UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended March 31,June 30, 2023

OR

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

For the transition from _______to _______________

Commission file number 000-14319

AMERICAN CLEAN RESOURCES GROUP, INC.

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

12567 West Cedar Drive, Lakewood, CO 80228-2039

(Address of Principal Executive Offices)

(888) 960-7347

(Issuer’s Telephone Number, Including Area Code)

611 Walnut Street, Gadsden, Alabama 35901

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

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

Indicate by check mark whether the Registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒☑  No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such fi les)files).). Yes ☒☑  No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act: ☐

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

As of May 10,August 18, 2023, there were 2,674,53012,918,760 shares of common stock outstanding which is the Registrant’s only class of voting stock. 

Documents incorporated by referencereference.

AMERICAN CLEAN RESOURCES GROUP, INC.

FORM 10-Q

FOR THE THREE AND SIX MONTHS ENDED MARCH 31,JUNE 30, 2023

TABLE OF CONTENTS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains certain statements which are forward-looking in nature and are based on the current beliefs of our management as well as assumptions made by and information currently available to management, general trends in our operations or financial results, plans, expectations, estimates and beliefs. In addition, when used in this Form 10-Q, the words “may,” “could,” “should,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “predict” and similar expressions and their variants, as they relate to us or our management, may identify forward-looking statements. These statements reflect our judgment as of the date of this Form 10-Q with respect to future events, the outcome of which is subject to risks. We have attempted to identify, in context, certain of the factors that we believe may cause actual future experience and results to differ materially from our current expectations, which may have a significant impact on our business, operating results, financial condition or your investment in our common stock, as described in Part II, Item 1A entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (“SEC”) on April 17, 2023.

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

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

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN CLEAN RESOURCES GROUP, INC.

CONDENSED Consolidated Balance Sheets

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

AMERICAN CLEAN RESOURCES GROUP, INC.

CONDENSED Consolidated STATEMENTS OF OPERATIONS

(Unaudited)

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

AMERICAN CLEAN RESOURCES GROUP, INC.

CONDENSED Consolidated STATEMENTS OF CASH FLOWS 

(Unaudited)

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

AMERICAN CLEAN RESOURCES GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

FOR THE THREE MONTHS ENDED MARCH 31,June 30, 2023 AND 2022

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

AMERICAN CLEAN RESOURCES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREESIX MONTHS ENDED MARCH 31,JUNE 30, 2023

(unaudited)

NOTE 1 – NATURE OF BUSINESS

American Clean Resources Group, Inc. f/k/a Standard Metals Processing, Inc. (“we,” “us,” “our,” “ACRG” or the “Company”) is an exploration stage company, incorporated in Nevada having officesan office in Lakewood, Colorado and through its subsidiary, a property in Tonopah, Nevada. The business plan is to purchase equipment and build a facility on the Tonopah property to serve as a permitted custom processing toll milling facility (which includes an analytical lab, pyrometallurgical plant, and hydrometallurgical recovery plant).

The Company plans to perform permitted custom processing toll milling which is a process whereby mined material is crushed and ground into fine particles to ease the extraction of any precious minerals contained therein, such as minerals in the gold, silver, and platinum metal groups. Custom milling and refining can include many different processes that are designed specifically for each ore load and to maximize the extraction of precious metals from carbon or concentrates. These toll-processing services also distil, dry, mix, or mill chemicals and bulk materials on a contractual basis and provide a chemical production outsourcing option for industrial companies, which lack the expertise, capacity, or regulatory permits for in-house production.

We are required to obtain several permits before we can begin construction of a small-scale mineral processing facility to conduct permitted processing toll milling activities and construction of the required additional buildings and well relocation necessary for us to commence operations.

Going Concern

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), assuming we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the threesix months ended March 31,June 30, 2023, the Company incurred net losses from operations of $195,357.$617,294. At March 31,June 30, 2023, the Company had an accumulated deficit of $106,725,853$107,147,790 and a working capital deficit of $12,545,405.$12,967,342. In addition, virtually all of the Company’s assets are encumbered or pledged under a senior secured convertible promissory note payable to a related party that is in default.party. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise the required additional capital or debt financing to meet short and long-term operating requirements. During the threesix months ended March 31,June 30, 2023, the Company had $39,426$162,404 of expenses, and $945,960$8,938,877 of defaulted notes payable and accrued interest, plus a legal judgement sold by their holders, that were paidpurchased directly by GPR,Granite Peak Resources, LLC (“GPR”), a related party and the Company'sCompany’s convertible note line of credit with GPR was increased by this same amount. During the three monthsyear ended MarchDecember 31, 2022, the Company had $314,433 of expenses that were paid directly by GPR, a related party and the Company'sCompany’s convertible note line of credit with GPR was increased by this same amount. (See Notes 4 and 8)Note 4).

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

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of ACRGAmerican Clean Resources Group Inc. (“ACRG”) and its wholly owned subsidiary Aurielle Enterprises Inc. (“AE”) and its wholly owned subsidiaries, Tonopah Custom Processing, Inc., (“TCP”) and Tonopah Resources, Inc. (“TR”). All significant intercompany transactions, accounts and balances have been eliminated in consolidation.  

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”),GAAP, for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and footnotes required by USU.S. GAAP for complete financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2022, filed April 17, 2023. In the opinion of management, all adjustments (consisting of normal recurring adjustments unless otherwise indicated) considered necessary for a fair presentation have been included. Operating results for the three and six months ended March 31,June 30, 2023, are not necessarily indicative of the results that may be expected for the year as a whole.

The accompanying condensed consolidated financial statements of the Company have been prepared using the accrual method of accounting in accordance with U.S. GAAP and considering the requirements of the SEC.

Cash

We maintain our cash in high-quality financial institutions. The balances, at times, may exceed federally insured limits, however the Company has not experienced any losses with respect to uninsured balances.

Long-Lived Assets and Impairment of Long-Lived Assets

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

Impairment of Long-Lived Assets and Long-Lived Assets

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

Use of Estimates

Preparing condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 

Revenue Recognition and Deferred Revenue

As of March 31,June 30, 2023 and December 31, 2022, we have recorded no revenues from custom permitted processing toll milling. If we achieve revenue generation, the Company plans to report such revenues consistent with ASC Topic 606 Revenues from Contracts with Customers.

Financial Instruments

The carrying amounts for all financial instruments approximates fair value. The carrying amounts for cash, accounts payable and accrued liabilities approximated fair value because of the short maturity of these instruments. The fair value of short-term debt is approximated at their carrying amounts based upon the expected borrowing rate for debt with similar remaining maturities and comparable risk.

Loss per Common Share

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

At March 31,June 30, 2023, and December 31, 2022, the number of equivalent shares of convertible notes payable of 2,324,26110,030,236 and 846,499 respectively, were excluded from the diluted weighted average common share calculation due to the antidilutive effect such shares would have on net loss per common share.

Income Taxes

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

Accounting guidance requires the recognition of a financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company believes its income tax filing positions and deductions will be sustained upon examination and accordingly, no reserves, or related accruals for interest and penalties have been recorded at December 31, 2022 and March 31,June 30, 2023. The Company recognizes interest and penalties on unrecognized tax benefits as well as interest received from favorable tax settlements within income tax expense.

Recent Accounting Standards

During the three month periodyear ended MarchDecember 31, 2023,2022, and through May 15, 2023,the date of filing, there were several new accounting pronouncements issued by the Financial Accounting Standards Board.Board (“FASB”). Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements.

Management’s Evaluation of Subsequent Events

The Company evaluates events that have occurred after the consolidated balance sheet date of March 31, 2023, through the date which the consolidated financial statements were issued. Based upon the review, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.

Mineral Properties

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

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

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

The Company does not own any mining claims. It owns tailings located on the Tonopah property and the rights to some tailings located in Manhattan, Nevada. The Company has not disturbed or processed any of this material, but recently authorized GPR to examine the economic feasibility of processing the tailings to reclaim their residual content of valuable metals in exchange for the exclusive right to process the tailings should their economic assessment prove positive. The terms of such processing to be mutually agreed upon between GPR and the Company in the future based on the results of the assessment.  In addition, the Company and Sustainable Metal Solutions, LLC (“SMS”), an affiliate of GPR, previously agreed to form a joint venture into which the Company will contributewould have contributed the solar energy rights attributable to its 1,086 acres in exchange for SMS’s agreement to develop, manage and underwrite the venture.venture, as the Company and SMS are in contract for the Company’s acquisition of SMS, the Company intends to incorporate solar energy production into its planned operations.

Management’s Evaluation of Subsequent Events

The Company evaluates events that have occurred after the condensed consolidated balance sheet date of June 30, 2023, through the date which the consolidated financial statements were issued. Based upon the review, other than described in Note 9 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.

NOTE 3 – MINING AND MINERAL RIGHTS

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

The Company has continued to assess the realizability of its mining and mineral rights. Based on an assessment the Company conducted in January 2023, the Company believes the carrying value of the rights recorded on its books is not impaired. TheHowever, the Company determined that its land, mineral rights, and water rights of $3,883,524 waswere fairly stated and not exposed to impairment.

NOTE 4 – CONVERTIBLE NOTESPROMISSORY NOTE(S) PAYABLE, RELATED PARTY

On March 16, 2020 the Company executed a Line of Credit (“LOC”) with Granite Peak Resources, LLC (“GPR”), a related party, evidenced by a convertible promissory note. The LOC is for up to $2,500,000, matures over three years and may be increased by up to another $1,000,000 and extended an additional two years at GPR’s sole option. The LOC is for funding operating expenses critical to the Company’s basic operations and redirection and all requests for funds may be approved or disapproved in GPR’s sole discretion. The LOC bears interest at 10% per annum, iswas convertible into shares of the Company’s common stock at a per share price of $1.65 and is secured by the real and personal property of the Company and its subsidiaries, and the subsidiaries’ stock GPR already has under lien (See Note 8). During the three months ended March 31, 2023, the Company had $39,426 of expenses, and $945,960 of defaulted notes payable and accrued interest sold by their holders, that were paid directly by GPR, a related party and the Company's convertible note line of credit with GPR was increased by this same amount. During the year ended December 31, 2022, the Company had $314,433 of expenses that were paid directly by GPR, a related party and the Company's convertible note line of credit with GPR was increased by this same amount certain accounts payable. At March 31, 2023 and December 31, 2022 the balance due GPR under the LOC is $2,184,913 and $1,299,527 principal and $243,169 and $184,928 accrued interest, respectively.

The Company entered into an Amendment and Forbearance Agreement with GPR on January 5, 2023 wherein GPR agreed to: (a) increase the existing LOC from $5,000,000 due March 16, 2025 to $35,000,000 due March 16, 2027, (b) roll two existing promissory notes and the judgement purchased by GPR into the LOC resulting in the extinguishment of such notes and judgement as separate instruments, and (c) to forebear until January 12, 2024, on exercising its foreclosure rights under its defaulted Senior Secured Note. The Company’s Board of Directors approved a revision in the conversion price at which the LOC may convert into the Company’s common stock from $1.65 per share to $1.05 per share, based upon the market price of the Company’s common stock over the 3 days preceding the agreement. GPR is the Company’s majority shareholder and largest debtholder. GPR holds a senior secured interest in all of the assets of the Company, including the stock of its subsidiary entities. Effective June 12, 2023, the Company entered into a Third Amendment Agreement with GPR, wherein the LOC was increased to $52,500,000 and both the Senior Secured Promissory Note (previously held by Pure Path and acquired in 2019- see the Company’s 10-K for 2022) and the Flechner Judgment (defined in Note 7 below) were rolled into the balance of the LOC and the Deed of Trust was increased to $250,000,000.

Advances by GPR to pay directly certain operating expenses, reduce certain accounts payable, or acquire certain notes payable in default on the Company’s behalf have been included in the convertible promissory issued by the Company in connection with the LOC and classified accordingly in the accompanying consolidated condensed consolidated financial statements. During the six months ended June 30, 2023, the Company had $162,404 of expenses, and $8,938,877 of notes payable and accrued interest, and a legal judgment sold by their respective holders, that were purchased directly by GPR, a related party and the Company’s convertible line of credit with GPR was increased by this same amount. During the year ended December 31, 2022, the Company had $162,404 of expenses that were paid directly by GPR, and the Company’s convertible line of credit with GPR was increased by this same amount of the related accounts payable and liabilities. At June 30, 2023 and December 31, 2022 the balance due GPR under the LOC is $10,238,404 and $1,199,527 principal and $293,344 and $184,928 accrued interest, respectively.

The entire balance of the LOC was converted into shares of restricted common stock of the Company in August 2023. See Subsequent Events.

NOTE 5 – PREFERRED STOCK – SERIES A

The Series A Preferred Stock is presented as mezzanine equity due to its rights and preference. The Attributes of the Series A Preferred Stock include but are not limited toincluded in the following:Company’s Annual Statement on Form 10-K.

Distribution in Liquidation

The Series A Preferred Stock has a liquidation preference of $10,000,000, payable only upon certain liquidity events or upon achievement of a market value of our equity equaling $200,000,000 or more. Upon any liquidation, dissolution or winding up of the Company, and after paying or adequately providing for the payment of all its obligations, the remainder of the assets of the Company shall be distributed, either in cash or in kind, first pro rata to the holders of the Series A Preferred Stock in an amount equal to the Liquidation Value (as described below); then, to any other series of Preferred Stock, until an amount to be determined by a resolution of the Board of Directors prior to issuances of such Preferred Stock, has been distributed per share, and, then, the remainder pro rata to the holders of the Common Stock. Upon the occurrence of any Liquidation Event (as defined below), each holder of Series A Preferred Stock will receive a payment equal to the Original Issue Price for each share of Series A Preferred Stock held by such holder (the “Liquidation Value”). A “Liquidation Event” will have occurred when:

Written notice of any Liquidation Event (the “Liquidation Notice”) shall be given by mail, postage prepaid, or by facsimile to non-U.S. residents, not less than five days prior to the anticipated payment date state therein, to the holders of record of Series A Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Company. The Liquidation Notice shall state (i) the anticipated payment date, and (ii) the total Liquidation Value available for distribution to Series A Preferred Stock shareholders upon the occurrence of the Liquidation Event.

Redemption

The Series A Preferred Stock may be redeemed in whole or in part as determined by a resolution of the Board of Directors at any time, at a price equal to the Liquidation Value.

Voting Rights

Shares of Series A Preferred Stock shall have no rights to vote on any matter submitted to a vote of shareholders, except as required by law, in which case each share of Series A Preferred Stock shall be entitled to one vote.

Conversion Rights

Holders of Series A Preferred Stock will have no right to convert such shares into any other equity securities of the Company.

NOTE 6 – COMMON STOCK

Common Stock - Option Grants

The Company recorded no compensation expense for the threesix months ended March 31,June 30, 2023 and 2022. As of March 31,June 30, 2023, there was $0 in unrecognized compensation expense.

The Company did not grant any options during the threesix months ended March 31,June 30, 2023, none expired, and none were cancelled. There are no unvested options as of March 31, 2023. 

Common Stock issued on exercise of stock optionsJune 30, 2022. 

None.

Sale of Common Stock

None.

Option Grants  

During the three months ended March 31, 2023 and the year ended December 31, 2022, there were no option grants issued, cancelled, or outstanding.

Common Stock Purchase Warrants

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

DuringThe Company did not grant any warrants during the threesix months ended MarchJune 30, 2023 and no warrants were exercised, 5,000 expired, and none were cancelled. At June 30, 2022 there were 5,000 warrants outstanding, with exercise prices of $56.00, a weighted exercise price of $56.00 and a weighted remaining contractual life of 0.9 years.

The aggregate intrinsic value of the 5,000 outstanding and exercisable warrants at June 30, 2023 and December 31, 2022 was $0. The intrinsic value is the difference between the closing stock price on June 30, 2023 and December 31, 2022, and the exercise price, multiplied by the number of in-the-money warrants had all warrant holders exercised their warrants on June 30, 2023 or June 30, 2022.

Common Stock issued on exercise of stock options

None.

Sale of Common Stock

None.

Option Grants  

During the year ended December 31, 2022 and the three and six months ended June 30, 2023, there were no option grants issued, cancelled, or outstanding.

Common Stock Purchase Warrants

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

During the year ended December 31, 2022 and the six months ended June 30, 2023, there were no stock purchase warrants issued, cancelled, or outstanding.

The aggregate intrinsic value of the outstanding and exercisable warrants at MarchDecember 31, 2023 and December 31, 2022, respectively, was $0, as there are no outstanding$0. The intrinsic value is the difference between the closing stock price on December 31, 2023, and exercisable warrants.2022 and the exercise price, multiplied by the number of in-the-money warrants had all warrant holders exercised their warrants on December 31, 2023, and 2022 is $0.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Merger with SMS

On January 10, 2022, the Company executed a definitive agreement to acquire a controlling interest in Sustainable Metal Solutions, LLC (“SMS”) and its subsidiaries (collectively referred to as the “SMS Group”). Closing of the acquisition of the SMS Group is subject to due diligence. The purchase price for the controlling interest inof the SMS Group will be determined based uponon the price of ACRG common stock on the date of closing,Closing, such date to be decided by the Parties in good faith after all conditions precedent are met. SMSThe Company will file a registration statement with the Securities and Exchange Commission (“SEC”) covering all shares of common stock issued in connection with this transaction. is an American multi-companycommitted to being a leading environmental development platform focusedwith a focus on producing carbon neutral precious minerals and metals by adhering to a set of clear environmental, social and governance (“ESG”) procedures and policies. The SMS Group is active in the exploration and advancement of mining rights to metals and minerals thereby driving American mineral independence while revitalizingthat may be refined and marketed using the most efficient and sustainable sources of clean energy and operating methods to promote clean land, clean water, and clean air conservation. The SMS Group is working with various technologies to extract valuable metals and minerals efficiently and responsibly, both by mining them from their original underground state and by processing them from historically abandoned mine tailings containing substantial amounts of valuable metals and minerals. These metals were overlooked by earlier mining operations due to less developed separation technologies available at that time and the high cost of moving and reprocessing them. Management of the SMS Group believes that recovering metals and minerals from previously discarded tailings enhances the domestic supply of such metals and minerals at a lower economic cost than importation or traditional domestic mining operations. Additionally, SMS Management believes this will also enables the revitalization of the environment and minimizing the impacts of climate change. helps mitigate our carbon footprint. The land, tailings, soil, and material left behind after processing may be repurposed as fill for housing development, land conservation efforts, and road fill, thereby promoting environmental stewardship with sensible land use and biodiversity.

The business of the SMS Group is consistent with the Company’s posture to acquire, license or joint venture with other parties involved in toll milling, processing, or mining related activities, which may include GPR and its affiliated entities, including, but not limited to, NovaMetallix. Inc., and BlackBear Natural Resources, LTD.

The SMS Group agreed to the Company’s independent accountants review and audit its financial statements for 2021, 2022, and 2023, and to assist in the financial disclosure requirements required by the SEC. As previously disclosed, this is a complex audit and is still in process.

In addition, the SK 1300, a comprehensive independent engineering report on SMS's mineral reserves at December 2021, 2022, and 2023, required by the SEC, are being completed; another necessary step in preparing the merger disclosure documents to solicit ACRG’s shareholder approval of the planned business combination.

Legal Matters 

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

On August 12, 2015 the United StatesStated District Court for the District of Colorado issued a judgment in favor of Stephen E. Flechner for $2,157,000.Flechner. An amended final judgment was ordered in adjudication of the Complaint by the U.S. District Court for the District of Colorado (the “Court”) on August 28, 2015 in favor of Flechner in the amount of $2,157,000, plus interest through the date of judgment of $235,246, plus interest of $472.76/day from August 28, 2015 until paid in full. The Company has recognized the daily interest due from the date of the August 28, 2015 judgment through March 31, 2023, totaling $1,354,038, resulting in a total amount of $3,746,285 being included in the accrual for settlement of lawsuits relating to this matter in the accompanying condensed consolidated balance sheet as of March 31, 2023.(“Flechner Judgment”).

On November 29, 2021, the Company was notified that its majority shareholder, GPR, had executed definitive documents with Stephen E. Flechner to acquire his judgment against the Company. Documents have been filed with the Court to reflect this acquisition.

On June 12, 2023 the Company and GPR agreed to roll the balance of the Judgment into the LOC.

NOTE 8 – related party TRANSACTIONS

During March 2019, the Company was informed that a change of control of the Company had occurred. GPR, through its members, including Pure Path Capital Management LLC acquired 1,389,289 shares of common stock (including 90,000 warrants to purchase common stock). The members transferred their shares of common stock of the Company in exchange for a pro-rata ownership interest in GPR and are listed in the Schedule 13D filed by GPR on March 29, 2019. Since March 2019, through March 31, 2023, GPR and its members, through several unsolicited transactions purchased another 43,206 shares of common stock. GPR has not communicated to the Company any plans to change any of the current officers or directors or governing documents. GPR has expressed the purpose of its acquisition is to assist the Company in resolving its current obligations and claims, as a critical step in determining its future business plans.

GPR also acquired the senior secured creditor position previously held by Pure Path Capital Group LLC (the “Secured Note”), which includes a $2,500,000 first deed of trust on the Tonopah property and an outstanding promissory note with a principal balance of $2,229,187 as of both March 31, 2023 and December 31, 2022, and related accrued interest of $1,978,761 and $2,286,109, respectively. The Secured Note is securitized by all the Company’s tangible or intangible assets, already or hereinafter acquired, including but not limited to machinery, inventory, accounts receivable, cash, computers, hardware, land and mineral rights, etc., and all of the outstanding shares of the Company’s subsidiary AE and its subsidiaries TCP and TR which are held in Pledge by GPR’s Nevada counsel. The outstanding principal balance on the Secured Note of $2,229,187 together with related accrued interest of $978,761 at March 31, 2023.

As further detailed in Note 4, in March 2020, the Company executed a Line of Credit (“LOC”) with GPR, a related party, evidenced by a 10% convertible promissory note. The LOC iswas for up to $2,500,000, maturesmatured over three years and may be increased by up to another $1,000,000$1,000.000 and extended an additional two years, respectively at GPR’s sole option. As theThe LOC, like the Secured Note, is secured by all the Company’s assets including a pledge of 100% of its subsidiaries’ stock. As such, the LOC’s outstanding balance and accrued interest increase the amount of secured debt owned by GPR.

The Company entered Intointo an Amendment and Forbearance Agreement with GPR effective July 12, 2021, wherein the LOC was increased to $5,000,000, the due date was extended to March 16, 2025 with an option to increase the LOC by an additional $5,000,000 with an extension for five additional years and the exercise price was reduced to $1.65 per share based on the current market price. The Company entered into a Second Amendment and Forbearance Agreement with GPR on January 5, 2023 wherein GPR agreed to: (a) increase the existing LOC from $5,000,000 due March 16, 2025 to $35,000,000 due March 16, 2027, (b) roll two existing promissory notes purchased by GPR into the LOC resulting in the extinguishment of such notes as separate instruments, and (c) to forebear until January 12, 2024, on exercising its foreclosure rights under its defaulted Senior Secured Note. The Company’s Board of Directors approved a revision in the conversion price at which the LOC may convert into the Company’s common stock from $1.65 per share to $1.05 per share, based upon the market price of the Company’s common stock over the 3 days preceding the agreement. Effective June 12, 2023, the Company entered into a Third Amendment Agreement with GPR, iswherein the Company’s majority shareholderLOC was increased to $52,500,000 and largest debtholder. GPR holds a senior secured interestboth the Senior Secured Convertible Note (previously held by Pure Path) and the Flechner Judgment (defined in allNote 7) were rolled into the balance of the assetsLOC and the Deed of Trust was increased to $250,000,000.

The entire balance of the LOC was converted into shares of restricted common stock of the Company including the stock of its subsidiary entities.

On February 11, 2015, the Company issued an unsecured promissory note (the “TG Note”) to Tina Gregerson Family Properties, LLC, an entity controlled by a former director of the Company. The TG Note for up to $750,000 was provided in tranches. Maturity of each tranche is one year from the date of receipt. Interest accrued at 8% per annum on each tranche. Under the terms of the TG Note, the Company received $477,500. The TG Note was purchased from Ms. Gregerson by GPR, the Company’s majority shareholder in September 2021 and rolled into the LOC on January 5, 2023 and is no longer a separate note with a separate balance.August 2023. See Subsequent Events.

NOTE 9 – EARNINGS (LOSS) PER SHARE

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

At March 31, 2023 and December 31, 2022, the weighted average shares from no stock options or warrants outstanding and Convertible Promissory note equivalent shares of 2,324,261, and 846,499, respectively were excluded from the diluted weighted average common share calculation, due to the antidilutive effect such shares would have on net loss per common share.

NOTE 109 – SUBSEQUENT EVENTS

None.In furtherance of the preparation for the planned merger with the SMS Companies, Granite Peak Resources, LLC converted a $5,250,000 portion of the LOC into 5 million shares of restricted common stock effective August 2, 2023. The remaining $5,506,441 balance of the LOC was converted into 5,244,230 shares of restricted common stock effective August 15, 2023. GPR now owns 11,731,991 shares of common stock which is 90.8% of the Company’s outstanding shares of common stock.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management discussion and analysis of financial condition and results of operations should be read in connection with the accompanying unaudited condensed financial statements and related notes thereto included elsewhere in this report and the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC on April 17, 2023.

Cautionary Notice Regarding Forward Looking Statements

Readers are cautioned that the following discussion contains certain forward-looking statements and should be read in conjunction with the “Special Note Regarding Forward-Looking Statements” appearing at the beginning of this Quarterly Report.

The information contained in this Item 2 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

As used in this Quarterly Report on Form 10-Q and unless otherwise indicated, the terms “Company,” “we,” “us,” and “our” refer to American Clean Resources, Group, Inc. and our wholly owned subsidiary, Aurielle Enterprises Inc. (“AE”), and AE’s wholly owned subsidiaries Tonopah Custom Processing, Inc. (“TCP”) and Tonopah Resources, Inc. (“TR”). Unless otherwise specified, all dollar amounts are expressed in United States dollars.  

Corporate History

We were incorporated in the State of Colorado on July 10, 1985 and re-domiciled in Nevada in March 2013. In 2011, we closed a series of transactions, whereby we acquired certain assets of Shea Mining & Milling, LLC, which assets include land, buildings, a dormant milling facility, abandoned milling equipment, water permits, mine tailings, mine dumps and the assignment of a note payable, a lease and a contract agreement with permits. We completed the Shea Exchange Agreement in order to offer toll milling services of precious minerals. Toll milling is a process whereby mined material is crushed and ground into fine particles to ease the extraction of any precious minerals contained therein, such as gold, silver, and platinum group metals. Custom milling and refining can include many different processes to extract precious metals from carbon or concentrates. These toll-processing services also distill, dry, mix, or mill chemicals and bulk materials on a contractual basis and provide a chemical production outsourcing option for industrial companies which lack the expertise, capacity, or regulatory permits for in-house production.

Overview of the Company

We have an office in Lakewood, Colorado and, through a subsidiary, a property in Tonopah, Nevada. Our business plan is to purchase equipment and build a facility on the Tonopah property to serve as a permitted custom processing toll milling facility which includes an analytical lab, pyrometallurgical plant, and hydrometallurgical recovery plant. We are required to obtain several permits before we can begin construction of a small-scale mineral processing facility and the required additional buildings to conduct permitted processing toll milling activities and commence operations.

Water Pollution Control Permit with Nevada Department of Environmental Protection

Through Tonopah Custom Processing, Inc. (“TCP”),TCP, a Water Pollution Control Permit (“WPCP”) Application was filed with the Nevada Department of Environmental Protection (“NDEP”) Bureau of Mines and Mining Reclamation (“BMMR”) for the approval of the permits necessary for a small-scale mineral processing facility planned for the Tonopah property. The plant will perform laboratory testing, pilot testing, and custom processing of precious metal ores and concentrates from mining industry clients. Processing of ore materials will employ standard mineral processing techniques including gravity concentration, froth flotation and chemical leaching and carbon stripping.

The WPCP must be approved prior to commencing the planned construction of our processing plant in Tonopah, Nevada.  In connection with our WPCP application, NDEP suggested that we take the following actions: (i) retain a Nevada Certified Environmental Manager (“CEM”), (ii) perform Meteoric Profile II water testing on ground water directly below the mill as well as surrounding wells located off site, and (iii) determine baseline values of water using the Meteoric Profile II results. NDEP regulations require that the Company delay any new construction planned for “metal extraction” until after the permits are in place.

Advanced Surveying & Professional Services, a Professional Land Surveyor (“PLS”), completed surveys and testing of the Tonopah property required for the application of our required permits. After completion of the survey, it was determined the property is 1,186 acres. The scope of work the PLS completed includes: (i) setting a total of 19 permanent monuments at angle points along lines, (ii) setting eight permanent monuments locating US Hwy 95, (iii) recording a professional map indicating longitude and latitude for all corners, and (iv) providing a digital map accessible in Auto Cad software.

Site Preparation

We have completed the initial grading of specific designated areas on the 40 undisturbed acres of land including clearing all vegetation, removing of all scrap metal, and the excavation of the building pad for preparation of our planned new 21,875 square foot processing plant and have completed the removal of all the extra and unnecessary materials and old equipment that has accumulated on the land. We have also refurbished a trailer that will act as our construction office.

Business Plan

The Company is reexamining its next steps for developing a processing facility.  In an effort to move the Company’s business plan forward, the Company may evaluate opportunities to acquire, license, or joint venture with other parties, involved in toll milling, processing, or mining related activities, which may include GPR and its affiliated entities including, but not limited to, Sustainable Metal Solutions, LLC (“SMS”), Remedy Environmental LLC, and Black Bear Natural Resources, LTD.

The Company owns tailings located on the Tonopah property and the rights to some tailings located in Manhattan, Nevada. The Company has not disturbed or processed any of this material, but recently authorized GPR to examine the economic feasibility of processing the tailings to reclaim their residual content of valuable metals in exchange for the exclusive right to process the tailings should their economic assessment prove positive. The terms of such processing to be mutually agreed upon between GPR and the Company in the future based on the results of the assessment.  In addition, the Company and SMS, an affiliate of GPR, previously agreed to form a joint venture into which the Company will contributewould have contributed the solar energy rights attributable to its 1,086 acres in exchange for SMS’s agreement to develop, manage and underwrite the venture.venture, as the Company and SMS are in contract for the Company’s acquisition of SMS, the Company intends to incorporate solar energy production into its planned operations.

Products and Services

We plan to establish ourselves as a custom processing and permitted toll milling service provider. Our business plan is to build a facility on our Tonopah property, which includes an analytical lab, pyrometallurgical, and hydrometallurgical recovery plant.

The Company’s intention is to become a full service permitted custom toll milling and processing company that facilitates the extraction of precious and strategic minerals from mined material. The Company is in the process of obtaining the permits needed for construction and operation of our permitted custom processing toll milling facility with state-of-the-art equipment capable of processing gold, silver, and platinum metal groups. Many junior miners do not have the capital or the ability to permit a processing facility, yet they have a large supply of mined material that requires milling be performed. It is often cost prohibitive or impractical for these mine operators to send their materials to processing mills owned by the large mining companies, or to other customers sorely needing milling and processing services.

While Nevada has a historic role as a mining center with good proximate geology and ample mined product, very little custom processing toll milling capacity remains in the state. During the last several decades, other processing facilities have been shuttered due to high costs of regulations and the vertical integration of milling within large mining companies leaving junior miners with few options for local milling services. As a result, we are in a unique position among processing facilities because we are capable of true permitted custom processing. We have the only ball mill located within a custom toll milling facility within 300 miles allowing us to serve miners in the western United States, Canada, Mexico, and Central America.

Many junior miners are undercapitalized, have limited access to capital markets and have a large supply of mined material that requires milling be performed. Many large mining companies reserve their milling capacity for their inventory, which does not make providing third party services worthwhile. This provides the Company with an opportunity to provide these potential customers with dearly needed milling and processing services. Some of our mining customers will be able to take their tailings (the material left over after the desired minerals have been extracted) from the material they deposited with the Company and put it back in the exact same mines those tailings initially came from. Thereby eliminating the need for the Company to store or dispose of their voluminous remains.

Comparison of the ThreeSix Months Ended March 31,June 30, 2023 and March 31,June 30, 2022

Revenues

We had no revenues from any operations for the threesix months ended March 31,June 30, 2023 and 2022 Furthermore, we do not anticipate any significant future revenue until we have sufficiently funded construction and begin operations.

General and Administrative Expenses

General and administrative expenses were $42,119$206,565 for the threesix months ended March 31,June 30, 2023, as compared to $126,857$311,706 for the same period in 2022. The decrease for the threesix months ended March 31,June 30, 2023, was principally a result of a reduction in engineering and development expenses necessary with evaluating future uses of the Company’s property. In the threesix months ended March 31,June 30, 2022, the $126,857$311,706 of administrative expenses resulted in the substantial completion of that effort. We anticipate that operating expenses will increase for fiscal 2023 as we continue to move forward withassess the merger with SMS.Company’s future.

Other Income and Expenses

We receive monthly lease payments of from American Tower Corporation for a cellular tower located on our Tonopah land. As such Other Incomeother income for the threesix months ended March 31,June 30, 2023, was $2,099.$4,198 compared to $4,198 for the respective period in 2022. Additionally, the Company had a gain on derecognition of debt for the threesix months ended March 31,June 30, 2023 of $57,572 which was not reproduceableapplicable in the prior period.

Interest expense for the threesix months ended March 31,June 30, 2023, was $212,909,$472,499, compared to $182,698$367,659 for the same period in 2022. The increase of $30,211$104,840 in the currentprior period was consistent with the balances of debt between periods.

Liquidity and Capital Resources

Liquidity is a measure of an entity’s ability to secure enough cash to meet its contractual and operating needs as they arise. We have funded our operations and satisfied our capital requirements through increases in convertible debt pursuant to our LOC during the threesix months ended March 31,June 30, 2023, and 2022. We do not anticipate generating sufficient net positive cash flows from our operations to fund the next twelve months. We had a working capital deficit of $12,545,405$12,967,342 at March 31,June 30, 2023. Cash was $658$716 at March 31,June 30, 2023, as compared to cash of $1,251 at December 31, 2022.

Our cash reserves will not be sufficient to meet our operational needs and thus, we need to raise additional capital to pay for our operational expenses and provide for capital expenditures. Our basic operational expenses are currently estimated at approximately $25,000$35,000 per month. Above the basic operational expenses, we estimate that we need approximately $10,000,000 to begin limited toll milling operations. If we are not able to raise additional working capital, we may have to cease operations altogether.

Operating Activities

Net cash used in operating activities was $(593)($535) and $(391)($815) for the threesix months ended March 31,June 30, 2023, and 2022, respectively. Cash was provided by operating activities during both periods primarily due to payments advanced under the LOC for operating expenses offset by net increases in accrued liabilities.

Financing Activities

For the threesix months ended March 31,June 30, 2023, net cash provided by financing activities was $0. For the threesix months ended March 31,June 30, 2022, net cash provided by financing activities was also $0.

Off-Balance Sheet Arrangements

During the threesix months ended March 31,June 30, 2023, we did not engage in any off-balance sheet arrangements as defined in item 303(a)(4) of the SEC’s Regulation S-K.

Effects of Inflation

We do not believe that inflation has had a material impact on our business, revenues or operating results during the periods presented.

Critical Accounting Policies and Estimates

Our significant accounting policies are more fully described in the notes to our condensed consolidated financial statements included herein for the threesix months ended March 31,June 30, 2023 and in the notes to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022. We believe that the accounting policies below are critical for one to fully understand and evaluate our financial condition and results of operations.

Impairment of Long-lived Assets

We review our property and mining and mineral rights subject to amortization and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset class may not be recoverable. Indicators of potential impairment include: an adverse change in legal factors or in the business climate that could affect the value of the asset; an adverse change in the extent or manner in which the asset is used or is expected to be used, or in its physical condition; and current or forecasted operating or cash flow losses that demonstrate continuing losses associated with the use of the asset. If indicators of impairment are present, the asset is tested for recoverability by comparing the carrying value of the asset to the related estimated undiscounted future cash flows expected to be derived from the asset. If the expected cash flows are less than the carrying value of the asset, then the asset is considered to be impaired and its carrying value is written down to fair value, based on the related estimated discounted cash flows. During the year ended December 31, 2018, we combined the carrying value of our mining and mineral assets as they are inseparable and depend upon each other in value creation. See Note 3. There were no impairment charges in the threesix months ended March 31,June 30, 2023.

Recent Accounting Standards

During the year ended December 31, 2022, and the threesix months ended March 31,June 30, 2023 and through the date of this filing, there were several new accounting pronouncements issued by the Financial Accounting Standards Board. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements. 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not Applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (who is our Principal Executive Officer) and our Chief Financial Officer and Treasurer (who is our Principal Financial Officer and Principal Accounting Officer), of the effectiveness of the design of our disclosure controls and procedures (as defined by Exchange Act Rules 13a-15(e) or 15d-15(e)) as of March 31,June 30, 2023 pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31,June 30, 2023 in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. This conclusion is based on findings that constituted material weaknesses. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s interim financial statements will not be prevented or detected on a timely basis.

In performing the above-referenced assessment, management identified the following deficiencies in the design or operation of our internal controls and procedures, which management considers to be material weaknesses:

(i) Lack of Formal Policies and Procedures. We utilize a third-party independent contractor for the preparation of our financial statements. Although the financial statements and footnotes are reviewed by our management, we do not have a formal policy to review significant accounting transactions and the accounting treatment of such transactions. The third-party independent contractor is not involved in the day to day operations of the Company and may not be provided information from management on a timely basis to allow for adequate reporting/consideration of certain transactions.

(ii) Audit Committee and Financial Expert. We do not have a formal audit committee with a financial expert, and thus we lack the board oversight role within the financial reporting process.

(iii) Insufficient Resources. We have insufficient quantity of dedicated resources and experienced personnel involved in reviewing and designing internal controls. As a result, a material misstatement of the interim and annual financial statements could occur and not be prevented or detected on a timely basis.

(iv) Entity Level Risk Assessment. We did not perform an entity level risk assessment to evaluate the implication of relevant risks on financial reporting, including the impact of potential fraud related risks and the risks related to non-routine transactions, if any, on internal control over financial reporting. Lack of an entity-level risk assessment constituted an internal control design deficiency which resulted in more than a remote likelihood that a material error would not have been prevented or detected and constituted a material weakness.

Our management feels the weaknesses identified above have not had any material effect on our financial results. However, we are currently reviewing our disclosure controls and procedures related to these material weaknesses, and expect to implement changes in the near term, as resources permit, to address these material weaknesses. Our management will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds permit.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended March 31,June 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

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

On August 12, 2015 the United StatesStated District Court for the District of Colorado issued a judgment in favor of Stephen E. Flechner for $2,157,000.Flechner. An amended final judgment was ordered in adjudication of the Complaint by the U.S. District Court for the District of Colorado (the “Court”) on August 28, 2015 in favor of Flechner in the amount of $2,157,000, plus interest through the date of judgment of $235,246, plus interest of $472.76/day from August 28, 2015 until paid in full. The Company has recognized the daily interest due from the date of the August 28, 2015 judgment through March 31, 2023, totaling $1,354,038, resulting in a total amount of $3,746,284 being included in the accrual for settlement of lawsuits relating to this matter in the accompanying condensed consolidated balance sheet as of March 31, 2023.Flechner.

On November 29, 2021, the Company was notified that its majority shareholder, GPR, had executed definitive documents with Stephen Flechner to acquire his judgment against the Company. Documents have been filed with the Court to reflect this acquisition.

On June 12, 2023 the Company and GPR agreed to roll the balance of the Judgment into the LOC.

ITEM 1A. RISK FACTORS

As a smaller reporting company, we are not required to provide the information required by this Item. We note, however, that an investment in our common stock involves a number of very significant risks. Investors should carefully consider the risk factors included in the “Risk Factors” section of our Annual Report on Form 10-K for our fiscal year ended December 31, 2022, as filed with SEC on April 17, 2023, in addition to other information contained in such Annual Report and in this Quarterly Report on Form 10-Q, in evaluating the Company and our business before purchasing shares of our common stock. The Company’s business, operating results and financial condition could be

adversely affected due to any of those risks.

Item 2. Unregistered Sales of Equity Securities and Use Of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

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.

2019