | Sustaining capital | | | 165,582 | | | | 262,291 | | | | 228,948 | | | | 278,106 | | General and administrative | | | 273,977 | | | | 475,289 | | | | 136,007 | | | | 649,842 | | Less stock-based compensation and other non-cash items | | | 3,885 | | | | (30,626 | ) | | | (6,736 | ) | | | (625,967 | ) | All in sustaining costs | | $ | 2,899,125 | | | $ | 4,674,474 | | | $ | 2,200,931 | | | $ | 4,434,595 | | Divided by ounces produced | | | 1,589 | | | | 2,730 | | | | 1,373 | | | | 2,429 | | Cash cost per ounce | | $ | 1,302.01 | | | $ | 1,166.53 | | | $ | 1,190.49 | | | $ | 1,320.19 | | All in sustaining cost (AISC) per ounce | | $ | 1,824.50 | | | $ | 1,712.26 | | | $ | 1,603,.01 | | | $ | 1,825.69 | |
Financial Condition and Liquidity
| | | For the Periods Ended September 30 | | For the Six Months Ended June 30, | | Net cash provided (used) by: | | 2017 | | 2016 | | 2022 | | | 2021 | | Operating activities | $ | 231,785 | $ | (453,716) | | $ | (1,694,476 | ) | | $ | (762,582 | ) | Investing activities | | (75,914) | | (411,347) | | (889,004 | ) | | (2,334,899 | ) | Financing activities | | (61,441) | | 1,285,902 | | | 3,740,585 | | | | 1,552,217 | | Net change in cash and cash equivalents | | 94,430 | | 420,839 | | 1,157,105 | | (1,545,264 | ) | Cash and cash equivalents, beginning of period | | 154,833 | | 62,275 | | | 1,976,518 | | | | 2,539,945 | | Cash and cash equivalents, end of period | $ | 249,263 | $ | 483,114 | | $ | 3,133,623 | | | $ | 994,681 | |
The Company’s cash flow is directly related to revenues generated from production. The Company has experienced operating losses and negative operating cash flows prior to and during the ramp up of production activities at the Golden Chest Mine. In addition to cash flow from operations, ongoing operations are dependent on the Company’s ability to obtain public equity financing by the issuance of capital and to generate profitable operations in the future.
The Company is currently producing from both the open-pit and underground at the Golden Chest Mine and preparing to begin production underground, which is scheduled for November 2017.Mine. In addition, during the first nine months of 2017, production has generated positive cash flow of $231,785 and planned production forpast, the next 18 months indicates the trend to improve. The Company has also been successful in raising required capital to commence production and fund ongoing operations, completing afrom sale of common stock, forward gold sale of $1.2 million in 2016contracts, and closing private placements of $1.4 million in the first quarter of 2017. Subsequent to September 30, 2017 The Company completed a private placement of $310,000 using the proceeds to reduce debt and pay off the remaining balance on the Golden Chest Mine property.
debt. As a result of its planned production, equity sales and ability to restructurepotential debt borrowings or restructurings, management believes cash flows from operations and existing cash are sufficient to conduct planned operations and meet contractual obligations for the next 12 months.
Changes in Financial Condition
The Company maintains an adequate cash balance by increasing entered into a Sales Agreement with Roth Capital Partners, LLC (the “Sales Agents”) dated June 7, 2022 (the “Sales Agreement”), pursuant to which the Company may, from time to time, sell up to $10 million in shares (the “Placement Shares”) of the Company’s common stock through the Sales Agents, acting as the Company’s sales agent and/or decreasing its discretionary expenditures as limited by availabilityprincipal, in a continuous at-the-market offering (the “ATM Offering”). The Company will pay the Sales Agents a commission of cashup to 3.0% of the aggregate gross proceeds the Company receives from operations or from financing activities.all sales of the Company’s common stock under the Sales Agreement. The cash balance at September 30, 2017 was $249,263 comparedPlacement Shares will be offered and sold pursuant to $154,833 at the end of 2016.
CashCompany’s shelf registration statement on Form S-3 (Registration No. 333-264647) and Cash Equivalents
Cash and cash equivalents increased as of September 30, 2017 compared to December 31, 2016 as a result of cash flows from production as well as equity financingthe related base prospectus included in the first quarter of 2017
Gold Sales Receivable
Gold sales receivable increasedregistration statement, as of September 30, 2017 compared to December 31, 2016 as a result of an increase in gold concentrate sales.
Note Receivable
Note receivable decreased as of September 30, 2017 compared to December 31, 2016 as a result collection of debt owed the Company.
Other Current Assets
Other current assets increased as of September 30, 2017 compared to December 31, 2016 as a result of prepaid expenses which will be expensed throughout the upcoming year.
Accounts Payable
The accounts payable balance increased as of September 30, 2017 compared to December 31, 2016 because of increased activity.
Reclamation Bond
The reclamation bond balance increased as of September 30, 2017 compared to December 31, 2016 because an additional reclamation bond was posted with the Idaho Department of Lands for expansion of the Golden Chest open pit reclamation.
Notes and Interest Payable Related Parties
Notes and interest payable related parties have decreased overall as of September 30, 2017 compared to December 31, 2016 as scheduled payments have been made. Additionally, two notes have been amended resulting in reclassification of current debt to long term.
Forward Gold Contracts
Forward gold contracts have decreased overall as of September 30, 2017 compared to December 31, 2016 as scheduled payments have been made. Additionally, Ophir Holdings, a related party, has agreed to delay the delivery of gold ounces due to it resulting in reclassification some of the current portion of gold forward contracts to long term.
Depreciation
Depreciation increased in 2017 compared to 2016 as a result of units of production depreciation calculations as the mill and Golden Chest as production of ore proceeds in 2017.
Amortization of Discount on Note Payable
Amortization of discount on note payable decreased in 2017 compared to 2016 as a result a lower associated debt balance.
Stock Based Compensation
Stock based compensation has increased in 2017 compared to 2016 as the Company has implemented its stock based compensation plan.
Change in Fair Value of Forward Gold Contracts
Change in fair value of forward gold contracts is lower in 2017 compared to 2016 as a result of a lower debt balance that requires adjustment to market value in 2017.
Milling Receivable
Milling receivable has a positive cash flow in 2017 compared to 2016 as payments have been receivedsupplemented by the Company for past work that was completed.
Gold Sales Receivable
Gold sales receivable increased in 2017 compared to 2016 as a resultprospectus supplement dated June 7, 2022. As of an increase in gold concentrate sales.
Concentrate Inventory
Concentrate inventory increased in 2017 compared to 2016 as a result of production in 2017 compared to 2016 where production did not commence until the 4th quarter.
Other Current Assets
Other current assets increased as of SeptemberJune 30, 2017 compared to 2016 as a result of prepaid expenses which will be expensed throughout the upcoming year.
Accrued Payroll and Related Payroll Expense
Cash outflows from accrued payroll and related payroll expense have leveled off in 2017 compared to 2016 as a result of more consistent operating activity as the Company continues operations.
Purchase of Investment in Joint Venture
Cash flow for purchase of investment in joint venture in the first quarter of 2016 were because of the acquisition of the 50% interest in the Butte Highlands JV.
Acquisition of GF&H, Net of Gain Recognized as Equity Transaction
Acquisition of GF&H, net of gain recognized as equity transaction, was a charge in 2016 related to the acquisition of the GF&H property.
Sales of Common Stock and Warrants, Net of Issuance Costs
The Company completed two private placements in the first quarter of 2017.
Proceeds from Forward Gold Contracts
Proceeds from forward gold contracts in 2016 were from the Company entering into those contracts in July of 2016.
Borrowings on Notes Payable, Related Parties
In 20162022, the Company received funding from related parties to fundnet proceeds on sales of 138,665 shares of common stock under the startupSales Agreement of the Golden Chest production.approximately $980,107 (after deducting $30,532 in commissions and expenses) at a weighted average price of $7.29.
Principal Payments on Forward Gold Contracts in Cash and Gold Coins Purchased for Payments on Forward Gold Contracts
Payments on forward gold contracts in cash and gold coins purchased for payments on forward gold contracts are new payments for the forward gold contracts entered into in the third quarter of 2016.
Principal Payments on Notes Payable
Cash outflow for principal payments on notes payable increased in 2017 compared to 2016 as a result of payments on a note payable for the Golden Chest.
Principal Payments on Notes Payables Related Party
Cash outflow for principal payments on notes payable related party increased in 2017 compared to 2016 as a result of payments on a note payables to the Company’s related parties.
ItemITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for small reporting companies.
Item 4:
ITEM 4: CONTROLS AND PROCEDURES
Disclosure Controls and Procedures At SeptemberJune 30, 2017,2022, our Vice President who also serves as our Chief Accounting Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), which disclosure controls and procedures are designed to insure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within required time periods specified by the Securities & Exchange Commission rules and forms.
Based upon that evaluation, it was concluded that our disclosure controls were effective as of SeptemberJune 30, 2017,2022, to ensure timely reporting with the Securities and Exchange Commission. Specifically, the Company’s corporate governance and disclosure controls and procedures provided reasonable assurance that required reports were timely and accurately reported in our periodic reports filed with the Securities and Exchange Commission.
Changes in internal control over financial reporting There was no material change in internal control over financial reporting in the quarter ended SeptemberJune 30, 2017.2022.
PART II - OTHER INFORMATION
Item 1.
ITEM 1. LEGAL PROCEEDINGS
NoneNone.
Item 2.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Neither the constituent instruments defining the rights of the Company’s securities filers nor the rights evidenced by the Company’s outstanding common stock have been modified, limited or qualified.
DuringIn the first quarter of 20172021 the Company issued 11,700,000714 shares of unregistered common stock at $0.10$3.22 per share for services provided for a total value of $2,300. Also, in the first quarter of 2021, 44,643 options were exercised in exchange for 28,196 shares at $5.32 per share in a cashless warrant exercise. In the second quarter of 2021 the Company issued 1,071 shares of common stock at $3.92 per share for services provided for a total value of $4,200. 19,841 warrants were exercised at $2.52 per share for $50,000. 291,667 options were exercised at $2.52 per share in exchange for $735,000 of convertible debt. Also, in the second quarter of 2021, 7,143 options were exercised in exchange for 3,571 shares at $3.92 per share in a cashless warrant exercise
The Company closed a private placement in February 2022. Under the private placement, the Company sold 360,134 units at $7.50 per unit for net proceeds of $850,000 net$2,701,000. Each unit consisted of commission and brokerage costs as a resultone share of two private placement offerings.
Duringthe Company’s common stock. In the first quarter of 20162022 the Company issued 3,000,0003,572 shares of unregistered common stock at $0.07$9.05 per share for a total consideration of $210,000 as a part of the Butte Highlands mineral property purchase. During the third quarter of 2016 the Company issued 175,760 shares of unregistered common stock at $0.15 per shareservices provided for a total considerationvalue of $26,364 as part$32,326. In the first quarter of 2022 23,057 shares were issued in exchange for outstanding warrants for net proceeds of $68,006. In the first quarter of 2022, 51,789 options were exercised in exchange for 28,981 shares at an average price of $9.72 per share in a cashless warrant exercise. In March of 2022 392,866 shares of the paymentCompany’s stock were issued to holders of convertible debt. 35,715 of those shares were issued at rate of $5.60 per share and the remaining 357,151 of those shares were issued at a rate of $4.90 per share in exchange for a total of $1,950,000 in debt. In the acquisitionsecond quarter of 2022, 70,919 shares were issued in exchange for outstanding warrants for net proceeds of $397,147. In the outstandingsecond quarter of 2022, 42,859 options were exercised in exchange for 26,584 shares at an average price of GF&H Company.$9.44 per share in a cashless warrant exercise.
The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D Rule 506(b). The common shares are restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Securities Act of 1933, as amended.
Item 3.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has no outstanding senior securities.
Item 4.
ITEM 4. MINE SAFETY DISCLOSURES
Pursuant toThe information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the quarter ended September 30, 2017, the Company had no citations for a violation of mandatory health or safety standards that could significantly and substantially (S&S citation) contribute to the cause and effect a mine safety or health hazard under sectionItem 104 of Regulation S-K is included in exhibit 95 to this report.
ITEM 5. OTHER INFORMATION In January 2022, the Federal Mine SafetyBoard adopted its (a) Code of Business Conduct and Health Act of 1977. There were no legal actions, mining-related fatalities, or similar events in relation to the Company’s United States operations requiring disclosure pursuant to Section 1503(a)Ethics; (b) Charter of the Dodd-Frank Act.
Item 5.Audit Committee; (c) Charter of the Compensation Committee; (d) Charter of the Corporate Governance and Nominating Committee; and (e) Whistle Blower Policy. Copies of each are attached hereto as Exhibits 14, 99.1, 99.2, 99.3, and 99.4, respectively.
OTHER INFORMATION
None
Item 6.
EXHIBITS
ITEM 6. EXHIBITS Exhibits 3.1 | Description
| Amended and Restated Articles of Incorporation, incorporated by reference to the Company’s Form 8-K as filed with the Securities and Exchange Commission on October 27, 2021 | 3.13.2
| | ArticlesAmended and Restated By-laws of Incorporation. Filed as an exhibit to the registrant's registration statement on Form 10 (Commission File No. 000-28837) andIdaho Strategic Resources, Inc., incorporated by reference herein.to the Company’s Form 8-K as filed with the Securities and Exchange Commission on October 27, 2021
| 3.210.1*
| | Bylaws. Filed as an exhibitVenture Agreement with United Mine Services, Inc. dated January 7, 2011.
| 10.2*** | | Consent, Waiver and Assumption of Venture Agreement by Crescent dated February 14, 2014 | 10.3 | | Registrant’s Grant of Options to the registrant's registration statement on Form 10 (Commission File No. 000-28837)Directors and Officers dated December 30, 2016, incorporated by reference herein.to the Company’s Form 8-K as filed with the Securities and Exchange Commission on January 4, 2017. | 31.110.4
| | Registrant’s Grant of Options to Employees and Directors of the Company dated October 20, 2021, incorporated by reference to the Company’s Form 8-K as filed with the Securities and Exchange Commission on October 22, 2021. | 10.5 | | Form of Convertible Note Purchase Agreement dated as of February 18, 2020, incorporated by reference to the Company’s 8-K as filed with the Securities and Exchange Commission on February 20, 2020. | 10.6 | | Form of Convertible Promissory Note dated as of February 18, 2020, incorporated by reference to the Company’s 8-K as filed with the Securities and Exchange Commission on February 20, 2020. | 10.7 | | Form of Convertible Note Purchase Agreement dated as of April 14, 2021, incorporated by reference to the Company’s 8-K as filed with the Securities and Exchange Commission on April 19, 2021. | 10.8 | | Form of Convertible Promissory Note dated as of April 14, 2021, incorporated by reference to the Company’s 8-K as filed with the Securities and Exchange Commission on April 19, 2021. | 10.9 | | Sales Agreement, dated June 7, 2022, by and between the Company and Roth Capital Partners, LLC, incorporated by reference to the Company’s 8-K as filed with the Securities and Exchange Commission on June 9, 2022. | 23.1***** | | Consent of Lyons O’Dowd, PLLC | 23.2***** | | Consent of Assure CPA, LLC | 31.1**** | | Certification pursuant to Section 302 of the Sarbanes-Oxley actAct of 2002.* | 31.231.2****
| | Certification pursuant to Section 302 of the Sarbanes-Oxley actAct of 2002.* | 32.132.1****
| | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | 32.232.2****
| | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | 101.INS95****
| | Mine safety information listed in Section 1503 of the Dodd-Frank Act. | 101.INS**** | | XBRL Instance Document | 101.SCH101.SCH****
| | XBRL Taxonomy Extension Schema Document | 101.CAL101.CAL****
| | XBRL Taxonomy Extension Calculation Linkbase Document | 101.DEF101.DEF****
| | XBRL Taxonomy Extension Definition Linkbase Document | 101.LAB101.LAB****
| | XBRL Taxonomy Extension Label Linkbase Document | 101.PRE101.PRE****
| | XBRL Taxonomy Extension Presentation Linkbase Document |
_______________ * | Filed with the Registrant’s Form 10 on June 4, 2014. | ** | Filed July 2, 2014 | *** | Filed March 31, 2015. | **** | Filed herewith. | ***** | Filed with the Registrant’s S-3 Registration Statement on May 3, 2022. |
* as filed herewithSIGNATURES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| IDAHO STRATEGIC RESOURCES, INC | | | | | | | By: | /s/ John Swallow | | | | John Swallow, | | | its: | President and Chief Executive Officer | | | Date | August 15, 2022 | | | | | | | By: | /s/ Grant Brackebusch | | | | Grant Brackebusch, | | | its: | Vice President and Chief Financial Officer | | | Date: | August 15, 2022 | |
NEW JERSEY MINING COMPANY
By: /s/ John Swallow
John Swallow,
its: President, Chief Executive Officer and Chief Financial Officer
Date November 14, 2017
By: /s/ Grant Brackebusch
Grant Brackebusch,
its: Vice President
Date: November 14, 2017
21
|