Notes to the Consolidated Financial Statements (unaudited)
1.
BASIS OF PRESENTATION
The unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, as well as the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Companys management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the interim financial statements have been included. Operating results for the three-month period ended March 31, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018.
For further information refer to the financial statements and footnotes thereto in the Companys Annual Report on Form 10-K for the year ended December 31, 2017.
Going Concern
The accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern. The Company has incurred losses since its inception and does not have sufficient cash to fund normal operations and meet debt obligations for the next 12 months without deferring payment on certain current liabilities and/or raising additional funds.
The Company currently has no historical recurring source of revenue and in 2016 received its first cash distribution from the joint venture (Note 3). If these distributions increase in future years and the Company profitably executes its business plan, its ability to continue as a going concern may improve and become less dependent on the Companys ability to raise capital to fund its future exploration and working capital requirements. The Companys plans for the long-term return to and continuation as a going concern include the profitable exploitation of its mining properties and financing the Companys future operations through sales of its common stock and/or debt.
These factors raise substantial doubt about the Companys ability to continue as a going concern.
The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. If the going concern basis were not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reclassifications
Certain reclassifications have been made to conform prior years data to the current presentation. These reclassifications have no effect on the results of reported operations or stockholders deficit or cash flows.
Earnings (Loss) Per Share
We are authorized to issue 250,000,000 shares of common stock, $0.10 par value per share. At March 31, 2018, there were 134,107,809 shares of our common stock issued and outstanding.
For the periods ended March 31, 2018 and 2017, the effect of the Companys outstanding preferred shares, options and warrants, totaling 103,386,073 and 94,263,712, respectively, would have been anti-dilutive.
6
Goldrich Mining Company
Notes to the Consolidated Financial Statements (unaudited)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Accounting for Investments in Joint Ventures
For joint ventures in which the Company does not have joint control or significant influence, the cost method is used. Under the cost method, these investments are carried at the lower of cost or fair value. For those joint ventures in which there is joint control between the parties and in which the Company has significant influence, the equity method is utilized whereby the Companys share of the ventures earnings and losses is included in the statement of operations as earnings in joint ventures and its investments therein are adjusted by a similar amount.
Goldrich has no significant influence over its joint venture described in Note 4
Joint Venture
, and therefore accounts for its investment using the cost method. The Company recognizes as income, funds received that are distributed from net accumulated earnings of the joint venture.
For joint ventures where the Company holds more than 50% of the voting interest and has significant influence, the joint venture is consolidated with the presentation of a non-controlling interest. In determining whether significant influence exists, the Company considers its participation in policy-making decisions and its representation on the ventures management committee. Goldrich currently has no joint venture of this nature.
The Company periodically assesses its investments in joint ventures for impairment. If management determines that a decline in fair value is other than temporary it will write-down the investment and charge the impairment against operations.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09 Revenue Recognition, replacing guidance currently codified in Subtopic 605-10 Revenue Recognition-Overall. The new ASU establishes a new five step principles-based framework in an effort to significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU No. 2015-14 deferred the effective date of ASU No. 2014-09 until annual and interim reporting periods beginning after December 15, 2017. We adopted ASU No. 2014-09 as of January 1, 2018 using the modified-retrospective transition approach. There was no impact of adoption of the update to our consolidated financial statements for the three months ended March 31, 2018.
We performed an assessment of the impact of implementation of ASU No. 2014-09, and concluded it does not change the timing of revenue recognition or amounts of revenue recognized compared to how we recognize revenue under our current policies. Adoption of ASU No. 2014-09 involves additional disclosures, where applicable, on (i) contracts with customers, (ii) significant judgments and changes in judgments in determining the timing of satisfaction of performance obligations and the transaction price, and (iii) assets recognized for costs to obtain or fulfill contracts.
In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the potential impact of implementing this update on the consolidated financial statements.
7
Goldrich Mining Company
Notes to the Consolidated Financial Statements (unaudited)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. Adoption of the update on January 1, 2018 had no impact on the consolidated financial statements
In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash. The update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. Adoption of the update on January 1, 2018 had no impact on the consolidated financial statements.
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.
Cash and Cash Equivalents
For the purposes of the statement of cash flows, we consider all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Significant estimates used in preparing these financial statements include those assumed in estimating the recoverability of the cost of mining claims, accrued remediation costs, asset retirement obligations, stock-based compensation, and deferred tax assets and related valuation allowances. Actual results could differ from those estimates.
Property, Equipment, and Accumulated Depreciation
Property and equipment are stated at cost, which is determined by cash paid or fair value of the shares of the Companys common stock issued. The Companys property and equipment are located on the Companys unpatented state mining claims located in the Chandalar mining district of Alaska, with only a minor portion located in Spokane, WA, consisting of office equipment.
All property and equipment purchased prior to 2009 are fully depreciated. The Companys equipment is located at the Chandalar property in Alaska, with a small amount of office equipment located at Company offices in Spokane, Washington. Assets are depreciated on a straight-line basis. Improvements, which significantly increase an assets value or significantly extend its useful life are capitalized and depreciated over the assets remaining useful life.
When a fixed asset is sold at a price either higher or lower than its carrying amount, or undepreciated cost at the date of disposal, the difference between the sale proceeds over the carrying amount is recognized as gain, while a loss is recognized when the carrying amount exceeds the sale proceeds. The gain or loss is recognized in the Consolidated Statements of Operations.
8
Goldrich Mining Company
Notes to the Consolidated Financial Statements (unaudited)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Mining Properties, Claims, and Royalty Option
The Company capitalizes costs for acquiring mineral properties, claims and royalty option and expenses, costs to maintain mineral rights and leases as incurred. Should a property reach the production stage, these capitalized costs would be amortized using the units-of-production method on the basis of periodic estimates of ore reserves. Mineral properties are periodically assessed for impairment of value, and any subsequent losses are charged to operations at the time of impairment. If a property is abandoned or sold, its capitalized costs are charged to operations.
Income Taxes
Income taxes are recognized in accordance with Accounting Standards Codification (ASC) 740 Income Taxes, whereby deferred income tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized. ASC 740 prescribes a recognition threshold and measurement attribute for the recognition and measurement of a tax position taken or expected to be taken in a tax return.
Revenue Recognition
The Company does not have joint control or significant influence over the joint venture; therefore, distributions from our joint venture are recognized using the cost method. In accordance with ASU No. 2014-09, the Company has determined that our revenue does not arise from contracts with customers, does not involve satisfaction of any performance obligations on the part of the Company, or require company assets to be recognized or applied to determine costs to obtain or fulfill any contract generating revenue.
The Companys revenue is generating through profit percentage split through its non-controlling ownership of the joint venture. Revenues are derived as a percentage of joint venture profits, which are not reasonably estimable and cannot be determined by the joint venture until after the completion of the accounting for each annual mining season, which occurs in the fourth quarter of each year. At the conclusion of 2017 and 2016, Goldrich was allocated a distribution from its joint venture partner of $218,770 and $67,580, respectively. See note 3,
Joint Venture.
Stock-Based Compensation
The Company periodically issues common shares or options to purchase shares of the Companys common shares to its officers, directors or other parties. These issuances are recorded at fair value. The Company uses a Black Scholes valuation model for determining fair value of options to purchase shares, and compensation expense is recognized ratably over the vesting periods on a straight line basis. Compensation expense for grants that vest immediately are recognized in the period of grant.
Exploration Costs
Exploration costs are expensed in the period in which they occur.
Derivatives
The Company measures derivative contracts as assets or liabilities based on their fair value. Gains or losses resulting from changes in the fair value of derivatives in each period are recorded in current operating results. None of the Companys derivative contracts qualify for hedge accounting. The Company does not hold or issue derivative financial instruments for speculative trading purposes.
9
Goldrich Mining Company
Notes to the Consolidated Financial Statements (unaudited)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Remediation
The Companys operations have been, and are subject to, standards for mine reclamation that have been established by various governmental agencies. The Company records the fair value of an asset retirement obligation as a liability in the period in which the Company incurs a legal obligation for the retirement of tangible long-lived assets. A corresponding asset is also recorded and depreciated over the life of the long-lived asset using a units of production method. After the initial measurement of the asset retirement obligation, the liability will be adjusted at the end of each reporting period to reflect changes in the estimated future cash flows underlying the obligation. Determination of any amounts recognized is based upon numerous estimates and assumptions, including future retirement costs, future inflation rates and the credit-adjusted risk-free interest rates.
For non-operating properties, the Company accrues costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable. Such costs are based on managements estimate of amounts expected to be incurred when the remediation work is performed.
Fair Value Measurements
When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period are included in earnings that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date.
During 2018 and 2017, the Company determined fair value on a recurring basis and non-recurring basis as follows:
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Balance
March 31, 2018
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Balance
December 31, 2017
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Fair Value
Hierarchy level
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Liabilities
|
|
|
|
Recurring: Notes payable in gold (Note 6)
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$ 357,777
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$ 355,950
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2
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The carrying amounts of financial instruments, including notes payable, approximate fair value at March 31, 2018 and December 31, 2017.
3.
JOINT VENTURE
On May 7, 2012, the Company entered into a joint venture with NyacAU, LLC (NyacAU), an Alaskan private company, to bring Goldrichs Chandalar placer gold properties into production as defined in the joint venture agreement. In each case as used herein in reference to the JV, production is as defined by the JV agreement. As part of the agreement, Goldrich Placer, LLC (Goldrich Placer), a wholly-owned subsidiary of Goldrich and NyacAU (together the Members) formed a 50:50 joint venture company, Goldrich NyacAU Placer, LLC (GNP), to operate the Chandalar placer mines, with NyacAU acting as managing partner. Goldrich has no significant control or influence over the JV, and therefore accounts for its investment using the cost method.
10
Goldrich Mining Company
Notes to the Consolidated Financial Statements (unaudited)
3.
JOINT VENTURE, CONTINUED:
Under the terms of the joint venture agreement (the Agreement), NyacAU provided funding to the JV. The loans are to be repaid from future production. According to the Agreement, on at least an annual basis, the JV shall allocate and distribute all revenue (whether in cash or as gold) generated from the JVs placer operation in the following order:
1.
Operating Expenses. GNP will first pay all Operating Expenses as defined in the Operating Agreement for placer mining operations at the Claims for the current mining year. Until Commercial Production is achieved, GNP will drawdown or use a line of credit from NyacAU (LOC1) to fund payment of the Operating Expenses and repay LOC1 to the extent of the current year's Operating Expenses.
2.
Members' Distribution - Ten Percent (10%) Portion. After payment of Operating Expenses, GNP will distribute in kind twenty percent (20%) of the remaining gold produced, equally, ten percent (10%) to NyacAU as a Member of GNP and ten percent (10%) to Goldrich as a Member of GNP; provided, however, that, for so long as any secondary line of credit from NyacAU to GNP (LOC2) or loan from NyacAU to GNP to purchase the Jumbo Basin royalty (Loan3) are not paid in full, GNP shall retain one hundred percent (100%) of this distribution to Goldrich and shall apply such funds as payment to reduce the balance of LOC2 and Loan3 until they are paid in full. LOC2 has never been funded or utilized. At December 31, 2107 and at March 31, 2018, $95,239 of Loan3 remains unpaid.
3.
LOC1 Payments. After payment of Operating Expenses and the Members' distribution, GNP will apply any remaining revenue to reduce the remaining balance of LOC1, if any, until it is paid in full.
4.
Reserves. After payment of Operating Expenses, the Members' distribution, and payment of LOC1, the Company may fund Reserves in an amount that is consistent with the annual budget.
5.
Member Distributions, LOC2 Payments and Loan3 Recovery. After payment of Operating Expenses, the Members', payment of LOC1, and funding of any Reserves, from any remaining gold production or revenue, the Company will distribute fifty percent (50%) to NyacAU as a Member of GNP and fifty percent (50%) to Goldrich as a Member of GNP; provided, however, that, for so long as LOC2 or Loan3 are not paid in full, GNP shall retain one hundred percent (100%) of the distribution to Goldrich and shall apply such funds as payment to reduce the balance of LOC2 and Loan3 until they are paid in full.
Substantially all required allocations and distributions are made no later than October 31st of each year. At the time of distribution and the proceeds are identifiable and the likelihood of collection is determined, the Company recognizes joint venture revenue.
On June 23, 2015, the Company raised net proceeds of $1.1 million through the sale of 12.5% of the cash flows Goldrich Placer receives in the future from its interest in GNP (Distribution Interest), paid in cash under items #2 and #5, to Chandalar Gold, LLC (CGL) and GVC Capital, LLC, (GVC), both of which are non-related entities. Goldrich Placer retained its ownership of its 50% interest in GNP but, after the transaction, subject to the terms of the GNP operating agreement, Goldrich Placer will effectively receive approximately 44%, CGL will effectively receive 6% (12% of Goldrich Placers 50% of GNP = 6%) and GVC will effectively receive 0.25% (0.5% of Goldrich Placers 50% of GNP = 0.25%) of any distributions produced by GNP. As of December 31, 2017 and March 31, 2018, an amount of $35,794 has been accrued for this 12.5% and is included in accrued liabilities.
11
Goldrich Mining Company
Notes to the Consolidated Financial Statements (unaudited)
4.
RELATED PARTY TRANSACTIONS
Beginning in January 2016 and through 2017, the salary of the Companys Chief Executive Officer (CEO) has not been paid in full. An amount of $192,500 was accrued for fees at December 31, 2017, of which $45,000 was paid during the quarter ended March 31, 2018. An amount of $192,500 has been accrued at March 31, 2018. An amount of $35,093 was accrued for fees due to the Companys Chief Financial Officer (CFO) at December 31, 2017, of which $15,000 was paid during the quarter ended March 31, 2018. An amount of $34,301 has been accrued for fees at March 31, 2018. These amounts are included in related parties payable.
5.
NOTES PAYABLE
On February 13, 2018, the Company announced a senior secured notes financing for a possible total net proceeds of $2,200,000. During the year ended December 31, 2017, the Company received the first tranche of the notes for gross proceeds of $1,794,737, discounted at 5%, resulting in net proceeds of $1,705,000. The financing remains open for an additional $495,000 of net proceeds.
The secured senior notes mature on October 31, 2018, have an interest rate of 15% per annum, calculated on a 360-day year and payable monthly, and were issued net of a 5% original issue discount. A total of 9,422,359 five-year Class T warrants were issued to the lenders. The warrants have an exercise price of $0.03 and expire on November 30, 2022. The Company paid finder fees totaling $30,000 to related party entities, and incurred $21,000 of other finance and placement costs. Interest of $83,450 was expensed during the quarter ended March 31, 2018, and $35,224 is accrued at March 31, 2018 and is included in accounts payable and accrued liabilities. Interest due at March 31, 2018 was timely paid.
The senior secured notes are secured by distributions from the GNP joint venture. The notes rank junior to:
(i)
Any GNP Distributions that are only deemed to be made by GNP to Goldrich Placer pursuant to the Operating Agreement but are then withheld pursuant to Section 10.1 of the GNP Operating Agreement; and
(ii)
Any GNP Distributions that are made by the GNP to Goldrich Placer pursuant to the GNP Operating Agreement but are then withheld to pay Loan 3 and 2012 reclamation expenses; and
(iii)
Any GNP Distributions that are made by the GNP to Goldrich Placer pursuant to the Operating Agreement but are then used to pay legal fees relating to mediation/arbitration concerning distributions due to Goldrich Placer from GNP; and
(iv)
Any GNP Distributions that are part of the Chandalar Sale, described below; and
(v)
Any GNP Distributions that are part of the GVC Sale, described below; and
(vi)
Any GNP Distributions which are secured by the Companys outstanding Senior Gold Forward Sales Contracts.
The Chandalar Sale relates to a purchase agreement, dated as of June 19, 2015, whereby the Company, through its subsidiary Goldrich Placer, sold and assigned to CGL 12% of any and all GNP Distributions to Goldrich Placer, subject to the limitations set forth in the purchase agreement and the related assignment.
See Note 3 Joint Venture
. The GVC Sale relates to a purchase agreement, dated as of May 22, 2015, whereby the Company, through its subsidiary Goldrich Placer, sold and assigned to GVC 0.50% of any and all GNP Distributions to Goldrich Placer, subject to the limitations set forth in the purchase agreement and the related assignment.
See Note 3 Joint Venture
.
Repayment of all amounts owed under the notes are guaranteed by Goldrich Placer, which in turn owns a 50% interest in Goldrich NyacAU Placer LLC.
See Note 3 Joint Venture
. The notes contain standard default provisions, including failure to pay interest and principal when due. Under the terms of the notes, any additional loans will be issued at a 5% discount and, for each loan, the Company will issue 5.25 Class T warrants for each dollar loaned under this agreement.
12
Goldrich Mining Company
Notes to the Consolidated Financial Statements (unaudited)
5.
NOTES PAYABLE, CONTINUED:
At March 31, 2018, the Company had outstanding total notes payable of $1,794,737 less remaining unamortized discounts of $194,445 for a net liability of $1,600,292. At December 31, 2017, the Company had outstanding total notes payable of $1,794,737 less remaining unamortized discounts of $280,747 for a net liability of $1,513,990.
6.
NOTES PAYABLE IN GOLD
During 2013, the Company issued notes payable in gold totaling $820,000, less a discount of $205,000, for proceeds of $615,000. Under the terms of the notes, the Company agreed to deliver gold to the holders at the lesser of $1,350 per ounce of fine gold or a 25% discount to market price as calculated on the contract date and specify delivery of gold in November 2014.
On November 30, 2017, the Company renegotiated terms with the holders. A default condition arising from the non-delivery of the gold in 2017 was alleviated by agreements with the three note holders to extend the delivery date of gold to November 30, 2018, with the following terms:
·
Fifteen percent (15%), or 76 ounces, of the required quantity of gold under the contract, prior to amendment one in 2014, amendment two in 2015, and amendment three in 2016, which was originally due on the Delivery Date of November 30, 2014, was delivered on November 30, 2017. In lieu of gold, the Company could elect to satisfy the delivery of the deliverable required quantity by paying, an amount equal to the deliverable required quantity times the greater of the original purchase price or the index price for the day preceding the date of payment. The Company paid a total of $97,295 in cash to satisfy this renegotiated term.
·
The Company agreed to pay interest on the value of the delayed delivery required quantity of $341,543, at an annual non-compounding percentage rate of 10% payable quarterly with any remaining interest due and payable on the delivery date.
·
If the delivery date index price on November 30, 2018 is less than the original purchase price, an additional adjusted required amount shall be delivered by December 31, 2018.
For the quarter ended March 31, 2018, using a forward gold price of $1,341, the Company recognized a change in fair value of $1,828 in accounting for these notes as derivatives. The fair value was calculated using the market approach with Level 2 inputs. At March 31, 2018, the Company had outstanding total notes payable in gold of $357,777, representing 266.788 ounces of fine gold deliverable at November 30, 2018. At December 31, 2017, the Company had outstanding total notes payable in gold of $355,950, representing 266.788 ounces of fine gold. Interest due at March 31, 2018 was timely paid.
7.
COMMITMENTS AND CONTINGENCIES
The Company has 426.5 acres of patented claims and 22,432 acres of non-patented claims. We are subject to annual claims rental fees in order to maintain our non-patented claims. In addition to the annual claims rental fees due November 30 of each year, we are also required to meet annual labor requirements due November 30 of each year. The Company is able to carry forward costs for annual labor that exceed the required yearly totals for four years. Following are the annual claims and labor requirements for 2018.
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November 30, 2018
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Claims Rental
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$ 90,670
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Annual Labor
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61,100
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Yearly Totals
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$ 151,770
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13
Goldrich Mining Company
Notes to the Consolidated Financial Statements (unaudited)
7.
COMMITMENTS AND CONTINGENCIES, CONTINUED:
The Company has a carryover to 2018 of approximately $22.3 million to satisfy its annual labor requirements. This carryover expires in the years 2018 through 2023 if unneeded to satisfy requirements in those years.
The Company challenged certain accounting treatment of capital leases, allocations of tax losses, charges to the JV for funding costs related to the JV managers financing, related-party transactions, and other items of dispute in a mediation that was unsuccessful in reaching an agreement. As a result, the Company has filed for arbitration before a panel of three independent arbitrators to address these items. A successful arbitration may result in increases to the 2017 and 2016 distributions under Item 2 of
Note 3 Joint Venture
, and revise the computation of these distributions in 2018 and future years. No assurance has been given that the arbitration will be successful.
In addition, GNP must meet the Minimum Production Requirements as defined by the operating agreement. The Minimum Production Requirement for each year is determined by the price of gold on December 1 in the preceding year. The Minimum Production Requirements for 2016, 2017 and 2018 are 1,100, 1,200 and 1,300 ounces of fine gold, respectively, distributable to each of Goldrich and NyacAU.
The value of the combined 2016 and 2017 Minimum Production Requirements has been calculated at $2,981,950 using the price of gold at $1,296.50 per ounce at December 31, 2017. However, no receivable has been recorded for this amount due to the potential failure of the JV to meet the Minimum Production Requirements by 2018, which may force the dissolution of the JV and may make the collection of this amount uncertain.
The Minimum Production Requirements for 2016, 2017 and 2018 must substantially be paid by October 31, 2018 and, for each year thereafter, the annual Minimum Production Requirements shall be met if GNP distributes an average of a minimum of fifteen hundred (1,500 ounces) per year to each member of GNP over a rolling three-year period, subject to modification based on the price of gold. If the price of gold falls below $1,500 per ounce, the annual Minimum Production Requirement of 1,500 ounces of gold will be reduced one hundred (100) ounces for each one hundred dollars per ounce decrease in the price, to the minimum price of one thousand dollars ($1,000). If the price of gold falls below one thousand dollars ($1,000) per ounce on December 1 in any year, there will be no minimum production required for the next year and such year will be eliminated from the average minimum calculation. If the Minimum Production Requirements are not met, GNP shall be dissolved unless agreed in writing by the members.
8.
SUBSEQUENT EVENTS
In May 2018, the Company received a second tranche of the Notes Payable financing for gross proceeds of $136,842, discounted at 5%, resulting in net proceeds of $130,000.
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