EDGAR 10-K Filing

Company CIK: 8328
Filing Year: 2022
Filename: 8328_10-K_2022_0001575872-22-000281.json

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ITEM 1. BUSINESS
ITEM 1.
BUSINESS
SUMMARY
Applied Minerals, Inc. (the “Company” or “Applied Minerals” or “we” or “us”) (OTC PINK: AMNL) owns the Dragon Mine in central Utah. From the mine we extract, process, or have processed by a third party, halloysite clay and iron oxide for sale to a range of end markets. We market the minerals directly and through distributors.
We also engage in research and development and frequently work collaboratively with potential customers, consultants, distributors, and a third-party processors to process and enhance our halloysite clay products to improve the performance of our customers’ existing and new products.
Halloysite
Our halloysite clay, which we market under the DRAGONITE™ trade name, is an aluminosilicate mineral with a hollow tubular shape. DRAGONITE can utilize halloysite’s shape, high surface area, and reactivity to add significant functionality to a number of applications.
Iron Oxide
Our iron oxide, which we market under the AMIRON™ trade name, is a high purity product. We have sold it for use in cement as well as an absorbent for hydrogen sulfide gas contained in natural gas.
Sales
In 2021, we recorded revenues of $1,409,019, of which $414,940 was related to sales of DRAGONITE to 21 customers and $994,079 was related to sales of AMIRON to one customer.
Characterization of the Mineralization
Over the last 12
years, the Company has expended significant resources, including commissioning a resource study, to determine the amount, character and mineability of the mineralization of the deposits at the Dragon Mine.
Classification for SEC Purposes
The Company is classified as an “exploration stage” company for purposes of Industry Guide 7 of the U.S. Securities and Exchange Commission (“SEC”) Under Industry Guide 7, companies engaged in significant mining operations are classified into three categories, referred to as “stages” - exploration, development, and production. Exploration stage includes all companies that do not have established reserves in accordance with Industry Guide 7. Such companies are deemed to be “in the search for mineral deposits.” Notwithstanding the nature and extent of development-type or production-type activities that have been undertaken or completed, a company cannot be classified as a development or production stage company unless it has established reserves in accordance with Industry Guide 7. The mineralization indicated by the resource study (described below) we have commissioned cannot be classified as a reserve for purpose of Industry Guide 7.
In 2018, SEC adopted rules to modernize property disclosures for mining companies. Such rules
went
into effect in 2021. The mineralization indicated by the resource study would not qualify as a reserve under the new rules.
Processing Capability
We have a primary processing plant with capacity to mill up to 45,000 tons of mineralization per annum for certain clay and iron applications. The Company has a second processing facility with a capacity of up to 5,000 tons per annum that is dedicated to
processing its halloysite resource.
Both facilities utilize dry-based milling equipment that do not eliminate impurities such as iron oxide as effectively
as wet processing but are useful in situations where wet processing in not necessary
Distribution Channels
The Company markets and sells its products directly and through distributors. The Company also uses several leading distribution organizations, E.T. Horn, Brandt Technologies, LLC, and Azelis to market its products. The Company has an exclusive agreement with a distributor for Japan.
INFORMATION ABOUT THE COMPANY
Applied Minerals, Inc. (OTC: AMNL) owns the Dragon Mine from which we can extract halloysite clay and iron oxide, which we then process or have processed and sell. We also engage in research and development and frequently work collaboratively with potential customers, consultants, and distributors to engineer and enhance our halloysite clay and iron oxide products to improve the performance of our customers’ existing and new products.
The Dragon Mine is a 267-acre property located in central Utah, approximately 70 miles south of Salt Lake City, Utah.
We market our halloysite clay-based line of products under the trade name DRAGONITE. We have marketed our iron oxide line of products under the trade name AMIRON.
Halloysite is mined and marketed by other companies, primarily by a French company, Imerys, which owns the other major halloysite mine, which is located in New Zealand. The halloysite from that mine is sold primarily for use in ceramics and tableware. When new management came into the Company in 2009, new management decided to focus on new, premium-priced uses of halloysite. Those premium-priced uses had been, and continue to be, identified typically in published research. Because the Company is primarily dedicated to new, advanced uses of halloysite that would permit the Company to charge premium prices, the sales and marketing process is one that often takes an extended period of time. The Company’s pricing strategy is opportunistic and if significant competition develops, that strategy could be adversely affected.
The Company acquired the Dragon Mine primarily to exploit the mine’s halloysite resources. At the time that the Dragon Mine was acquired, it was
assumed that the iron oxide mineralization would be useful only for steelmaking. Given historical price conditions, the grade of iron we mine and our
method of mining (underground), sales of iron oxide for steelmaking are often uneconomic and at best would yield marginal or low profits. The iron oxide resource at the Dragon Mine is of high chemical purity, a low level of heavy metals content, high
surface area (25 m2/g - 125 m2/g) and reactivity. We focus on marketing the iron to markets that need such product characteristics. Those markets on average will yield higher profit
margins for the Company.
INFORMATION ABOUT THE DRAGON MINE
History of the Dragon Mine
The Dragon Mine was first mined in the third quarter of the 19th
century and has since been mined by various owners and operators. It was mined for iron oxide from the late nineteenth century until approximately 1931 and it was mined for halloysite clay from approximately 1931 to 1976. From 1949 to 1976, the halloysite was sold for use as a petroleum cracking catalyst. A fire closed the mine in 1976. No mining took place from 1976 until 2001, at which point the Company leased the property with an option to buy it. The Company purchased the property in 2005.
Prior to a change in management in 2009, the Company did relatively little to categorize the mineralization at the Dragon Mine or to identify and exploit markets for the minerals. Since new management was installed in 2009, the Company has used and proposes to continue to use a consulting geologist to categorize the mineralization at the Dragon Mine and management has identified, developed and exploited premium-priced markets for halloysite and, with respect to the single $5 million sale noted above, iron oxide.
Resource Development/Exploration Drilling Expenses
In 2021 and 2020 the Company spent $247,980 and $201,234, respectively, on exploration and resource development.
More Detailed Description of the Mineralization at the Dragon Mine
Clays
. Kaolinite and halloysite are clays and members of the kaolin group of clays. Both are aluminosilicate clays. Kaolinite and halloysite are essentially chemically identical but have different morphologies (shapes). Kaolinite typically appears in plates or sheets. Halloysite, in contrast, typically appears in the shape of hollow tubes. On average, the halloysite tubes have a length in the range of 0.5 - 3.0 microns, an exterior diameter in the range of 50 - 70 nanometers and an internal diameter (lumen) in the range of 15 - 30 nanometers. Formation of halloysite occurs when kaolinite sheets roll into tubes due to the strain caused by a lattice mismatch between the adjacent silicon dioxide and aluminum oxide layers. Halloysite is non-toxic and natural, demonstrating high biocompatibility without posing any risk to the environment.
Kaolinite is one of the world’s most common minerals. U.S. production in 2016 was approximately 7.3 million tons.
Halloysite is, by comparison, a rarer mineral and we believe worldwide production is less than 25,000 tons, the majority of which is used in ceramic applications.
Iron Oxide
.
Hematite is the mineral form of iron oxide, which exists in a range of colors, including black to steel or silver-gray and brown to reddish brown, or red.
Geothite is an iron hydroxide oxide mineral, which exists in a range of colors, including yellowish to reddish to dark brown. If goethite is sufficiently heated to eliminate its contained water, it is transformed into hematite.
Mixtures of goethite and hematite are brown in color.
STATUS OF THE COMPANY FOR SEC REPORTING PURPOSES
The Company is classified as an “exploration stage” company for purposes of Industry Guide 7 of the U.S. Securities and Exchange Commission.
Under Industry Guide 7, companies engaged in significant mining operations are classified into three categories, referred to as “stages” - exploration, development, and production.
Exploration stage includes all companies engaged in the search for mineral deposits (that is, reserves), which are not in either the development or production stage. In order to be classified as a development or production stage company, the company must have already established reserves. Notwithstanding the nature and extent of development-type or production-type activities that have been undertaken or completed, a company cannot be classified as a development or production stage company unless it has established reserves.
Under Industry Guide 7, a “reserve” is “that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.” Generally speaking, a company may not declare reserves, unless, among other requirements, a competent professional engineer conducts a detailed engineering and economic study and prepares a “bankable” or “final” feasibility study that “demonstrates that a mineral deposit can be mined profitably at a commercial rate.”
The Company has commissioned an ongoing study described above that was conducted using the standards of the JORC Code of the Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves. The mineralization described in the study does not qualify as reserves for purposes of Industry Guide 7
In 2018, SEC adopted rules to modernize property disclosures for mining companies. Such rules
went into effect in 2021. The mineralization indicated by the resource study would not qualify as a reserve under the new rules.
Despite the fact that the Company has not established reserves for purposes of Industry Guide 7, the Company has mined, processed and sold, and intends to continue to mine, process, and sell halloysite clay and iron oxide from the Dragon Mine.
A consequence of the absence of reserves under Industry Guide 7 is that the mining company, such as the Company, is deemed to lack an objective basis to assert that it has a deposit with mineralization that can be economically and legally extracted or produced and sold to produce revenue.
PROCESSING CAPABILITIES
We have a primary processing plant with capacity to mill up to 45,000 tons of mineralization per annum for certain clay applications. This facility can mill iron oxide and clay. Additionally, the Company has a second processing facility with a capacity of up to 5,000 tons per annum that is dedicated to processing its halloysite resource. Both facilities utilize dry-based milling equipment that do not eliminate impurities such as iron oxide as effectively as wet processing but are useful in situations where wet processing in not necessary.
MINING AND PRODUCTION ACTIVITY IN 2021 AND 2020
The following table discloses for the twelve (12) months ended December 31, 2021 and 2020, respectively (i) the number of tons of halloysite clay and iron oxide extracted by the Company from the Dragon Mine and (ii) the number of tons of finished product produced by the Company:
Tons extracted
Halloysite clay
Iron oxide
27,067
14,900
Products produced (tons)
Halloysite clay
Iron oxide
26,867
14,900
CUSTOMERS
DRAGONITE
During 2021 the Company sold its DRAGONITE halloysite clay product to approximately 21 customers. The Company is currently working with a number of prospective customers for its DRAGONITE halloysite clay product and hopes to convert one or more of these prospective customers during 2022. However, the Company cannot provide any assurances that it will be successful in doing so.
AMIRON
During
October
the
Company
signed
an
agreement
to
supply
a
manufacture
of
cement
up
to
30,000
tons
of
AMIRON
per
year over a two-year period. The Company sold the majority of its iron production to this customer during 2021. The agreement ended in December 2021
Sales by Customer Use
The table below discloses the percentage of total revenue by product category for the twelve months ended December 31, 2021 and 2020. “Testing” represents revenue generated from the sale of products used for laboratory testing by customers or potential customers. “Scale-Ups” represents revenue generated from the sale of products to customers or potential customers to determine whether our products perform successfully within a production-scale environment. “Commercial Production” represents revenue generated from the sale of products to customers that are either consumed by the costumer or incorporated into a product that is sold by a customer to a third-party. “Other” represents revenue generated from the sale of products for which the Company is not aware of the use by a potential customer.
Percentages of Sales
Classified by
Customer Use
Sales for:
Commercial Production
Scale-Ups
Testing
Other
*
*
Total
* < 1%
SALES AND MARKETING
The Company markets and sells its products directly and/or through distributors.
E.T. Horn acts as exclusive distributor for AMIRON in the following states: Washington, Oregon, Idaho, Montana, Wyoming, California, Nevada, Utah, Arizona, New Mexico. It acts as exclusive distributor of DRAGONITE in those states plus Texas, Oklahoma, Arkansas, and Louisiana.
Brandt Technologies, LLC acts as exclusive distributor for DRAGONITE and AMIRON in North Dakota, South Dakota, Nebraska, Kansas, Missouri, Iowa, Minnesota, Wisconsin, Illinois, Indiana, Kentucky, Ohio, and Michigan.
Azelis acts as exclusive distributor for DRAGONITE in Mississippi. Alabama, Tennessee, Georgia, Florida, South Carolina, North Carolina, Virginia, West Virginia, Maryland, Delaware, Pennsylvania, New Jersey, Connecticut, New York, Vermont, Massachusetts, New Hampshire, and Maine. The Company intends to engage a distributor for AMIRON in these states.
The Company has an exclusive distribution agreement with Fimatec, Ltd. for Japan
APPLICATION MARKETS
DRAGONITE
The following is a description of the application markets in which the Company has commercial customers for halloysite-based DRAGONITE products:
Molecular Sieves and Catalysts.
Molecular Sieves.
DRAGONITE™ is a binder to zeolite crystals to enhance a molecular sieve’s productivity in critical functions such as drying of natural gas and air, separation of liquid from product streams, and separation of impurities from a gas stream. DRAGONITE possesses a dispersion ability that allows it to combine with the zeolite crystals without reducing the rate of diffusion of liquids and gases. DRAGONITE’s fine particle size, porosity, and thermal stability also ensure that adsorbates diffuse rapidly through the sieve without affecting the adsorbent blend’s physical properties.
Catalysts.
DRAGONITE
may
be
used
as
a
catalyst
and
catalyst
support
for
the
hydrotreatment
and
hydrodemetalation
of
hydrocarbonaceous
feedstocks. In certain applications DRAGONITE has been shown to
remove impurities such as metals, sulfur, nitrogen, and asphaltenes. Crude oil petroleum must be processed
in order to make it into gasoline and other fuels. Catalytic cracking involves the addition of a catalyst to speed up the cracking. The reactive nature of
halloysite lends itself to being a catalyst especially for high sulfur oil. Halloysite can also be used as a support for catalysts, which are applied to the
halloysite as a coating.
Halloysite from the Dragon Mine was mined and processed as a catalyst for petroleum cracking from 1949 to 1976.
Flame Retardant Additives
Flame retardant additives are widely used in flammable and flame resistant plastics and are found in electronics, building insulation, polyurethane foam, and wire and cable.
Plastic manufacturers typically mix or load a small amount of flame retardant into plastic to lower the risk of flammability of their products. We believe that DRAGONITE can be used as a partial replacement for Alumina Trihydrate (ATH) and Magnesium Hydroxide (MDH) in certain applications and as a synergist to ATH and MDH in other applications.
At typical loadings, ATH and MDH can adversely affect certain mechanical properties of plastics. We believe that DRAGONITE, in conjunction with ATH and MDH, exhibits a synergistic performance. Our research and development indicates that DRAGONITE can be used to replace 50% - 75% of antimony trioxide (ATO) in plastic without affecting flame retardancy, retaining the same rating under UL 94, the Standard for Safety of Flammability of Plastic Materials for Parts in Devices and Appliances testing.
We believe that in certain applications the use of DRAGONITE instead of other fire retardant products may allow a manufacturer to use less fire retardant and may, in addition, may enable the manufacturer to reduce the weight of the manufactured part. DRAGONITE-XR does not release its naturally bound water until 400°C, making it suitable for polymers processed under extreme conditions.
Other clays compete in the markets for partially replacing ATH, MDH, and ATO.
Binders for Ceramics
DRAGONITE is an effective binder for traditional ceramic products (any of various hard, brittle, heat-resistant and corrosion-resistant materials made by shaping and then firing a nonmetallic mineral, such as clay, at a high temperature). Binders are substances that improve the mechanical strength of green ceramic bodies so they can pass through production steps before firing without breakage. We believe that DRAGONITE, when used as a binder, also effectuates an improvement in the casting rate of the ceramic manufacturing process. This would equate to an increase in manufacturing efficiency.
Nucleation of Polymers; Reinforcement of Polymers
.
Nucleation.
Plastics and polymers are composed of long molecular chains that form irregular, entangled coils in a melted resin, the phase in which a resin is liquid and its molecules can move about freely. In semi-crystalline polymers, the chains rearrange upon freezing and form partly ordered regions. Examples of semi-crystalline polymers are polyethylene (PE), polypropylene (PP), Nylon 6 and Nylon 6-6. Crystallization of a polymer occurs as a result of nucleation, a process that starts with small, nanometer-sized domains upon which the polymer chains arrange in an orderly manner to develop larger crystals. The overall rate of crystallization of a polymer be can increased by a nucleating agent. In plastic molding processes, especially in injection molding, the plastic part must remain in the mold until crystallization is complete (freezing). To the extent that crystallization is accelerated, the time in the mold can be reduced, thereby resulting in productivity enhancement. We believe that DRAGONITE added to a resin at a loading of just 1% can significantly speed up the process of crystallization.
We believe DRAGONITE can be effective as a nucleating agent for both polyethylene and polypropylene.
Reinforcement Fillers.
Many plastics are reinforced with a filler to enhance the mechanical properties of a polymer. Reinforced plastics, in certain instances, can compete with stiffer materials like metal while also offering an opportunity to reduce the weight of a manufactured part (“light-weighting”).
We believe that the utilization of DRAGONITE as a reinforcing filler can result in the improvement of one or more mechanical properties of a polymer such as modulus (the measure of how well a polymer resists breaking when pulled apart), strength (the measure of the stress needed to break a polymer), and impact resistance (the measure of a polymer’s resistance when impacted by a sharp and sudden stress).
Paints and Coatings
Halloysite has been shown to improve the adhesion and impact resistance properties of polymer-based paints and coatings. Additionally, halloysite has been shown to significantly improve the corrosion resistance of paints and coatings over synthetic anti-corrosion agents.
Other Opportunities.
Other potential markets that present opportunities for halloysite but as to which the Company does not have commercial customers include cement (halloysite may increase tensile strength more than twice the increase in compressive strength while reducing permeability), batteries (the silicon material in halloysite, which is an aluminasilicate, may be extracted from halloysite and used in anode in lithium ion batteries and halloysite may be used in electrolyte in batteries), and controlled release carrier in cosmetics and in other applications.
AMIRON
The AMIRON line of natural iron oxide-based products can be used in technical and pigmentary application markets.
In October 2019 the Company
signed an agreement to supply a manufacture of cement up to 30,000 tons of AMIRON per year over a two-year period. The agreement ended in December 2021.
THE SALES PROCESS
The Company sells its products using employees, agents, and distributors, selling on a global basis.
DRAGONITE
The Company markets its DRAGONITE into two general types of application markets.
The first type is a market in which halloysite has not been previously used, or is to be used as an additive in substitution for another additive, to
enhance a functionality of an application.
This type of market requires a number of steps to be completed before a sale can be consummated. Like
any new material that will be incorporated into a commercial manufacturing process, a significant amount of testing must be performed by a customer
before DRAGONITE can be incorporated into a manufacturing process and a product. Sales of this type often require working with the potential
customers’
existing formulations, which can vary from potential customer to
potential customer. The successful commercialization of such products can take years develop.
Working with a potential customer could include identifying a solution, such as (i) surface coating or (ii) when to introduce DRAGONITE into the formulation or (iii) the conditions under which it should be introduced or (iv) changes, deletions, additions, or substitutions involving other elements of the customer’s formulation. Without the customer’s collaboration in identifying a solution, DRAGONITE could be unsuccessful in achieving the customer’s goals. This process can take an extended period of time (years in the case of discoloration of polymers as a result of the introduction of DRAGONITE) and, in some cases, there is no solution. In this type of market, price can be an important consideration and in some cases, we are not able to compete.
The second type of market is one in which halloysite clay is currently being used in traditional application markets. Within these established markets, we believe our DRAGONITE products often offers an enhanced value proposition with respect to purity and other properties sought by customers, although in some cases DRAGONITE’s purity and/or other properties may not be required or useful. The pricing of our products relative to those of our competitors, however, will always be a significant factor in determining our ability to penetrate these markets.
AMIRON
The Company encounters the same types of challenges marketing AMIRON, as it faces in marketing DRAGONITE. In particular, the Company must
compete on price and quality in relation to competitive materials. It cannot be assured that we will be successful in
penetrating markets for AMIRON.
RESEARCH, DEVELOPMENT AND TESTING
The Company’s research and development and testing efforts are focused on the continued creation of commercial applications for our halloysite-based products and our iron oxides. The Company conducts research and development efforts internally and occasionally through consultants. The Company also conducts product research and development collaboratively with distributors, customers and potential customers.
In 2021 and 2020, the Company spent approximately $565 and $6,587 on testing and research, respectively.
TRADEMARKS AND PATENTS
We have trademarked the name DRAGONITE and AMIRON. We believe these trademarks are important to the successful marketing of our product offering.
REGULATION
The Utah Department of Natural Resources sets the guidelines for exploration and other mineral related activities based on provisions of the Mined Land Reclamation Act, Title 40-8, Utah Code Annotated 1953, as amended, and the General Rules and Rules of Practice and Procedures, R647-1 through R647-5. We have received a large mine permit from the Department. The Company does not believe that such regulations, including environmental regulations, have or will adversely affect the Company’s business or have a material impact on capital expenditures, earnings and competitive position of the Company.
We carry a Mine Safety and Health Administration (MSHA) license (#4202383) for the Dragon Mine and report as required to MSHA. The Company is subject to extensive regulation and periodic inspections by the Mine Safety and Health Administration, which was created by the Mine Safety and Health Act of 1977. The regulations generally are designed to assure the health and safety of miners and our mine is periodically inspected by MSHA. The Company does not believe that such regulations have or will materially adversely affect the Company’s business or have a material impact on capital expenditures, earnings and competitive position of the Company.
The clays that the Company mines, including halloysite, may contain various levels of crystalline silica when mined. Crystalline silica is considered a hazardous substance under regulations promulgated by the U.S. Occupational Health and Safety Administration (OSHA) and U.S. Mine Health and Safety Administration (MSHA) and as a result is subject to permissible exposure limits (PELs), both in the mine and at the workplaces of our customers. The Company is required to provide Safety Data Sheets (SDS) at the mine and accompanying sales of products to customers. The Company must also apply hazard warning to labels of containers of the product sold to customers, if levels of crystalline silica are present above specified thresholds. Kaolin and halloysite are also subject to PELs.
EMPLOYEES
As of April 15, 2022, the Company had seven
employees. None of our employees are covered by a collective bargaining agreement, we have never experienced a work stoppage, and we consider our labor relations to be excellent.

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ITEM 1A. RISK FACTORS
ITEM 1A.
RISK FACTORS
AN INVESTMENT IN OUR SECURITIES IS VERY SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, ALONG WITH THE OTHER MATTERS RELATED TO RISK REFERRED TO HEREIN THIS ANNUAL REPORT, BEFORE YOU DECIDE TO BUY OUR SECURITIES. IF YOU DECIDE TO BUY OUR SECURITIES, YOU SHOULD BE ABLE TO AFFORD A COMPLETE LOSS OF YOUR INVESTMENT.
Our business activities are subject to significant risks, including those described below. Every investor, or potential investor, in our securities should carefully consider these risks. If any of the described risks actually occurs, our business, financial position and results of operations could be materially and adversely affected. Such risks are not the only ones we face, and additional risks and uncertainties not presently known to us or that we currently deem immaterial may also significantly and adversely affect our business.
SPECIFIC RISKS APPLICABLE TO APPLIED MINERALS
LOSSES, DEFICITS, GOING CONCERN.
We have experienced annual operating losses for as long as we have financial records (since 1998). For the years ended December 31, 2021 and 2020, the Company sustained losses from continuing operations of $3,283,239 and $3,287,711, respectively. At December 31, 2021 and 2020, the Company had accumulated deficits of $125,305,379 and $122,022,140, respectively. We have very limited cash as of the date of this report, negative cash flow, and continuing unprofitable operations. Accordingly, our independent registered public accounting firm, MaloneBailey, LLP, has included a going concern paragraph in its opinion on our financial statements.
We may need to seek additional financing to support our continued operations; however, there are no assurances that any such financing can be obtained on favorable terms, if at all, especially in light of the restrictions imposed on the incurrence of additional debt by the Series A Notes and the Series 2023 Notes.
Material Weakness in our Internal Control over Financial Reporting
We have identified material weaknesses in our internal control over financial reporting. If we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential stockholders could lose confidence in our financial reporting, which could harm our business and the trading price of our stock.
During the preparation of our consolidated financial statements for the year ended December 31, 2021, we and our independent registered public accounting firm, identified deficiencies in our internal control over financial reporting, as defined in the standards established by the Public Company Accounting Oversight Board. Management determined the control deficiencies constitute material weaknesses in our internal control over financial reporting.
The existence of a material weakness could result in errors in our financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, leading to a decline in the trading price of our stock
MATURITY OF OUTSTANDING PIK-ELECTION CONVERTIBLE NOTES.
Unless the Company becomes quite successful its outstanding PIK-Election Convertible Notes may not elect to voluntarily convert into common stock. Unless the Company is able to generate significant cash flow, the Company may not have sufficient funds to pay outstanding PIK-Election Convertible Notes when such notes mature. Unless the stock price increases very significantly, the Company may not be able to force conversion of the notes before maturity.
The Company has two series of convertible, PIK notes outstanding, 3% PIK-Election Convertible Notes due May 1, 2023 ("Series A Notes") and 3% PIK-Election Notes due August 1, 2023 (“Series 2023 Notes”). As of April 15, 2022, the outstanding balance of the Series A Notes was approximately $30.0 million and the outstanding balance of the Series 2023 Notes was approximately $18.0 million. If the Company continues to pay interest in additional PIK Notes, the outstanding balances will increase to approximately $50.4 million in 2023.
The description of the risks associated with maturity and mandatory conversion set forth below is limited to the Series A Notes, but the risks related to the Series 2013 Notes are similar.
The Series A Notes mature on May 1, 2023. The Series 2023 Notes mature on August 1, 2023.
The holders of the Series A Notes may convert their principal and accrued but unpaid interest into shares of common stock of the Company at any time. As of April 15, 2022, the conversion price of the Series A Notes was $0.30 per share and would have converted into approximately 101.1 million shares of common stock of the Company. As of April 15, 2022, the conversion price of the Series 2023 Notes was $0.51 per share and would have converted into approximately 35.6 million shares of common stock of the Company.
The Series A Notes are mandatorily convertible by the Company at any time when (i) the volume weighted average price of the shares of the common stock of the Company is equal to or greater than $1.00 for thirty (30) consecutive trading days and (ii) the closing market price of the shares of the common stock of the Company is equal to or greater than $1.00.
As of April 15, 2022, the Series 2023 are mandatorily convertible by the Company at any time when the weighted average trading price of a share of the Company’s common stock is in excess of $0.51 for ten (10) consecutive trading days.
The Series A Notes and Series 2023 Notes contain significant negative covenants that limit or eliminate, without the consent of a majority by principal of the each series of Notes, among other things, mergers, sales of assets, dividends, borrowings, secured transactions, liens and transactions with affiliates.
PENETRATING MARKETS
For the Company to survive, we must penetrate our target markets and achieve sales levels and generate sufficient cash flow to break-even. To be a success, we must do better than that. As outlined below, and in light of the disclosures above, there is significant uncertainty that we will be able to do so.
Many of the applications for which we are selling for our halloysite-based material are applications for which halloysite has not been used previously. As a result, there are a number of obstacles that we need to overcome to achieve sales in these markets. It may be necessary to convince manufacturers to change their manufacturing processes and substitute our halloysite-based material for the product they are currently using, and in some cases, to use our halloysite-based material where no product was used before.
The process beginning with introducing our halloysite-based material to manufacturers and ending with the manufacturers using our products in their production (i) can encounter inertia, skepticism, and different corporate priorities, (ii) requires educating potential customers (some of whom can be resistant) on whether our product actually works for the manufacturer’s particular need, the benefits of our material, and how to test and use our material (how much to add, when to add, and so forth), and (iii) often requires working with potential customers to assure that the potential customers test the materials under proper conditions to assure that our products provide the desired results, do not adversely affect the customer’s product and do not interfere with the other constituents of, or processes to make, the customer’s product. In summary, while we believe that our halloysite-based material often adds significant value, we can say two things about the process that ends with manufacturers using our halloysite-based material: it can take a long time and there is no certainty that we will be able to convince enough manufacturers to use our halloysite-base material.
Similarly, we have attempted to sell our iron oxides, which are natural, into markets where synthetic iron oxides have been used in the past. In trying to make such sales, we encounter the same or similar types of problems described in the preceding paragraph
Other applications for our halloysite-based material and our iron oxides are applications for which halloysite or natural iron oxides have been used previously. To penetrate these markets, we face the difficulties encountered by any company trying to enter an established market competing against established players that may be in better financial condition that we are and are already familiar to, and in many cases have relationships with, the potential customers, which may make purchasing from such competitors more attractive than purchasing from us. While we believe that in many cases, our products are superior to those already in the market; there is uncertainty that we will be able to penetrate those markets to a sufficient degree. Because individual halloysite and iron oxide deposits can differ in significant respects, we may have to demonstrate that our halloysite or iron oxide will actually work for the manufacturer’s particular need and thus we can encounter the problems discussed in the third paragraph of this section.
COMPETITION
Competition from Other Miners of Halloysite
Currently there is limited competition involving the sale of our halloysite-based DRAGONITE products in our advanced-applications target markets. If our DRAGONITE products penetrate our advanced-application target markets, we may face significant competition from competitors as well as from non-halloysite solutions often sold by larger, more established companies. The basis for competition is performance, price and reliability. The Company’s pricing strategy is opportunistic and if significant competition develops, that strategy could be adversely affected.
Despite the widespread occurrences of halloysite, large deposits from which high purity halloysite can be economically extracted are comparatively rare. These include deposits with high-grade zones that are dominantly halloysite and lower grade deposits where halloysite can be readily separated to give a high purity product. Relatively pure halloysite typically occurs as narrow lenses or pockets in altered rock and often requires selective mining and sorting to produce a high-grade product. Halloysite is often associated with fine-grained kaolinite, silica or other fine-grained mineral contaminants and as such, for many applications, requiring beneficiation methods that rely primarily on wet processing.
To our knowledge, significant production of high-grade halloysite from large deposits for specialist industrial use at present is limited to the Dragon Mine and open pit mines owned by Imerys, a large French minerals company, in Northland, New Zealand, and in mines in Turkey and in China
The New Zealand mines produce about 15,000 tons of halloysite per year. The raw clay from New Zealand contains around 50% halloysite, 50% silica minerals (quartz, cristobalite, tridymite, amorphous silica), and minor feldspar. It must be processed to eliminate the crystalline silica materials. A 2014 Safety Data Sheet for Imerys’ product states “This product contains between 1% and 10% of quartz (fine fraction), and quartz (fine fraction) is classified as STOT RE1, which means definitely toxic to humans or toxic effect was determined in animal experiments after repeated exposure.”
Our Safety Data Sheet indicates that our processed halloysite “may contain naturally occurring Respirable Crystalline Silica (CAS #’s 14808-60-7 and 14464-46-1) at trace concentration levels below HazCom 2012 and GHS Revision 3 hazard classification limits. Per XRC analysis, which combines the analytical capabilities of X-Ray Diffraction, Computer Controlled Scanning Electron Microscopy/Energy Dispersive Spectroscopy and Raman Spectroscopy to conduct particle-by-particle inter-instrumental relocation and physicochemical/mineralogical analysis - naturally occurring trace level substances in these products, including Respirable Crystalline Silica, are inextricably bound, environmentally unavailable and at de minimis concentrations. Thus, in the current and anticipated future physical state of these products, they are believed to be incapable of causing harm under normal conditions of use or as a result of extreme upset.” Our halloysite does not contain cristobalite.
Imerys’ halloysite has low amounts of Fe2O3. Some of our raw halloysite may contain more Fe2O3 but it can be processed out through bleaching or can be reduced through blending with purer halloysite.
To our knowledge, Imerys has not made any significant efforts so that its halloysite can penetrate that advanced markets that the Company is attempting to penetrate.
Halloysite from Turkey is sold for use in catalysts for a very low price, but it may not have the same functionality as the Company’s halloysite. For some uses such functionality may not be necessary.
Halloysite from China is being sold for use in molecular sieves.
A company owning a deposit in Idaho claims to have proven and probable reserves of halloysite of 382,000 tons and that it will produce halloysite products and market them for some of several uses. Some of those uses are the same as the uses for which the Company is marketing its Dragonite.
Smaller deposits occur in many countries including Japan, Korea, China, Thailand, Indonesia, Australia, South America, and Europe. It is reported that halloysite from China, Brazil, Poland, and Turkey is sold commercially, but halloysite from other locations may be sold commercially. Halloysite is typically used for ceramics and paper coating.
The degree or extent to which the halloysite from other deposits can or will compete with our halloysite-based products is subject to a variety of factors, including the following:
●
Deposits of halloysite are formed under a variety of geological conditions of hydrothermal alteration and weathering. As a result, the nature and extent of impurities, the length of the tube, thickness of the walls, and the size of the pore or lumen can all vary. In many deposits, the halloysite is mixed with significant amounts of other clays, limiting its usefulness for certain applications. Other deposits can contain significant amounts of crystalline silica and/or cristobalite, which may limit the usefulness for certain applications and/or require additional processing, although given the fine grain of silica and cristobalite, there are limits to the ability to eliminate them. Other deposits contain more iron oxide than is acceptable, requiring additional processing. Other deposits may be of high quality.
●
Some deposits are subject to difficulties relating to mining. Some deposits are located in geographically isolated areas.
The global resource base for economically mineable halloysite might be expanded to meet substantial growth in demand, especially if demand was for higher-value markets that would justify higher costs for mining and processing out containments. Such expansion might be anticipated both through the discovery of new deposits and through the adoption of more elaborate process methods to separate halloysite occurring within lower-grade sources. Competition from the other halloysite producers could arise and could adversely affect sales and margins and such competition would be based on performance and/or price. In particular, competition could affect the Company’s sales strategy of opportunistic pricing.
Competition from Suppliers of Alternative Solutions to Halloysite
When we market halloysite for use in situations where halloysite has not been previously used, or is to be used as an additive in substitution for another additive to enhance certain functionality of an application, we will face competition from suppliers of other solutions and the competition will be based on performance, price and reliability.
Competition for Iron Oxide
We expect to compete with companies that, in some cases, may be larger and better capitalized than us. Because individual iron oxide deposits can differ in significant respects, our iron oxide may not be suitable for certain uses and we may have to demonstrate that our iron oxide will actually work for the manufacturer’s particular need and we can encounter problems in getting manufacturers to test our product and even if such tests are successful, to use our iron oxide. We also compete with synthetic iron oxide.
THE COMPANY’S SUCCESS DEPENDS ON OUR SENIOR MANAGEMENT
Our senior management has played a critical role in leading the effort to commercialize our halloysite-based products and iron oxides. If the Company loses the services of members of senior management, there is no assurance that the Company would be able to attract and retain qualified replacements.
OTHER MORE GENERALIZED RISKS AND UNCERTAINTIES
The actual Dragon Mine profitability or economic feasibility may be adversely affected by any of the following factors, among others:
●
Changes in tonnage, grades and characteristics of mineralization to be mined and processed;
●
Higher input and labor costs;
●
The quality of the data on which engineering assumptions were made;
●
Adverse geotechnical conditions;
●
Availability and cost of adequate and skilled labor force and supply and cost of water and power;
●
Availability and terms of financing;
●
Environmental or other government laws and regulations related to the Dragon Mine;
●
Changes in tax laws, including percentage depletion and net operating loss carryforwards;
●
Weather or severe climate impacts;
●
Potential delays relating to social and community issues;
●
Industrial accidents, including in connection with the operation of mining and transportation equipment and accidents associated with the preparation and ignition of blasting operations, milling equipment and conveyor systems;
●
Underground fires or floods;
●
Unexpected geological formations or conditions (whether in mineral or gaseous form);
●
Ground and water conditions;
●
Accidents in underground operations;
●
Failure of mining pit slopes;
●
Seismic activity; and
●
Other natural phenomena, such as lightning, cyclonic or storms, floods or other inclement weather conditions.
THERE IS COMPREHENSIVE FEDERAL, STATE AND LOCAL REGULATION OF THE EXPLORATION AND MINING INDUSTRY THAT COULD HAVE A NEGATIVE IMPACT OUR MINING OPERATIONS.
Exploration and mining operations are subject to federal, state and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground, the discharge of materials into the environment, restoration the property after mining operations are completed. Exploration and mining operations and some of the products we sell are also subject to federal, state and/or local laws and regulations that seek to maintain health and safety standards. No assurance can be given that standards imposed by federal, state or local authorities will not be changed or that any such changes would not have material adverse effects on our activities, including mine closure. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on our financial position. Additionally, we may be subject to liability for pollution or other environmental damages that we may elect not to insure against due to prohibitive premium costs and other reasons. Additionally, we may be subject to liability for pollution or other environmental damages that we may elect not to insure against due to prohibitive premium costs and other reasons.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.

---

ITEM 2. PROPERTIES
ITEM 2.
PROPERTIES
PRINCIPAL OFFICE
The corporate office is located at 1200 Silver City Road, Eureka, UT 84628.
MINING PROPERTY
The following section describes our right, title, or claim to the Dragon Mine property.
The Dragon Mine property, located in Juab County, Utah, within the Tintic Mining District, has been principally exploited for halloysite clay and iron oxide. It is located approximately 2 miles southwest of Eureka, Utah and can be accessed via state highway and county road. There is no evidence of a water source on the property.
The property covers approximately 267 acres with a large mining permit covering 40 acres allowing for the extraction of minerals. The property consists of 38 patented and six unpatented mining claims located in the following sections: T10S, R2W, sections 29, 30, 31, and T10S, R3W, Section 36, all relative to the Salt Lake Base Meridian. The Company pays approximately $800 in annual maintenance fees to the U.S. Department of Interior Bureau of Land Management to maintain rights to its unpatented claims. The BLM Claim Numbers are: UMC385543, UMC 385544, UMC394659, UMC394660, UMC408539, and UMC408540.
The Company has no underlying royalty agreements with any third-party with respect to the Dragon Mine. We leased the property in 2001 and in 2005 we purchased the property for $500,000 in cash. As more fully explained in the “Business” section, the property has two mining areas, the Dragon Pit, which contains high purity halloysite, mixed clays and iron oxide and the Western Area, which contains mixed clays and iron oxides.
Processing Facilities at Dragon Mine; Plant and Equipment
The Company has two dry-process facilities at its Dragon Mine property. One facility, is able process halloysite clay and iron oxide, has a capacity of up to 45,000 ton per year for certain types of clay processing and includes a Hosokawa Alpine mill. Before processing, the mineral is crushed. If only crushing is needed for a particular product, our production capacity will be significantly higher. The other facility is dedicated to dry processing of halloysite clay resource and has an annual capacity of up to 10,000 tons per year.
We believe the physical plant and equipment utilized at the Dragon Mine are in satisfactory condition to continue our current mining and processing activity except where the Company anticipates using a third party to beneficiate its halloysite. The Company continually reviews the adequacy of its physical plant and equipment inventory and expects to invest accordingly to ensure that the size and quality of its physical plant and equipment can meet its needs. Currently, our physical plant includes, but is not limited to, two processing mills, a dry house, a site office, a general storage facility, an equipment repair facility, and a structure housing three IR compressors, which are used to power the mill and certain drilling equipment used underground. Our mining equipment includes, but is not limited to, a road header, an underground drill, a deep drill, a skid steer, a front-end loader and a number of other pieces traditionally used to mine underground. There are some pieces of equipment we choose to rent on a daily basis rather than own or lease to own. The Company uses diesel fuel and propane and has water transported to the property from an external source. The property has sufficient access to roads to enable the transportation of materials and products. The property also has a well-equipped laboratory used for quality control and research.
SEC Industry Guide 7 and Resource Study
As of the filing of this report, the Company was classified as an exploration stage company for purposes of Industry Guide 7 of the U.S. Securities and Exchange Commission.
Under Industry Guide 7, companies engaged in significant mining operations are classified into three categories, referred to as “stages”- exploration, development, and production. Exploration stage includes all companies engaged in the search for mineral deposits (reserves). In order to be classified as a development or production stage company, a company must have already established reserves. Unless a company has established reserves, it cannot be classified as a development or production stage company, notwithstanding the nature and extent of development-type or production- type activities that have been undertaken or completed.
The Company has commissioned a study of the mine’s “resources” that was conducted using the standards of the JORC Code of the Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves. The mineralization described in the study does not qualify as reserves under Industry Guide 7.
In 2018, SEC adopted rules to modernize property disclosures for mining companies. Such rules go into effect in 2021. The mineralization indicated by the resource study would not qualify as a reserve under the new rules.
For purposes of Industry Guide 7, a consequence of the absence of reserves is that the mining company, such as the Company, is deemed to lack an objective basis to assert that it has a deposit with mineralization that can be economically and legally extracted or produced and sold to produce revenue.
Despite the fact that the Company has not established reserves, the Company has mined, processed and sold, and intends to continue to mine, process, and sell, halloysite clay and iron oxide from the Dragon Mine.
Exploration Agreement
On December 22, 2017, the Company and Continental Mineral Claims, Inc. (“CMC”) entered into an Exploration Agreement with Option to Purchase (“Agreement”). The Company granted to CMC the exclusive right and option to enter upon and conduct mineral exploration activities (the “Exploration License”) for Metallic Minerals on the Company’s Dragon Mine minesite in Utah (the “Mining Claims”). Metallic Minerals are defined to include minerals with a high specific gravity and metallic luster, such as gold, silver, lead, copper, zinc, molybdenum, titanium, tungsten, uranium, tin, iron, etc., but shall exclude any such Metallic Minerals that are intermingled within any economically-recoverable, non-metallic mineral deposits located at or above an elevation of 5,590 feet above sea level. Non-metallic minerals include clay and iron oxide, the minerals mined by the Company. The Company believes that all economic recoverable non-metallic mineral deposits are well above 5,590 feet above sea level. The Exploration License is for a period of ten years.
In consideration of the Exploration License CMC paid the Company $350,000 upon the execution of the agreement and paid it $150,000 on the first anniversary of the Exploration License in December 2018. CMC will pay the Company $250,000 on or before each subsequent anniversary during the Exploration License term following the first anniversary of the Effective Date of this Agreement unless the Exploration License is terminated earlier by CMC by exercising the option or failing to make the required payment for the Exploration License.
In March 2020 CMC exercised its option to acquire 100% of the Metallic Rights within the Mining Claims from the Company, subject to the terms and conditions of the Agreement. The proceeds paid to the Company upon the exercise of the option totaled $1,050,000.
Upon the exercise of the option, the Company retained the all rights and title to (1) the surface interest (with exception of those rights associated with the Metallic Rights), and (2) all non-metallic minerals (expressly including all industrial minerals including clays and iron oxides).
Upon the exercise of the option the Company retained protections against unreasonable interference of its current and future mining operations by CMC. CMC may not do anything that may, at the Company’s determination, adversely impact the Company’s Mining Operations. “Mining Operations” shall mean the activities incident to mineral extraction, permitting, and any operations by CMC or the Company relating to the removal of minerals, respectively, that are or may reasonably be conducted on the Mining Claims, including the exploration for, and development, active mining, removing, producing and selling of any minerals, including the Metallic Minerals. The Agreement states that the parties understand that the Company is willing to enter into the Agreement only if it is assured that CMC will not have any right to unreasonably interfere with the Company’s current mining operations and possible future Mining Operations on the Mining Claims.

---

ITEM 3. LEGAL PROCEEDINGS
ITEM 3.
LEGAL PROCEEDINGS
As of the date of this report, there is no pending or threatened litigation. We may become involved in or subject to, routine litigation, claims, disputes, proceedings and investigations in the ordinary course of business, could have a material adverse effect on our financial condition, cash flows or results of operations.

---

ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4.
MINE SAFETY DISCLOSURES
The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and this Item is included in Exhibit 95 to this 10-K.
PART II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5.
MARKET PRICE FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Prices for Our Common Stock
Our common stock is quoted on the OTC under the symbol “AMNL.” The following quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not represent actual transactions.
Year 2021
Year 2020
High
Low
High
Low
First Quarter
$
0.10
$
0.02
$
0.02
$
0.01
Second Quarter
$
0.03
$
0.02
$
0.01
$
0.01
Third Quarter
$
0.03
$
0.02
$
0.01
$
0.01
Fourth Quarter
$
0.03
$
0.01
$
0.04
$
0.01
Record Holders
As of December 31, 2021, there were approximately 595 holders of record of our common stock. This number does not include an indeterminate number of shareholders whose shares are held by brokers in street name.
Dividends
Since we became a reporting company in 2002, we have never declared or paid any cash dividend on our common stock. We have no current plans to declare dividends. We are subject to restrictions or limitations relating to the declaration or payment of dividends under the Series A Notes and Series 2023 Notes.
Equity Compensation Plans
Plans Approved by Stockholders
Shareholders approved the 2012 Long-Term Incentive Plan (“2012 LTIP”) and the 2016 Incentive Plan. (“2016 IP”).
The number of shares subject to the 2012 LTIP for issuance or reference was 8,900,000 of which 6,234,923 were outstanding at December 31, 2021. The number of shares subject to the 2016 IP was 15,000,000 of which 6,890,000 were outstanding at December 31, 2021.
Plans Not Approved by Stockholders
Prior to the adoption of the 2012 LTIP, the Company granted options to purchase 12,378,411 shares of common stock under individual arrangements. As of December 31, 2021, only 3,204,653 options under such individual arrangements are outstanding.
In May and August, 2016, the Company adopted the 2016 Long-Term Incentive Plan (“2016 LTIP”). The number of shares of common stock for issuance or for reference purposes subject to the 2016 LTIP was 2,000,000. The Company granted options to purchase 1,993,655
shares of common stock under the 2016 LTIP.
In 2017, prior to the adoption of the 2017 Incentive Plan (“2017 IP”) in August 2017, the Company granted options to purchase 870,000 shares of common stock under individual arrangements.
The number of shares of common stock for issuance or for reference purposes subject to the 2017 IP was 40 million. The Company granted options to purchase 38,889,958 shares of common stock under the 2017 IP of which 36,061,269 were outstanding at December 31, 2021.
Equity Compensation Information
As of December 31, 2021
Number of securities
to be issued upon
exercise of
outstanding
options
(a)
Weighted-average
exercise price of
outstanding options
(b)
Number of securities
remaining available
for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
Equity compensation plans approved by security holders (1)
13,124,923
$
0.61
10,655,077
Equity compensation plans not approved by security holders (2)
39,665,922
$
0.13
1,997,255
Total
52,790,845
$
0.25
12,652,332
(1)
Includes 6,890,000 options outstanding under the 2016 IP and 6,234,923 options outstanding under the 2012 LTIP.
(2)
Includes 230,000 options outstanding under the 2016 LTIP, 36,061,269 options outstanding under the 2017 IP and 3,374,653 options outstanding under individual arrangements
Comparison of 5-Year Cumulative Returns
12-31-17
12-31-18
12-31-19
12-31-20
12-31-21
Applied Minerals, Inc.
$
$
$
$
$
iShares Russell Microcap ® Index ETF
$
$
$
$
$
S&P Metals & Mining Index
$
$
$
$
$
* Cumulative return assumes a $100 investment of each respective security at December 31, 2016.

---

ITEM 6. SELECTED FINANCIAL DATA
ITEM 6.
SELECTED FINANCIAL DATA
Year Ended December 31 (in 000’s
except per
share data)
Revenue
$
1,409.0
$
879.2
$
486.0
$
4,873.2
$
2,444.7
Net loss
$
(3,283.2
)
$
(3,287.7
)
$
(5,973.1
)
$
(3,326.0
)
$
(14,910.7
)
Net loss - basic
$
(0.02
)
$
(0.02
)
$
(0.03
)
$
(0.02
)
$
(0.13
)
Net loss - diluted
$
(0.02
)
$
(0.02
)
$
(0.03
)
$
(0.02
)
$
(0.13
)
Cash and equivalents
$
74.3
$
669.6
$
52.8
$
2,892.3
$
47.7
Total assets
$
1,177.8
$
1,900.3
$
1,489.2
$
4,137.0
$
3,324.2
Long-term liabilities
$
48,035.3
$
46,265.1
$
43,842.6
$
36,825.3
$
35,291.9
Shareholders’ (deficit)
$
(50,400.8
)
$
(47,829.4
)
$
(44,784.1
)
$
(34,118.7
)
$
(33,200.8
)

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Applied Minerals, Inc. is a global producer of DRAGONITE halloysite clay and AMIRON advanced natural iron oxides. We are a vertically integrated operation focused on developing grades of DRAGONITE and AMIRON that can be utilized for both traditional and advanced end-market applications. We have mineral production capacity of up to approximately 55,000 tons per year.
See “ITEM 1. BUSINESS” for further details regarding both our business strategy.
Impact of COVID-19 Pandemic on Financial Statements
In December 2019, a novel strain of COVID-19 was reported in China. Since then, COVID-19 has spread globally, to include Canada, the United States and several European countries. The spread of COVID-19 from China to other countries has resulted in the World Health Organization (WHO) declaring the outbreak of COVID-19 as a “pandemic,” or a worldwide spread of a new disease, on March 11, 2020. Many countries around the world have imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus and have closed non-essential businesses.
As local jurisdictions continue to put restrictions in place, our ability to continue to operate our business may also be limited. Such events may result in a period of business, supply and product manufacturing disruption, and in reduced operations, any of which could materially affect our business, financial condition and results of operations. In response to COVID-19, the Company implemented remote working and thus far, has not experienced a significant disruption or delay in our operations
To date, COVID-19 has not had a material financial impact on the Company. However, COVID-19 has caused severe disruptions in transportation and limited access to the Company’s facility, resulting in limited support from its staff and professional advisors. The small size of the Company’s accounting staff and the additional responsibilities emanating from COVID-19 may cause a delay in the Company’s ability to complete subsequent reports in a timely manner.
RECENT ISSUED ACCOUNTING PRONOUNCEMENTS
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments within ASU No. 2019-12 are effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, and early adoption is permitted. The adoption of ASU 2019-12 had no impact on the Company’s financial results.
Results of Operations - 2021 Compared to 2020
The following sets forth, for the periods indicated, certain components of our operating earnings, including such data stated as percentage of revenues:
Twelve Months Ended December 31
Variance
% of
Rev.
% of
Rev.
Amount
%
REVENUES
$
1,409,019
%
$
879,169
%
$
529,850
%
OPERATING EXPENSES:
Production costs
1,658,661
%
1,245,776
%
412,885
%
Exploration costs
247,980
%
201,234
%
46,746
%
General and administrative *
1,594,907
%
2,265,805
%
(
670,898
)
(30
)%
Total Operating Expenses
3,501,548
%
3,712,815
%
(211,267
)
(6
)%
Operating Loss
(2,092,529
)
(149
)%
(2,833,646
)
(322
)%
741,117
(26
)%
OTHER INCOME (EXPENSE):
Interest expense, net, including amortization of deferred financing cost and debt discount
(1,873,124
)
(133
)%
(1,809,397
)
(206
)%
63,727
%
Other income
682,414
%
1,355,332
%
(672,918
)
(50
)%
Total Other (Expense)
(1,190,710
)
(85
)%
(454,065
)
(52
)%
736,645
%
Net Loss
$
(3,283,239
)
(233
)%
$
(3,287,711
)
(374
)%
$
(4,472
)
(0
)%
*
Includes $234,409
and $75,669 of non-cash stock compensation expense for 2021 and 2020, respectively, related to employee, director and consultant stock options.
Revenue generated during 2021 was $1,409,019 compared to $879,169 of revenue generated during the same period in 2020, an increase of $529,850 or 60%. The increase was driven primarily by a $454,379, or 84%, increase in sales of AMIRON iron oxide.
Sales of AMIRON during 2021 totaled $994,079, an increase of $389,579, or approximately 64%, when compared to 2020. The increase was driven primarily by an increase in sales to a manufacturer of cement.
Sales of DRAGONITE during 2021 totaled $414,940, an increase of $140,271, or approximately 51% when compared to 2020. The increase was driven primarily by an increase in sales to customers for use in flame retardent applications, partially offset by a decline in sales to a customer for use in an oilfield application due to the disruption in the oil markets.
Operating expenses incurred during 2021 totaled $3,501,548, a decrease of $211,267, or 6%, when compared to 2020. The decline in operating expenses was driven primarily by a $670,890, or 30%, decline in general and administrative expense partially offset by a $412,885, or 33%, increase in production costs when compared to 2020.
Production costs include those operating expenses which management believes are directly related to the mining and processing of the Company’s iron oxide and halloysite minerals, which result in the production of its AMIRON and DRAGONITE products for commercial sale. Production costs include, but are not limited to, wages and benefits of employees who mine material and who work in the Company’s milling operations, energy costs associated with the operation of the Company’s two mills, the cost of mining and milling supplies and the cost of the maintenance and repair of the Company’s mining and milling equipment. Wages and energy expenses are the two largest components of the Company’s production costs.
Production costs during 2021 were $1,658,661, an increase of $412,885, or 33%, when compared to 2020. The increase was driven primarily by a $314,354 increase in contract labor due to an increase in iron mining production and a $75,846 increase in clay processing expense related to the purchase of inventory upon the termination of a tolling agreement.
Exploration costs include operating expenses incurred at the Dragon Mine that are not directly related to production activities. Exploration costs, excluding depreciation expense, incurred during 2021 totaled $247,980 compared to $201,234 incurred during 2020, an increase of $46,746.
The Company’s general and administrative expenses are associated with corporate overhead. General and administrative expenses for 2021 totaled $1,594,907 compared to $2,265,805 of expense incurred during the same period in 2020, a decline of $670,898 or 30%. The decline was driven primarily by a (i) $399,121, or 53%, reduction in management salary and benefit expense related to the elimination and consolidation of a number of management positions during 2020, (ii) a $245,811 decrease in director expense, or 43%, (iii) a $115,141 decrease in insurance expense and a (iv) $40,996 decline in office rent expense, partially offset by a $158,740 increase in equity compensation expense related to the granting of equity options to management and directors.
Operating loss incurred during the year was $2,092,529, a decline of $741,117, or 26%, when compared to 2020. The decline in operating loss was driven primarily by the $670,898 decline in general and administrative expense and $528,850 increase in revenue, partially offset by a $412,885 increase in production costs.
Total other expense for 2021 was $1,190,710 compared to $454,065 during the same period in 2020, an increase of $736,645 or 162%. The increase in total other expense was driven primarily by the absence of a $1,300,000 payment received from CMC upon the exercise of an option to purchase the metallic mineral rights of the Dragon Mine in 2020, partially offset by $487,547 of gain related to the forgiveness of two PPP loans and $75,808 in proceeds from the net sale of excess equipment and reimbursements.
Net loss for 2021 was $3,283,239, a decline
$4,472, or 0%, when compared to 2020.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a history of recurring losses from operations and the use of cash in operating activities. For the twelve months ended December 31, 2021, the Company’s net loss was $3,283,239 and cash used by operating activities was $1,112,254. As of December 31, 2021, the Company had current assets of $270,561 and current liabilities of $3,543,388 of which $372,028 was accrued PIK Note interest to be paid in additional PIK Notes. The Company’s current liabilities also include (i) $717,327 of accrued salaries, severance and related taxes deferred by current and past members of management until the Company’s liquidity improves, (ii) $1,438,311 of accrued directors fee and other director compensation as determined by the Company’s Board, (iii) $119,269 of payables to a compounder for which it has agreed to satisfy in halloysite product and (iv) $47,783 of disputed or erroneously accrued expenses.
Cash used by operating activities in 2021 was $1,112,254 compared to $845,123 of cash provided by operations during the same period in 2020. The decline in cash provided by operating activities was due primarily to a reduction in accounts payable and accrued liabilities and the absence of $1,000,000 of deferred revenue recognized during 2020.
The Company has no cash activities in investing activities during 2021 and 2020.
Cash provided by financing activities during 2021 was $516,947 compared to $228,356 of cash used by financing activities in 2020.
Our total assets as of December 31, 2021 were $1,177,821 compared to $1,900,307 as of December 31, 2020, or an decrease of $722,486. The decrease in total assets was due primarily to a $595,307 decrease in cash.
Management believes that in order for the Company to meet its obligations arising from normal business operations through April 15, 2022 that the Company may be required (i) to raise additional capital either in the form of a private placement of common stock or debt and/or (ii) generate additional sales of its products that will generate sufficient operating profit and cash flows to fund operations. Without additional capital or additional sales of its products, the Company’s ability to continue to operate may be limited.
Based on the Company’s current cash usage expectations, management believes it may not have sufficient liquidity to fund its operations through April 15, 2022. Further, management cannot provide any assurance that it is probable that the Company will be successful in accomplishing any of its plans to raise debt or equity financing or generate additional product sales. Collectively these factors raise substantial doubt regarding the Company’s ability to continue as going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded assets amounts and classification of liabilities that might be necessary should the Company not be able to continue as a going concern.
OFF-BALANCE SHEET ARRANGEMENTS
There are no off-balance sheet arrangements between the Company and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.
CONTRACTUAL OBLIGATIONS
The following table summarizes our contractual obligations as of December 31, 2021 that require us to make future cash payments. For contractual obligations, we included payments that we have an unconditional obligation to make:
Payment due by period
Total
< 1 year
1 - 3
years
3 - 5
Years
> 5 years
Contractual Obligations:
Rent obligations
$
29,376
$
29,376
Rent payments for the years ended December 31, 2021 and 2020
were $116,649 and $113,253, respectively.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has no virtually exposure to fluctuations in interest rates or foreign currencies.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8.
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Report of Independent Registered Public Accounting Firm PCOBA id is 206
Financial Statements:
Consolidated Balance Sheets at December 31, 2021 and 2020
Consolidated Statements of Operations for the Years Ended December 31, 2021 and 2020
Consolidated Statements of Changes in Stockholders' Deficit for each of the Years Ended December 31, 2021 and 2020
Consolidated Statements of Cash Flows for Each of the Years Ended December 31, 2021 and 2020
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Applied Minerals, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Applied Minerals, Inc. (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Matter
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ MaloneBailey, LLP
www.malonebailey.com
We have served as the Company's auditor since 2018.
Houston, Texas
April 15, 2022
APPLIED MINERALS, INC.
(An Exploration Stage Mining Company)
CONSOLIDATED BALANCE SHEETS
As of December 31,
ASSETS
Current Assets
Cash
$
74,253
$
669,560
Accounts receivable
34,309
67,557
Deposits and prepaid expenses
161,999
190,698
Total Current Assets
270,561
927,815
Land
500,000
500,000
Operating lease right-of-use assets
28,111
136,308
Fiancé
lease right-of-use
42,821
-
Other Assets
Deposits
336,328
336,184
Total Other Assets
336,328
336,184
TOTAL ASSETS
$
1,177,821
$
1,900,307
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued liabilities
$
3,017,454
$
2,632,156
Paycheck Protection Program Loan
-
223,075
PIK Note interest accrual
372,028
365,121
Current portion of notes payable
112,835
133,081
Current portion of finance lease liabili
ties
11,986
-
Current portion of operating lease liabilities
29,085
111,236
Total Current Liabilities
3,543,388
3,464,669
Long-Term Liabilities
PIK Notes payable, net of $681,102 and $1,082,988 debt discount, respectively
47,004,480
45,235,990
Deferred revenue
1,000,000
1,000,000
Finance lease liability
30,835
-
Operating lease liabilities
29,085
Total Long-Term Liabilities
48,035,315
46,265,075
TOTAL LIABILITIES
51,578,703
49,729,744
Stockholders’ Deficit
Preferred stock, $0.001 par value, 10,000,000 shares authorized, and 262,000 and 128,000 shares issued and outstanding at December 31, 2021 and 2020, respectively
Common stock, $0.001 par value, 700,000,000 shares authorized at December 31, 2021 and 2020, respectively and 217,655,150 and 183,938,549 shares issued and outstanding at December 31, 2021 and 2020 (155,078,570
shares
reserved as of December 31, 2021
)
217,654
183,939
Additional paid-in capital
74,686,581
74,008,636
Accumulated deficit prior to the exploration stage
(20,009,496
)
(20,009,496
)
Accumulated deficit during the exploration stage
(105,295,883
)
(102,012,644
)
Total Stockholders’ Deficit
(50,400,882
)
(47,829,437
)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
$
1,177,821
$
1,900,307
The accompanying notes are an integral part of these consolidated financial statements.
APPLIED MINERALS, INC.
(An Exploration Stage Mining Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended
December 31,
REVENUES
$
1,409,019
$
879,169
OPERATING EXPENSES:
Production costs
1,658,661
1,245,776
Exploration costs
247,980
201,234
General and administrative
1,594,907
2,265,805
Total Operating Expenses
3,501,548
3,712,815
Operating Loss
(2,092,529
)
(2,833,646
)
OTHER INCOME (EXPENSE):
Interest expense, net
including amortization of deferred financing cost and debt discount)
(1,873,124
)
(1,809,397
)
Other income, net
682,414
1,355,332
Total Other Income (Expense)
(1,190,710
)
(454,065
)
NET LOSS
$
(3,283,239
)
$
(3,287,711
)
Deemed dividend on Series B Convertible Preferred Stock
(280,121
)
(81,836
)
Net Loss Attributable to Common Shareholders
$
(3,563,360
)
$
(3,369,547
)
Net Loss Per Common Share -Basic and Diluted
$
(0.02
)
$
(0.02
)
Weighted Average Common Shares Outstanding - Basic and Diluted
197,513,183
176,642,306
The accompanying notes are an integral part of these consolidated financial statements.
APPLIED MINERALS, INC.
(An Exploration Stage Mining Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
Common
Stock
Shares
Common
Stock
Amount
Preferred
Stock
Shares
Preferred
Stock
Amount
Additional
Paid-in
Capital
Accumulated
Deficit Prior to
Exploration
Stage
Accumulated
Deficit
During
Exploration
Stage
Total
Stockholders’
Deficit
Balance, December 31, 2019
175,513,549
$
175,514
-
$
-
$
73,774,766
$
(20,009,496
)
$
(98,724,933
)
$
(44,784,149
)
Shares issued for note conversion
8,300,000
8,300
-
-
32,204
-
-
40,504
Shares issued to noteholder
125,000
-
-
1,125
-
-
1,250
Shares issued in private placement
-
-
128,000
124,872
-
-
125,000
Beneficial conversion feature on Convertible Series B Stock
-
-
-
-
81,836
-
-
81,836
Deemed dividend from beneficial conversion feature on Convertible Series B Preferred Stock
-
-
-
(81,836
)
-
-
(81,836
)
Stock option compensation expense
-
-
-
-
75,669
-
-
75,669
Net Loss
-
-
-
-
-
-
(3,287,711
)
(3,287,711
)
Balance, December 31, 2020
183,938,549
$
183,939
128,000
$
$
74,008,636
$
(20,009,496
)
$
(102,012,644
)
$
(47,829,437
)
Shares issued on conversion of preferred stock
28,717,335
28,717
(304,136
)
(304
)
(19,028
)
-
-
9,385
Shares issued in private placement
-
-
438,136
467,562
-
-
468,000
Beneficial conversion feature on Convertible Series B Preferred Stock
-
-
-
-
280,121
-
-
280,121
Deemed dividend from beneficial conversion feature on Convertible Series B Preferred Stock
-
-
-
-
(280,121
)
-
-
(280,121
)
Shares issued for cashless exercise of options
3,836,475
3,836
(3,836
)
-
-
Shares issued to employee in lieu of bonus
1,162,791
1,162
-
-
56,977
-
-
58,139
Stock option compensation expense
-
-
-
-
176,270
-
-
176,270
Net Loss
-
-
-
-
-
-
(3,283,239
)
(3,283,239
)
Balance, December 31, 2021
217,655,150
$
217,654
262,000
$
$
74,686,581
$
(20,009,496
)
$
(105,295,883
)
$
(50,400,882
)
The accompanying notes are an integral part of these consolidated financial statements.
APPLIED MINERALS, INC.
(An Exploration Stage Mining Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended
December 31,
Cash Flows from Operating Activities:
Net loss
$
(3,283,239
)
$
(3,287,711
)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation
7,751
-
Change in fair value of convertible note
-
23,000
Penalty on convertible note
37,500
Amortization of discount - PIK Notes
401,886
381,323
Amortization of discount - notes payable
-
6,250
Amortization of deferred financing costs
-
6,250
Accrued interest on PIK Notes
1,409,455
1,370,005
Stock-based compensation expense
234,409
75,669
Shares issued for interest
9,385
-
Non-cash lease expense
108,197
101,843
Gain on forgiveness of PPP loan
(487,547
)
-
Change in operating assets and liabilities:
Accounts receivable
33,248
10,751
Deposits and prepaid expenses
216,084
312,584
Operating lease liability
(111,236
)
(101,487
)
Accounts payable and accrued expenses
349,353
909,146
Deferred revenue
-
1,000,000
Net cash (used in) provided by operating activities
(1,112,254
)
845,123
Cash Flows from Financing Activities:
Payments on insurance financing
(207,774
)
(295,556
)
Payments on notes payable
-
(394,625
)
Payments on finance lease liability
(7,751
)
-
Proceeds from private placement
468,000
125,000
Proceeds from Paycheck Protection Program Loan
264,472
223,075
Proceeds from notes payable
-
113,750
Net cash provided by (used in) financing activities
516,947
(228,356
)
Net (decrease) increase in cash and cash equivalents
(595,307
)
616,767
Cash and cash equivalents at beginning of year
669,560
52,793
Cash and cash equivalents at end of year
$
74,253
$
669,560
The accompanying notes are an integral part of these consolidated financial statements.
APPLIED MINERALS, INC.
(An Exploration Stage Mining Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended
December 31,
Supplemental disclosure of cash flow information:
Cash paid for interest
$
6,037
$
4,395
Cash paid for income taxes
$
-
$
-
Supplemental disclosure of non-cash financing activity:
Notes payable - insurance financing
$
187,528
$
219,538
Capitalization of ROU assets and finance lease liability
$
49,020
$
-
Accrued PIK interest paid through issuance of PIK Notes
$
1,402,548
$
1,181,787
Deemed dividend on convertible Preferred Stock Series B due to BCF
$
280,121
$
81,836
Common stock issued to note holders for financing cost
$
-
$
1,250
Common stock issued for cashless exercise of options
$
3,836
$
-
Common stock issued upon conversion of Preferred Stock Series B
$
28,717
$
-
Common stock issued upon conversion of note payable
$
-
$
40,504
The accompanying notes are an integral part of these consolidated financial statements.
APPLIED MINERALS, INC.
(An Exploration Stage Mining Company)
Notes to the Consolidated Financial Statements
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Applied Minerals, Inc. (the “Company”) is the owner of the Dragon Mine located in the Tintic Mining District of the State of Utah from where it produces halloysite clay and iron oxide. The Company is currently selling its DRAGONITE halloysite clay product regularly to four customers. Several prospective customers are conducting either commercial-scale trials or field trials for an array of products that are expected to use DRAGONITE as a functional additive. In October 2019 the Company entered into an agreement to supply a manufacturer of cement with up to 30,000 tons AMIRON iron oxide per year over a two-year period.
Applied Minerals, Inc. is a publicly traded company incorporated in the state of Delaware. The common stock trades on the OTC Bulletin Board under the symbol “AMNL.”
Status of the Company for SEC Reporting Purposes
The Company is classified as an “exploration stage” company for purposes of Industry Guide 7 of the U.S. Securities and Exchange Commission (“SEC”).
Under Industry Guide 7, companies engaged in significant mining operations are classified into three categories, referred to as “stages” - exploration, development, and production.
Exploration stage includes all companies that do not have established reserves in accordance with Industry Guide 7. Such companies are deemed to be “in the search for mineral deposits.” Notwithstanding the nature and extent of development-type or production-type activities that have been undertaken or completed, a company cannot be classified as a development or production stage company unless it has established reserves in accordance with Industry Guide 7.
Exploration Agreement
On December 22, 2017, the Company and Continental Mineral Claims, Inc. (“CMC”) entered into an Exploration Agreement with Option to Purchase (“Agreement”). The Company granted to CMC the exclusive right and option to enter upon and conduct mineral exploration activities (the “Exploration License”) for Metallic Minerals on the Company’s Dragon Mine minesite in Utah (the “Mining Claims”). Metallic Minerals are defined to include minerals with a high specific gravity and metallic luster, such as gold, silver, lead, copper, zinc, molybdenum, titanium, tungsten, uranium, tin, iron, etc., but shall exclude any such Metallic Minerals that are intermingled within any economically-recoverable, non-metallic mineral deposits located at or above an elevation of 5,590 feet above sea level. Non-metallic minerals include clay and iron oxide, the minerals mined by the Company. The Company believes that all economic recoverable non-metallic mineral deposits are well above 5,590 feet above sea level. The Exploration License is for a period of ten years.
In consideration of the Exploration License CMC paid the Company $350,000 upon the execution of the agreement and paid it $150,000 on the first anniversary of the Exploration License in December 2018. Per the agreement CMC was obligated to pay the Company $250,000 on or before each subsequent anniversary during the Exploration License term following the first anniversary of the Effective Date of the Agreement unless the Exploration License was terminated earlier by CMC by exercising the option or failing to make the required payment for the Exploration License.
On March 25, 2020, the Company and Tintic Copper and Gold, Inc. (CMC’s successor) (“Tintic”) agreed to lower the exercise price of the Option to $1,050,000 and Tintic immediately exercised the Option. The proceeds from the exercise of the Option are presented as Other Income. The Company also provided Tintic with a Right of First Offer,
which will expire on December 21, 2027 and can be extended to December 21, 2032 for a payment of $250,000 by Tintic to the Company.
Upon the exercise of the option, the Company retained the all rights and title to (1) the surface interest (with exception of those rights associated with the Metallic Rights), and (2) all non-metallic minerals (expressly including all industrial minerals including clays and iron oxides).
Upon the exercise of the option the Company retained protections against unreasonable interference of its current and future mining operations by CMC. CMC may not do anything that may, at the Company’s determination, adversely impact the Company’s Mining Operations. “Mining Operations” shall mean the activities incident to mineral extraction, permitting, and any operations by CMC or the Company relating to the removal of minerals, respectively, that are or may reasonably be conducted on the Mining Claims, including the exploration for, and development, active mining, removing, producing and selling of any minerals, including the Metallic Minerals. The Agreement states that the parties understand that the Company was willing to enter into the Agreement only if it was assured that CMC would not have any right to unreasonably interfere with the Company’s current mining operations and possible future Mining Operations on the Mining Claims.
Impact of COVID-19 Pandemic on Financial Statements
In December 2019, a novel strain of COVID-19 was reported in China. Since then, COVID-19 has spread globally, to include Canada, the United States and several European countries. The spread of COVID-19 from China to other countries has resulted in the World Health Organization (WHO) declaring the outbreak of COVID-19 as a “pandemic,” or a worldwide spread of a new disease, on March 11, 2020.
Since then
m
any countries around the world imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus and have closed non-essential businesses.
The effects of the COVID-19 restrictions adversely affected our business in 2020 and 2021 as certain customers delayed purchases of our DRAGONITE halloysite clay products. As countries, including the U.S., begin to ease restrictions certain of our customers may resume their previously planned purchases of our DRAGONITE halloysite clay products.
NOTE 2 - GOING CONCERN AND BASIS OF PRESENTATION
The Company has a history of recurring losses from operations and the use of cash in operating activities. For the twelve months ended December 31, 2021, the Company’s net loss was $3,283,239 and cash used in operating activities was $1,112,254. As of December 31, 2021, the Company had current assets of $270,561 and current liabilities of $3,543,388 of which $372,028 was accrued PIK Note interest to be paid in additional PIK Notes. The Company’s current liabilities also include. (i) $717,327 of accrued salaries, severance and related taxes deferred by current and past members of management until the Company’s liquidity improves, (ii) $1,438,311 of accrued directors fee and other director compensation as determined by the Company’s Board, (iii) $119,269 of payables to a compounder for which it has agreed to satisfy in halloysite product and (iv) $47,783 of disputed or erroneously accrued expenses.
Management believes that in order for the Company to meet its obligations arising from normal business operations through April 15, 2023 that the Company may be required (i) to raise additional capital either in the form of a private placement of common stock or debt and/or (ii)generate additional sales of its products that will generate sufficient operating profit and cash flows to fund operations. Without additional capital or additional sales of its products, the Company’s ability to continue to operate may be limited.
Based on the Company’s current cash usage expectations, management believes it may not have sufficient liquidity to fund its operations through April 15, 2023. Further, management cannot provide any assurance that it is probable that the Company will be successful in accomplishing any of its plans to raise debt or equity financing or generate additional product sales. Collectively these factors raise substantial doubt regarding the Company’s ability to continue as going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded assets amounts and classification of liabilities that might be necessary should the Company not be able to continue as a going concern.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Applied Minerals, Inc. and its inactive subsidiary, which holds 100 acres of timber and mineral property in northern Idaho.
Basis of Presentation
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company bases its estimates on historical experience and market-specific or other relevant assumptions that it believes are reasonable under the circumstances. The amounts of assets and liabilities reported in the Company’s balance sheets and the amount of expenses and income reported for each of the periods presented are affected by estimates and assumptions, which are used for, but are not limited to, determining the fair value of assets and liabilities, warrant and PIK note derivative liabilities, stock compensation, impairment of long-lived assets and valuation allowance on income taxes. Actual results could differ from such estimates or assumptions.
As of December 31, 2021, the extent to which the COVID-19 pandemic will impact our business going forward depends on numerous dynamic factors, which
we cannot reliably predict. As a result, many of our estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As the events continue to evolve with respect to the pandemic, our estimates may materially change in future periods.
Cash and Cash Equivalents
Cash and cash equivalents represent unrestricted cash on hand and all highly liquid investments with original contractual maturities of three months or less.
Concentration of Credit Risk
Cash balances, accounts receivable and derivative financial instruments are financial instruments potentially subject to credit risk. Cash and cash equivalents are maintained in bank deposit accounts, which, at times, may exceed the federally insured limits. Management periodically reviews and assesses the financial condition of the banks to mitigate the risk of loss.
For the years ended December 31, 2021 and 2020, revenues from the Company’s two largest customers accounted for 76% and 69% of total revenues, respectively. As of December 31, 2021, and 2020, amounts owed from these customers comprised 77% and 44% of accounts receivable, respectively.
Receivables
Trade receivables are reported at outstanding principal amounts, net of an allowance for doubtful accounts.
Management evaluates the collectability of receivable account balances to determine the allowance, if any. Management considers the other party’s credit risk and financial condition, as well as current and projected economic and market conditions, in determining the amount of the allowance. Receivable balances are written off when management determines that the balance is uncollectable. No allowance was required at December 31, 2021 and 2020.
Property and Equipment
Property and equipment are carried at cost net of accumulated depreciation and amortization. Depreciation and amortization are computed on the straight-line method over the estimated useful lives of the assets, or the life of the lease, whichever is shorter, as follows:
Estimated
Useful Life
(years)
Building and Building Improvements
5 - 40
Mining equipment
2 - 7
Office and shop furniture and equipment
3 - 7
Vehicles
Impairment of Long-lived Assets
The Company periodically reviews the carrying amounts of long-lived assets to determine whether current events or circumstances warrant adjustment to such carrying amounts. Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. When such events occur, the Company compares the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset to its carrying amount. If this comparison indicates that there is impairment, the amount of the impairment is typically calculated using discounted expected future cash flows where observable fair values are not readily determinable. Considerable management judgment is necessary to estimate the fair value of assets. Assets to be disposed of are carried at the lower of their financial statement carrying amount or fair value, less cost to sell. The Company has determined that there was no impairment of its long-lived assets as of December 31, 2021 and 2020.
Revenue Recognition
Revenue includes sales of halloysite clay and iron oxide and is recognized when title passes to the buyer and when collectability is reasonably assured. Title passes to the buyer based on terms of the sales contract. Product pricing is determined based on contractual arrangements with the Company’s customers. The Company’s revenue recognition policies are established in accordance with the Revenue Recognition topics of ASC 606, and accordingly, revenue is recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (1) identify the contracts with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods it transfers to the customer. The Company recognizes revenue at a point in time based on management’s evaluation of when performance obligations under the terms of a contract with the customer are satisfied and control of the product has been transferred to the customer. In most situations, transfer of control is considered complete when the products have been shipped to the customer.
Mining Exploration and Development Costs
Land and mining property are carried at cost. The Company expenses prospecting and mining exploration costs. At the point when a property is determined to have proven and probable reserves, subsequent development costs will be capitalized and will be charged to operations using the units-of-production method over proven and probable reserves. Upon abandonment or sale of a mineral property, all capitalized costs relating to the specific property are written off in the period abandoned or sold and a gain or loss is recognized.
Income taxes
The Company uses an asset and liability approach which results in the recognition of deferred tax liabilities and assets for the expected future tax consequences or benefits of temporary differences between the financial reporting basis and the tax basis of assets and liabilities, as well as operating loss and tax credit carry forwards, using enacted tax rates in effect in the years in which the differences are expected to reverse.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of its deferred tax assets will not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. A full valuation allowance has been provided for the Company’s net deferred tax assets as it is more likely than not that they will not be realized.
Authoritative guidance provides that the tax effects from an uncertain tax position taken or expected to be taken in a tax return can be recognized in our financial statements only if the position is more likely than not of being sustained on audit based on the technical merits of the position. As of December 31, 2021, no benefit from uncertain tax positions was recognized in our financial statements. The Company has elected to classify interest and/or penalties related to income tax matters in income tax expense.
Stock Options and Warrants
The Company follows ASC 718, which provide guidance in accounting for share-based awards exchanged for services rendered and requires companies to expense the estimated fair value of these awards over the requisite service period. The Company instituted a formal long-term and short-term incentive plan on November 20, 2012, which was approved by its shareholders. Prior to that date, we did not have a formal equity plan, but all equity grants, including stock options and warrants, were approved by our Board of Directors. We determine the fair value of the stock-based compensation awards granted to non-employees as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete. Beginning in the quarter ended June 30, 2013 the Company began using the simplified method to determine the expected term for any options granted because the Company did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The Company previously utilized the contractual term as the expected term.
Environmental Matters
Expenditures for ongoing compliance with environmental regulations that relate to current operations are expensed or capitalized as appropriate. Expenditures resulting from the remediation of existing conditions caused by past operations that do not contribute to future revenue generations are expensed. Liabilities are recognized when environmental assessments indicate that remediation efforts are probable, and the costs can be reasonably estimated.
Estimates of such liabilities are based upon currently available facts, existing technology and presently enacted laws and regulations taking into consideration the likely effects of inflation and other societal and economic factors and include estimates of associated legal costs. These amounts also reflect prior experience in remediating contaminated sites, other companies’ clean-up experience and data released by The Environmental Protection Agency or other organizations. Such estimates are by their nature imprecise and can be expected to be revised over time because of changes in government regulations, operations, technology, and inflation. Recoveries are evaluated separately from the liability and, when recovery is assured, the Company records and reports an asset separately from the associated liability.
The Company has posted a cash bond in the amount of $297,000 required by the Utah Department of Oil, Gas and Minerals to cover estimated reclamation costs related the Company large mining permit for its Dragon Mine property.
Note Payable - Convertible
The Company follows ASC 480-10, Distinguishing Liabilities from Equity
(“ASC 480-10”) in its evaluation of the accounting for a certain instrument. A financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares shall be classified as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on any one of the following: (a) a fixed monetary amount known at inception; (b) variations in something other than the fair value of the issuer’s equity shares; or (c) variations inversely related to changes in the fair value of the issuer’s equity shares. Hybrid instruments meeting these criteria are not further evaluated for any embedded derivatives and are carried as a liability at fair value at each balance sheet date with remeasurements reported in interest expense in the accompanying Consolidated Statements of Operations.
Recent Issued Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments within ASU No. 2019-12 are effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, and early adoption is permitted. The adoption of ASI 2019-12 had no impact on the Company’s financial results.
NOTE 4 - LEASES
On March 16, 2017, the Company entered into a 5-year operating lease agreement for permanent office space, base rent payment is approximately $9,000 per month, subject to annual adjustments.
For the year ended December 31
Supplemental cash flow information related to leases:
Operating cash flows paid for operating leases
$
111,236
$
113,253
Non-cash lease expense
$
108,197
$
(357
)
Supplemental balance sheet information related to leases:
As of December 31,
As of December 31,
Operating lease Right-of-use assets
$
28,111
$
136,308
Current portion of operating lease liabilities
$
29,085
$
111,236
Long-term operating lease liabilities
-
29,085
Total operating lease liabilities
$
29,085
$
140,321
Weighted average remaining operating lease term
0.25 years
1.25 years
Weighted average discount rate
%
%
The following table summarizes the maturity of le
ase liabilities under operating leases as of December 31, 2021
:
29,376
Total lease payments
29,376
Less: imputed interest
(291
)
Total lease liabilities
$
29,085
In July 2020, the Company entered into a sublease agreement with respect to its Brooklyn, N.Y. office. The leas
e and sublease agreements expire in April 2022. The base rent of the sublease agreement was
$7,049 per month and
increased
by 2.5%
annually beginning
in July 2021.
The Company entered into an agreement to sublet a portion of its office space. The sublease is considered to be an operating lease and the Company has not been released from its obligations under the March 16, 2017, 5-year lease agreement. The Company recognizes income from sublease on a straight-line basis over the term of the sublease, as a reduction to lease expense. The sublease is not measured un
der ASC 842 since the Company remains the primary obligor under the original lease and the sublease is considered to be an operating lease
Finance Lease
On May 14, 2021, the Company entered into a 4-year financing lease agreement for an equipment, base rent payment is approximately $1,107 per month.
Supplemental cash flow information related to leases:
Twelve months ended
December 31, 2021
Finance cash flows used in finance lease
$
(7,751
)
Operating cash flows from finance lease
$
7,751
Supplemental balance sheet information related to leases:
As of Dece
mber 31,
Finance lease Right-of-use assets
$
42,821
Current portion of finance lease liability
$
11,986
Long-term finance lease liability
30,835
Total finance lease liability
$
42,821
Weighted average remaining operating lease term
3.33 years
Weighted average discount rate
%
The following table su
mmarizes the maturity of lease liability under finance lease as of December 31, 2021:
$
14,099
14,099
14,099
4,700
Total lease payments
46,997
Less: imputed interest
(4,176
)
Total lease liabilities
$
42,821
NOTE 5 - PROPERTY AND EQUIPMENT
The following is a summary of property, plant, and equipment - at cost, less accumulated depreciation:
December 31,
Land
$
500,000
$
500,000
500,000
500,000
Less: Accumulated depreciation
-
-
Total
$
500,000
$
500,000
The Company did not record any depreciation expens
e for the years ended December 31, 2021 and 2020. As of December 31, 2021 the Company has accrued $28,542 in property taxes due to the Juab County Treasurer.
NOTE 6 - DEPOSIT
The following is a summary of deposit:
December 31,
Cash Bond (Mine Permit deposit)
$
297,160
$
297,016
Office Lease Security Deposit
39,168
39,168
Total
$
336,328
$
336,184
NOTE 7 - NOTES PAYABLE
Notes payable at December 31, 2021 and 2020 consist of the following:
December 31,
Note payable for insurance companies, payable $1,839 and $15,124 monthly (a)
$
-
$
133,081
Note payable to insurance companies, payable $1,780 and $12,804 monthly, (b)
$
112,835
$
-
$
112,835
$
133,081
Less: Current Portion
$
(112,835
)
$
(133,081
)
Notes Payable, Long-Term Portion
$
-
$
-
(a)
In October 2020, the Company entered into two notes payable with interest rate of 4.04% and 6.89% with an insurance company for liability insurance, payable in 10 monthly installments, which
started in November 2020.
(b)
On October 2021, the Company entered into two notes payable with interest rates of 4.04% and 6.29% with an insurance company for liability insurance, payable in 10 monthly installment payments which started in November 2021
During the 2021 and 2020, the Company's interest payments totaled $3,186 and $4,395, respectively.
NOTE 8 - PAYCHECK PROTECTION PROGRAM LOAN
On May 5, 2020 the Company entered into a promissory note (“PPP Loan”) in the amount of $223,075 from Bank of America, N.A. under the Paycheck Protection Program (“PPP”),
which was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration. The term of the promissory note is two years and the annual interest rate is 1.0%, which shall be deferred for the first six months of the term of the loan. Pursuant to the terms of the CARES Act, the proceeds of each PPP Loan may be used for payroll costs, mortgage interest, rent or utility costs.
The promissory note evidencing each PPP Loan contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in a claim for the immediate repayment of all amounts outstanding under such PPP Loan, collection of all amounts owing from the respective Borrower, filing suit and obtaining judgment against the respective Borrower.
Under the terms of the CARES Act, each Borrower can apply for and be granted forgiveness for all or a portion of the PPP Loan. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds in accordance with the terms of the CARES Act, as described above, during the 8-week period after loan origination and the maintenance or achievement of certain employee levels. No assurance is provided that any Borrower will obtain forgiveness under any relevant PPP Loan in whole or in part.
On March 1, 2021, the Company applied for and was granted full forgiveness of the PPP Loan it entered into on May 5, 2020 in the amount of $223,075.
On February 25, 2021 the Company entered into a second promissory note (“Second PPP Loan”) in the amount of $264,472 from Bank of America, N.A. under the Paycheck Protection Program. The terms of the Second PPP Loan are similar to the PPP Loan the Company entered into on May 5, 2020. On October 22, 2021, the Company was granted full forgiveness of the Second PPP Loan.
, resulting in a total
gain of $487,547 included in other income of the Company’s Results of Operations for 2021.
NOTE 9 - CONVERTIBLE DEBT
PIK Notes
The Company raised $23 million of financing through the issuance of two series of Paid-In-Kind (“PIK”)-Election Convertible Notes in 2013 (“Series 2023 Notes”) and 2014 (“Series A Notes”). The original terms of the Series A Notes included among other things: (i) a maturity of November 1, 2018 with an option to extend to November 1, 2019, (ii) a stated interest rate of 10% paid semi-annually and (iii) a conversion price of $0.90, adjusted downward based on an anti-dilution provision. The original terms of the Series 2023 Notes included among other things: (i) a maturity of August 1, 2023, (ii) a stated interest rate of 10% paid semi-annually and (iii) a conversion price of $1.40, adjusted downward based on an anti-dilution provision. On December 14, 2017, an amendment agreement, entered into between the Company and the holders of the Series A Notes and Series 2023 Notes, went into effect. The agreement resulted in changes to certain terms of the Series A and Series 2023 Notes. The key terms of the Series A and Series 2023 Notes, as amended, are highlighted in the table below:
Key Terms
Series 2023 Notes
Series A Notes
Inception Date
08/01/2013
11/03/2014
Cash Received
$10,500,000
$12,500,000
Principal (Initial Liability)
$10,500,000
$19,848,486
Maturity (Term)
Matures on August 1, 2023, but convertible into shares of the Company’s common stock at the discretion of the holder or by the Company based on the market price of the Company’s stock;
Matures on May 1, 2023 but extends to August 1, 2023 if the Series 2023 Notes are still outstanding. Convertible into shares of the Company’s common stock at the discretion of the holder or by the Company based on the market price of the Company’s stock;
Exercise Price
$0.54, as
adjusted downward based on anti-dilution provisions/downround protection
$0.33, as
adjusted downward based on anti-dilution provisions/down-round protection;
Stated Interest
10% per annum through December 14, 2017, 3% per annum thereafter, due semiannually;
10% per annum through December 14, 2017, 3% per annum thereafter, due semiannually;
In April 2019 the Company entered into a settlement agreement with the holders of the Series A Notes and Series 2023 Notes (the “PIK Notes”). Per the terms of the agreement the Company will pay to holders of PIK Notes on a pro rata basis the following percentages of revenue booked during a fiscal quarter: (a) three percent (3%) of gross revenues if cash or cash equivalents on the Company’s balance sheet or otherwise is less than $3 million on the last day of the fiscal quarter; or (b) five percent (5%) of gross revenues if cash or cash equivalents on the Company’s balance sheet or otherwise is greater than $3 million but less than $5 million the last day of the fiscal quarter; or (c) twelve percent (12%) of gross revenues if cash or cash equivalents on the Company’s balance sheet or otherwise is greater than $5 million.
As of December 31, 2021, the liability components of the PIK Notes on the Company’s balance sheet are listed in the following table:
Series 2023
Notes
Series A
Notes
Total
PIK Note Payable, Gross
$
17,759,822
$
29,925,760
$
47,685,582
Less: Discount
-
(681,102
)
(681,102
)
PIK Note Payable, Net
$
17,759,822
$
29,244,658
$
47,004,480
PIK Note Derivative Liability
$
-
$
-
$
-
As of December 31, 2020, the liability components of the PIK Notes on the Company’s balance sheet are listed in the following table:
Series 2023
Notes
Series A
Notes
Total
PIK Note Payable, Gross
$
17,249,430
$
29,069,548
$
46,318,978
Less: Discount
-
(1,082,988
)
(1,082,988
)
PIK Note Payable, Net
$
17,249,430
$
27,986,560
$
45,235,990
PIK Note Derivative Liability
$
-
$
-
$
-
Series A Notes (Amended)
On November 3, 2014 (“Issue Date”), the Company issued, in a private placement pursuant to investment agreements, $19,848,486 principal amount of 10% PIK-Election Convertible Notes due 2018 ("Series A Notes") in exchange for $12,500,000 in cash and the cancellation of previously-issued warrants held by one investor.
The original terms of the Series A Notes included among other things: (i) a maturity of November 1, 2018 with an option to extend to November 1, 2019, (ii) a stated interest rate of 10% paid semi-annually and (iii) a conversion price of $0.90, adjusted downward based on an anti-dilution provision. The original terms of both the Series A Notes and Series 2023 Notes can be as exhibits to Forms 8-K filed on November 5, 2014.
Below are key amended terms of the Series A Notes:
●
Maturity
: May 1, 2023.
●
Exercise Price
: $0.40 per share and will be adjusted from time to time pursuant anti-dilution provisions.
●
Stated Interest
: 10% payable semi-annually in arrears through December 14, 2017, 3% payable semi-annually in arrears thereafter.
●
Liquidated Damages
: The Company is required to pay the noteholders 1% of the principal amount of the Series A Notes if a Registration statement is not filed and effective within 90 days of the inception date (and further damages for every 30 days thereafter).
●
The number of shares issuable under the Notes may be affected by the anti-dilution provisions of the Notes. The antidilution provisions adjust the Exercise Price of the Notes in the event of stock dividends and splits, issuance below the market price of the common stock, issuances below the conversion price of the Notes, pro rata distribution of assets, rights plans, tender offers, and exchange offers.
The entire principal amount of the Series A Notes and accrued interest thereon shall be mandatorily converted into shares of the Company’s common stock if (i) the Volume Weighted Average Price (“VWAP”) of the thirty (30) preceding trading days is at or greater than $1.00 or the VWAP of the ten (10) preceding trading days is at or greater than $1.40; (ii) the closing market price of the shares of the Company’s common stock is at or greater than $1.00; (iii) all outstanding amounts under each Series 2023 Note or replacement financing, if any, shall have been converted into shares of the Company’s common stock pursuant to the terms of such Series 2023 Note or the replacement financing, if any, on or prior to the date on which a notice of mandatory conversion is received; and (iv) either (x) a registration statement is effective and available for the resale of all of the shares into which the Series A Notes convert on the date on which the Series A notes are mandatorily converted and each of the five (5) trading days prior to the date of mandatory conversion and on the date of mandatory conversion the holders of the Series A Notes are not restricted from selling or distributing any shares into which the Series A Notes convert pursuant to the provisions of the Registration Rights Agreement or (y) the holders Series A Notes may sell all such shares into which the Series A Notes convert immediately under Rule 144 under the Securities Act.
The Series A Notes were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability, or any net investment in a foreign operation. In addition to the customary anti-dilution provisions the notes contain a down-round provision whereby the conversion price would be adjusted downward in the event that additional shares of the Company’s common stock or securities exercisable, convertible or exchangeable for the Company’s common stock were issued for cash consideration (e.g. a capital raise) at a price less than the conversion price. Therefore, the estimated fair value of the conversion feature of $9,212,285 (based on observable inputs using a Monte Carlo model) was bifurcated from the Series A Notes and accounted for as a separate derivative liability, which resulted in a corresponding amount of debt discount on the Series A Notes. In addition, an additional debt discount of $7,348,486 was recorded as a result of the difference between the $12,500,000 of cash received and the $19,848,486 of principal on the Series A Notes. This combined debt discount of $16,560,771 is being amortized using the effective interest method over the 9-year term of the Notes as Interest Expense, while the PIK Note Derivative is carried at fair value (using a Monte Carlo model) until the Notes are converted or otherwise extinguished. Any changes in fair value are recognized in earnings.
During the year ended December 31, 2021, the Company issued additional PIK Notes of $737,161 in lieu of cash interest payments
and amortized debt discount of $401,886
. The carrying
value of the Series A Notes Payable as of December 31, 2021 was $29,244,658
As
of December 31, 2021, the Company was in compliance with the covenants of the Series A Notes.
As of December 31, 2021, Geoffrey Scott, a director of the Company owned $4,573,534 of principal of the Series A Notes.
Series 2023 Notes (Amended)
In August 2013, the Company received $10,500,000 of financing through the private placement of 10% mandatory convertible Notes due 2023 ("Series 2023 Notes"). The principal amount of the Notes is due on maturity. The Company can elect to pay semi-annual interest on the Series 2023 Notes with additional PIK Notes containing the same terms as the Series 2023 Notes, except interest will accrue from issuance of such notes. The Company can also elect to pay interest in cash.
The Series 2023 Notes convert into the Company’s common stock at a conversion price of $0.59 per share, which is subject to customary anti-dilution adjustments; the holders may convert the Series 2023 Notes at any time. The Series 2023 Notes are mandatorily convertible after one year when the weighted average trading price of a share of the common stock for the preceding ten trading days is in excess of the conversion price. The Series 2023 Notes contain customary representations and warranties and several covenants. The proceeds are being used for general corporate purposes. No broker was used and no commission was paid in connection with the sale of the Series 2023 Notes.
These Series 2023 Notes were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. In addition to the customary anti-dilution provisions the notes contain a down-round provision whereby the conversion price would be adjusted downward in the event that additional shares of the Company’s common stock or securities exercisable, convertible or exchangeable for the Company’s common stock were issued for cash consideration (e.g. a capital raise) at a price less than the conversion price. Therefore, the estimated fair value of the conversion feature of $2,055,000 (based on observable inputs using a Monte Carlo model) was bifurcated from the Series 2023 Notes and accounted for as a separate derivative liability, which resulted in a corresponding amount of debt discount on the Series 2023 Notes. The debt discount is being amortized using the effective interest method over the 10-year term of the Series 2023 Notes as Interest Expense, while the PIK Note Derivative is carried at fair value (using a Monte Carlo model) until the Series 2023 Notes are converted or otherwise extinguished. Any changes in fair value are recognized in earnings.
During the year ended December 31, 2021, the Company issued additional PIK Notes of $306,435 in lieu of cash interest payments. The carrying value of the Series 2023 Notes Payable was $17,759,822 as of December 31, 2021
.
As of December 31, 2021, the Company was in compliance with the covenants of the Series 2023 Notes.
NOTE 10 - STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is authorized to issue 10,000,000 shares of noncumulative, non-voting, nonconvertible preferred stock, $0.001 par value per share.
At December 31, 2021 and 2020, 262,000 and 128,000 shares of preferred stock were issued and outstanding, respectively.
During the year ended December 31, 2021, 438,136 shares of Series B Preferred Stock were issued at an average stated price of $1.068 per share for cash proceeds of $468,000, net of $15,000 legal fees.
Each share of Series B Preferred Shares will carry an annual dividend in the amount of twelve percent (12%) of the Stated Value (the “Divided Rate”), which shall be cumulative and compounded daily, payable solely upon redemption, liquidation or conversion. The Company has
the right to redeem all or any portion of the shares within 180 days following the issuance day.
The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the Issuance Date, to convert all or any part of the outstanding Series B Preferred Stock into fully paid and non-assessable shares of Common Stock. The conversion price (the “Conversion Price”) shall equal the 61% multiplied by the Market Price (representing a discount rate of 39%). “Market Price” means the lowest Trading Price for the Common Stock during the twenty (20) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.
At the time of issuance, the Company evaluated the nature of Series B Preferred and concluded it more akin to equity and recorded it as permanent equity. The Company also recorded $280,121 beneficial conversion feature to additional paid in capital. For the year ended December 31, 2021, the Company recorded deemed dividend on Convertible Series B Preferred Stock of $280,121.
During the year ended December 31, 2020, 128,000 shares of preferred stock were issued at a stated price of $1.00 per share for cash proceeds of $125,000, net of $3,000 legal fees.
Each share of Series B Preferred Shares will carry an annual dividend in the amount of twelve percent (12%) of the Stated Value (the “Divided Rate”), which shall be cumulative and compounded daily, payable solely upon redemption, liquidation or conversion. The Company has
the right to redeem all or any portion of the shares within 180 days following the issuance day.
The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the Issuance Date, to convert all or any part of the outstanding Series B Preferred Stock into fully paid and non-assessable shares of Common Stock. The conversion price (the “Conversion Price”) shall equal the 61% multiplied by the Market Price (representing a discount rate of 39%). “Market Price” means the lowest Trading Price for the Common Stock during the twenty (20) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.
At the time of issuance, the Company evaluated the nature of Series B Preferred and concluded it more akin to equity and recorded it as permanent equity. The Company also recorded $81,836 beneficial conversion feature to additional paid in capital. For the year ended December 31, 2020, the Company recorded deemed dividend on Convertible Series B Preferred Stock of $81,836.
Common Stock
The Company is authorized to issue 700,000,000 shares of common stock with a $0.001 par value per share.
At December 31, 2021 and 2020,
217,655,150
a
nd 183,938,549 shares were issued and outstanding, respectively.
During the year ended December 31, 2021, (i) 3,836,475 shares of common stock were issued upon the exercise by two former employees and one current employee of options to purchase 9,528,688 shares
of common stock, (ii) 1,162,791 shares of common stock were issued to an employee as payment for
bonus with value of $58,139 at the time of the grant
and (ii) 28,717,336 shares of common stock were issued upon the conversion of 304,136 shares of Series B Preferred Stock at an average price of $0.011 per share.
During the year ended December 31, 2020, (i) 125,000 shares were issued at a price of $0.01 per share to note holders as financing cost and (ii) 8,300,000 shares were issued upon the conversion of $40,504 of principal and accrued interest related to the FirstFire Convertible Note.
NOTE 11 - OPTIONS AND WARRANTS TO PURCHASE COMMON STOCK
Outstanding Stock Warrants
The Compensation Committee of the Company Board of Directors has full authority to administer and interpret the 2016 Incentive Plan, to grant awards under the 2016 Incentive Plan, to determine the persons to whom awards will be granted, to determine the types of awards to be granted, to determine the terms and conditions of each award, to determine the number of shares of Common Stock to be covered by each award and to make all other determinations in connection with the 2016 Incentive Plan and the awards thereunder as the Committee, in its sole discretion, deems necessary or desirable.
A summary of the status and changes of the warrants issued for 2021 and 2020 is as follows:
December 31, 2021
December 31, 2020
Shares
issuable
upon
exercise
of
Weighted
Shares
issuable
upon
exercise
of
Weighted
Outstanding
Warrants
Average
Exercise Price
Outstanding
Warrants
Average
Exercise Price
Outstanding at beginning of year
24,619,623
$
0.16
26,688,373
$
0.15
Issued
-
-
-
-
Exercised
-
-
-
-
Forfeited
13,619,623
0.21
2,068,750
0.04
Outstanding at end of year
11,000,000
0.10
24,619,623
0.16
At December 31, 2021 and 2020, the intrinsic values of the outstanding warrants were $0.
A summary of the status of the warrants outstanding and exercisable at December 31, 2021 is presented below:
Exercise Price
Shares issuable
upon exercise of
Outstanding Warrants
Weighted Average
Remaining
Contractual Life
(years)
Weighted
Average
Exercise Price
$
0.10
11,000,000
0.96
$
0.10
11,000,000
0.96
$
0.10
Outstanding Stock Options
On November 20, 2012, the shareholders of the Company approved the adoption of the Applied Minerals, Inc. 2012 Long-Term Incentive Plan (“LTIP”) and the Short-Term Incentive Plan (“STIP”) and the performance criteria used in setting performance goals for awards intended to be performance-based. Under the LTIP, 8,900,000 shares are authorized for issuance. The STIP does not refer to a particular number of shares under the LTIP, but would use the shares authorized in the LTIP for issuance under the STIP. The CEO, the CFO, and named executive officers, and directors, among others are eligible to participate in the LTIP and STIP. Prior to the adoption of the LTIP and STIP, stock options were granted under individual arrangements between the Company and the grantees, and approved by the Board of Directors.
On December 7, 2016, the stockholders of the Company approved the 2016 Incentive Plan. The purpose of the 2016 Incentive Plan is to enhance the profitability and value of the Company for the benefit of its stockholders by enabling the Company to offer eligible employees, consultants, and non-employee directors incentive awards in order to attract, retain and reward such individuals and strengthen the mutuality of interests between such individuals and the Company’s stockholders. The aggregate number of shares of Common Stock that may be issued or used for reference purposes under the 2016 Incentive Plan or with respect to which awards may be granted may not exceed 15,000,000 shares, which may be either (i) authorized and unissued Common Stock or (ii) Common Stock held in or acquired for the treasury of the Company.
The Compensation Committee of the Company Board of Directors has full authority to administer and interpret the 2016 Incentive Plan, to grant awards under the 2016 Incentive Plan, to determine the persons to whom awards will be granted, to determine the types of awards to be granted, to determine the terms and conditions of each award, to determine the number of shares of Common Stock to be covered by each award and to make all other determinations in connection with the 2016 Incentive Plan and the awards thereunder as the Committee, in its sole discretion, deems necessary or desirable.
The fair value of each of the Company's stock option awards is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based on an average of historical volatility of the Company's common stock. The risk-free interest rate for periods within the contractual life of the stock option award is based on the yield curve of a zero-coupon U.S. Treasury Bond on the date the award is granted with a maturity equal to the expected term of the award. During 2021 the Company options to 9,450,000 shares of its common stock with an exercise price of $0.03 and a term of five years to certain executives and directors.
The significant assumptions relating to the valuation of the Company's options issued for 2021 were as follows on a weighted average basis:
Dividend Yield
0%
-
Expected Life (in years)
2.75
-
Expected Volatility
208.0%
-
Risk Free Interest Rate
0.38%
-
A summary of the status and changes of the options granted under stock option plans and other agreements for 2021 and 2020 is as follows:
December 31, 2021
December 31, 2020
Weighted
Weighted
Average
Average
Shares
Exercise Price
Shares
Exercise Price
Outstanding at beginning of year
56,661,515
0.28
60,676,568
$
0.26
Granted
9,450,000
0.03
-
$
-
Exercised
(9,528,688
)
0.06
-
-
Expired
(3,791,982
)
0.67
(100,000
)
0.22
Forfeited
-
-
(3,915,053
)
0.06
Outstanding at end of year
52,790,845
0.25
56,661,515
$
0.28
A summary of the status of the options outstanding at December 31, 2021 is presented below:
Options Outstanding
Options Exercisable
Range of per
share exercise
price
Shares
Weighted
average
remaining
contractual
life (years)
Per share
weighted
average
exercise
price
Shares
Weighted
average
remaining
contractual
life (years)
Per share
weighted
average
exercise price
$0.03 - $0.08
38,409,881
5.41
$
0.06
35,102,381
5.47
$
0.05
$0.10 - $0.84
10,338,904
1.38
0.47
10,338,904
1.38
0.47
$1.10 - $1.66
4,042,060
0.96
1.57
4.042,060
0.96
1.57
52,790,845
4.28
$
0.25
49,483,345
4.26
$
0.27
Compensation expense of $176,270, and $75,669, has been recognized for the vested options for the years ended December 31, 2021 and 2020, respectively.
On August 18, 2017, the Company’s management was granted performance-based options to purchase 27.5 million shares of the Company’s common stock at $0.06 per share. The options expire on August 18, 2027. On November 1, 2017, the first fifty percent (50%) of the performance-based options vested as management was able to (i) close the sale of an aggregate of $600,000 of units (consisting of a share of common stock of the Company and a warrant to buy 0.25 of a share of common stock of the Company) at $0.04 per unit and (ii) establish toll processing arrangements with two toll processors of halloysite that, in management’s good faith belief, can process halloysite to the Company’s specifications. An additional twenty-five percent (25
%) of the performance-based options vested on January 18, 2018 when management generated $900,000 of additional cash proceeds through (i) the sale of common stock and (ii) the licensing of a right to explore the Dragon Mine property for certain precious metals.
The vesting of the remaining 8.3%, 8.3% and 8.4% of the performance-based options
was scheduled to occur
when (i) EBITDA is positive over a twelve-month period, (ii) EBITDA is at or greater than $2 million over a twelve-month period and (iii) EBITDA is at or greater than $4 million over a twelve-month period, respectively. Of the 27.5 million performance options granted to management in August 2017, approximately 14.3 million were outstanding at December 31
, 2021. The reduction was due to the forfeiture of options to purchase 0.4 million shares of common stock and the exercise of options to purchase approximately 9.5 million shares of common stock during the three months ended March 31, 2021. In July, 2021, the board accelerated the vesting of 1,195,138 options granted to Christopher Carney in August, 2017 and accelerated the vesting of 333,333 options granted in March 2019 to Sharad Mathur, CTO
In July 2021 the board approved a grant to management of options to purchase 5.7 million shares of common stock at $0.03 per share. The options have a term of five years. Fifty percent (50%) of the grant vested in July 2021 and the remainder vests in equal monthly amounts through June 2022. In July 2021 the board approved a grant to the directors and a consultant of options to purchase 3.75 million shares of common stock at $0.03 per share. The options have a term of five years. Fifty percent (50%) of the grant vested in July 2021 and the remainder vests in equal monthly amounts through June 2022. The fair value of the options granted in July on the grant date using the Black Scholes model was $169,690. As of December 31, 2021, the Company had
$47,843 of unamortized compensation expense
.
NOTE 12 - PER SHARE DATA
The computation of basic earnings (loss) per share of common stock is based on the weighted average number of shares outstanding during the year. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the year plus the common stock equivalents that would arise from the exercise of stock options and warrants outstanding under the treasury method and the average market price per share during the year as well as the conversion of notes.
At December 31, 2021, the weighted average shares outstanding excluded options to purchase 52,790,845 shares of common stock of the Company, warrants to purchase 11,000,000 shares of common stock of the Company and 124,437,208 shares of common stock of the Company issuable upon the conversion of notes payable because their effect would be anti-dilutive.
At December 31, 2020, the weighted average shares outstanding excluded options to purchase 56,661,515 shares of common stock of the Company, warrants to purchase 24,619,623 shares of common stock of the Company and 107,025,597 shares of common stock of the Company issuable upon the conversion of notes payable because their effect would be anti-dilutive.
NOTE 13 - INCOME TAXES
The Company calculates its deferred tax assets and liabilities using the federal tax rate of 21% and the effective state rates, net of federal benefits of 2.4%.
The tax effect of items that give rise to the deferred tax assets and liabilities are as follows:
December 31,
December 31,
Deferred tax assets:
Net operating loss carry forward
$
25,931,122
$
25,191,672
Stock-based compensation
1,372,350
1,699,706
Fixed assets
670,212
693,139
Total deferred tax assets
27,973,684
27,584,517
Deferred tax liabilities:
Less: valuation allowance
(27,973,684
)
(27,584,517
)
$
-
$
-
In assessing the realization of deferred tax assets, management determines whether it is more likely than not some, or all, of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the carryforward period as well as the period in which those temporary differences become deductible. Management considers the reversal of taxable temporary differences, projected taxable income and tax planning strategies in making this assessment. Based upon historical losses and the possibility of continued losses over the periods that the deferred tax assets are deductible, management believes it is more likely than not that the Company will not realize the benefits of these deferred tax assets and thus recorded a valuation allowance against the entire deferred tax asset balance. The valuation allowance
decreased by
$389,167 and increased by
$570,660 in the years
ended December 31, 2021 and 2020, respectively.
At December 31, 2021
, the Company had net operating loss carry-forwards of $108,834,687 for federal income tax purposes and $73,902,721 for state and local income tax purposes. The federal net operating loss carry-forwards are available to be utilized against future taxable income through fiscal year 2040 and state loss carry-forwards expire from 2025 through 2040, subject to substantial restrictions on the utilization of net operating losses in the event of an “ownership change” as defined by the Internal Revenue Code. Utilization of the Company’s federal and state net operating loss carry-forwards are subject to limitations as a result of these restrictions. No amounts were provided for unrecognized tax benefits attributable to uncertain tax positions as of December 31, 2021 and 2020.
The Internal Revenue Code of 1986, as amended (the Code) provides for a limitation of the annual use of net operating losses following certain ownership changes (as defined by the Code) that could limit the Company’s ability to utilize these carryforwards. At this time, the Company has not completed a study to assess whether an ownership change under Section 382 of the Code has occurred, or whether there have been multiple ownership changes since the Company’s formation, due to the costs and complexities associated with such a study. The Company may have experienced various ownership changes, as defined by the Code, as a result of past financing transactions. Accordingly, the Company’s ability to utilize the aforementioned carryforwards may be limited. Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes. Therefore, the Company may not be able to take full advantage of these carryforwards for Federal or state income tax purposes.
The Tax Cuts and Jobs Act (“Tax Act”) was enacted on December 22, 2017. The Tax Act reduces the US corporate rate from 35% to 21% beginning in 2018. The Company remeasured its deferred tax assets based upon the new 21% tax rate. As a result, the Company decreased its deferred tax assets by $15,181,980 with a corresponding adjustment to its valuation allowance for the year ended December 31, 2017.
A reconciliation of the differences between the effective and statutory income tax rates is as follows:
December 31, 2021
December 31, 2020
Federal statutory rate
$
(689,480
)
21.0
%
$
(690,419
)
21.0
%
State income taxes
(87,192
)
2.7
%
(88,957
)
2.7
%
Change in valuation allowance
389,167
(11.9
)%
722,966
(21.9
)%
Amortization of discount on PIK Notes
84,396
(2.6
)%
-
-
PPP loan forgiveness
(102,385
)
3.1
%
-
-
Expired options
343,316
(10.5
)%
-
-
Miscellaneous
62,178
(1.8
)%
(57,410
)
(1.8
)%
$
(0
)
(0.1
)
%
$
-
0.0
%
NOTE 14 - COMMITMENTS AND CONTINGENCIES
Operating Lease Commitment
On January 1, 2017, the Company moved its headquarters to a temporary location. The Company paid a monthly rent of $6,000 through March 31, 2017 for the temporary office. On March 16, 2017, the Company entered into a 5-year lease agreement for permanent office space, base rent payment is approximately $9,400 per month, subject to annual adjustments. On July 1, 2020 the Company entered into an agreement to sublet its New York corporate office through the end of the term of its lease agreement.
Rent expense is calculated using the straight-line method based on total minimum lease payments over the initial term of the lease. Landlord tenant improvement allowances and rent expense exceeding actual rent payments are accounted for as deferred rent liability in the balance sheet and amortized on a straight-line basis over the initial term of the respective leases.
Future minimum payments, by year and in the aggregate, under non-cancellable operating leases with initial or remaining terms of one year or more, consist of the following at December 31, 2021:
Year
Amount
$
29,376
$
29,376
NOTE 15 - SIGNIFICANT CONTRACTS
On November 23, 2020 the Company entered into a Exclusivity and Collaboration Agreement with a Korea-domiciled manufacturer {“Purchaser”) of specialty industrial equipment. As part of the agreement the Buyer purchased 334 tons of halloysite clay located at the Dragon Mine (Eureka, UT) for total proceeds of $1,000,000.
For a period of ten (10) years from the Effective Date (“Initial Term”), AMI will exclusively work with the Purchaser to commercialize the use of halloysite clay and/or its derivatives for use in a battery technology for the Korean Market (the Korean Market is defined as companies domiciled in Korea that manufacture, market and/or sell battery technologies in Korea, outside Korea or both).
Upon the successful development of halloysite clay and/or its derivatives for use in a battery technology, the Purchaser and AMI will negotiate in good faith and agree upon the calculation and other terms of a quarterly payment (“Sales Royalty Payment”) to be paid to AMI by the Purchaser. The Sales Royalty Payment will be based on a percentage of sales generated by the Purchaser of halloysite and/or its derivatives in a battery technology for the Korean Market.
If AMI or the Purchaser terminates the Agreement prior to the second anniversary of the Effective Date, AMI will make a commercially reasonable effort to sell any remaining balance of the Initial Halloysite
Clay Purchase to one or more third parties on behalf of the Purchaser.
The Term of the Agreement will renew after the Initial Term for additional five (5) year periods unless terminated by either the Purchaser or AMI.
The Agreement contains other standard conditions with respect to intellectual property, confidential information, governing law and dispute resolution.
As of April 15, 2022, the Company has not received written communication from the Purchaser it has terminated the Exclusivity and Collaboration Agreement.
On August 21, 2018 (“Effective Date”), Applied Minerals, Inc. (the “Company”) and the purchaser of the Company’s Surface Piles (“Purchaser”) entered into a Sale Agreement (the “Agreement”) for the sale of five Surface Piles for Initial Consideration of $4,546,145 and Additional Consideration of $1.00 per ton of Surface Pile material removed by Purchaser or its Agents from the Dragon Mine property. The Surface Piles include 4,546,145 tons of Surface Pile material, a mixture of halloysite, kaolinite and illite clays and a range of non-clay minerals.
It is solely the responsibility of Purchaser to remove the Surface Pile material from the Company’s Dragon Mine Property. Purchaser will have 60 years to remove Surface Pile material. Thereafter, ownership of any Surface Pile material remaining on the Dragon Mine property will automatically revert to the Company. Purchaser may from time to time transfer to the Company any Surface Pile material that it decides will not be removed.
Purchaser may bring on to Dragon Mine Property equipment and personnel reasonably acceptable to the Company for measuring, weighing, testing, crushing and otherwise processing, air-drying, commingling, storing, loading, removing documenting, or selling in connection with the Surface Piles
The Company may relocate a Surface Pile if the Purchaser agrees and such agreement will not be unreasonably withheld. Purchaser will not, and will cause its Agents not to, interfere in any material respect with the operations of the Company.
NOTE 16 - SUBSEQUENT EVENTS
In January 2022 t
he Company entered into a promissory note agreement with Coventry Enterprises LLC. The promissory note is in the principal amount of $90,000, including an original issue discount of 16.7%, resulting in net proceeds to the Company of $75,000. The annual interest rate of the promissory note is 10%. Principal and interest is due to Coventry in seven equal monthly payments of $14,142.50 commencing on June 24, 2022 until the promissory note is paid in full no later than January 24, 2023. In the Event of Default, Coventry will have the right to convert the outstanding principal and interest into stock at a price equal to ninety (90) percent of the lowest trading price over a ten (10) day trading period immediately prior to the date of conversion. As part of entering into the promissory note agreement, the Company issued 300,000 restricted shares of common stock under to Coventry Enterprises, LLC.
In March 2022 the Company entered into a loan for $125,000 with Small Business Financial Solutions, LLC. Payment of the loan occurs in 79 equal weekly payments of $2,025.32 on the first day of each week following receipt of the funds.
In March 2022 the Company entered into a consulting agreement with a firm that provide investor relations services. As part of the agreement the Company issued 10,000,000 restricted shares of common stock under to the firm.
In March 2022 the Company entered into a settlement with a contract-mining provider to settle a liability of $200,000. The contract-mining provider mined iron for the Company during part of 2021. As part of the settlement, the Company agreed to pay the contract-mining provider (i)
$10,000 per month over ten
(10) consecutive months beginning April 2022 and (ii) a grant of
4,444,444 restricted shares of common stock.
In March 2022 the Company issued 20,164,153 shares of common stock upon the conversion of 75,000 shares of Series B Preferred Stock issued in August 2021.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
During the years ended December 31, 2021 and 2020, there were no disagreements with our independent registered public accounting firms.

---

ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of December 31, 2020. Our principal executive and financial officers supervised and participated in the evaluation. Based on the evaluation, our principal executive and financial officers each concluded that our disclosure controls and procedures were not effective in providing reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s forms and rules as of December 31, 2020.
Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
●
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
●
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
●
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.
Management’s Annual Report on Internal Control over Financial Reporting
Our management, including the chief executive officer and chief financial officer, concluded that the Company’s internal controls over financial reporting were not effective as of December 31, 2020 due to the material weaknesses defined below. In arriving at that conclusion, we considered the criteria established in the 2013 Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and we performed a complete assessment as outlined in Commission Guidance Regarding Management’s Report on Internal Control Over Financial Reporting Under Section 13(a) or 15(d) of the Exchange Act
("SOX").
To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.
In performing our assessment, we identified the risks that most likely affect reliable financial reporting and are most likely to have a material impact on the company’s consolidated financial statements, documented each business process within the risk area, determined the control points related to the business process and tested the design and effectiveness of each control. In addition to process (transactional) level controls, we evaluated entity level controls to determine if compensating controls mitigated any process level risks. Entity level controls include a broad range of non-transactional activities including account reconciliations, management review of results, the company’s Code of Conduct and Audit Committee review of practices and results.
SEC Release 33-8809 defines “material weakness” as a deficiency, or a combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the registrant’s financial statement will not be prevented or detected on a timely basis. SEC release 33-8809 defines “significant deficiency” as a deficiency, or combination of deficiencies in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting.
Management has identified the following material weaknesses, which have caused management to conclude that as of December 31, 2021, our internal controls over financial reporting were not effective at the reasonable assurance level:
●
Insufficient segregation of duties, oversight of work performed and lack of compensating controls in our finance and accounting functions due to limited personnel; and
●
We lack a sufficient process for periodic financial reporting, including timely preparation and review of financial reports and statements.
Notwithstanding the existence of these material weaknesses in our internal control over financial reporting, the management believes that the consolidated financial statements included in this Form 10-K fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
Internal Control Remediation Efforts
Management has taken the following steps to remedy the material weaknesses in our internal control over financial reporting:
1.
During the third calendar quarter of 2018, management engaged an experienced accounting consultant to (i) assist with ongoing GAAP and U.S. Securities and Exchange Commission compliance requirements (ii) and develop a sufficient process for periodic financial reporting, including timely preparation and review of financial reports and statements. Additionally, management may further expand the accounting and finance function by hiring appropriate staff to resolve this material weakness in 2022 if the necessary resources become available.
2.
The Company’s accounting consultant will continue to assist management with strengthening its internal controls in 2022.
The annual report does not include an attestation report of the independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the independent registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permits us to provide only management's report in this annual report.

---

ITEM 9B. OTHER INFORMATION
ITEM 9B.
OTHER INFORMATION
None.
PART III

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Identification of Directors and Officers
The following table provides the names, positions, ages and principal occupations of our current directors, and our executive officers.
Name and Position
with The
Company
Age
Director/Officer Since
Principal Occupation
Mario Concha
Chairman since 2016; Director since 2013;
President, Mario Concha and Associates
Robert T. Betz
Director since 2014
Owner, Personal Care Ingredients
John F. Levy
Vice Chairman since 2016; Director since 2008
CEO of Board Advisory
Geoffrey Scott
Director since 2019
Private Investor
Christopher T. Carney
Officer since 2015; Director and CEO since October 2020
CEO and CEO of the Company
(1)
The directors are elected to serve until the next annual meeting of shareholders. Officers serve at the pleasure of the Board.
Background of Directors and Officers
Mario Concha, Non-Executive Chairman, Director, President and CEO
Mr. Concha is President of Mario Concha and Associates, a firm providing consulting services to senior executives and boards of directors. He serves on the board of the National Association of Corporate Directors, Atlanta Chapter. He has served as a director of Arclin, Ltd., a manufacturer of specialty resins, and Auro Resources, Corp, a mineral exploration company with holdings in Colombia’s gold region. Mr. Concha was an officer of Georgia Pacific Corporation and president of its Chemical Division from 1998 to 2005. Prior to Georgia Pacific, Mr. Concha participated in the formation of GS Industries, a manufacturer of specialty steels for the mining industry, through a leveraged buyout of Armco Inc.’s Worldwide Grinding Systems Division. He then served as President of its International Division from 1992 to 1998. From 1985 to 1992, Mr. Concha was Vice President-International for Occidental Chemical Corporation. Prior to Occidental Chemical, he served in several senior management positions at Union Carbide Corporation in the United States and overseas.
Mr. Concha is a graduate of Cornell University with a degree in Chemical Engineering. He has attended the Advanced Management Program at the University of Virginia's Darden School of Business and the NACD-ISS accredited Director's College at the University of Georgia's Terry College of Business. He is a member of the National Association of Corporate Directors, the American Chemical Society, and the American Institute of Chemical Engineers.
Key attributes, experience and skills
: Mr. Concha has over 40 years experience as a hands-on corporate executive. He has first-hand industry knowledge, gained from senior executive positions in various industries, including chemicals, plastics, forest products, metals, and mining. In addition to manufacturing operations, he has had extensive involvement in marketing, sales, and finance. Mr. Concha also brings corporate governance experience, having served on both public and private company boards.
Robert T. Betz, Director
From 2000 through his retirement in 2002, Mr. Betz was the President of Cognis Corp., the North American division of Cognis GmbH, a $4 billion worldwide supplier of specialty chemicals and nutritional ingredients that was spun off from Henkel AG & Company ("Henkel"). From 1989 through 2000, Mr. Betz held a number of management positions at Henkel, including Executive VP and President of its Emery Group, a leading manufacturer of oleochemicals, and President of its Chemicals Group for North America.
From 1979 through 1989, Mr. Betz worked in a number of manufacturing and operations capacities for the Emery Division of National Distillers and Chemicals Corp., eventually rising to President of the division. Mr. Betz began his career in the specialty chemicals industry by joining Emery Industries in 1963. Between 1963 and 1979 he worked for the company as Market Development Representative, Manager of Corporate Planning, Vice President of Operations - Emery (Canada), Manager of Commercial Development, and General Manager of Business Groups. Emery Industries was sold to National Distillers and Chemicals Corp. in 1979.
Since 2003, Mr. Betz has been the owner of Personal Care Ingredients, LLC, a privately-owned marketer of natural products to the personal care industry. Mr. Betz also serves as a director for Bio-Botanica, a manufacturer of natural extracts.
Mr. Betz holds a B.S. in Chemical Engineering and an M.B.A., both degrees from the University of Cincinnati. He has also attended the Program for Management Development at Harvard University.
Key attributes experience and skills
. During Mr. Betz’s career, he has been involved in developing new products or new markets for existing products. Several of these products grew into sizeable businesses. He managed multiple chemical manufacturing facilities and managed a multi-billion dollar polyethylene business. He was responsible for profit and loss for businesses with sales of $900 million. While heading the chemical operations, he was responsible for all aspects of the business: manufacturing, sales, R&D, IT, HS&E, HR, purchasing, engineering, and legal. His career has continuously involved developing, manufacturing, and selling products directed at most of the markets that Applied Minerals is attempting to penetrate. Since his retirement, he served on the boards of three chemical-related, private companies: Plaza Group, Syrgis, and Hightower Petroleum.
John F. Levy, Vice Chairman and Director
Since May 2005, Mr. Levy has served as the Chief Executive Officer of Board Advisory, a consulting firm that advises public companies in the areas of corporate governance, corporate compliance, financial reporting, and financial strategies. Mr. Levy served as the Chief Executive Officer of Sticky Fingers Restaurant, LLC, a South Carolina based barbeque restaurant chain, and has held this position from August 2019 to May 2020. Mr. Levy previously served as a business consultant with Sticky Fingers Restaurants, LLC from February 2019 to August 2019. In addition to his service on Applied Minerals, Inc. board of directors, Mr. Levy serves on the board of directors and as audit committee chair of Happiness Biotech Group Limited (since October 2019), a Chinese-based nutraceutical and dietary supplements company. Since November 2021, Mr. Levy has served
on the board of directors, the audit committee and as compensation committee chair of
Singularity Future Technology Ltd. (formerly known as Sino-Global Shipping America, Ltd.) which is diversifying into the cryptocurrency market, while continuing to support and grow its shipping, chartering, logistics and related services business. Headquartered in New Yo
rk, the Company has offices in
Mainland China and United States.
Mr. Levy served as a director, chairman of the Audit Committee, and a member of the Governance and Nominating Committee, of Washington Prime Group, a Real Estate Investment Trust, from June 20196 to October 2021. Washington Prime Group and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code on June 13, 2021 and emerged from bankruptcy protection on October 21, 2021.
Mr. Levy was a director, chairman of the Governance and Nominating Committee, and a member of the Audit and Compensation Committees of Takung Art Co., Ltd., an operator of an electronic online platform for artists, art dealers and art investors to offer and trade in ownership units over valuable artwork from February 2016 to June 2019. He was a director of China Commercial Credit, a publicly held Chinese micro-lender, from 2013 to 2016. He was a director and audit committee member of Applied Energetics, Inc. (AERG), a publicly held company that specialized in the development and application of high-power lasers, high voltage electronics advanced optical systems and energy management systems technologies from 2009 to 2016.
From 2006 to 2013, Mr. Levy was a director and chair of the Audit Committee of Gilman Ciocia, Inc., a publicly traded financial planning and tax preparation firm and served as lead director from 2007 to 2013. From 2010 to 2012, he served as director of Brightpoint, Inc., a publicly traded company that provides supply chain solutions to leading stakeholders in the wireless industry. From 2008 through 2010, he served as a director of Applied Natural Gas Fuels, Inc. (formerly PNG Ventures, Inc.). From 2006 to 2010, Mr. Levy served as a director and Audit Committee chairman of Take Two Interactive Software, Inc., a public company that is a global developer and publisher of video games best known for the Grand Theft Auto franchise. Mr. Levy is a frequent speaker on the roles and responsibilities of Board members and audit committee members.
He has authored many courses including The 21st Century Director: Ethical and Legal Responsibilities of Board Members, Acquisitions to Grow the Business: Structure, Due Diligence, Financing, Ethics and Sustainability: A 4-way Path to Success, Finance and Innovation: Reinvent Your Department and Your Company, Predicting the Future: 21st Century Budgets and Projections
and Heartfelt Leadership: How Ethical Leaders Build Trusting Organizations
. All courses have been presented to state accounting societies.
Mr. Levy is a Certified Public Accountant with several years of experience. Mr. Levy is a graduate of the Wharton School of the University of Pennsylvania, and received his MBA from St. Joseph's University in Philadelphia. Mr. Levy has completed the National Association of Corporate Directors’ Board Leadership Fellow program of study.
Key attributes, experience and skills:
Mr. Levy has over 35 years of progressive financial, accounting, and business experience, including having served as Chief Financial Officer of both public and private companies for over 13 years. Mr. Levy brings to the board expertise in corporate governance and compliance matters along with extensive experience gained from numerous senior executive positions with public companies Further, Mr. Levy’s service on the boards of directors of public companies in a variety of industries allows him to bring a diverse blend of experiences to the Company’s board.
Geoffrey Scott, Director
Mr. Scott is a private investor. From 1995 to 2018, Mr. Scott was an investment advisor and president of Scott Asset Management, whose clients were high net worth individuals. From 1990 to 1995, he was a vice president, corporate finance at Merrill Lynch. From 1973 to 1990, he was a vice president of corporate banking at Chase Manhattan Bank.
Key attributes, experience and skills:
For 10 years, he served on the Board of a private company, growing revenue from approximately $50 million to $150 million. In a quickly growing company, allocation of resources is a very important consideration. He served on the audit and compensation committees. The company was eventually sold to a private equity buyer. His experience with charting the growth of smaller companies will be of value to the Board of the Company.
Christopher T. Carney, Chief Executive Officer, Chief Financial Officer, Director
Mr. Carney is President and CEO and has served in those positions since October 22, 2020. Mr. Carney has also served as the Company’s CFO since August 2015.
From February 2009 through May 2012, Mr. Carney was the Interim Chief Financial Officer of the Company. From May 2012 through August 2015, Mr. Carney was a VP of Business Development for the Company. Mr. Carney was appointed Chief Financial Officer of the Company in August 2015 when the previous Chief Financial Officer resigned. He retained his position as Vice President of Business Development. From March 2007 until December 2008, Mr. Carney was an analyst at SAC Capital/CR Intrinsic Investors, LLC, a hedge fund, where he evaluated the debt and equity securities of companies undergoing financial restructurings and/or operational turnarounds. From March 2004 until October 2006, Mr. Carney was a distressed debt and special situations analyst for RBC Dain Rauscher Inc., a registered broker-dealer. Mr. Carney graduated with a BA in Computer Science from Lehman College and an MBA in Finance from Tulane University.
Key attributes, experience and skills: He has worked for the Company in a number of capacities since January 2009. Since August 2015 he has been the Company’s Chief Financial Officer.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our officers, directors, and any person who beneficially owns more than 10% of our common stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Executive officers, directors, and more than 10% shareholders are required by regulation to furnish us with copies of all Section 16(a) forms which they file. To the best of our knowledge, all filings were made timely in 2021.
Code of Ethics
We have adopted a Code of Conduct and Ethics for our Chief Executive Officer and our senior financial officers. A copy of our Code of Conduct and Ethics is posted on our website at www.appliedminerals.com and can be obtained at no cost by mail at: Applied Minerals, Inc., PO Box 432 Eureka, UT 846289. We believe our Code of Conduct and Ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely, and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the Code.
Board Meetings
There were five meetings of the Board of Directors, six meetings of the Operations Committee, one meeting of the Compensation Committee, four meetings of the Audit Committee, and one meetings each of the Governance and Nominating Committee and the Health, Safety and Environment Committee held in 2021. Every director attended at least 75% of all board meetings and all committee meetings of which that director was a member. It is the policy of the Board that all Board members attend the annual meeting of shareholders, if possible.
Committees of the Board
The following sets forth the Committees of the Board and membership of the committees as of December 31, 2021. The charters of the committees are available at the Company’s website, appliedminerals.com. The Board of Directors has determined that all committee members are independent under the independence definition used by NASDAQ except for Mr. Carney.
Audit Committee
Governance
and
Nominating
Committee
Compensation
Committee
Health, Safety and
Environment
Committee
Operations
Committee
Mario Concha
X
X
X
Robert Betz
X
X
X*
X*
X*
John Levy
X*
X*
X
Geoffrey Scott
X
X
Christopher T Carney
* Committee Chairman
The charters of the Committees are available on the Company’s website, www.appliedminerals.com.
The Audit Committee satisfies the definition of Audit Committee in Section 3(a)(58)(A) of the Securities Exchange Act of 1934.
Audit Committee Financial Expert
The Board of Directors has determined that Mr. Levy is an audit committee financial expert as the term is defined in the rules of the Securities and Exchange Commission and is independent under the independence standards of NASDAQ (the independence standard used by the Company) and the enhanced independence standards of Section 10A-3 of the Securities Exchange Act.
Audit Committee Report
The audit committee has reviewed and discussed the audited financial statements included elsewhere in this Annual Report with management;
The audit committee has discussed with the independent auditors the matters required to be discussed by the Auditing Standards AU Section 380 - The Auditor’s Communication with those charged with Governance as adopted by the Public Company Accounting Oversight Board in Rule 3200T;
The audit committee has received the written disclosures and the letter from the independent accountant required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the audit committee concerning independence and has discussed with the independent accountant the independent accountant's independence; and
Based on the review and discussions referred to in three preceding paragraphs, the audit committee recommended to the board of directors that the audited financial statements be included in the Company's annual report on Form 10-K (17 CFR 249.310) for the last fiscal year for filing with the Commission.
Audit Committee
John Levy, Chairman
Geoffrey Scott
Robert Betz
The Nomination Process
The general criteria that our Board uses to select nominees includes the following: reputation for integrity, honesty and adherence to high ethical standards; demonstrated business acumen, experience, and ability to exercise sound judgments in matters that relate to the current and long-term objectives of the Company; willingness and ability to contribute positively to the decision-making process of the Company; commitment to understand the Company, its risk factors and its industry and to regularly attend and participate in meetings of the Board and its committees; interest and ability to understand the sometimes conflicting interests of the various constituencies of the Company, which include stockholders, employees, customers, creditors and the general public; ability to act in the interests of all stakeholders; and the absence of any appearance of a conflict of interest that would impair the nominee's ability to represent the interests of all of the Company’s stockholders and to fulfill the responsibilities of a director. There are, however, no specific minimum qualifications that nominees must have in order to be selected. The Board will consider director candidates recommended by our stockholders.
In evaluating candidates recommended by our stockholders, the Board of Directors applies the same criteria discussed above. Any stockholder recommendations for director nominees proposed for consideration by the Board should include the nominee's name and qualifications for Board membership and should be addressed in writing to the President, Applied Minerals, Inc., PO Box 432, Eureka, UT 84628. There have been no changes in the procedures by which shareholders may recommend candidates for director.
Compensation Committee
The Committee’s charter provides that the Committee meet at least twice a year and the committee will have the resources and authority necessary to discharge its duties and responsibilities and the committee has sole authority to retain and terminate outside counsel, compensation consultants, or other experts or consultants, as it deems appropriate, including sole authority to approve the fees and other retention terms for such persons.
The principal responsibilities of the Compensation Committee are as follows:
1.
Board Compensation
. Periodically review the compensation paid to non-employee directors and make recommendations to the Board for any adjustments.
2.
Chief Executive Officer Compensation
.
a.
Assist the Board in establishing CEO annual goals and objectives, if appropriate.
b.
Recommend CEO compensation to the other independent members of the Board for approval.
3.
Other Executive Officer Compensation
.
a.
Oversee an evaluation of the performance of the Company's executive officers and approve the annual compensation, including salary and incentive compensation, for the executive officers.
b.
Review the structure and competitiveness of the Company’s executive officer compensation programs considering the following factors: (i) the attraction and retention of executive officers; (ii) the motivation of executive officers to achieve the Company’s business objectives; and (iii) the alignment of the interests of executive officers with the long-term interests of the Company’s shareholders.
c.
Review and approve compensation arrangements for new executive officers and termination arrangements for executive officers.
The Compensation Committee may form and delegate authority to subcommittees and may delegate authority to one or more designated members of the Committee. The Committee may delegate to the Chief Executive Officer the authority to make grants of equity-based compensation in the form of rights or options to eligible officers and employees who are not executive officers, such authority including the power to (i) designate officers and employees of the Company or of any of its subsidiaries to be recipients of such rights or options created by the Company, and (ii) determine the number of such rights or options to be received by such officers and employees; provided, however, that the resolution so authorizing the Chief Executive Officer shall specify the total number of rights or options the Chief Executive Officer may so award. If such authority is delegated, the Chief Executive Officer shall regularly report to the Committee grants so made and the Committee may revoke any delegation of authority at any time. The Compensation Committee has not delegated any authority to the Chief Executive Officer.
Compensation Committee Interlocks and Insider Participation
There were no interlocks during 2021.
Shareholder Communications to the Board of Directors
Stockholders may communicate with the Board of Directors by sending a letter to Applied Minerals, Inc. Board of Directors, c/o President & CEO, PO Box 432, Eureka, UT 84628. The President will receive the correspondence and forward it to the individual director or directors to whom the communication is directed or to all directors, if not directed to one or more specifically.
Section 16(a) beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our officers, directors, and any person who beneficially owns more than 10% of our Common Stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Executive officers, directors, and more than 10% shareholders are required by regulation to furnish us with copies of all Section 16(a) forms which they file. To the best of our knowledge, a timely filing of a Form 4 to report the granting of options in July 2021 to Messrs. Concha, Betz, Scot, Levy and Carney were not made. A Form 5 for each individual was filed in February 2022 to report the grants.

---

ITEM 11. EXECUTIVE COMPENSATION
ITEM 11.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Name and
Principal
Position
Year
Salary ($)
Cash
Bonus
($)
Option
Award
($) (1)
Total ($)
Christopher T. Carney (2)
150,000
- 0 -
65,600
215,500
162,500
- 0 -
- 0 -
162,500
200,000
- 0 -
- 0 -
200,000
Sharad Mathur (2)(5)
150,000
- 0 -
65,500
215,500
162,500
- 0 -
- 0 -
162,500
160,000
- 0 -
- 0 -
160,000
Andre Zeitoun (3)
- 0 -
- 0 -
- 0 -
- 0 -
- 0 -
- 0 -
- 0 -
- 0 -
242,083
- 0 -
- 0 -
242,083
William Gleeson (3)
- 0 -
- 0 -
- 0 -
- 0 -
65,972
- 0 -
- 0 -
65,972
250,000
- 0 -
- 0 -
250,000
Mario Concha (2)(4)
- 0 -
- 0 -
- 0 -
116,667
- 0 -
- 0 -
166,667
61,667
- 0 -
- 0 -
61,667
(1)
Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For additional information, refer to Note 10 to the Notes to Consolidated Financial Statements found in Item 8, Part II of this document. These amounts reflect the Company’s accounting expense for these awards, and do not correspond to the amount that will be recognized as income by the named executive officers o the amount that will be recognized as a tax deduction by the Company, if any, upon exercise. The options awards were valued using the Black Scholes Option Valuation Model.
(2)
During 2021 and 2020, $62,500 and $114,583, respectively, of Mr. Carney’s salary were deferred. During 2021 and 2020 $37,500 and $114,583, respectively, of Mr. Mathur’s salary was deferred and. During 2020 and 2019, $150,000 and $61,667, respectively, of Mr. Concha’s salary were deferred. Deferred salaries are to be paid in whole or part when the Board determines the Company has adequate liquidity to do so.
(3)
Mr. Zeitoun resigned as President and CEO on September 9, 2019. Mr. Gleeson resigned as General Counsel on April 5, 2020.
(4)
Mr. Concha was appointed President and CEO on September 9, 2019. The Compensation Committee set Mr. Concha’s salary at $200,000 per annum. Mr. Concha resigned as President and CEO on October 22, 2020.
(5)
Mr. Mathur was named Chief Technology Officer in December 2018.
Pensions
The Company does not have any pension plan nor does it have any nonqualified defined contribution and other nonqualified deferred compensation plans.
Potential Payments upon Termination or Change-in-Control.
In accordance with SEC rules, the following statements are based on the assumption that the triggering event took place on December 31, 2021.
Mr. Carney
. In the event Mr. Carney was terminated by the Company without Cause or he terminated his employment for Good Reason, he shall receive (i) not less than two months of his base salary and (ii) an amount equal to six months of COBRA payments over a period of two months. Mr. Carney's base salary was $150,000.
Plan-Based Awards
There were options to purchase 9,450,000 shares of common stock granted under the 2017 Incentive Plan in 2021.
Outstanding Equity Awards at December 31, 2021
The following table provides information on the holdings as of December 31, 2021 of stock options granted to the named executive officers. This table includes unexercised and unvested option awards. Each equity grant is shown separately for each named executive officer
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2021
Name
Grant
Date
Number of
Securities
Underlying
Unexercised
Options:
Exercisable
Number of
Securities
Underlying
Unexercised
Options:
Unexercisable
Equity
Incentive
Plan Awards
Number of
Securities
Underlying
Unexercised
Unearned
Options
Option
Exercise
Price
Option
Expiration
Date
Christopher T. Carney
02-08-11
580,930
-
-
$
0.83
01-01-22
11-20-12
580,931
-
-
$
1.66
01-01-23
06-10-14
75,000
-
-
$
0.84
06-10-24
02-05-15
50,000
-
-
$
0.68
02-05-25
05-11-16
248,344
-
-
$
0.24
05-11-21
07-06-16
500,000
-
-
$
0.16
08-15-19
12-14-17
4,780,550
-
-
$
0.06
12-13-27
07-23-21
2,137,500
712,500
-
$
0.03
7-23-26
Sharad Mathur
03-13-19
1,000,000
-
-
$
0.05
12-28-28
07-23-21
2,137,500
712,500
-
$
0.03
7-23-26
Andre Zeitoun (1)
02-08-11
1,742,792
-
-
$
0.83
01-01-22
11-20-12
1,742,792
-
-
$
1.66
01-01-23
05-11-16
321,123
-
-
$
0.24
05-11-21
12-14-17
8,933,079
-
-
$
0.06
12-13-27
William Gleeson (2)
08-18-11
900,000
-
-
$
1.90
08-18-21
11-20-12
72,406
-
-
$
1.66
11-20-22
06-10-14
600,000
-
-
$
0.84
06-10-24
05-11-16
248,344
-
-
$
0.24
05-11-21
12-14-17
2,812,079
-
-
$
0.06
12-13-27
Mario Concha (3)
03-14-14
50,000
-
-
$
0.83
03-13-24
02-12-15
50,000
-
-
$
0.66
02-12-25
01-01-16
50,000
-
-
$
0.28
01-01-26
01-06-16
43,885
-
-
$
0.29
01-06-21
01-29-16
80,000
-
-
$
0.28
01-29-21
05-11-16
200.000
-
-
$
0.25
05-11-21
05-11-16
430,000
-
-
$
0.25
05-11-21
08-01-16
70,000
-
-
$
0.25
08-01-26
05-23-17
70,000
-
-
$
0.25
05-17-22
05-24-17
70,000
-
-
$
0.25
05-24-22
12-07-17
140,000
-
-
$
0.25
12-07-22
08-08-17
3,666,667
-
-
$
0.06
08-08-27
04-25-19
500,000
-
-
$
0.04
04-25-29
07-23-21
593,750
146,250
-
$
0.03
07-23-26
1)
Mr. Zeitoun resigned as President and Chief Executive Officer on September 9, 2019
(2)
Mr. Gleeson resigned as General Counsel on April 5, 2020.
(3)
Mr. Concha was appointed President and CEO on September 9, 2019 and resigned as President and CEO on October 22, 2020.
Options Exercised and Stock Vested
None of the Named Executive Officers has exercised any options, SARs or similar instruments and none had any stock awards, vested or unvested.
Director Compensation for the Year Ended December 31, 2021
The following sets forth compensation to our directors in 2021. The fees payable to directors are $50,000 per year and $10,000 per year for chairman of the Board and $10,000 per year for chairman of a committee, except the Operations Committee (“Board Fees”). The fees payable for the Operations Committee are $150,000 for the chairman and $62,500 for the member who is an independent director (“Operations Committee Fees”). The Board Fees vested quarterly. The Operations Committee Fees vested on May 1, 2020. Beginning the last quarter of 2018, Board Fees have been accrued but not paid. The Board Fees may be paid in cash or equity in the future, to be determined by the Board.
Name
Fees Earned or
Paid
in Cash ($)(2)
Common Stock
Awards ($)
Options Awards
($)(3)
Total
($)
Mario Concha
60,000
17,250
77,250
Robert Betz
132,500
17,250
149,750
John Levy
80,000
17,250
97,250
Geoffrey Scott
50,000
17,250
67,250
Christopher Carney (1)
(1)
Mr. Carney was not separately compensated for services as a director. Mr. Carney was appointed a director on October 22, 2020.
(2)
Amounts represent fees earned for service for the period from January 1, 2021 through December 31,2021. These amounts have been accrued but not yet paid as of December 31, 2021.
(3)
Black Scholes value at grant date
Compensation Discussion and Analysis
Objectives and Strategy
The Company’s objectives are to develop a range of commercial applications for its halloysite clay-based and iron oxide-based products and to market
those applications to industries seeking enhanced product functionality and to market its iron oxides for pigment and other uses. We believe the
successful marketing of such applications will generate material profits for the Company, which, in turn, will create significant value for its
stockholders. To realize this objective, the Company must attract and retain individuals, including our Named Executive Officers (“Named Executive
Officers
” or “NEOs”
) (Messrs. Carney and Mathur), who possess the skill sets and experience needed to effectively develop and implement
the business strategies and corporate governance infrastructure necessary to achieve commercial success.
Accordingly, compensation for the Named Executive Officers is designed to:
●
Attract, motivate, and retain qualified Named Executive Officers;
●
Incentivize the Named Executive Officers to lead the Company to profitable operations and to increase stockholder value;
●
Assure that over time a significant part of NEO compensation is linked to the Company’s long-term stock price performance, which aligns the Named Executive Officers’ financial interests with those of the Company’s stockholders
●
Motivate the Named Executive Officers to develop long-term careers at the Company and contribute to its future prospects; and
●
Permit the Named Executive Officers to remain focused on the development of the Company’s business in the midst of actual or potential change-in-control transactions.
The Company does not have a policy concerning minimum ownership or hedging by officers of Company securities.
Compensation of Mr. Zeitoun
Mr. Zeitoun resigned as CEO on September 9, 2019.
2019 Compensation
On the recommendation of the Compensation Committee, the Board determined Mr. Zeitoun’s 2019 compensation to be as follows: salary - $350,000. Mr. Zeitoun resigned at President, CEO and Director on September 9, 2019. Mario Concha was named President and CEO by the Board on September 10, 2019. On the recommendation of the Compensation Committee, the Board determined Mr. Concha’s 2019 compensation to be based on an annual salary of $200,000.
Compensation for Mr. Carney
2019 Compensation
On the recommendation of the Compensation Committee, the Board determined Mr. Carney’s 2019 compensation to be as follows: Salary- $200,000.
2020 Compensation
On the recommendation of the Compensation Committee, the Board determined Mr. Carney’s 2020 compensation to be as follows: Salary- $200,000. On May 1, 2020 Mr. Carney’s salary was reduced to $150,000.
2021 Compensation
On the recommendation of the Compensation Committee, the Board determined Mr. Carney’s 2021 compensation to be as follows: Salary- $150,000. On July 23, 2021, the Board granted Mr. Carney options to purchase 2,850,000 shares of common stock at $0.03 per share. One-half of the options vested on the grant date and the remainder vest equally over a twelve (12) month period ending July, 2022.
Compensation for Mr. Mathur
2019 Compensation
On the recommendation of the Compensation Committee, the Company entered into a three-year employment agreement with Mr. Mathur. The agreement included an annual salary of $160,000 and a potential annual bonus of up to $25,000, which would be paid in shares of the Company’s common stock. Mr. Mathur was also granted options to purchase 1,000,000 shares of common stock at $0,05 per share. The options had a term of 10 years and vested ratably over a three-year period
2020 Compensation
On the recommendation of the Compensation
Committee, the Board increased Mr. Mathur’s salary to $200,000 per annum. On May 1, 2020 Mr. Mathur’s salary was reduced to $150,000 along with the salaries of the Company’s other executives.
2021 Compensation
On the recommendation of the Compensation Committee, the Board determined Mr. Mathur’s 2021 compensation to be as follows: Salary- $150,000. On July 23, 2021, the Board granted Mr. Mathur options to purchase 2,850,000 shares of common stock at $0.03 per share. One-half of the options vested on the grant date and the remainder vest equally over a twelve (12) month period ending July, 2022.
Compensation for Mr. Gleeson
2019 Compensation
On the recommendation of the Compensation Committee, the Board determined Mr. Gleeson’s 2019 compensation to be as follows: Salary - $250,000.
2020 Compensation
On the recommendation of the Compensation Committee, the Board determined Mr. Gleeson’s 2020 compensation to be as follows: Salary - $250,000. Mr. Gleeson resigned on April 5, 2020. Mr. Gleeson’s salary, from February 1, 2020 through his date of resignation, was deferred. At December 31, 2020 Mr. Gleeson was owed $41,667 in deferred salary.
Tax and Accounting Treatment of Compensation
Tax Deductibility Cap on Executive Compensation
The Compensation Committee is aware that Section 162(m) of the Internal Revenue Code treats certain elements of executive compensation in excess of $1 million a year as an expense not deductible by the Company for federal income tax purposes. Depending on the market price of the Company’s common stock on the date of exercise of options that are not performance-based, the compensation of certain executive officers in future years may be in excess of $1 million for purposes of Section 162(m). The Compensation Committee reserves the right to pay compensation that may be non-deductible to the Company if it determines that it would be in the best interests of the Company.
Tax and Accounting Treatment of Options
We are required to recognize in our financial statements compensation cost arising from the issuance of stock options. GAAP requires that such that compensation cost is determined using fair value principles (we use the Black-Scholes method of valuation) and is recognized in our financial statements over the requisite service period of an instrument. However, the tax deduction is only recorded on our tax return when the option is exercised. The tax benefit received at exercise and recognized in our tax return is generally equal to the intrinsic value of the option on the date of exercise.
Compensation of Policies and Practices as they relate to Risk Management
The Company does not believe that its compensation policies and practices (cash compensation and at-the-market or above-market five- and ten-year options without or without performance standards and with or without vesting schedules) are reasonably likely to have a material adverse effect on the Company as they relate to risk management practices and risk-taking incentives.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Annual Report on Form 10-K and the Company’s next proxy statement for the election of director.
Geoffrey Scott
John Levy
Robert Betz

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security Ownership of Certain Beneficial Owners and Management Ownership Tables
The following table sets forth, as of April 15, 2022, information regarding the beneficial ownership of our common stock with respect to each of the named executive officers, each of our directors, each person known by us to own beneficially more than 5% of the common stock, and all of our directors and executive officers as a group. Each individual or entity named has sole investment and voting power with respect to shares of common stock indicated as beneficially owned by such person, subject to community property laws, where applicable, except where otherwise noted. The percentage of common stock beneficially owned is based on
252,556,760
shares of common stock outstanding as of April 15, 2022 plus the shares that a person has a right to acquire within 60 days of April 15, 2022.
Number of
Shares of
Percentage
of Common
Common Stock
Beneficially
Stock
Beneficially
Name and Address (1)
Owned (2)
Owned
Mario Concha (3) (4)
7,503,499
2.9
Robert Betz (3) (5)
4,597,804
1.8
John Levy (3) (6)
3,605,701
1.9
Geoffrey Scott (3) (12)
24,669,317
9.2
Sharad Mathur (13)(14)
4,650,289
1.8
Christopher T. Carney (3) (8) (14)
8,937,491
3.4
All Officers and Directors as a Group
54,964,029
18.7
IBS Capital, LLC (7)
20,521,718
8.1
Samlyn Capital, LLC (9)
65,604,030
21.3
Berylson Master Fund, L.P. (10)
15,463,419
5.8
Kingdon Capital Management, LLC (11)
26,433,007
9.5
* Less than 1%
(1)
Unless otherwise indicated, the address of the persons named in this column is c/o Applied Minerals, Inc., PO Box 432, Eureka, UT 84628.
(2)
Included in this calculation are shares deemed beneficially owned by virtue of the individual’s right to acquire them within 60 days of the date of April 15, 2021 as determined pursuant to Rule 13d-3 of the Securities Exchange Act of 1934.
(3)
Director
(4)
Mr.
Concha’s holdings include: (i) options to purchase 50,000 shares of common stock at $0.83 per share expiring in March, 2024; (ii) options to purchase 50,000 shares of common stock at $0.66 per share expiring in February, 2025; (iii) options to purchase 50,000 shares of common stock at $0.28 per share expiring in January, 2026; (iv) options to purchase 70,000 shares of common stock at $0.25 per share expiring in August, 2026; (v) options to purchase 140,000 shares of common stock at $025 per share expiring in May, 2022; (vi) options to purchase 3,666,667 shares of common stock expiring at $0.06 per share in August 2027; (vii) options to purchase 140,000 shares of common stock at $0.25 per share expiring in December, 2022; (viii) options to purchase 500,000 shares of common stock at $0.04 per share expiring in April, 2029; and (ix) options to purchase
687,500 shares of common stock at $0.03 per share expiring in July 2026.
(5)
Mr.
Betz’s holdings include: (i) options to purchase 50,000 shares of common stock at $0.83 per share expiring in March, 2024; (ii) options to purchase 50,000 shares of common stock at $0.66 per share expiring in February 2025; (iii) options to purchase 50,000 shares of common stock at $0.28 per share expiring in January, 2026; (iv) options to purchase 33,937 shares of common stock at $0.29 per share expiring in January, 2026; (v) options to purchase 64,815 shares of common stock at $0.28 per share expiring in January 2026; (vi) options to purchase 50,000 shares of common stock at $0.25 per share expiring in May, 2026; (vii) options to purchase 60,000 shares of common stock at $0.25 per share expiring in August, 2026; (viii) options to purchase 140,000 shares of common stock at $0.25 per share expiring in May, 2022; (ix) options to purchase 2,208,334 shares of common stock at $0.06 per share expiring in August, 2027; (x) options to purchase 500,000 shares of common stock at $0.04 per share expiring in April, 2029; and (xi) options to purchase
687,500 shares of common stock at $0.03 per share expiring in July 2026.
(6)
Mr.
Levy’s holdings include: (i) options to purchase 100,000 shares of common stock at $1.66 per share expiring November, 2022; (ii) options to purchase 50,000 shares of common stock at $0.83 per share expiring in March, 2024; (iii) options to purchase 50,000 shares of common stock at $0.66 per share expiring in February, 2025; (iv) options to purchase 50,000 shares of common stock at $0.28 per share, and expiring in January, 2026; (v) options to purchase 51,170 shares of common stock at $0.29 per share expiring in January, 2026; (vi) options to purchase 70,000 shares of common stock at $0.25 per share expiring in August, 2026; (vii) options to purchase 120,000 shares of common stock for $0.25 per share expiring in May, 2022; (viii) options to purchase 1,000,000 shares of common stock at $0.06 per share expiring in August, 2027; (ix) options to purchase 500,000 shares of common stock at $0.04 per share expiring in April, 2029; and (x) options to purchase
687,500 shares of common stock at $0.03 per share expiring in July 2026.
(7)
IBS Capital LLC is deemed to be the beneficial owner of shares held by the funds it manages by virtue of the right to vote and dispose of such securities. The IBS Turnaround Fund (QP) (A Limited Partnership) owns (i) 11,655,043 shares of common stock; (ii) options to purchase 49,820 shares of common stock at $0.21 per share expiring in January, 2026; (iii) options to purchase 30,100 shares of common stock at $0.25 per share expiring in August, 2026; (iv) options to purchase 64,000 shares of common stock at $0.25 per share expiring May, 2022; and (v) warrants to purchase 601,060 shares of common stock at $0.10 per share expiring in December, 2022.
The IBS Turnaround Fund, L.P. owns (i) 6,232,314 shares of common stock; (ii) options to purchase 16,000 shares of common stock at $0.25 per share expiring in August, 2026; (iii) options to purchase 30,000 shares of common stock at $0.25 per share expiring in May, 2022; and (iv) warrants to purchase 299,317 shares of common stock at $0.10 per share expiring in December, 2022.
The IBS Opportunity Fund, Ltd. owns (i) 1,475,154 shares of common stock (ii) options to purchase 3,900 shares of common stock at $0.25 per share expiring in August, 2026; (iii) options to purchase 6,000 shares of common stock at $0.25 per share expiring in May, 2022; and (iv) warrants to purchase 58,400 shares of common stock at $0.10 per share expiring in December, 2022.
(8)
Mr. Carney’s holdings include: (i) options to purchase 580,931 shares of common stock at $1.66 per share expiring in November, 2022; (ii) options to purchase 75,000 shares of common stock at $0.84 per share expiring in June, 2024; (iii) options to purchase 50,000 shares of common stock at $0.68 per share expiring in February, 2025; (iv) options to purchase 3,585,413 shares of common stock at $0.06 per share expiring in August, 2027; and (v) options to purchase
2,612,500 shares of common stock at $0.03 per share expiring in July 2026.
(9)
Samlyn
Onshore Fund, LP owns (i) 4,027,973 shares of common stock, (ii) 17,836,747 shares of common stock issuable upon conversion of the Series A Notes, (iii) options to purchase 44,097 shares of common stock at $0.12 per share expiring in April, 2023, (iv) options to purchase 136,000 shares of common stock at $0.04 per share expiring in April, 2029 and (v) warrants to purchase 1,101,062 shares of common stock at $0.10 per share expiring in December, 2022. The reported securities are directly owned by Samlyn Onshore Fund, LP and may be deemed to be indirectly beneficially owned by (i) Samlyn Capital, LLC as the investment manager of Samlyn Onshore Fund, LP and (ii) Samlyn Partners, LLC (“Samlyn Partners”), as the general partner of Samlyn Onshore Fund, LP. The reported securities may also be deemed to be indirectly beneficially owned by Robert Pohly as the principal of Samlyn Capital, LLC and Managing Member of Samlyn Partners.
Samlyn
Offshore Master Fund, Ltd. owns (i) 6,483,443 shares of common stock, (ii) 33,418,285 shares of common stock issuable upon conversion of the Series A Notes, (iii) options to purchase 129,514 shares of common stock at $0.12 per share expiring in April, 2023, (iv) options to purchase 364,000 shares of common stock at $0.04 per share expiring in April, 2029 and (v) warrants to purchase 2,062,909 shares of common stock at $0.10 per share expiring in December, 2022. The reported securities are directly owned by Samlyn Offshore Master Fund, Ltd. and may be deemed to be indirectly beneficially owned by (i) Samlyn Capital, LLC as the investment manager of Samlyn Offshore Master Fund, Ltd., and (ii) Robert Pohly as the principal of Samlyn Capital, LLC.
Samlyn
Capital, LLC, Samlyn Partners and Robert Pohly disclaim beneficial ownership of the reported securities except to the extent of their respective pecuniary interests therein, and this report shall not be deemed an admission that any of them are the beneficial owners of the securities for purposes of Section 16 of the Exchange Act or for any other purpose. The address of Samlyn Capital, LLC is 500 Park Avenue, New York, N.Y. 10022.
(10)
James Berylson is the sole managing member of Berylson Capital Partners, LLC, which manages the Berylson Master Fund, L.P. The Berylson Master Fund, L.P. owns (i) 13,665,324 shares of common stock issuable upon the conversion of its Series 2023 Notes and (ii) 1,798,095 shares of common stock issuable upon the exercise of warrants expiring in December 2022. The address of Berylson Capital Partners, LLC, is 200 Clarendon Street, Boston, MA 02116.
Kingdon Capital Management, LLC, 152 West 57th
Street, 50th
Floor, New York, N.Y. 10019, is the beneficial owner of shares of the Company, which are held by funds it manages by virtue of the right to vote and dispose of the securities. M. Kingdon Offshore Mast Fund, L.P. owns (i) 24,072,642 shares of common stock issuable upon the conversion of its Series 2023 and Series A Notes, (ii) options to purchase 277,777 shares of common stock at $0.12 per share
expiring in April 2023
and (iii) warrants to purchase 2,082,588 shares of common stock at
(11)
$0.10 per share
expiring in December 2022
. Mark Kingdon is the President of Kingdon Capital Management, LLC and may be deemed to beneficially own these shares.
(12)
Mr. Scott’s holdings include: (i) 15,531,817 shares of common stock issuable upon the conversion of his ownership of the Series A PIK Notes; (ii) options to purchase 500,000 shares of common stock at $0.04 per share expiring in April, 2029; and (iii) options to purchase 687,500 shares of comon at $0.03 per share expiring in July 2026.
(13)
Mr. Mathur’s holding include: (i) options to purchase 750,000 shares of common stock at $0.05 per share expiring in December 2028 and (ii) options to purchase 2,612,500 shares of common stock at $0.03 per share expiring in July 2026.
(14)
Executive officer.
Equity Compensation Plans
Plans Approved by Stockholders
Shareholders approved the 2012 Long-Term Incentive Plan (“2012 LTIP”) and the 2016 Incentive Plan. (“2016 IP”).
The number of shares subject to the 2012 LTIP for issuance or reference was 8,900,000. The number of shares subject to the 2016 IP was 15,000,000.
Plans Not Approved by Stockholders
Prior to the adoption of the 2012 LTIP, the Company granted options to purchase 12,378,411 shares of common stock under individual arrangements. As of December 31, 2020, only 4,104,653 options under such individual arrangements are outstanding.
In May and August 2016, the Company adopted the 2016 Long-Term Incentive Plan (“2016 LTIP”). The number of shares of common stock for issuance or for reference purposes subject to the 2016 LTIP was 2,000,000. The Company granted options to purchase 1,993,655 shares of common stock under the 2016 LTIP.
In 2017, prior to the adoption of the 2017 Incentive Plan (“2017 IP”) in August 2017, the Company granted options to purchase 870,000 shares of common stock under individual arrangements.
The number of shares of common stock for issuance or for reference purposes subject to the 2017 IP was 40 million. The Company granted options to purchase 39,305,011 shares of common stock under the 2017 IP of which 36,061,269 were outstanding at December 31, 2021.
Equity Compensation Information
As of December 31, 2021
Number of securities
to be issued upon
exercise of
outstanding
options
Weighted-average
exercise price of
outstanding options
Number of securities
remaining available
for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(a)
			
(b)
(c)
Equity compensation plans approved by security holders (1)
13,124,923
$
0.61
10,655,077
Equity compensation plans not approved by security holders (2)
39,665,922
$
0.18
1,997,255
Total
52,790,845
$
0.25
12,652,332
(1)
Includes 6,890,000 options outstanding under the 2016 IP and 6,234,923 options outstanding under the 2012 LTIP.
(2)
Includes 230,000 options outstanding under the 2016 LTIP, 36,061,269 options outstanding under the 2017 IP and 3,374,653 options outstanding under individual arrangements.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Review, approval or ratification of transactions with related persons.
Our Board of Directors reviews any transaction, except for ordinary business travel and entertainment, involving the Company and a related party before the transaction or upon any significant change in the transaction or relationship. For these purposes, the term "related-party transaction" includes any transaction required to be disclosed pursuant to Item 404 of Regulation S-K of the SEC.
Transactions with Related Persons
None.
Policy on Board of Directors' Pre-Approval of Audit an Non-Audit Services of Independent Auditors
The Audit Committee has adopted a policy for the pre-approval of all audit, audit-related, tax, and other services provided by the Company’s independent registered public accounting firm. The policy is designed to ensure that the provision of these services does not impair the registered public accounting firm’s independence. Under the policy, any services provided by the independent registered public accounting firm, including audit, audit-related, tax and other services must be specifically pre-approved by the Board of Directors. The Board of Directors does not delegate responsibilities to pre-approve services performed by the independent registered public accounting firm to management. For the fiscal year ended December 31, 2021, all services provided by the Company’s independent registered public accounting firm were pre-approved by the Board of Directors.
Director Independence
The directors who are deemed to be independent under the independence standards of NASDAQ (the independence standard used by the Company) are Messrs. Levy, Concha, Betz, and Scott. The members of the Audit Committee, Messrs. Levy, Scott and
Betz are also independent under the enhanced independence standards of Section 10A-3 of the Securities Exchange Act.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
MaloneBailey LLP (“MaloneBailey”) was selected by our Board of Directors as the Company’s independent registered public accounting firm for the years ending December 31, 2021 and 2020 and as our independent registered public accounting firm reviewed the interim financial statements for the twelve months ended December 31, 2021 and 2020.
The following table presents fees for services rendered by MaloneBailey, the independent auditor for the audit of the Company’s annual consolidated financial statements for the years ended December 31, 2021 and 2020.
January 1
through
December 31,
January 1
through
December 31,
Audit Fees (1)
$
117,000
$
97,500
Tax Fees
- 0 -
Total
$
117,000
$
97,500
(1)
Audit fees includes fees for the audit of the annual financial statements and the review of the financial statements for the quarters and represent the aggregate fees paid for professional services including: (i) audits of annual financial statements and (ii) reviews of quarterly financial statements
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
1.
Financial Statements: See “Index to Consolidated Financial Statements” in Part II, Item 8 of this Form 10-K.
2.
Financial Statement Schedule: See “Schedule II-Valuation and Qualifying Accounts” in this section of this Form 10-K.
3.
Exhibits: The exhibits listed in the accompanying index to exhibits are filed, furnished, or incorporated by reference as part of this Form 10-K.
Certain of the agreements filed as exhibits to this Form 10-K contain representations and warranties by the parties to the agreements that have been made solely for the benefit of the parties to the agreement. These representations and warranties:
●
may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures are not necessarily reflected in the agreements;
●
may apply standards of materiality that differ from those of a reasonable investor; and accordingly, these representations and warranties may not describe the actual state of affairs as of the date that these representations and warranties were made or at any other time. Investors should not rely on them as statements of fact.