Notes to the Consolidated Financial Statements
1.ORGANIZATION AND DESCRIPTION OF BUSINESS
Goldrich Mining Company (“Company”) was incorporated under the laws of the State of Alaska on March 26, 1959. The Company is engaged in the business of acquiring and exploring mineral properties throughout the Americas, primarily those containing gold and associated base and precious metals. During 2019, all of the Company’s activities were focused on the Chandalar property in Alaska. The Company’s common stock trades on the Over-The-Counter Bulletin Board (“OTCBB”) exchange under the ticker symbol GRMC.
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 an accumulated deficit of $35,493,775 at December 31, 2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company may profitably execute a production business plan, and thereby, its ability to continue as a going concern may improve and become less dependent on the Company’s ability to raise capital to fund its future exploration and working capital requirements. The Company’s plans for the long-term return to and continuation as a going concern include the profitable exploitation of its mining properties and financing the Company’s future operations through sales of its common stock and/or debt.
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
Consolidation of and Accounting for Subsidiaries
The consolidated financial statements include the accounts of the Company and the accounts of its 100% owned subsidiary Goldrich Placer, LLC. This subsidiary is included in the accompanying financial statements by consolidation of the Statements of Operations and the Balance Sheets as of and for the years ended December 31, 2019 and December 31, 2018, with all intercompany balances and investment accounts eliminated.
Accounting for Investments in Joint Ventures
ASC 321 Investments – Equity Securities provides guidance for equity interests that meet the definition of an equity security, as well as other equity interests (such as investments in partnerships, unincorporated joint ventures, and limited liability companies) that are required to be accounted for like equity securities under ASC 321. The term “equity interest” refers to all equity instruments within the scope of ASC 321. Under ASC 321, all equity investments are to be accounted for at fair value. However, there is a measurement alternative for those investments without readily determinable fair values. As required by ASC 321-10-35-2, the appropriate method for investments without a readily determinable fair value is “cost less impairment”.
The Company has an equity interest in Goldrich NyacAU Placer LLC, a 50%-owned joint venture in which the Company does not have joint control or significant influence. See Note 4 Joint Venture. Additionally, the ownership interests of the joint venture are not traded on any established market, and the fair value of the joint venture cannot be readily determined or estimated. Therefore, the Company measures its investment in the joint venture at cost less impairment, adjusted for any distributions received during the period. The carrying amount of this investment was $nil as of December 31, 2019 and 2018, respectively.
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Goldrich Mining Company
Notes to the Consolidated Financial Statements
The Company performs a quantitative and qualitative assessment at each reporting date to determine whether the investment is impaired and an impairment loss equal to the difference between the carrying value and fair value is recorded within Other (income) expense on the Company's Consolidated Statement of Operations if an impairment has been determined. Because the carrying value of the joint venture is $nil, there were no impairment losses recorded during the years ended December 31, 2019 and 2018.
Earnings (Loss) Per Share
Net income (loss) per share is computed by dividing the net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the year. Diluted net income (loss) per share reflects the potential dilution that could occur from common shares issuable through stock options, warrants, and other convertible securities.
For the years ended December 31, 2019 and 2018, the effect of the Company’s outstanding convertible preferred shares, options and warrants, totaling 93,590,499 and 110,379,490 for the two years, respectively, has not been included in the Company’s net income (loss) per share as their inclusion would have been anti-dilutive.
Recent Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The update removes, modifies and makes additions to the disclosure requirements on fair value measurements. The update is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. Management does not expect the ASU to have a material effect on the Company’s 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.
Reclassifications
Certain prior period amounts have been reclassified to conform to the 2019 financial statement presentation. Reclassifications had no effect on net loss, stockholders' equity, or cash flows as previously reported.
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, joint venture distributions, accrued remediation costs, asset retirement obligations, stock-based compensation, deferred tax assets and related valuation allowances and uncertainties regarding the outcome of arbitration proceedings. Actual results could differ from those estimates.
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Goldrich Mining Company
Notes to the Consolidated Financial Statements
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 Company’s common stock issued. The Company’s property and equipment are located on the Company’s unpatented state mining claims located in the Chandalar mining district of Alaska.
All property and equipment purchased prior to 2009 are fully depreciated. The Company’s 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 asset’s value or significantly extend its useful life are capitalized and depreciated over the asset’s 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.
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.
Exploration Costs
Exploration costs are expensed in the period in which they occur.
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.
Uncertain tax positions are evaluated in a two-step process, whereby (i) it is determined whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the related tax authority would be recognized.
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 less impairment method. In accordance with ASU No. 2014-09, the Company has determined that its 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.
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Notes to the Consolidated Financial Statements
Stock-Based Compensation
The Company periodically issues common shares or options to purchase shares of the Company’s 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.
Remediation and Asset Retirement Obligation
The Company’s 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 management’s 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 2019 and 2018, the Company determined fair value on a recurring basis and non-recurring basis as follows:
|
Balance
December 31, 2019
|
Balance
December 31, 2018
|
Fair Value
Hierarchy level
|
Liabilities
|
|
|
|
Recurring: Notes payable in gold (Note 7)
|
$ 406,319
|
$ 342,157
|
2
|
The carrying amounts of financial instruments, including notes payable, approximate fair value at December 31, 2019 and 2018. The inputs to the valuation of Level 2 liabilities are described in Note 7 Notes Payable in Gold.
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Goldrich Mining Company
Notes to the Consolidated Financial Statements
3.PROPERTY, EQUIPMENT AND MINING CLAIMS
Equipment
At December 31, 2019 and 2018, the Company’s equipment classifications were as follows:
|
2019
|
2018
|
Exploration and mining equipment
|
$ 1,627,351
|
$ 1,627,351
|
Vehicles and rolling stock
|
390,140
|
390,140
|
Office and other equipment
|
65,549
|
65,549
|
Total
|
2,083,040
|
2,083,040
|
Accumulated depreciation
|
(2,082,324)
|
(2,081,015)
|
Equipment, net of depreciation
|
$ 716
|
$ 2,025
|
Of the Company’s equipment, $1,319,341 are being depreciated over lives of three and five years and $763,699 are being depreciated over seven and ten years, resulting in total depreciation expense of $1,309 for 2019. Assets of $1,319,341 and $763,699 being depreciated over corresponding periods, respectively, resulting in total depreciation of $4,844 for 2018.
Mining Properties and Claims, and Royalty Option
At December 31, 2019 and 2018, the Company’s mining properties claims, and royalty option were as follows:
|
2019
|
2018
|
Chandalar property and claims
|
$ 264,000
|
$ 264,000
|
2003 purchased claims
|
35,000
|
35,000
|
Unpatented state claims staked
|
40,400
|
40,400
|
Asset retirement costs
|
(1)37,028
|
242,766
|
Jumbo Basin royalty option (Note 4)
|
(2)250,000
|
286,350
|
Total
|
$ 626,428
|
$ 868,516
|
(1)Asset retirement costs will be amortized over the related long-lived asset using a units of production method. During 2019, the Company reduced its estimate of Asset retirement costs and Asset retirement obligation by $205,738 (see Note 9 Asset Retirement Obligation).
(2)During the year ended December 31, 2019, the arbitration panel awarded distributions from 2016 and 2017 to Goldrich from GNP that paid the balance of principal and interest of Loan3, a loan made to purchase the Jumbo Basin royalty options. While reviewing the carrying costs of the royalty option, management determined that its carrying value exceeded the contractual purchase price by $36,350, and adjusted the carrying value during 2019 as a charge to its Statements of Operations.
4.JOINT VENTURE
On April 3, 2012, Goldrich Placer, LLC (“GP”), a subsidiary of Goldrich, entered into a term sheet for a joint venture with NyacAU, LLC (“NyacAU”), an Alaskan private company, to bring Goldrich’s Chandalar placer gold properties into production as defined in the joint venture agreement (the “Operating Agreement”) which was subsequently signed with an effective date of April 2, 2012. In each case as used herein in reference to the JV, ‘production’ is as defined by the Operating Agreement. As part of the Operating Agreement, GP 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 less impairment method.
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Goldrich Mining Company
Notes to the Consolidated Financial Statements
Under the terms of the Operating Agreement, NyacAU provided funding to the JV. The loans are to be repaid from future production. According to the Operating Agreement, on at least an annual basis, the JV shall allocate and distribute all revenue (whether in cash or as gold) generated from the JV’s 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 the 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.
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. LOC2 has never been funded or utilized.
As of December 31, 2018, the JV had not achieved commercial production as required under the Operating Agreement. As a result, GNP was dissolved during 2019 and, as of December 31, 2019, the liquidation of GNP was in process. The Company has calculated distributions under item #2 above for the 2018 production season using the same methodology as prior years’ distributions. NyacAU has challenged its responsibility to declare or pay any distributions of this type for 2018. The Company has refuted the challenge as well as certain changes to the financial statements (see Arbitration).
On June 23, 2015, the Company raised net proceeds of $1.1 million through the sale of 12.5% of the cash flows of GP, Goldrich’s subsidiary, receives in the future from its interest in GNP (“Distribution Interest”), paid in cash under items #2, to Chandalar Gold, LLC (“CGL”) and GVC Capital, LLC, (“GVC”), both of which are non-related entities. GP retained its ownership of its 50% interest in GNP but, after the transaction, subject to the terms of the GNP Operating Agreement, GP will effectively receive approximately 44%, CGL will effectively receive 6% (12% of Goldrich’s 50% of GNP = 6%) and GVC will effectively receive 0.25% (0.5% of Goldrich’s 50% of GNP = 0.25%) of any distributions produced by GNP. At December 31, 2019 and 2018, an amount of $35,794 has been accrued for the distribution which is included in accrued liabilities for distributions to the Company that were applied to Loan3 in 2016 and 2017. No additional amounts have been accrued for the 2019 and 2018 distributions due to uncertainties relating to realization of distributions from NyacAU, although during arbitration proceedings, Loan3 was determined and agreed to be paid in full (see Arbitration).
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Goldrich Mining Company
Notes to the Consolidated Financial Statements
In 2012, the joint venture purchased, on Goldrich’s behalf, a 2% royalty interest, payable on all production from certain Goldrich mining claims at the Chandalar, Alaska property for $250,000 from Jumbo Basin Corporation. This transaction gave rise to Loan3, which was carried at an interest rate of the greater of prime plus 2% or 10%, and is to be repaid from distributions to Goldrich as defined in the Operating Agreement, prior to any distributions in cash to Goldrich. During the year ended December 31, 2019, the arbitration panel (see Arbitration below) awarded distributions from 2016 and 2017 to Goldrich from GNP. In accordance with terms of the Operating Agreement, the Company applied the distributions toward Loan3 and the balance of principal and interest for LOC3 were paid in full. While reviewing the carrying costs of the royalty option, management determined that its carrying value exceeded the contractual purchase price by $36,350 and adjusted the carrying value during 2019.
Arbitration
In December 2017, the Company filed an arbitration statement of claim against NyacAU and other parties. The claim challenged certain accounting treatment of capital leases, allocations of tax losses, charges to the JV for funding costs related to the JV manager’s financing, related-party transactions, and other items of dispute in a previous mediation that was unsuccessful in reaching an agreement. As a result, the Company participated in an arbitration before a panel of three independent arbitrators during 2018 to address these items. Through 2019 and the filing of this report in 2020, the Company has continued to respond to panel inquiries, make motions to prosecute or defend positions, answer motions made by the opposing JV partner and aggressively support the Company’s efforts toward success.
The Company records amounts for loss or gain contingencies when it is probable that a liability or an asset is realizable and can be reasonably estimated. To date, the arbitration proceedings are still in progress, with some rulings being issued for and against the Company’s positions. No assurance can be given that the arbitration will result in a successful outcome for the Company. Due to uncertainties relating to the pending outcome, the financial statements contain only adjustments for the final results of the arbitration that are estimable and probable. See Note 12 Commitments and Contingencies and Note 13 Subsequent Events for additional information and rulings subsequent to December 31, 2019. The Company incurred $202,431 and $1,835,382 in arbitration expenses during the years ended December 31, 2019 and December 31, 2018, respectively.
5.RELATED PARTY TRANSACTIONS
Beginning in January 2016 and through December 31, 2019, the salary of the Company’s Chief Executive Officer (“CEO”) has not been paid in full. Fees due to the Company’s Chief Financial Officer (“CFO”) have been accrued and remain unpaid:
CEO
|
Year ended
12/31/19
|
Year ended
12/31/18
|
Beginning Balance
|
$ 295,000
|
$ 192,500
|
Deferred During Period
|
180,000
|
180,000
|
Cash Paid During Period
|
(48,500)
|
(77,500)
|
Ending Balance
|
426,500
|
295,000
|
|
|
|
CFO
|
|
|
Beginning Balance
|
64,909
|
35,202
|
Deferred During Period
|
42,703
|
64,222
|
Cash Paid During Period
|
(28,968)
|
(34,515)
|
Ending Balance
|
78,644
|
64,909
|
|
|
|
Board fees payable
|
95,003
|
97,818
|
Total Related party payables
|
$ 600,147
|
$ 457,727
|
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Goldrich Mining Company
Notes to the Consolidated Financial Statements
During the year ended December 31, 2018 the Company also awarded 1,850,000 shares of common stock to officers and a director as compensation. The value of the shares awarded was $64,565 based upon the quoted value of the stock at the time of the grant.
6.NOTES PAYABLE & NOTES PAYABLE – RELATED PARTY
At December 31, 2019, the Company had outstanding Notes payable of $1,020,000 and outstanding Notes payable – related party of $3,246,316. At December 31, 2018, the Company had outstanding Notes payable of $952,634 and outstanding Notes payable – related party of $2,378,947. The Notes payable and Notes payable – related party had matured on October 31, 2018. In November 2019, the Company and the holders of the notes amended the notes, and the notes are now due within 10 days of a demand notice of the holders. There has been no notice of default or demand issued by any holder.
During the year ended December 31, 2019, the Company received additional tranches of the notes payable for a total of $934,737, discounted at 5% or $46,737, resulting in net proceeds of $888,000, of which net proceeds of $824,000 was from a related party, Nicholas Gallagher, a shareholder and director of the Company, who also holds the full balance of the Notes payable - related party described above. The notes are due upon demand; therefore, the discounts and related warrants issued with them were immediately expensed to finance costs.
During the years ended December 31, 2019 and December 31, 2018, the Company paid finder fees totaling $7,697 and $6,000, respectively, to related party entities, and incurred $26,640 and $25,520, respectively, of other finance and placement costs. Interest of $552,492 was expensed during the year ended December 31, 2019 of which $402,527 was to related parties. Interest of $734,922 is accrued at December 31, 2019 and is included in Interest payable, Interest payable – related parties, Interest payable in stock and Interest payable in stock – related parties. Interest due at December 31, 2019 was not timely paid and is due within 10 days of a demand notice by the holders. There has been no notice of default or demand issued by any holder.
The table below summarizes the total notes due, the amount received with discount, warrants issued for finders fees and cash expensed for finders fees for all periods related to the Notes payable and Notes payable – related party.
Tranche Date
|
Net amount after 5% Discount
|
Note Face Value
|
Warrants
issued to holders
|
Finders fees in Warrants
|
Finders fees in Cash
|
Notes Payable
|
|
|
|
|
|
Dec. 22, 2017
|
$ 705,000
|
$ 742,105
|
3,896,047
|
311,684
|
$ -
|
Dec. 24, 2018
|
200,000
|
210,526
|
1,105,262
|
88,421
|
6,000
|
March 31, 2019
|
14,000
|
14,737
|
77,368
|
6,189
|
420
|
June 30, 2019
|
50,000
|
52,632
|
276,315
|
22,105
|
1,500
|
Total Notes Payable
|
969,000
|
1,020,000
|
5,354,992
|
428,399
|
$ 7,920
|
|
|
|
|
|
|
Related Party
|
|
|
|
|
|
Dec. 22, 2017
|
1,000,000
|
1,052,632
|
5,526,312
|
442,105
|
30,000
|
Dec. 24, 2018
|
1,260,000
|
1,326,316
|
6,963,155
|
557,052
|
37,800
|
March 31, 2019
|
71,000
|
74,737
|
392,368
|
31,390
|
2,130
|
June 30, 2019
|
135,000
|
142,105
|
746,051
|
59,684
|
4,050
|
Sept. 30, 2019
|
303,000
|
318,947
|
1,674,471
|
133,958
|
9,090
|
Oct. 31, 2019
|
50,000
|
52,632
|
276,315
|
22,105
|
1,500
|
Dec. 18, 2019
|
265,000
|
278,947
|
-
|
-
|
7,950
|
Total Notes Payable -Related Party
|
3,084,000
|
3,246,316
|
15,578,672
|
1,246,294
|
92,520
|
Total
|
$ 4,053,000
|
$ 4,266,316
|
20,933,664
|
1,674,693
|
$ 100,440
|
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Goldrich Mining Company
Notes to the Consolidated Financial Statements
A total of 22,608,357 five-year Class T warrants have been issued in connection with the note issuances, of which 20,933,664 have been issued to holders and 1,674,693 have been issued for finders fees. The warrants have an exercise price of $0.03 per common share and expire on various dates from November 30, 2022 through December 19, 2024. During the year ended December 31, 2019, the Company issued 3,442,888 warrants in connection with the notes payable, of which 275,476 warrants were for finders fees. During the year ended December 31, 2018, the Company issued 8,713,890 warrants in connection with the notes payable, of which 645,473 were for finders fees.
The relative fair values of the warrants were estimated on the issue dates at $44,203 and $165,857 for 2019 and 2018, respectively, using the following weighted average assumptions:
|
|
December 31, 2019
|
December 31, 2018
|
Market price of common stock on date of issuance
|
|
$0.007 - $0.0275
|
$0.02 - $0.035
|
Risk-free interest rate
|
|
1.34% - 2.51%
|
2.26% - 3.07%
|
Expected dividend yield
|
|
0
|
0
|
Expected term (in years)
|
|
5
|
5
|
Expected volatility
|
|
154.7% - 172.1%
|
155.5% - 162.4%
|
Effective November 1, 2019, the Company entered into an Amended and Restated Loan, Security, and Intercreditor Agreement (the “Amended Agreement”) with Nicholas Gallagher (“Gallagher”), a related party and member of the Company’s Board of Directors, in his capacity as agent for and on behalf of the holders of the Notes payable. No compensation was paid or accrued for Mr. Gallagher, either in cash or warrants, for his services as agent for other holders. Pursuant to the Amended Agreement, in exchange for the secured promissory notes and other consideration:
1.Holders have loaned to borrower prior to November 1, 2019, an aggregate principal amount of $3,987,368;
2.Gallagher has agreed to make additional loans to borrower from and after November 1, 2019, totaling a maximum principal amount of $394,737 (the net proceeds of which to the Company will be $375,000);
3.With his consent, any new lender or existing holder may make an additional loan or loans under the Amended Agreement;
4.Any loans arising after July 1, 2018 by Mr. Gallagher and any loans made after November 1, 2019 by any new or existing Holder other than Gallagher, after Gallagher has consented in writing to such loan or advance, are Senior secured loans. Senior Notes are entitled to be repaid in full before any of the Junior Notes are repaid; and
5.The Company agreed to other terms, the most significant of which are as follows:
a.to pay, no later than February 28, 2021, (1) to the order of NGB Capital Limited (a company owned by Mr. Gallagher), a finder’s fee in the amount of $49,273, and (2) to the order of Capital Investments 4165 LLC a finder’s fee in the amount of $7,920. Of these amounts $6,500 and $nil were remitted in 2020; and
b.to reimburse Gallagher, no later than February 20, 2020, for up to $35,000 in legal fees and costs incurred by Gallagher in connection with the Amended Agreement. The Company accrued $32,644 at December 31, 2019 and paid the amount to Mr. Gallagher in 2020 under this clause.
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Goldrich Mining Company
Notes to the Consolidated Financial Statements
Under the Amended Agreement, for each holder of the Notes payable, whether or not a related party:
1.The borrower and holder entered into a Deed of Trust whereunder the Notes are secured by a security interest in all real property, claims, contracts, agreements, leases, permits and the like.
2.The borrower and any holder may negotiate a separate agreement enabling the borrower to issue shares to the holder in satisfaction of some or all interest that may be due to that Holder.
3.The Company entered into a Guaranty whereunder, among other conditions, the Company unconditionally guarantees and promises to pay to the order of each holder:
a.the principal sum of each Note payable held by such holder when and as the same becomes due, whether at the stated maturity thereof, by acceleration, call for redemption, tender, or otherwise,
b.all interest payable on each such Note payable when and as the same becomes due, and
c.any other amounts owing by the Company to such holder under the Amended Agreement or any other loan document when and as the same becomes due.
In an agreement separate from the Amended Agreement, Goldrich and Mr. Gallagher agreed that Mr. Gallagher, at his option, has the right to convert outstanding but unpaid and future interest on his loan into stock of the Company at $0.015 per share. In another agreement separate from the Amended Agreement, Goldrich and holders, other than Mr. Gallagher, agreed to convert $36,813 of unpaid interest into stock of the Company at $0.015 per share. During 2020, a total of 13,719,248 common shares with a basis of $0.015 per share, were issued to the holders, reducing interest payable by $205,789 (see Note 13 Subsequent Events).
Several events of default were enumerated in the Amended Agreement, including the following:
a.the Company fails to pay (i) any portion of the principal amount of any Note when due or (ii) any accrued and unpaid Interest when due and such failure continues for three (3) Business Days or (iii) any other amount that is due and payable under this Amended Agreement, any Note, or the Deed of Trust and such failure continues for ten (10) Business Days after demand for such payment is made by the Holder;
b.the Company fails to observe or perform any other obligation, covenant, or agreement applicable to the Company under this Amended Agreement as and when due and fails to cure such failure within 10 Business Days of notice of such failure by the holder to the Company;
c.the Company fails to observe or perform any covenant or agreement applicable under the Guaranty and fails to cure such failure within 10 Business Days of notice of such failure by the holder to the Company;
d.an insolvency or liquidation proceeding or assignment is commenced with respect to the Company or its subsidiary; or
e.any alleged creditor other than the holders seeks to collect any amount allegedly due and owing to said creditor at that time.
7.NOTES PAYABLE IN GOLD
During 2013, the Company issued notes payable in gold totaling $820,000, less a discount of $205,000, for net proceeds of $615,000. Under the terms of the notes, the Company agreed to deliver gold to the holders at the
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Goldrich Mining Company
Notes to the Consolidated Financial Statements
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.
During the year ended December 31, 2019, the Company renegotiated terms with the holders for a sixth time. A default condition arising from the non-delivery of the gold on March 31, 2019, was alleviated by agreements with the three note holders with the following amended terms:
·The fourth delayed delivery required quantity shall be delivered to the purchaser at the delivery point on the date that is sixty (60) days after the date that the purchaser gives notice to the Company that the required quantity must be delivered.
·Subsequent to February 28, 2019, the Company agreed to pay interest on the value of the fourth delayed delivery required quantity at an annual percentage rate of 10% from February 28, 2019, payable quarterly with any remaining interest due and payable on the delivery date for the required quantity. Interest shall be non-compounding, provided however, that any interest not paid in full by any required interest payment date, shall be added to the principal and shall be subject to interest at the interest rate until such late interest payment is made in full.
·The Company, at the Company’s sole discretion, has the option to pay or deliver the required quantity prior to receiving notice from the purchaser demanding payment of the required quantity or prior to sixty days after the notice date. If the Company exercises this option, in relation to the required quantity, the delivery date as set forth in the original agreement, was amended to be the date of actual payment or delivery.
·The value of the required quantity was reset on March 1, 2019 and was equal to the number of ounces of gold in the fourth delayed delivery required quantity multiplied by the original purchase price used to calculate the amount of gold due in the original agreement.
Through the date of the issuance of these financial statements, the gold notes have not been paid and the note holders have not demanded payment or delivery of gold. At December 31, 2019 and 2018, 266.788 ounces of fine gold was due and deliverable to the holders of the Notes.
Due to the change in the delivery terms provided in the sixth amendment, the Company estimated the fair value of the notes based upon the market price of gold on December 31, 2019 of $1,523 per ounce as quoted on the London PM Fix market, or $406,319, as of December 31, 2019. The valuation resulted in an increase in gold notes payable of $64,162 during 2019.
At December 31, 2019 and 2018, the fair value was calculated using the market approach with Level 2 inputs of gold delivery contracts based upon previous contractual delivery dates. At December 31, 2018, the Company had outstanding total notes payable in gold of $342,157, using a per ounce value of $1,283 as quoted on the London PM Fix market.
Interest of $35,025 and $34,182 was recognized during the years ended December 31, 2019 and 2018, respectively.
8.STOCKHOLDERS’ EQUITY
Common Stock:
On September 30, 2019, the Company changed transfer agents due to issues of communication, transaction delays and other matters being experienced with our long-standing transfer agent. The Company engaged Nevada Agency & Transfer Company (“NATCO”) to act as its transfer agent going forward. During the transfer of records, NATCO determined that a difference of 3,138,787 shares existed between the Company’s detail records and the share listings provided by the outgoing agent. The Company has researched, reconciled, and tested the shares of stock outstanding and believes its detail listing to be accurate. There is the possibility, however, that future information may become available that changes the number of shares the Company reports
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Goldrich Mining Company
Notes to the Consolidated Financial Statements
as outstanding. Management does not believe that such information will have a material effect on the Company’s financial position or its results of its operations.
Series A Convertible Preferred Stock:
The Company has 150,000 shares of Series A Convertible Preferred Stock outstanding at December 31, 2019 and 2018. These shares were issued from the designated 1,000,000 shares of Series A Preferred Stock, no par value, with the following rights and preferences:
Liquidation Preference: Upon a liquidation event, an amount in cash equal to $2.00 per share (adjusted appropriately for stock splits, stock dividends and the like), for a total of $300,000 at December 31, 2019 and 2018, together with declared but unpaid dividends to which the holders of outstanding shares of Series A Preferred Stock are entitled shall be paid prior to liquidation payments to holders of Company securities junior to the Series A Preferred Stock.
·Voting: Each holder of Series A Preferred Stock shall be entitled to vote on all matters upon which holders of common stock would be entitled to vote and shall be entitled to that number of votes equal to the number of whole shares of common stock into which such holder’s shares of Series A Preferred Stock could be converted.
·Conversion: Any share of Series A Preferred Stock may, at the option of the holder, be converted at any time into six shares of common stock. The Company has the right, at its sole option, to convert all Series A Preferred Stock into common stock after the third anniversary of its issuance if the weighted average trading price of the common stock exceeds $1.00 per share for ten consecutive trading days. The Company also has the right, at its sole option, to convert all Series A Preferred Stock into common stock after the tenth anniversary from the date of issuance.
·Dividend Rate: The holders of Series A Preferred Stock shall be entitled to receive, when and as declared by the Board, yearly cumulative dividends from the surplus or net profits of the Company at an effective rate of 5% per annum, of the original Series A Preferred Stock purchase price of $1.00 per share. The Series A dividend shall accrue ratably from the date of issuance of the Series A Preferred Stock through the entire period in which shares of Series A Preferred Stock are held and shall be payable to the holder of the Series A Preferred Stock on the conversion date of the Series A Preferred Stock or as may be declared by the Board, with proper adjustment for any dividend period which is less than a full year.
·Preferential and Cumulative. The Series A dividends shall be payable before any dividends will be paid upon, or set apart for, the common stock of the Company and will be cumulative, so that any dividends not paid or set apart for payment for the Series A Preferred Stock, will be fully paid and set apart for payment, before any dividends will be paid upon, or set apart for, the common stock of the Company.
·Payment of Dividend: If the Company shall have sufficient earnings to pay a dividend on the Series A Preferred Stock, upon declaration of any dividend by the Board in compliance with the Alaska Code and the Company’s Articles of Incorporation and Bylaws, the holder of Series A Preferred Stock may elect to receive payment of Series A dividend on a dividend payment date in cash, or provisionally in gold. Payment of Series A dividends in gold shall be paid only if the Company is producing gold in sufficient quantities as of the dividend payment date to pay such in-kind dividend and shall be delivered in the form of gold produced from the Company’s Chandalar property. We have total dividends in arrears of $84,958 as of December 31, 2019. Total dividends of $30,618 were declared and payable as a result of conversion of preferred stock during 2011 and 2016.
Conversion of outstanding shares of Series A Preferred stock would have resulted in dilution of 900,000 and 900,000 common shares for the years ended December 31, 2019 and 2018, respectively.
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Notes to the Consolidated Financial Statements
Series B Convertible Preferred Stock:
The Company has 200 shares of Series B Convertible Preferred Stock outstanding at December 31, 2019 and 2018. These shares were issued from the designated 300 shares of Series B Preferred Stock, no par value, with the following rights and preferences:
·Liquidation Preference: Upon a liquidation event, an amount in cash equal to $1,000 per share (adjusted appropriately for stock splits, stock dividends and the like), for a total of $200,000 at December 31, 2019 shall be paid prior to liquidation payments to holders of Company securities junior to the Series B Preferred Stock. Holders of the Company’s Series A Preferred Stock shall be paid in advance of holders of the Series B Preferred Stock on the occurrence of a Liquidation Event.
·Voting: Each holder of Series B Preferred Stock shall be entitled to vote on all matters upon which holders of common stock would be entitled to vote and shall be entitled to that number of votes equal to the number of whole shares of common stock into which such holder’s shares of Series B Preferred Stock could be converted. Holders of Series B Preferred Stock vote as a single class with the common shares on an as-if-converted basis. No holder of Series B Preferred Stock is entitled to pre-emptive voting rights.
·Conversion: Shares of Series B Preferred Stock may, at the option of the holder, be converted at any time into a number of fully-paid and non-assessable shares of common stock as is equal to the product obtained by multiplying the Series B shares by $1,000, then dividing by the Series B conversion price of $0.07 per common share. The Series B conversion price is subject to adjustment in accordance with the provisions of the statement of designation.
·Dividend Rate: The holders of Series B Preferred Stock shall not be entitled to receive dividends.
Conversion of outstanding shares of Series B Preferred stock would result in dilution of 2,857,142 common shares for the years ended December 31, 2019 and 2018.
Series C Convertible Preferred Stock:
The Company has 250 shares of Series C Convertible Preferred Stock outstanding at December 31, 2019 and 2018. These shares were issued from the designated 250 shares of Series C Preferred Stock, no par value, with the following rights and preferences:
·Liquidation Preference: Upon a liquidation event, an amount in cash equal to $1,000 per share (adjusted appropriately for stock splits, stock dividends and the like), for a total of $250,000 at December 31, 2019 shall be paid prior to liquidation payments to holders of Company securities junior to the Series C Preferred Stock. Holders of the Company’s Series A Preferred Stock and Series B Preferred Stock shall be paid in advance of holders of the Series C Preferred Stock on the occurrence of a Liquidation Event.
·Voting: Each holder of Series C Preferred Stock shall be entitled to vote on all matters upon which holders of common stock would be entitled to vote and shall be entitled to that number of votes equal to the number of whole shares of common stock into which such holder’s shares of Series C Preferred Stock could be converted. Holders of Series C Preferred Stock vote as a single class with the common shares on an as-if-converted basis. No holder of Series C Preferred Stock is entitled to pre-emptive voting rights.
·Conversion: Shares of Series C Preferred Stock may, at the option of the holder, be converted at any time into a number of fully-paid and non-assessable shares of common stock as is equal to the product obtained by multiplying the Series C shares by $1,000, then dividing by the Series C conversion price of $0.03 per common share. The Series C conversion price is subject to adjustment in accordance with the provisions of the statement of designation.
·Dividend Rate: The holders of Series C Preferred Stock shall not be entitled to receive dividends.
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Goldrich Mining Company
Notes to the Consolidated Financial Statements
Conversion of outstanding shares of Series C Preferred stock would result in dilution of 8,333,333 common shares for the years ended December 31, 2019 and 2018.
Series D Convertible Preferred Stock:
The Company has 150 shares of Series D Convertible Preferred Stock outstanding at December 31, 2019 and 2018. These shares were issued from the designated 150 shares of Series D Preferred Stock, no par value. Conversion of outstanding shares of Series D Preferred stock would result in dilution of 5,000,000 common shares for the years ended December 31, 2019 and 2018.
Series E Convertible Preferred Stock:
The Company has 300 shares of Series E Convertible Preferred Stock outstanding at December 31, 2019 and 2018. These shares were issued from the designated 300 shares of Series E Preferred Stock, no par value. Conversion of outstanding shares of Series E Preferred stock would result in dilution of 10,000,000 common shares for the years ended December 31, 2019 and 2018.
Series F Convertible Preferred Stock:
The Company has 153 shares of Series F Convertible Preferred Stock outstanding at December 31, 2019 and 2018. These shares were issued from the designated 300 shares of Series F Preferred Stock, no par value. Conversion of outstanding shares of Series F Preferred stock would result in dilution of 5,100,000 and 5,100,000 common shares for the years ended December 31, 2019 and 2018, respectively.
Series D, E and F Preferred Stock were issued with the following rights and preferences:
·Liquidation Preference: Upon a liquidation event, an amount in cash equal to $1,000 per share (adjusted appropriately for stock splits, stock dividends and the like), shall be paid prior to liquidation payments to holders of Company securities junior to the Series D, E, and F Preferred Stock. Holders of the Company’s Series A, B and C Preferred Stock shall be paid in advance of holders of the Series D, E and F Preferred Stock on the occurrence of a Liquidation Event.
·Voting: Each holder of Series D, E and F Preferred Stock shall be entitled to vote on all matters upon which holders of common stock would be entitled to vote and shall be entitled to that number of votes equal to the number of whole shares of common stock into which such holder’s shares of Series D, E and F Preferred Stock could be converted. Holders of Series D, E and F Preferred Stock vote as a single class respectively with the common shares on an as-if-converted basis. No holder of Series D, E and F Preferred Stock is entitled to pre-emptive voting rights.
·Conversion: Shares of Series D, E and F Preferred Stock may, at the option of the holder, be converted at any time into a number of fully-paid and non-assessable shares of common stock as is equal to the product obtained by multiplying the Series D, E and F shares by $1,000, then dividing by the Series D, E and F conversion price of $0.03 per common share. The Series D, E and F conversion price is subject to adjustment in accordance with the provisions of the statement of designation.
·Dividend Rate: The holders of Series D, E and F Preferred Stock shall not be entitled to receive dividends.
·The Series D, E and F Preferred Stock includes a redemption feature as described above.
A related party and member of the Company’s board of directors, Nicholas Gallagher, holds and controls all of the outstanding shares of the Series A, B and C Preferred Stock, 50 shares of the Series D Preferred Stock, 280 shares of the Series E Preferred Stock and all of the Series F Preferred Stock.
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Goldrich Mining Company
Notes to the Consolidated Financial Statements
Warrants:
The following is a summary of warrants at December 31, 2019:
|
Shares
|
|
Exercise
Price ($)
|
Expiration Date
|
Class L Warrants: (Issued for Private Placement of Preferred Stock)
|
|
|
|
|
Outstanding and exercisable at January 1, 2018
|
2,857,142
|
|
0.10
|
Jan 23, 2019
|
Outstanding and exercisable at December 31, 2018
|
2,857,142
|
|
|
|
Expired
|
(2,857,142)
|
|
|
|
Outstanding and exercisable at December 31, 2019
|
-
|
|
|
|
Class M Warrants: (Issued for Note Payable)
|
|
|
|
|
Outstanding and exercisable at January 1, 2018
|
1,735,000
|
|
0.15
|
Jan 29, 2019
|
Outstanding and exercisable at December 31, 2018
|
1,735,000
|
|
|
|
Expired
|
(1,735,000)
|
|
|
|
Outstanding and exercisable at December 31, 2019
|
-
|
|
|
|
Class N Warrants: (Issued for Private Placement)
|
|
|
|
|
Outstanding and exercisable at January 1, 2018
|
13,863,042
|
|
0.11
|
Jun 6 to Jul 18, 2019
|
Outstanding and exercisable at December 31, 2018
|
13,863,042
|
|
|
|
Expired
|
(13,863,042)
|
|
|
|
Outstanding and exercisable at December 31, 2019
|
-
|
|
|
|
Class N-2 Warrants: (Issued for Finders Fees)
|
|
|
|
|
Outstanding and exercisable at January 1, 2018
|
2,701,386
|
|
.055
|
Jul 18, 2019
|
Outstanding and exercisable at December 31, 2018
|
2,701,386
|
|
|
|
Expired
|
(2,701,386)
|
|
|
|
Outstanding and exercisable at December 31, 2019
|
-
|
|
|
|
Class O Warrants: (Issued for Private Placement)
|
|
|
|
|
Outstanding and exercisable at January 1, 2018
|
5,000,000
|
|
.06
|
Mar 31, 2020
|
Outstanding and exercisable at December 31, 2018
|
5,000,000
|
|
|
|
Outstanding and exercisable at December 31, 2019
|
5,000,000
|
|
|
|
Class P Warrants: (Issued for Sale of GNP Distribution Interest)
|
|
|
|
|
Outstanding and exercisable at January 1, 2018
|
2,250,000
|
|
.07
|
Jun 23, 2020
|
Outstanding and exercisable at December 31, 2018
|
2,250,000
|
|
|
|
Outstanding and exercisable at December 31, 2019
|
2,250,000
|
|
|
|
Class P-2 Warrants: (Issued for Finders Fees)
|
|
|
|
|
Outstanding and exercisable at January 1, 2018
|
1,200,000
|
|
.05
|
Jun 23, 2020
|
Outstanding and exercisable at December 31, 2018
|
1,200,000
|
|
|
|
Outstanding and exercisable at December 31, 2019
|
1,200,000
|
|
|
|
Class Q Warrants: (Issued for Private Placement of Preferred Stock)
|
|
|
|
|
Outstanding and exercisable at January 1, 2018
|
8,333,333
|
|
.03
|
Dec 8, 2020
|
Outstanding and exercisable at December 31, 2018
|
8,333,333
|
|
|
|
Outstanding and exercisable at December 31, 2019
|
8,333,333
|
|
|
|
Class Q-2 Warrants: (Issued for Finders Fees)
|
|
|
|
|
Outstanding and exercisable at January 1, 2018
|
833,333
|
|
.03
|
Dec 8, 2020
|
Outstanding and exercisable at December 31, 2018
|
833,333
|
|
|
|
Outstanding and exercisable at December 31, 2019
|
833,333
|
|
|
|
Class S Warrants: (Issued for Private Placement)
|
|
|
|
|
Outstanding and exercisable at January 1, 2018
|
15,000,001
|
|
.045
|
Apr 6 to Dec 9, 2021
|
Outstanding and exercisable at December 31, 2018
|
15,000,001
|
|
|
|
Outstanding and exercisable at December 31, 2019
|
15,000,001
|
|
|
|
Class S Warrants: (Issued for Private Placement of Preferred Stock)
|
|
|
|
|
Outstanding and exercisable at January 1, 2018
|
5,100,000
|
|
.03
|
Dec 30, 2021 to Mar 30, 2022
|
Outstanding and exercisable at December 31, 2018
|
5,100,000
|
|
|
|
Outstanding and exercisable at December 31, 2019
|
5,100,000
|
|
|
|
Class T Warrants: (Issued with Senior Secured Notes Payable)
|
|
|
|
|
Outstanding and exercisable at January 1, 2018
|
9,422,359
|
|
.03
|
Dec 22, 2022
|
Warrants issued
|
8,068,417
|
|
.03
|
May 17 to Dec 24, 2023
|
Outstanding and exercisable at December 31, 2018
|
17,490,776
|
|
|
|
Warrants issued
|
5,117,581
|
|
.03
|
Jan 1 to Oct, 2024
|
Outstanding and exercisable at December 31, 2019
|
22,608,357
|
|
|
|
Warrants outstanding at December 31, 2018 were 76,364,013 with a weighted average exercise price of $0.057.
Warrants and weighted average exercise price at December 31, 2019
|
60,325,024
|
|
.038
|
|
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Goldrich Mining Company
Notes to the Consolidated Financial Statements
Warrants issued in 2019 included 3,442,888 issued to holders of Notes payable and Notes payable – related parties for 2019 borrowings, and 1,399,262 warrants for finders fees for 2017 and 2018 issued in 2019. See table in Note 6 Notes Payable and Notes Payable – Related Parties. During the year ended December 31, 2019, 21,156,570 warrants expired, representing all Class L, M, N and N-2 warrants.
Stock Options and Stock-Based Compensation:
Under the Company’s 2008 Equity Incentive Plan, as amended by shareholder vote on November 27, 2013 (the “Plan”), options to purchase shares of common stock may be granted to key employees, contract management and directors of the Company. The Plan permits the granting of nonqualified stock options, incentive stock options and shares of common stock. Upon exercise of options, shares of common stock are issued from the Company’s treasury stock or, if insufficient treasury shares are available, from authorized but unissued shares. Options are granted at a price equal to the closing price of the common stock on the date of grant. The stock options are generally exercisable immediately upon grant and for a period of 10 years.
In the event of cessation of the holder’s relationship with the Company, the holder’s exercise period terminates 90 days following such cessation. The Plan authorizes the issuance of up to 9,550,672 shares of common stock, subject to adjustment for certain events, such as a stock split or other dilutive events. As of December 31, 2019, there were a total of 2,350,672 shares available for grant in the Plan, 6,125,000 shares issued or exercised in prior years, and 1,075,000 options exercisable and outstanding.
A summary of stock option transactions for the years ended December 31, 2019 and 2018 are as follows:
Activity for 2019 and 2018
|
Shares
|
Weighted-
Average
Exercise Price
(per share)
|
Weighted
Average
Remaining
Contractual
Term (Years)
|
Aggregate
Intrinsic
Value
|
Options outstanding and exercisable at December 31, 2017
|
2,900,000
|
$ 0.23
|
2.25
|
$0
|
Issued in 2018
|
425,000
|
$ 0.02
|
9.98
|
$0
|
Expired in 2018
|
(1,500,000)
|
$ 0.20
|
|
|
Options outstanding and exercisable at December 31, 2018
|
1,825,000
|
$ 0.20
|
4.59
|
$0
|
Expired in 2019
|
(750,000)
|
$ 0.405
|
|
|
Options outstanding and exercisable at
December 31, 2019
|
1,075,000
|
$ 0.06
|
6.24
|
$0
|
For the years ended December 31, 2019 and 2018, the Company recognized $nil and $8,925 and in total share-based compensation for consultants. During 2018, the Company issued 1,850,000 shares of common stock to officers and employees for compensation expense of $64,565. As of December 31, 2019, the intrinsic value of options outstanding and exercisable was $nil.
Accounts Payable Satisfied with Common Stock
During the year ended December 31, 2018, the Company issued 1,000,000 shares of common stock with a fair value of $32,000 at $0.032 per share and 2,615,989 shares of common stock with a fair value of $91,298 at $0.0349 per share, based on then-current market, to satisfy $141,298 of accounts payable and accrued liabilities, resulting in a gain of $18,000.
9.ASSET RETIREMENT OBLIGATION
Remediation, reclamation and mine closure costs are based principally on legal and regulatory requirements. Management estimates costs associated with reclamation of mining properties as well as remediation costs for inactive properties. The Company uses assumptions about future costs, capital costs and reclamation costs. Such
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Notes to the Consolidated Financial Statements
assumptions are based on the Company’s current mining plan and the best available information for making such estimates.
On an ongoing basis, management evaluates its estimates and assumptions; however, actual amounts could differ from those based on such estimates and assumptions. Changes to the Company’s asset retirement obligation on its Chandalar property are as follows:
|
|
December 31, 2019
|
December 31, 2018
|
Asset Retirement Obligation – beginning balance
|
|
$ 347,778
|
$ 334,402
|
Reduction of Asset retirement obligation
|
|
(205,738)
|
-
|
Accretion
|
|
13,911
|
13,376
|
Asset Retirement Obligation – ending balance
|
|
$ 155,951
|
$ 347,778
|
During 2019, the Company reduced its estimate of Asset retirement asset and Asset retirement obligation by $205,738. Acres of disturbed property, which were included in the calculation of the previous Asset retirement obligation, were reduced due to consumption of the disturbed acreage by the mining activities of the JV, which expanded the mine pit and consumed acres previously identified. This reduction, based on estimates of remaining mine material by a third-party mining engineering firm retained by the Company to prepare a mine plan, brought the mine life to 10 years once mining resumes. Therefore, the required reclamation to be performed by the Company was reduced by any reclamation of the identified acres that became part and parcel to the asset reclamation obligation of the JV.
The mining activities of the JV have disturbed additional acreage for which an associated asset retirement obligation has arisen and is required to be accounted for by the JV. The asset and obligation of this asset retirement, as they will be affected by the dissolution of the JV, are not determinable until the arbitration panel makes its award. Due to the uncertainly of the outcome of arbitration, it is not possible at this time to reasonably estimate or quantify this asset and obligation or any change that may be required to amounts already recorded for the Company’s prior mining activities (see Note 4 – Joint Venture; Arbitration).
10.REMEDIATION
The Company is responsible to remediate areas disturbed by mining activities, with the exception of certain access roads, airstrips or other amenities that are permanent in nature and improve the general access and maintainability of state lands covered by the Company’s mining claims. The Company has accrued $100,000 and $100,000, respectively, for remedies required at a former owner’s mine site in addition to the asset retirement obligation as of December 31, 2019 and 2018.
11.INCOME TAXES
The Company did not recognize a tax provision for the years ended December 31, 2019 and 2018.
Following are the components of deferred tax assets and allowances at December 31, 2019 and 2018:
|
2019
|
2018
|
Deferred tax assets arising from:
|
|
|
Capitalized exploration and development costs
|
$ 48,000
|
$ 45,000
|
Unrecovered promotional and exploratory costs
|
112,000
|
112,000
|
Accrued remediation costs
|
66,000
|
62,000
|
Share based compensation
|
278,000
|
278,000
|
Net operating loss carryforwards
|
12,547,000
|
12,101,000
|
Total deferred tax assets
|
13,051,000
|
12,598,000
|
Less valuation allowance
|
(13,051,000)
|
(12,598,000)
|
Net deferred tax assets
|
$ -
|
$ -
|
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Goldrich Mining Company
Notes to the Consolidated Financial Statements
Management has determined that it is more likely than not that the Company will not realize the benefit of its deferred tax assets. Therefore, a valuation allowance equal to 100% of deferred tax asset has been recognized. The deferred tax assets were calculated based on an effective tax rate of 30% for 2019 and 2018.
During the year ended December 31, 2016, the Company filed amended tax returns to correct allocations of Joint Venture losses reported to the Company for the years ending 2012 through 2015, resulting in an increase in losses reported on its federal and state tax returns of $7.5 million and $6.8 million, respectively. For each year since 2015, the Company filed its federal and state tax returns with corrected allocations of losses from the Joint Venture. The Company’s and the Joint Venture’s federal returns for the 2015, 2016 and 2017 tax years are under audit by the Internal Revenue Service (“IRS”) to determine correct allocation of losses for the Joint Venture and its partners. In August 2020, the IRS issued an unfavorable ruling as it affects the Company in regard to the audit of the joint venture which, when the individual partners’ effects are communicated to the Company by the IRS, is probable to decrease the Company’s net federal and state net operating loss carryforwards (“NOL”) by totals of $2.0 million and $1.8 million, respectively for the years under audit. The change would not result in any current tax liability or refund unless and until the Company could utilize its net operating loss carryforwards. The 2018 tax return would require amendment with a reduction to taxable net operating loss of approximately $41,000.
At December 31, 2019, the Company had federal and state tax-basis net operating loss carryforwards, prior to giving effect to the probable changes resulting from the audit of the joint venture as described above, totaling $42.8 million and $39.5 million, respectively, compared with federal and state tax-basis net operating loss carryforwards totaling $40.3 million and $39.3 million for the period ended December 31, 2018. Of these net operating losses, $36.6 million will expire in various amounts from 2020 through 2037. Combined federal net operating losses of $6.2 million for the years 2019 and 2018 do not expire.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company does not expect that the NOL carryback provision of the CARES Act would result in a material cash benefit.
The CARES Act increases the amount of business interest expense that may be deducted for tax years beginning in 2019 and 2020 by computing the section 163(j) limitation. The CARES Act generally limits a taxpayer’s business interest deductions for a taxable year to the sum of: (1) 30% of the taxpayer’s adjusted taxable income for that year, (2) its business interest income and (3) floor plan financing interest. Any interest expense not deductible under 163(j) for any affected year may be carried forward without limitation. The Company does not expect that the change in the section 163(j) provision of the CARES Act would result in a material cash effect.
The differences between the provision (benefit) for federal income taxes and federal income taxes computed using the U.S. statutory tax rate of 21% were as follows:
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Notes to the Consolidated Financial Statements
|
2019
|
|
2018
|
|
Federal income tax expense (benefit) based on statutory rate
|
$ (547,000)
|
21.0%
|
$ (798,000)
|
21.0%
|
State income tax expense (benefit), net of federal taxes
|
(227,000)
|
8.7%
|
(328,000)
|
8.6%
|
Non-deductible share-based compensation
|
-
|
-%
|
21,000
|
(0.5)%
|
Revision of NOL estimates, state apportionment factors and state effective tax rates
|
321,000
|
(12.2)%
|
492,000
|
(13.0)%
|
Increase (decrease) in valuation allowance
|
453,000
|
(17.5)%
|
613,000
|
(16.1)%
|
Total taxes on income (loss)
|
$ -
|
-%
|
$ -
|
-%
|
The Company has assessed its tax positions other than the NOL issue above and has determined that it has taken an uncertain tax position that is probable to affect its federal and state net operating loss carryforwards in amounts by $2.0 million and $1.8 million, respectively, as described above, but does not give rise to an unrecognized tax liability being reported. In the event that the Company is assessed penalties and/or interest, penalties will be charged to other operating expense and interest will be charged to interest expense.
The Company files federal income tax returns in the United States only. Tax attributes, mainly net operating losses after 2014, can and probably will be adjusted as a result of an audit, as described above. The Company’s 2015, 2016 and 2017 tax filings are currently under examination. The Company is no longer subject to federal income tax examination by tax authorities for years before 2015.
12.COMMITMENTS AND CONTINGENCIES
We are subject to Alaska state annual claims rental fees in order to maintain our non-patented claims. In addition to the annual claims rental fees of approximately $125,945 due November 30 of each year, we are also required to meet annual labor requirements of approximately $61,100 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. The Company has significant carryovers to 2020 to satisfy its annual labor requirements. This carryover expires in the years 2020 through 2024 if unneeded to satisfy requirements in those years
Arbitration
In 2017, the Company, its subsidiary and the joint venture, as claimants, filed an arbitration statement of claim before a three-member Arbitration Panel (“the Panel”), against our JV partner and its affiliates; NyacAU, LLC (“NyacAU”), BEAR Leasing, LLC, and Dr. J. Michael James, as respondents. In 2018, the respondents filed a counter-claim against the Company, its subsidiaries and certain members of the Company’s current and former management, the counterclaim respondents. The arbitration claim alleged, amongst other things, claims concerning related-party transactions, accounting issues including capital vs. operating leases, interpretation of the joint venture operating agreement, allocation of tax losses between the joint venture partners, and unpaid amounts due Goldrich relating to the Chandalar Mine.
It is possible that there could be either adverse or favorable developments in the arbitration pending with the Company and its JV partner. The Company records provisions in the consolidated financial statements for pending arbitration results when it determines that an outcome is probable, and the amount of loss can be reasonably estimated. At the present time, except as stated otherwise, while it is reasonably possible that a favorable or unfavorable outcome in the arbitration may occur, after assessing the information available, management is unable to estimate the possible loss, or range of losses, for the pending arbitration; and
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Goldrich Mining Company
Notes to the Consolidated Financial Statements
accordingly, no estimated losses have been accrued in the consolidated financial statements for favorable or unfavorable outcomes. Legal defense costs are expensed as incurred. Favorable rulings would not result in the recognition of gains prior to offsetting against losses, due to the ruling being an estimate which must be constructively received prior to recognition.
During the year ended December 31, 2019, the Panel released various awards relating to the allegations of both parties. Some of which have been in favor of the Company’s positions some have been in favor of our JV partner and its affiliates. The arbitration is ongoing and the various parties to the claims and counterclaims continue to disagree on several matters.
On May 25, 2019, the Panel issued an Interim Award, which requested input from the parties on a small number of discrete issues, all input to be supported by references to the arbitration record.
On November 30, 2019, the Panel ordered the Partial Final Award and concurrently the Second Interim Award RE Dissolution/Liquidation of GNP and Related Issues (“the Second Interim Award”).
The Partial Final Award
The Partial Final Award addressed several matters including leases and the impact of their characterization on interim distributions. As a result, the Panel determined that the Company is entitled to an additional $214,797 in distributions for 2016 and an additional $198,644 for 2017, for a total of $413,442 from GNP. In like manner, the Panel determined that NyacAU is entitled to an additional $413,442 in distributions for these years. As the Company is uncertain as to the collectability of these distributions, no recognition of these revenues is included in its Statement of Operations for the year ended December 31, 2019.
The Partial Final Award also addressed the Company’s claim for payment of interest earned by LOC 1. The Panel determined that NyacAU should pay the Company 50% of the interest earned on LOC 1 actually received by NyacAU, or $126,666. The Company has not accrued a receivable or recognized interest income for the interest due to uncertainties surrounding its collectability.
The Panel ruled Goldrich was responsible to pay NyacAU for the 2012 reclamation work and NyacAU is also entitled to 5% interest on the award from the date the first invoice was sent to Goldrich in 2014. Goldrich has accrued a liability for this ruling on its consolidated balance sheet of $421,366 included in accounts payable and interest payable, however Goldrich has contested the party to whom payment should be made and whether additional amounts not invoiced by GNP should be included in the award.
The Partial Final Award found the Company liable for an act of negligent misrepresentation regarding the concealment of certain technical information from NyacAU. The Company has vigorously disputed the concealment and the finding of negligence. Nevertheless, as a result of the Panel’s determination, the Panel awarded Dr. J. Michael James a reimbursement of 17% of his previous $350,000 stock investment in the Company or $59,500 plus prejudgment interest of 5% and legal fees, for a total of $83,388. In addition, the Panel awarded Dr. James $9,858, plus interest at 5% and legal fees, for personal expenses incurred relating to GNP’s operations, for a total of $13,713. These amounts plus additional interest have been included in accounts payable and interest payable on the consolidated balance sheet at December 31, 2019.
The Second Interim Award
The Second Interim Award was necessitated by the fact that the dissolution/liquidation of the joint venture had not yet run its course. In the Second Interim Award the Panel ordered that:
a)No later than January 15, 2020, NyacAU and Goldrich shall attempt to establish, by agreement, a market value for the GNP permit in connection with a transfer of the Permit to Goldrich or a third party, taking into
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Goldrich Mining Company
Notes to the Consolidated Financial Statements
consideration the obligation of GNP, or any transferee of the permit, to complete reclamation in accordance with NyacAU’s government-approved reclamation plan.
b)Reasonably prior to May 31, 2020, NyacAU shall perform its obligation to “make provision … for reclamation by (1) adding all reclamation expenses actually incurred by NyacAU to LOC 1; (2) from GNP’s assets, to the extent possible after payment of GNP’s debts and liabilities and liquidation expenses”.
Neither order from the Second Interim Award was successfully executed by the parties on the dates specified by the Panel. The Second Interim Award confirmed the dissolution of GNP and noted that “no provision of the Claims Lease or the Operating Agreement speaks directly to the rights or obligations of GNP to transfer its mining permit, which is held in the name of the manager, NyacAU. Although GNP no longer has the right to mine, GNP and specifically NyacAU have the liability of reclamation.
Balance and payment of LOC1
The arbitration panel calculated a tentative balance of LOC1 at $16,483,271 as of June 2019. This balance will be adjusted for any additional costs incurred by GNP in the liquidation or awards and/or adjustments made by the arbitration panel. Upon liquidation of GNP, 50% of the LOC1 liability may be recorded on Goldrich’s balance sheet.
The arbitration panel ruled in the Final Post Award (see Subsequent Events below) that LOC1 cannot be increased for costs incurred after mining operations have ceased, including costs for reclamation. This deprives NyacAU of a security interest in 50% of future placer gold production at the site to repay reclamation expenses which it advances. Further, the panel ruled that the Operating Agreement does not impose an obligation on the Company to pay 50% of the reclamation fee, but that the reclamation obligation resides with the permit holder.
Right to Offset Damages or Distributions
The arbitration panel granted the request that any damages awarded to one party can be an offset to distributions (or damages) due to the other party.
13.SUBSEQUENT EVENTS
Subsequent to the year ended December 31, 2019, the Company received additional notes payable from a related party of $295,000, net of discount and additional notes payable of $40,000 net of discount.
In April of 2020, the Company applied for and received a loan under the Payroll Protection Program under the provisions of the CARES Act of $50,600. This loan may be converted to a grant and forgiven when the Company uses the funds for qualifying expenses and applies for forgiveness under the program.
During August through October of 2020, the Company received $439,000 cash as a result of exercise of Class Q, Class S, and Class T warrants at an exercise price of $0.03 per common share. Ownership of these warrants had been in the hands of a related party and were sold by him personally to unrelated parties. The unrelated parties then exercised the warrants for cash, resulting in the issuance of 14,633,330 common shares.
During September of 2020, the holders of the Notes payable and Notes payable – related party, received shares in lieu of cash for interest. A total of 13,719,248 common shares with a basis of $0.015 per share, were issued to the lenders, reducing interest payable by $205,789, of which $168,976 was to a related party.
Effective September 16, 2020, the Company entered into a contract with Yabucoa Partners Corp, dba Street Smart, to provide market research and analysis services to the Company. The Company will pay a flat fee of
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Goldrich Mining Company
Notes to the Consolidated Financial Statements
$150,000 payable $75,000 upon signing and $75,000 in 3 months. In addition, the Company will pay a monthly fee of $1,500, paid 6 (six) months in advance.
Arbitration rulings subsequent to December 31, 2019
Final Post Award Orders
On September 4, 2020, the arbitration panel issued Final Post Award Orders, wherein the panel issued rulings on multiple issues, including but not limited to, those discussed below:
·Reclamation
The Company had previously filed a motion to compel NyacAU to correct accruals for certain expenses including reclamation, demobilization, equipment rental and utilities. Most notably, the Company contended that an accrual for reclamation liability was short of a much larger estimate prepared by independent professionals as engaged by Goldrich. The panel denied the Company’s motion and ruled that Goldrich does not have the authority to compel the establishment of any reserves on the GNP financial records.
The Company had previously filed a motion to compel NyacAU to reclaim the disturbed acres as required under the Operating Agreement and the mining permit issued to NyacAU in 2013, and to require NyacAU to fund the reclamation reserve from cash that had been distributed to NyacAU. The panel denied the Company’s motion and ruled that while there was express provision in the Operating Agreement to establish reserves necessary for contingent or unforeseen liabilities or obligations, which could conceivably include reclamation reserves, the agreement does not impose an express obligation to reclaim the project site.
·Mining Claims
All of the Company’s mining claims remain the property of the Company; however, NyacAU staked several claims contiguous to the claims owned by the Company. The Company had previously filed a motion to compel the transfer of NyacAU’s claims from NyacAU to the Company. The motion was granted in part in that the claims held in NyacAU’s name were ruled to be owned by the Company, but would not be transferred immediately. They would remain in the possession of NyacAU as manager of the liquidation until the property covered by the claims was not being used for liquidation activities and could be transferred without disruption to the liquidation activity.
Judgements issued by Superior Court
On April 29, 2020, the Superior Court of the State of Alaska issued a judgement in favor of Dr. James, in the total amount of $13,713 (for the 2012 reclamation costs personally incurred, including interest) and $83,588 (for the adjustment to Dr. James’ stock purchase, including interest). The Court ordered both Goldrich and NyacAU to submit a status report to the Court in September 2020 regarding the Panel’s clarification of the amounts payable for the 2012 reclamation, including interest, it determined to be payable to NyacAU at that time. The status report has been filed by both parties, and these judgements remain unpaid and in force before the Superior Court. The amounts related to these judgements were accrued for at December 31, 2019.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Members of the Board of Directors and Executive Officers
Our directors hold office until the next annual meeting of the stockholders and the election and qualification of their successors. Officers are elected annually by the Board of Directors and serve at the direction of the Board of Directors. Each member of the Board of Directors was elected to membership on the Board on November 26, 2013. The Board of Directors held nine meetings in 2019 and five meetings in 2018.
The following table and information that follows sets forth, as of December 31, 2019, the names, and positions of our directors and executive officers:
Name
|
Age
|
Recent Business and Professional Experience
|
David S. Atkinson
Director
|
50
|
Mr. Atkinson became a Director of the Company on May 7, 2007. Mr. Atkinson spends about 15 hours a month on matters related to Goldrich. He is currently managing FG Investments, a Global Investment Advisor focused on commodities located in the Republic of Mauritius. In April 1999, he co-founded Forza Partners, L.P. and currently serves as portfolio manager. Forza Partners, L.P. is a hedge fund focused on the precious metals sector. In April 1997, he co-founded and, until December 1999, managed Tsunami Partners, LP, a fund located in Fort Worth, Texas. Mr. Atkinson has been an affiliate of the Market Technicians Association (MTA) since March 1994 and received MTA accreditation as a Chartered Market Technician (CMT) in July 2001. Mr. Atkinson received a B.A. in Economics from the University of Texas at Austin.
|
Nicholas Gallagher
Director
|
46
|
Mr. Gallagher became a director on November 1, 2016. Mr. Gallagher spends approximately 15 hours per month on matter related to Goldrich. In 2004 to the present, Mr. Gallagher incorporated NGB Capital, a private equity investment firm that manages personal and syndicated private equity and property investments in Europe, the United Kingdom and the United States of America. In 2000, Mr. Gallagher co-founded Powerscourt Capital Partners, a niche investment management firm structured to manage funds on behalf of high net worth individuals in the public and private equity markets. He served there until Powerscourt was acquired in 2004. He obtained a Bachelor of Law degree from the University of Newcastle in 1996. Mr. Gallagher then completed the Legal Practice Course at the College of Law in London and practiced as a solicitor at Memery Crystal, a law firm in the city of London from 1997 to 2000.
|
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Name
|
Age
|
Recent Business and Professional Experience
|
Garrick A. Mendham
Director
|
59
|
Mr. Mendham became a consulting director on August 12, 2013 and was appointed director on November 26, 2013. Mr. Mendham spends about 15 hours a month on matters related to Goldrich. Since May 2012 to the present, Mr. Mendham serves as Vice President of Operations and Project Development for RH Mining Resources, a Hong Kong based resources development company. From 2008 to 2012, he served as Director of Technical Services and General Manager of Technical Services for Regent Pacific Group in Hong Kong and Beijing, China, respectively. From 2006 to 2008, Mr. Mendham served as Manager of Technical Services for Rio Tinto Coal Australia, a subsidiary of Rio Tinto Group. From 2004 to 2006, he served as Manager of Mine Technical for Lihir Management Company in Papua, New Guinea. Prior to 2004, Mr. Mendham served in technical, corporate, planning and mining positions with Rio Tinto, BHP Billiton, Bond Corporation, and Queensland Nickel, including two years working in an Australian 20,000-ounces per year placer operation. Mr. Mendham brings over 30 years of mining experience in operations, technical work, and mining finance for both junior and large mining companies. Mr. Mendham is the Chairman of the Australasian Institute of Mining and Metallurgy Hong Kong branch. He received a Bachelor of Mine Engineering from the University of New South Wales, a Graduate Diploma in Finance from the Financial Services Institute of Australasia, and holds Mine Manager Certificates in Australia for both New South Wales and Western Australia.
|
William Orchow
Director
|
74
|
Mr. Orchow became a director on July 20, 2004. Mr. Orchow spends approximately 10 hours per month on matters related to Goldrich. He is currently a member of the board of directors of Cordoba Minerals Corp, a Canadian public company with projects in Colombia. Mr. Orchow sits on the boards of directors of several private junior mining companies. He served as a director of Revett Minerals, Inc., a Canadian company trading on the Toronto Stock Exchange, from September 2003 to June 2009. He also served as President and Chief Executive Officer of Revett Minerals from September 2003 to October 2008. Prior to Revett, Mr. Orchow took time off, from January 2003 to August 2003. From November 1994 to December 2002, Mr. Orchow was President and Chief Executive Officer of Kennecott Minerals Company, where he was responsible for the operation and business development of all of Kennecott’s mineral mines with the exception of its Bingham Canyon mine. From June 1993 to October 1994, he was President and Chief Executive Officer of Kennecott Energy Company, the third largest producer of domestic coal in the United States, and prior to that was Vice President of Kennecott Utah Copper Corporation. Mr. Orchow has also held senior management and director positions with Kennecott Holdings Corporation, the parent corporation of the aforementioned Kennecott entities. He has also been a director and member of the executive committee of the Gold Institute, a director of the National Mining Association and a director of the National Coal Association. Mr. Orchow is currently a member of the board of trustees of Westminster College in Salt Lake City and has been a member of the board of trustees, executive committee and past President of the Northwest Mining Association until December 31, 2011. He graduated from the College of Emporia in Emporia, Kansas with a B.S. in business.
|
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Name
|
Age
|
Recent Business and Professional Experience
|
Michael G. Rasmussen
Director
|
74
|
Dr. Rasmussen became a consulting director on April 15, 2013 and was appointed director on November 26, 2013. Dr. Rasmussen spends about 15 hours a month on matters related to Goldrich. In February 2013 to present, he launched a private consultancy providing geologist services to mining companies, including Goldrich, Kinross Gold Corp, Nevada Milling and Mining LLC and several others. From 2008 to 2013, Dr. Rasmussen served as the Vice President, Exploration and consulting geologist for Mines Management, Inc., a public company trading on the NYSE and TSX. From 2007 to 2008, he served as Vice President, Exploration for Aztec Metals Corp, and concurrently as consulting geologist for Endeavour Silver Corp, a Canadian public company trading on the NYSE and TSX, and Canarc Gold Corp, a Canadian public company trading on the FINRA OTCBB and TSX, From 2005 to 2007, Dr. Rasmussen served as Vice President, Exploration for Endeavour Silver Corporation and from 2004 to 2005 as Vice President, Exploration for International Wayside Gold Mines Ltd, a Canadian public company trading on the TSX. From 1990 to 2004, he held senior geologist roles at Echo Bay Mines and its parent Kinross Gold Corp, a public company trading on the NYSE and TSX. Dr. Rasmussen earned a PhD in Economic Geology from the University of Washington and a Master’s Degree in Geological Sciences from Loma Linda University. Dr. Rasmussen is licensed as a Professional Geologist by the Washington State Board of Geologists and the American Institute of Professional Geologists. Dr. Rasmussen has evaluated precious metals prospects and conducted exploration extensively throughout Mexico, Peru, British Colombia, and the western United States, and is credited with the discovery of the Emanuel Creek epithermal gold deposit for Echo Bay Mines.
|
William V. Schara
Chief Executive Officer,
Director
|
63
|
On October 19, 2009, Mr. Schara was appointed by the Board of Directors as Chief Executive Officer of the Company. From March 14, 2007 to October 19, 2009, Mr. Schara served as Chairman of the Board. Mr. Schara is a Certified Public Accountant, and has a Bachelor of Science Degree in Accounting from Marquette University. Mr. Schara spends fulltime on matters related to Goldrich. He was also appointed to the Company’s Audit Committee on February 13, 2006 and relinquished that position concurrent with his appointment as Chief Executive Officer. From October 2007 to September 2009, Mr. Schara served as President, Chief Executive Officer and Director of Nevoro, Inc., a Canadian company trading on the Toronto Stock Exchange. Beginning December 2004, he was employed as a management consultant for, and then from July 2005 to November 2007 as the Chief Financial officer of Minera Andes Inc., a Canadian development stage mining company listed on the Toronto Ventures Exchange and the FINRA OTCBB exchange. He previously worked for Yamana Gold Inc. and its predecessor companies from July 1995 to September 2003, the last four years of which were in the capacity of Vice President of Finance and Chief Financial Officer. Yamana Gold Inc. is a production stage Canadian public company trading on the Toronto Stock Exchange, the NYSE Amex and the London Alternative Investment Market Exchange. From September 2004 through April 2015, Mr. Schara served as a director of Marifil Mines Limited, an exploration stage Canadian public company traded on the Canadian Ventures Exchange. Mr. Schara has more than 30 years of experience in finance and accounting with extensive experience in business start-ups, international business, and managing small public companies and mining company joint ventures.
|
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Name
|
Age
|
Recent Business and Professional Experience
|
Stephen M. Vincent
Director
|
71
|
Mr. Vincent became a consulting director on August 12, 2013 and was appointed director on November 26, 2013. Mr. Vincent spends about 15 hours a month on matters related to Goldrich. Mr. Vincent has over 30 years of experience as a finance specialist. From February 2013 to the present, Mr. Vincent is principal of SMV Enterprises, Inc, providing financing services to clients. From 2005 to 2013, he worked at Northland Securities, providing investment bank services and developing a junior mining investment banking practice. From 1992 to 2004, Mr. Vincent worked at Allison Williams Company, providing structures and securitized financings including leasing and corporate debt. Prior to 1992, he held a range of positions with various companies including Moore Juran and Co., Miller and Schroeder Financial, and Piper Jaffray. His roles have included metals distribution, debt instrument structuring, and private equity financing. Mr. Vincent raised capital for companies developing the copper-nickel mining district of northeastern Minnesota. Mr. Vincent completed strategic equity investments for Duluth Metals Ltd., Franconia Minerals and Encampment Minerals. While at Northland Securities, Mr. Vincent completed a private placement financing for Goldrich in 2010. Mr. Vincent received a Bachelor’s degree in History from Boston College and attended the William Mitchell School of Law.
|
Ted R. Sharp
Chief Financial Officer
|
63
|
Mr. Sharp was appointed as our Chief Financial Officer, Secretary, and Treasurer effective March 2006. We have entered into a management consulting contract with Mr. Sharp, engaging him on a part-time basis. Mr. Sharp spends approximately 25% of his business hours each month on matters related to Goldrich. Mr. Sharp is a Certified Public Accountant, and has Bachelor of Business Administration Degree in Accounting from Boise State University. Since 2003, he has been President of Sharp Executive Associates, Inc., a privately-held accounting firm providing Chief Financial Officer services to clients. Concurrent with his position with Goldrich, from July 2012 through the present, Mr. Sharp is a principal and serves part-time as Chief Executive and Financial Officer of US Calcium LLC, a privately-held natural resource company. Concurrent with his position with Goldrich, from August 2018 through the present, Mr. Sharp serves part-time as Chief Financial Officer of Timberline Resources Corporation, a natural resource company trading on the OTCQB and TSX:V exchanges. Also concurrent with his position with Goldrich, from January 2019 through the present, Mr. Sharp serves part-time as Chief Financial Officer of US Gold Corporation, a natural resource company trading on the NASDAQ exchange. In the past, concurrent with his position with Goldrich, from May 2011 through January 2012, Mr. Sharp served part-time as Chief Financial Officer of Gryphon Gold Corporation, a natural resource company formerly trading on the FINRA OTCBB, and from September 2008 through November 2010, Mr. Sharp served part-time as Chief Executive Officer, President and Chief Financial Officer of Texada Ventures, Inc, a natural resource exploration company formerly trading on the FINRA OTCBB. Also concurrent with his position with Goldrich, from November of 2006 to June 2009, Mr. Sharp served part-time as Chief Financial Officer of Commodore Applied Technologies, Inc., an environmental solutions company formerly trading on the FINRA OTCBB. Prior to 2003, he worked for 14 years in positions of Chief Financial Officer, Managing Director of European Operations and Corporate Controller for Key Technology, Inc., a publicly-traded manufacturer of capital goods. Mr. Sharp has more than 35 years of experience in treasury management, internal financial controls, SEC reporting and Corporate Governance.
|
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Qualification of Directors
David S. Atkinson: Mr. Atkinson’s extensive experience in the capital markets and his specific experience in financing exploration stage mining companies as described above along with his current position as Investment Manager of Forza Partners and Forza Partners II, each of which are affiliates of the Company, led the Board to conclude that Mr. Atkinson should continue to serve as a director of the Company given the Company’s position as an exploration stage mining company and its need to seek financing to continue its operations in the coming fiscal year.
Nicholas Gallagher: Mr. Gallagher’s extensive experience in legal matters and as an investment manager, as well as his numerous years as a significant investor and affiliate of the Company, led the Board to conclude that Mr. Gallagher should join the Board and serve as a director of the Company given the Company’s position as an exploration stage mining company and its need to seek financing to continue its operations in the coming fiscal year.
Garrick A. Mendham: Mr. Mendham’s extensive experience as a manager in production companies and his specific experience with mining and exploration plans and analysis for both production and exploration stage mining companies as described above led the Board to conclude that Mr. Mendham should continue to serve as a director of the Company given the Company’s position as an exploration stage mining company and its need to work with its joint venture partner at GNP in formulating and executing mining plans to extract gold from its Chandalar placer operations.
William Orchow: Mr. Orchow’s extensive experience in executive management of large production companies and his specific experience as a director on multiple industry organizations and mining companies as described above along with his current position as Chairman of the Board led the Board to conclude that Mr. Orchow should continue to serve as a director of the Company given the Company’s position as an exploration stage mining company and its need to seek financing to continue its operations in the coming fiscal year.
Michael G. Rasmussen: Mr. Rasmussen’s extensive experience as a geologist with exploration stage companies and his skills in interpreting multifaceted geological date as described above led the Board to conclude that Mr. Rasmussen should continue to serve as a director of the Company given the Company’s position as an exploration stage mining company with an extensive property with challenging geological traits.
Stephen M. Vincent: Mr. Vincent’s extensive experience in the capital markets and his specific experience in financing exploration stage mining companies as described above along with his current position as Chairman of the Audit Committee led the Board to conclude that Mr. Vincent should continue to serve as a director of the Company given the Company’s position as an exploration stage mining company and its need to seek financing to continue its operations in the coming fiscal year.
William A. Schara: Mr. Schara’s extensive experience in finance and accounting and his specific experience in financing for both production and exploration stage mining companies as described above along with his current position as CEO of the Company led the Board to conclude that Mr. Schara should continue to serve as a director of the Company given the Company’s position as an exploration stage mining company and its need to seek financing to continue its operations in the coming fiscal year.
Arrangements Between Directors and Officers
To our knowledge, there is no arrangement or understanding between any of our officers and any other person pursuant to which the officer was selected to serve as an officer.
Family Relationships
There are no family relationships between, or among any of our directors or executive officers.
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Other Directorships
No directors of the Company are also directors of issuers with a class of securities registered under Section 12 of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”) (or which otherwise are required to file periodic reports under the Exchange Act).
Code of Ethics
The Board of Directors considers and implements our business and governance policies.
On November 7, 2005, our Board of Directors adopted a Code of Business Conduct and Ethics for directors, officers and executive officers of Goldrich Mining Company and its subsidiaries and affiliates. All our directors and employees have been provided with a copy of the Code, and it is posted on our website at www.goldrichmining.com. The document is intended to provide guidance for all directors and employees (including officers) and other persons who may be considered associates of the company to deal ethically in all aspects of its business and to comply fully with all laws, regulations, and company policies. If we make any amendments to this Code other than technical, administrative or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of the Code to our chief executive officer, or chief financial officer, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies on our website. A copy of the Code will be sent without charge to anyone requesting a copy by contacting us at our principal office.
The Code is in addition to other detailed policies relevant to business ethics that we may adopt from time to time.
Committees of the Board of Directors
The Board of Directors has an Audit Committee, a Compensation Committee, a Corporate Governance and Nominating Committee, a Technical Committee, an Operating Committee, and a Financing Committee.
Audit Committee
The Corporation has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of the Audit Committee during 2019 were Mr. Orchow and Mr. Vincent. Mr. Vincent is the Chairman of the Committee. Each of the Directors is considered “independent” as defined under Rule 5605(c)(2) of the NASDAQ listing rules and under Rule 10A-3 of the Exchange Act. The Committee operates under a formal written charter approved by the Committee and adopted by the Board of Directors. The Audit Committee held four meetings during 2019 and four meetings in 2018. The responsibilities of the Audit Committee include monitoring compliance with Company policies and applicable laws and regulations, making recommendations to the full Board of Directors concerning the adequacy and accuracy of internal systems and controls, the appointment of auditors and the acceptance of audits, and monitoring management's efforts to correct any deficiencies discovered in an audit or supervisory examination.
Compensation Committee
The members of the Compensation Committee during 2019 were Mr. Vincent, and Mr. Orchow; this Committee does not have a charter. Mr. Vincent is the Chairman of the Committee. This Committee receives and considers recommendations from the Chief Executive Officer for compensation for consultants, management and the Directors. Compensation matters regarding Mr. Schara and Mr. Sharp are recommended to the Board of Directors for their consideration. The Committee also is responsible for the administration of all awards made by the Board of Directors pursuant to the Restated 2008 Equity Incentive Plan (the “Plan”). The Compensation Committee makes recommendations to the Board of Directors regarding administration of the Plan. The Board of Directors, however, administers the Plan. The Company does not use compensation consultants. This Committee held no meetings in 2019 and 2018.
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Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee is composed of Mr. Orchow, Mr. Atkinson, and Mr. Schara. Mr. Orchow is the Chairman of this Committee. This Committee adopted a Charter at a meeting held May 7, 2007. The Charter does not include a policy with regard to consideration of director candidates recommended by shareholders. The Committee believes that it is in a better position than the average shareholder to locate and select qualified candidates for the Board of Directors, as the Company is a small gold exploration company that requires its directors to have knowledge regarding the risks and opportunities in the gold mining industry. The Committee did not hold any meetings in 2019 and 2018.
Operating Committee
The Operating Committee is composed of Mr. Orchow, Mr. Mendham, and Mr. Schara. Mr. Schara is the Chairman of this Committee. The Committee oversees the Company’s interest in GNP. The Committee held no meetings in 2019 and three in 2018.
Financing Committee
The Financing Committee is composed of Mr. Atkinson, Mr. Gallagher, Mr. Orchow, Mr. Schara, and Mr. Vincent. Mr. Schara is the Chairman of this Committee. The Committee advises the Chief Executive Officer on acquiring financing and evaluating financial alternatives. The Committee met once in 2019 and once in 2018.
Financial Expert
Stephen M. Vincent is Chairman of the Audit Committee and its designated Financial Expert as set forth in Item 401 of Regulation S-K, as promulgated by the SEC. Mr. Vincent is independent as defined under Rule 5605(c)(2) of NASDAQ listing rules and under Rule 10A-3 of the Exchange Act.
Recommendations to the Board of Directors
There have been no changes in the Company’s procedures by which shareholders of the Company may recommend nominees to the Company’s Board of Directors.
Legal Proceedings, Cease Trade Orders and Bankruptcy
Subsequent to the end of 2017, we filed a claim before an Arbitration panel consisting of 3 independent arbitrators against our joint venture partner to obtain relief from certain accounting practices employed by the manager of the joint venture. In response to our filing, the managing partner, NyacAU LLC, has filed an Arbitration Counter Claim against us, naming the officers and directors of the Company as they were constituted in 2012, at the time the JV’s Operating Agreement was signed by the respective partners. The arbitration hearing commenced during July and August of 2018.
Notes 4 Joint Venture, 12 Commitments & Contingencies and 13 Subsequent Events to the financial statements disclose in detail the rulings and awards that have been issued to date by the arbitration panel.
As of the date of this Annual Report, with the exception of the Arbitration Counter Claim described above, no director or executive officer of our Company and no shareholder holding more than 5% of any class of our voting securities, or any associate of any such director, officer or shareholder is a party adverse to us or any of our subsidiaries or has an interest adverse to us or any of our subsidiaries.
During the past ten years, no director, director nominee or executive of Goldrich has:
(a) filed or has had filed against such person, a petition under the U.S. federal bankruptcy laws or any state insolvency law, nor has a receiver, fiscal agent or similar officer been appointed by a court for the business or property of such person, or any partnership in which such person was a general partner, at or within two
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years before the time of filing, or any corporation or business association of which such person was an executive officer, at or within two years before such filings;
(b) been convicted or pleaded guilty or nolo contendere in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offences);
(c)been the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting such person's activities in any type of business, securities, trading, commodity or banking activities;
(d)been the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any U.S. federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any type of business, securities, trading, commodity or banking activities, or to be associated with persons engaged in any such activity;
(e)been found by a court of competent jurisdiction in a civil action or by the U.S. Securities and Exchange Commission, or by the U.S. Commodity Futures Trading Commission to have violated a U.S. federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
(f)been the subject of, or a party to, any U.S. federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: (i) any U.S. federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
(g)been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C.78c(a)(26)), any registered entity (as defined in Section 1(a)(29) of the U.S. Commodity Exchange Act (7 U.S.C.1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s officers, directors, and persons who beneficially own more than 10% of the Company’s common stock (“10% Stockholders”), to file reports of ownership and changes in ownership with the SEC. Such officers, directors, and 10% Stockholders are also required by SEC rules to furnish us with copies of all Section 16(a) forms that they file.
Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended December 31, 2019, all filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation Agreements and Summary of Executive Compensation:
William V. Schara, Principal Executive Officer:
We entered into an employment arrangement with William V. Schara on October 19, 2009 in conjunction with his appointment as our Chief Executive Officer. Mr. Schara is a Certified Public Accountant, and has a Bachelor of Science Degree in Accounting from Marquette University. His annual salary was fixed at $180,000 and 750,000
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options to purchase our common stock were issued to him, with 250,000 vesting immediately, 250,000 vesting on October 19, 2010 and 250,000 vesting on October 19, 2011. These options expired in October 2019. Mr. Schara has a three-year employment contract that is renewed and reviewed on an annual basis by the Board of Directors for appropriate changes in salary, benefits or other employment matters. Mr. Schara received only a partial salary in 2016, 2017, and 2018 due to the Company’s lack of finances. At December 31, 2019 a total of $426,500 of unpaid salary was accrued and included in payable to related parties, including $180,000 accrued during 2019.
Ted R. Sharp, Principal Financial Officer:
We entered into a written Independent Contractor Agreement, effective March 1, 2006, with Sharp Executive Associates, Inc. and the owner of that firm, Ted R. Sharp CPA, for Mr. Sharp to act as a Management Consultant to serve as Secretary, Treasurer and Chief Financial Officer and to provide through his extended staff and firm all services typical of an accounting department for a small company. Mr. Sharp is a Certified Public Accountant and his firm is an independent contractor, with business management and consulting interests with other companies that are independent of the consulting agreement he currently has in place with the Company. The term of the original Agreement was through December 31, 2006, and has been renewed on an annual basis, with the basis of fees changed from the monthly fee and to terms that would allow Mr. Sharp to bill the activities performed by members of his firm at hourly rates. In 2010, we hired an internal accountant to provide normal accounting functions for the Company and the use of Mr. Sharp’s staff was eliminated. Fees paid to Mr. Sharp’s firm subsequent to this date are for Mr. Sharp’s services only. When the ability to pay under a renewed agreement is assured, the terms of the contract will be reviewed and renewed. Either party may terminate the Agreement upon 15 days written notice. Mr. Sharp also will be reimbursed for reasonable expenses previously approved by us. Mr. Sharp is not an employee and serves on a part time basis. Mr. Sharp billed a total of $42,703 in fees in 2019, of which $78,644 remains unpaid at December 31, 2019.
Executive Compensation and Related Information
Summary Compensation Table
A summary of cash and other compensation paid in accordance with management consulting contracts for our Principal Executive Officer and the other named executives for the most recent two fiscal years is as follows:
Name(1)
and
Principal Position
|
Year
|
Salary
($)
|
Stock
Awards
($)
|
Total
|
(a)
|
(b)
|
(c)
|
(e)
|
(j)
|
William V. Schara
|
2019
|
180,000
|
-
|
180,000
|
Principal Executive Officer
|
2018
|
180,000
|
45,390(2)
|
225,390
|
Ted R. Sharp
|
2019
|
42,703
|
-
|
42,703
|
Principal Financial Officer
|
2018
|
64,222
|
10,470(3)
|
74,692
|
a.No other executive or person earned more than $100,000 for the year. Columns for certain forms of compensation have been omitted from the table because no compensation was paid for those forms of compensation during the period reported.
b.Includes 1,300,000 common shares at a fair value of $0.035 per share.
c.Includes 300,000 common shares at a fair value of $0.035 per share.
Material factors necessary to an understanding of the compensation in this table are set forth in the description of the compensation agreements. No performance targets or grants were modified or waived during the last fiscal year.
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Outstanding Equity Awards at Fiscal Year-end (2019)
Stock Awards
|
Name
|
Number of Securities Underlying Unexercised Options(1)
(#) Exercisable
|
Option Exercise Price
($)
|
Option Expiration Date
|
(a)
|
(b)
|
(e)
|
(f)
|
William V. Schara
Principal Executive
Officer
|
-
|
-
|
-
|
Ted R. Sharp
Principal Financial Officer
|
-
|
-
|
-
|
Retirement, Resignation or Termination Plans
With the exception of the following, we sponsor no plan, whether written or verbal, that would provide compensation or benefits of any type to an executive upon retirement, or any plan that would provide payment for retirement, resignation, or termination as a result of a change in control of our Company or as a result of a change in the responsibilities of an executive following a change in control of our Company.
The employment plan for Mr. Schara includes a two-year severance provision (or a three-year provision under a change in control), wherein the Company would be required to pay him a lump-sum severance equal of two years (or three years under a change of control) of his annual salary at termination due to reasons other than termination for cause.
Director Compensation
The Directors receive $500 for each board meeting and $300 for each committee meeting. Any officer who is also a board member does not receive fees for service on the board.
Stock Awards and Option Awards were made under our Restated 2008 Equity Incentive Plan. The fair values were computed in accordance with ASC 718. The grant, vesting and forfeiture information and assumptions made in valuation may be found in Note 8 to our consolidated financial statements for the year ended December 31, 2019 included in this Annual Report on Form 10-K. Grants to officers and directors under the 2008 Equity Incentive Plan are made as partial compensation for services rendered as well as to retain qualified persons in those positions and provide incentive for involvement and performance. Aggregate awards outstanding at December 31, 2019 are included in the Beneficial Ownership table and notes below.
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Name
|
Fees Earned or Paid in Cash
($)(1)
|
All Other Compensation
($)(2)
|
Total
($)
|
(a)
|
(b)
|
(g)
|
(h)
|
David S. Atkinson(3)
|
4,800
|
-
|
4,800
|
Garrick A. Mendham(5)
|
3,500
|
-
|
3,500
|
William Orchow(4)
|
4,800
|
-
|
4,800
|
Michael G. Rasmussen(6)
|
4,300
|
-
|
4,300
|
Stephen M. Vincent(7)
|
4,800
|
-
|
4,800
|
Nicholas Gallagher (8)
|
4,800
|
-
|
4,800
|
(1)The Directors receive $500 for each board meeting and $300 for each committee meeting.
(2)Stock Awards and Option Awards, when made, are made under our 2008 Equity Incentive Plan. The fair values were computed in accordance with ASC 718.
(3)Mr. Atkinson holds no options to purchase shares of common stock. Other compensation includes payment for director fees earned in prior years paid in shares totaling 174,785 common shares.
(4)Mr. Orchow held options to purchase a total of 250,000 shares of common stock, all of which are vested, which expired on August 27, 2018. Other compensation includes payment for director fees earned in prior years paid in shares totaling 853,868 common shares.
(5)Mr. Mendham holds options to purchase a total of 50,000 shares of common stock, all of which are vested. Other compensation includes payment for director fees earned in prior years paid in shares totaling 368,424 common shares.
(6)Mr. Rasmussen holds options to purchase a total of 350,000 shares of common stock, all of which are vested. Other compensation includes payment for director fees earned in prior years paid in shares totaling 436,963 common shares.
(7)Mr. Vincent holds options to purchase a total of 50,000 shares of common stock, all of which are vested. Other compensation includes payment for director fees earned in prior years paid in shares totaling 610,029 common shares.
(8)Mr. Gallagher holds no options to purchase shares of common stock. Other compensation includes payment for director fees earned in prior years paid in shares totaling 171,920 common shares.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regarding the beneficial ownership of shares of our common stock as of November 4, 2020 by:
i.each director and nominee for director;
ii.each of our executive officers named in the Summary Compensation Table under "Executive Compensation and Related Information" (the "Named Executive Officers");
iii.all our executive officers and directors as a group, and, based on currently available Schedules 13D and 13G filed with the SEC, the beneficial owners of more than 5% of our common stock.
Title of Class
|
Name of Beneficial Owner
|
Address
|
Amount and Nature of
Beneficial Ownership
|
|
Percent
of Class (1)
|
Directors and Named Executive Officers
|
Common Stock
|
David S. Atkinson, Director
|
Via San Martino, No. 9
Feltre, Italy 32032
|
8,106,824
|
(2)
|
4.12%
|
Common Stock
|
Garrick A. Mendham, Director
|
PO Box 668
Kingsford, NSW 2032
Australia
|
1,348,943
|
(3)
|
*
|
Common Stock
|
William Orchow, Chairman, Director
|
67 P Street
Salt Lake City, UT 84103
|
2,163,262
|
(4)
|
1.04%
|
Common Stock
|
Michael G. Rasmussen, Director
|
3311 S. Grand Blvd.
Spokane, WA 99203
|
975,145
|
(5)
|
*
|
Common Stock
|
William V. Schara, Chief Executive Officer, Director
|
3221 S. Rebecca
Spokane, WA 99223
|
3,397,804
|
(6)
|
1.73%
|
Common Stock
|
Ted R. Sharp, Secretary, Treasurer and Chief Financial Officer
|
15148 Pinehurst Way
Caldwell, ID 83607
|
1,170,182
|
(7)
|
*
|
Common Stock
|
Stephen M. Vincent, Director
|
255 Maple Hill Rd.
Hopkins, MN 55343
|
2,212,029
|
(8)
|
1.12%
|
Common Stock
|
Nicholas Gallagher, Director
|
5 Churchfields
The K Club, Straffan
Kildare, Ireland
|
77,977,415
|
(9)
|
34.12%
|
Common Stock
|
All current executive officers and directors as a group
|
97,351,604
|
|
43.96%
|
5% or greater shareholders
|
|
|
|
|
Common Stock
|
Forza Partners, L.P.
|
Via San Martino, No. 9
Feltre, Italy 32032
|
5,850,308
|
(2)
|
2.97%
|
Common Stock
|
NGB Nominees
|
5 Churchfields
The K Club, Straffan
Kildare, Ireland
|
31,207,104
|
(9)
|
14.14%
|
Common Stock
|
Randall & Christopher Johnson
|
8615 Eagle Creek Cir.
Savage, MN 55378
|
25,344,369
|
(10)
|
12.85%
|
*Less than 1%.
(1) This table is based upon information supplied by officers and directors. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, the Company believes that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 167,926,376 shares outstanding on November 4, 2020, adjusted on a partially diluted basis for each shareholder as required by rules promulgated by the SEC.
(2) Mr. Atkinson is general partner and holds positions as director and general manager of Forza Partners, L.P. and Forza Partners II, L.P. Mr. Atkinson is the sole investment decision maker for Forza Partners, L.P. and Forza Partners II, L.P. The shares total includes 885,694 shares of common stock, and 66,667 shares of common stock acquirable upon exercise of Class R warrants before December 9, 2021 held personally by Mr. Atkinson. Also includes 5,850,308 shares of common stock, held for the account of Forza Partners II. Mr. Atkinson is also a director to the Company. Because of Mr. Atkinson’s position as director and as general manager of Forza Partners, L.P. and Forza Partners II, L.P., the shares beneficially owned by Mr. Atkinson are listed twice in the table.
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(3)Includes 1,165,609 shares of common stock, 2 shares of Preferred E stock convertible into 66,667 shares of common stock, 50,000 shares of common stock acquirable upon exercise of vested options exercisable before August 12, 2023, and 66,667 shares of common stock acquirable upon exercise of Class R warrants before December 9, 2021.
(4)Includes 2,029,928 shares of common stock, 2 shares of Preferred E stock convertible into 66,667 shares of common stock, and 66,667 shares of common stock acquirable upon exercise of Class R warrants before December 9, 2021.
(5)Includes 625,145 shares of common stock, 50,000 shares of common stock acquirable upon exercise of vested options exercisable before July 7, 2023, and 300,000 shares of common stock acquirable upon exercise of vested options exercisable before December 19, 2024.
(6)Includes 3,264,470 shares of common stock, 2 shares of Preferred E stock convertible into 66,667 shares of common stock, and 66,667 shares of common stock acquirable upon exercise of Class R warrants before December 9, 2021.
(7)Includes 1,170,182 shares of common.
(8)Includes 1,362,029 shares of common stock, 12 shares of Preferred E stock convertible into 400,000 shares of common stock, 50,000 shares of common stock upon exercise of vested options exercisable before August 12, 2023, 333,333 shares of common stock acquirable upon exercise of Class R warrants before November 2, 2021, and 66,667 shares of common stock acquirable upon exercise of Class R warrants before December 9, 2021.
(9)Mr. Gallagher is general partner and holds positions as director and general manager of NGB Nominees, which is a greater than 5% shareholder. Mr. Gallagher is the sole investment decision maker for NGB Nominees. Includes 22,328,638 shares of common stock, 150,000 shares of Preferred A stock convertible into 900,000 shares of common stock, 200 shares of Preferred B stock convertible into 2,857,142 shares of common stock, 250 shares of Preferred C stock convertible into 8,333,333 shares of common stock, 50 shares of Preferred D stock convertible into 1,666,667 shares of common stock, 280 shares of Preferred E stock convertible into 9,333,333 shares of common stock, 153 shares of Preferred F stock convertible into 5,100,000 shares of common stock, 11,000,000 shares of common stock acquirable upon exercise of Class R warrants before December 9, 2021, 4,633,337 shares of common stock acquirable upon exercise of Class S warrants before March 31, 2022, and 11,824,966 shares of common stock acquirable upon exercise of Class T warrants before October 4, 2024.
(10)Includes 24,915,970 shares of common stock and 428,399 shares of common stock acquirable upon exercise of Class T warrants before June 30, 2024.
We have no knowledge of any other arrangements, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of our company.
We are not, to the best of our knowledge, directly or indirectly owned or controlled by another corporation or foreign government.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
In October 2009, we employed one of our existing directors, Mr. Schara, to serve as our President and Chief Executive Officer. In connection with his employment the Company issued 750,000 options as described in Note 9 to our consolidated financial statements contained in Item 8 of this Annual Report. Subsequent to 2012, those options were canceled and reissued under the same terms, except the life of the new options is now 6 years and 8 months, effectively resulting in a total option life of 10 years, similar to the lives of options granted to other officers and directors. At December 31, 2019, $426,500 has been accrued for deferred compensation to Mr. Schara, of which $180,000 was accrued during the year ended December 31, 2019.
At December 31, 2019, $78,644 has been accrued for fees due to Mr. Sharp, the Company’s Chief Financial Officer, of which $42,703 was accrued during the year ended December 31, 2019.
At December 31, 2019, $1,302 has been accrued for expenses due to related parties for expenses, of which $nil was accrued during the year ended December 31, 2019.
A total of $93,700 has been accrued for directors and related party consultants, of which $25,200 was accrued during the year ended December 31, 2019.
At December 31, 2019, the Company had outstanding Notes payable of $3,246,316 to Nicholas Gallagher, a shareholder and director of the Company. At December 31, 2018, the Company had outstanding Notes payable of $2,378,947 to Mr. Gallagher. The Notes payable to Mr. Gallagher had matured on October 31, 2018. Effective November 1, 2019, the Company entered into an Amended and Restated Loan, Security, and Intercreditor Agreement (the “Amended Agreement”) with Mr. Gallagher, in his capacity as agent for and on behalf of himself and other holders of the Notes payable. No compensation was paid or accrued for Mr. Gallagher, either in cash or warrants, for his services as agent for other holders. Under the Amended Agreement, the Company and Mr. Gallagher and the other holders entered into a Deed of Trust whereunder the Notes are secured by a security interest in all real property, claims, contracts, agreements, leases, permits and the like and the notes are now due within 10 days of a demand notice of the holders. There has been no notice of default or demand issued by any holder. See Note 6 - Notes Payable & Notes Payable – Related Party in the financial statements for details concerning the note payable.
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In an agreement separate from the Amended Agreement, Goldrich and Mr. Gallagher agreed that Mr. Gallagher, at his option, has the right to convert outstanding but unpaid and future interest on his note payable into stock of the Company at $0.015 per share.
In October 2020, Mr. Gallagher loaned an additional $10,000 to the Company as an increase of the secured senior note. Also in October 2020, an amount of $5,464.35, as partial payment of finders fees related to previous financings in 2018 and 2019, was paid to Mr. Gallagher.
Director Independence
Our Board of Directors has analyzed the independence of each director and nominee and has determined that the members of our Board of Directors listed below are independent as that term is defined under Rule 5605(a)(2) of the NASD listing rules. Each director is free of relationships that would interfere with the individual exercise of independent judgment. Based on these standards, the Board determined that each of the following non-employee directors, including nominated and continuing directors, is independent and has no relationship with us, except as a director and shareholder:
·Charles G. Bigelow
·William Orchow
·Michael G. Rasmussen
·Stephen M. Vincent
·Garrick A. Mendham
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The Board of Directors selected DeCoria, Maichel & Teague, P.S., 7307 N. Division, Suite 222, Spokane, WA 99208 as the independent registered public accounting firm to examine the consolidated financial statements of the Company and its subsidiary for the fiscal year ending December 31, 2019. DeCoria, Maichel & Teague, P.S. have audited the financial statements of the Company since the fiscal year ended December 31, 2003.
The following table summarizes the fees that DeCoria, Maichel and Teague, P.S. charged the Company for the listed services during 2019 and 2018:
Type of fee:
|
2019
|
2018
|
|
Description
|
|
|
|
|
|
Audit fees:
|
$47,733
|
$43,138
|
|
Services in connection with the audit of the annual financial statements and the review of the financial statements included in our reports on Forms 10-Q and 10-K.
|
Audit related fees:
|
-0-
|
-0-
|
|
For assurance and related services that were reasonably related to the performance of the audit or review of financial statements and not reported under “Audit Fees”.
|
Tax fees:
|
-0-
|
-0-
|
|
|
All other fees
|
688
|
-0-
|
|
|
Total
|
$48,421
|
$43,138
|
|
|
All of the services described above were approved by the Audit Committee.
The Audit Committee is responsible for appointing, setting compensation for and overseeing the work of the independent registered public accounting firm. The Audit Committee requires its pre-approval of all audit and permissible non-audit services provided by the independent registered public accounting firm. The Audit Committee considers whether such services are consistent with the rules of the SEC on auditor independence.
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