The accompanying footnotes are an integral part
of these unaudited condensed consolidated financial statements.
The accompanying footnotes are an integral part
of these unaudited condensed consolidated financial statements.
The accompanying footnotes are an integral part
of these unaudited condensed consolidated financial statements.
The accompanying footnotes are an integral
part of these unaudited condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(unaudited)
NOTE 1 – NATURE OF BUSINESS
Standard Metals Processing,
Inc. (“we,” “us,” “our,” “Standard Metals” or the “Company”) is an exploration
stage company, incorporated in Nevada having offices in Gadsden, Alabama and through its subsidiary, a property in Tonopah, Nevada. The
business plan is to purchase and install the equipment necessary to complete a facility on the Tonopah property to serve as a permitted
custom processing toll milling facility (which includes an analytical lab, pyrometallurgical plant, and hydrometallurgical recovery plant).
The Company plans to perform
permitted custom processing toll milling which is a process whereby mined material is crushed and ground into fine particles to ease the
extraction of any precious minerals contained therein, such as minerals in the gold, silver, and platinum metal groups. Custom milling
and refining can include many different processes that are designed specifically for each ore load and to maximize the extraction of precious
metals from carbon or concentrates. These toll processing services also distill, dry, mix, or mill chemicals and bulk materials on a contractual
basis and provide a chemical production outsourcing option for industrial companies, which lack the expertise, capacity, or regulatory
permits for in-house production.
We are required to obtain
several permits before we can begin construction of a small-scale mineral processing facility to conduct permitted processing toll milling
activities and construction of the required additional buildings and well relocation necessary for us to commence operations.
Going Concern
The accompanying condensed consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the United States of America, assuming we will continue as a going
concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the nine months
ended September 30, 2021, the Company had a net loss of $1,069,215. At September 30, 2021, the Company had an accumulated deficit of $105,419,617
and a working capital deficit of $11,239,169 . Additionally, all of the Company’s assets are under lien pursuant to a First
Deed of Trust and UCC filings, and 100% of the common stock of the Company’s subsidiary Aurielle Enterprises, Inc. (“AE”),
and that of its wholly owned subsidiaries Tonopah Custom Processing, Inc., (“TCP”) and Tonopah Resources, Inc. (“TR”)
have been pledged in favor of Granite Peak Resources, LLC (“GPR”), a related party, securing the Company’s aggregate
indebtedness to GPR of $5,441,750, including interest of $1,834,638 at September 30, 2021. These circumstances raise substantial doubt
about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent
on their ability to raise the required additional capital or debt financing to meet short and long-term operating requirements. (See Notes
4 and 7).
Management believes that private
placements of equity capital and/or additional debt financing will be needed to fund our long-term operating requirements. The Company
may also encounter business endeavors that require significant cash commitments or unanticipated problems or expenses that could result
in a requirement for additional cash. If the Company raises additional funds through the issuance of equity or convertible debt securities,
the percentage ownership of our current shareholders would likely be reduced, and such securities might have rights, preferences, or privileges
senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available
or are not available on acceptable terms, the Company may not be able to take advantage of prospective business endeavors or opportunities,
which could significantly and materially restrict our operations. We are continuing to pursue external financing alternatives to improve
our working capital position, however, if the Company is unable to obtain the necessary capital, the Company may have to cease operations.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The
consolidated financial statements include the accounts of Standard Metals Processing, Inc., and its wholly owned subsidiary Aurielle Enterprises
Inc. (f/k/a Tonopah Milling and Metals Group, Inc.) (“AE”) and its wholly owned subsidiaries Tonopah Custom Processing, Inc.,
(“TCP”) and Tonopah Resources, Inc. (“TR”) All significant intercompany transactions, accounts and balances have
been eliminated in consolidation.
Basis of Presentation
The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America (“US GAAP”), for interim financial information pursuant to the rules and regulations of the Securities and
Exchange Commission (the “SEC”). Accordingly, they do not include all the information and footnotes required by US GAAP for
complete financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2020 filed January 26, 2021.
In the opinion of management, all adjustments (consisting of normal recurring adjustments unless otherwise indicated) considered necessary
for a fair presentation have been included. Operating results for the nine months ended September 30, 2021 are not necessarily indicative
of the results that may be expected for the year as a whole.
Reclassification of Prior Year Presentation
Certain
prior period balance sheet amounts of accounts payable and accrued expenses have been reclassified for consistency with the current year
balance sheet presentation. These reclassifications had no effect on previously reported consolidated financial condition, results of
operations, cash flows, and shareholders’ deficit.
Mineral Properties
Mineral property acquisition
costs are recorded at cost and are deferred until the viability of the property is determined. No properties have produced operating revenues
at this time. Exploration, mineral property evaluation, option payments, related acquisition costs for mineral properties acquired under
an option agreement, general overhead, administrative and holding costs to maintain a property on a care and maintenance basis are expensed
in the period they are incurred. When reserves are determined for a property and a bankable feasibility study is completed, subsequent
exploration and development costs on the property would be capitalized. If a project were to be put into production, capitalized costs
would be amortized on the unit of production basis.
Management reviews the net
carrying value of each mineral property as changes may materialize with a property or at a minimum, on an annual basis. Where information
and conditions suggest impairment, estimated future net cash flows from each property are calculated using estimated future prices, proven
and probable reserves and value beyond proven and probable reserves, and operating, capital and reclamation costs on an undiscounted basis.
If it is determined that the future cash flows are less than the carrying value, a write-down to the estimated fair value is made with
a charge to operations for the period. Where estimates of future net cash flows are not available and where other conditions suggest impairment,
management assesses if the carrying value can be recovered.
Management’s estimates
of gold prices, recoverable reserves, probable outcomes, operating capital, and reclamation costs are subject to risks and uncertainties
that may affect the recoverability of mineral property costs.
The
Company does not own any mining claims. It owns tailings located on the Tonopah property and the rights to certain tailings located in
Manhattan, Nevada. The Company has not disturbed or processed any of this material, but recently authorized GPR to oversee an examination
of the economic feasibility of processing the tailings to reclaim their residual content of valuable metals in
exchange for the exclusive right to process the tailings should their economic assessment prove positive. In addition, the Company
and Sustainable Metal Solutions, LLC (“SMS”), an affiliate of GPR, agreed to form a joint venture into which the Company will
contribute the solar energy rights attributable to its 1,086 acres in exchange for SMS’s agreement to develop, manage and underwrite
the venture.
Impairment of Long-Lived Assets and Long-Lived Assets
The Company will periodically
evaluate the carrying value of long-lived assets to be held and used, including but not limited to, mineral properties, mine tailings,
mine dumps, capital assets and intangible assets, when events and circumstances warrant such a review and at least annually. The carrying
value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable
and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair
value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with
the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced
for the cost of disposal.
Use of Estimates
Preparing financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the amount of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Revenue Recognition and Deferred Revenue
As of September 30, 2021,
the Company has not recognized any revenues from custom permitted processing toll milling. If we achieve revenue generation, the Company
plans to report such revenues consistent with ASC Topic 606.
Income Taxes
Income taxes are accounted
for based upon an asset and liability approach. Accordingly, deferred tax assets and liabilities arise from the difference between the
tax basis of an asset or liability and its reported amount in the financial statements. Deferred tax amounts are determined using the
tax rates expected to be in effect when the taxes will be paid or refunds received, as provided under currently enacted tax law. Valuation
allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense or benefit
is the tax payable or refundable, respectively, for the period plus or minus the change in deferred tax assets and liabilities during
the period.
Accounting guidance requires
the recognition of a financial statement benefit of a tax position only after determining that the relevant tax authority would more likely
than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized
in the financial statements is the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement
with the relevant tax authority. The Company believes its income tax filing positions and deductions will be sustained upon examination
and accordingly, no reserves, or related accruals for interest and penalties have been recorded at September 30, 2021 and December 31,
2020. The Company recognizes interest and penalties due on unrecognized tax benefits as well as interest receivable from favorable tax
settlements within income tax expense.
Recent Accounting Standards
In December 2019, the FASB
issued ASU 2019-12, Income Taxes-Simplifying the Accounting for Income Taxes ("ASU 2019-12"). Among other items, the amendments
in ASU 2019-12 simplify the accounting treatment of tax law changes and year-to-date losses in interim periods. An entity generally recognizes
the effects of a change in tax law in the period of enactment, however, there is an exception for tax laws with delayed effective dates.
Under current guidance, an entity may not adjust its annual effective tax rate for a tax law change until the period in which the law
is effective. This exception was removed under ASU 2019-12, thereby providing that all effects of a tax law change are recognized in the
period of enactment, including adjustment of the estimated annual effective tax rate. Regarding year-to-date losses in interim periods,
an entity is required to estimate its annual effective tax rate for the full fiscal year at the end of each interim period and use that
rate to calculate its income taxes on a year-to-date basis. However, current guidance provides an exception that when a loss in an interim
period exceeds the anticipated loss for the year, the income tax benefit is limited to the amount that would be recognized if the year-to-date
loss were the anticipated loss for the full year. ASU 2019-12 removes this exception and provides that, in this situation, an entity would
compute its income tax benefit at each interim period based on its estimated annual effective tax rate. ASU 2019-l2 is effective for fiscal
years beginning after December 15, 2020, including interim periods within those annual periods Early adoption is permitted. The Company
is currently evaluating the effect that this update will have on its consolidated financial statements and related disclosures.
In June 2016, the FASB issued
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”)
and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, and ASU 2019-05 (collectively, "Topic 326").
Topic 326 requires measurement and recognition of expected credit losses for financial assets held. The Company will be required to adopt
this ASU for financial years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of topic
326 is not expected to have a material effect on the Company’s consolidated financial statements and financial statement disclosures.
During the nine months ended
September 30, 2021 and through the date of this filing, there were several new accounting pronouncements issued by the Financial Accounting
Standards Board. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe
the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial
statements.
NOTE 3 – MINING AND MINERAL RIGHTS
The Company previously prepared
the Tonopah property site for the construction of a permitted custom processing toll milling facility including grading the land, installing
fencing, and working with contractors for a planned 21,875 square foot building and servicing and drilling various wells for our future
operations.
The Company has continued to assess the realizability
of its mining and mineral rights. Based on an assessment the Company conducted in January 2021, the Company believes the carrying value
of the rights recorded on its books is not impaired. However, the Company determined that its land, mineral rights, and water rights are
inseparable and depend on each other in value creation. Accordingly, during the year ended December 31, 2018, the Company combined the
carrying value of the assets to present more clearly their intended use together.
NOTE 4 – CONVERTIBLE NOTES PAYABLE
On March 16, 2020, the Company
executed a Line of Credit (“LOC”) with Granite Peak Resources, LLC (“GPR”), a related party, evidenced by a convertible
promissory note. On July 12, 2021, the LOC’s availability was increased from $2,500,000 to $5,000,000; its maturity extended from
March 16, 2023 to March 16, 2025; GPR’s right to increase the LOC by another $1,000,000 and extend two additional years was increased
to $5,000,000 and extended for an additional five years; and GPR agreed to forebear exercising its foreclosure rights under its defaulted
Senior Secured Note and accrued interest of $3,647,532 at June 30, 2021 until December 31, 2021. In exchange for the foregoing accommodations
the Company revised the price at which the LOC can be converted into common stock from $2.00 to $1.65 per share. Disclosure of the common
share equivalent of the LOC’s principal and accrued interest outstanding has been revised accordingly.
The LOC is for funding operating
expenses critical to the Company’s redirection and all requests for funds may be approved or disapproved in GPR’s sole discretion.
The LOC bears interest at 10% per annum, and is secured by the real and personal property, and subsidiaries’ stock GPR’s Senior
Secured Note has under lien. During the nine months ended September 30, 2021, and year ended December 31, 2020, GPR advanced $580,828
and $206,022, respectively, pursuant to the LOC in direct payments on the Company’s behalf, to fund certain operating expenses and
reduce certain accounts payable. At September 30, 2021 and December 31, 2020 the balance due GPR under the LOC is $800,425 and $219,597
principal and $58,138 and $16,073 accrued interest, respectively. Advances by GPR to pay directly certain operating expenses and reduce
certain accounts payable on the Company’s behalf have been included in the convertible promissory issued by the Company in connection
with the LOC and classified accordingly in the accompanying consolidated condensed financial statements. (See Note 7)
Including
the foregoing advances under the LOC, there was $900,425 of principal and $122,297 of accrued interest outstanding on convertible debentures
at September 30, 2021. With exception of the $800,425 of principal advanced under the LOI to date, a pre-existing $100,000 convertible
note and its accrued interest of $64,159 which were in default was assigned to GPR in September 2021.
NOTE 5 – SHAREHOLDERS’ DEFICIT
Common Stock – Reverse Split
On April 6, 2021, holders of a majority of
the Company’s common stock authorized a 1 for 50 reverse stock split of the Company’s common stock, with all fractional shares
rounded to the nearest whole share, as of April 12, 2021 (the “Record Date”). This action was taken in accordance with the
Nevada Revised Statutes (“NRS”), Sections 78.315 and 78.320, however, a complete Information Statement has been mailed to
all shareholders as of the Record Date. The outstanding shares and per share amounts in the accompanying consolidated condensed financial
statements previously reported prior to the Record Date have been adjusted to give effect to the afore mentioned reverse split.
Common Stock -
Option Grants
The Company recorded no compensation
expense for the nine months ended September 30, 2021 and 2020. As of September 30, 2021, there was $0 in unrecognized compensation expense.
The Company did not grant
any options during the nine months ended September 30, 2021, and 25,000 options expired; none were cancelled. There are no vested or unvested
options outstanding as of September 30, 2021.
Common Stock Purchase Warrants
For warrants granted to non-employees
in exchange for services, the Company recorded the fair value of the equity instrument using the Black-Scholes pricing model unless the
value of the services is more reliably measurable.
The Company did not grant
any warrants during the nine months ended September 30, 2021 and no warrants were exercised, none expired, and none were cancelled. At
September 30, 2021 there were 5,000 warrants outstanding, with exercise prices of $61.50, a weighted exercise price of $61.50 and a weighted
remaining contractual life of 0.3 years.
The aggregate intrinsic value
of the 5,000 outstanding and exercisable warrants at September 30, 2021 and December 31, 2020 was $0. The intrinsic value is the difference
between the closing stock price on September 30, 2021 and December 31, 2020, and the exercise price, multiplied by the number of in-the-money
warrants had all warrant holders exercised their warrants on September 30, 2021 or December 31, 2020.
The following table summarizes
information about the Company’s stock purchase warrants outstanding at September 30, 2021.
|
|
Number
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Range of
Exercise
Price
|
|
|
Weighted
Remaining
Contractual
Life (1)
|
|
Outstanding at December 31, 2019
|
|
|
97,313
|
|
|
$
|
42.00
|
|
|
$
|
10.00
- 61.50
|
|
|
|
.5
years
|
|
Granted
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled or expired
|
|
|
54,655
|
|
|
|
38.00
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
37,658
|
|
|
|
44.50
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at December 31, 2020
|
|
|
5,000
|
|
|
|
61.50
|
|
|
|
61.50-61.50
|
|
|
|
1.2 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
Cancelled or expired
|
|
|
---
|
|
|
|
---
|
|
|
|
---
|
|
|
|
|
|
Outstanding and exercisable at September 30, 2021
|
|
|
5,000
|
|
|
$
|
61.50
|
|
|
$
|
61.50 - 61.50
|
|
|
|
0.3 years
|
|
|
(1)
|
The aggregate
intrinsic value of the 5,000 outstanding and exercisable warrants at September 30, 2021, and December 31, 2020, respectively, was $0.
The intrinsic value is the difference between the closing stock price on September 30, 2021, and December 31, 2020, and the exercise
price, multiplied by the number of in-the-money warrants had all warrant holders exercised their warrants on September 30, 2021, and
December 31, 2020.
|
NOTE 6 – COMMITMENTS AND CONTINGENCIES
Legal Matters
Stephen E. Flechner v. Standard Metals Processing,
Inc.
On April 29, 2014, Stephen
E. Flechner filed suit in the United States District Court for the District of Colorado against Standard Metals Processing, Inc. alleging
that the Company had refused to allow him to exercise stock options granted to him pursuant to a Stock Option Agreement, dated April 1,
2010, and a second Stock Option Agreement, dated January 21, 2011. On June 12, 2014, the Company filed an Answer and a Motion to Dismiss
or, Alternatively, to Stay or Transfer the action to the U.S. District Court for the Northern District of Alabama, Middle Division. On
January 16, 2015, the Company filed a Motion for Summary Judgment. On January 23, 2015, the Court issued an Order granting in part and
denying in part the Company’s Motion to Dismiss or, Alternatively, to Stay or Transfer the action to the U.S. District Court for
the Northern District of Alabama, Middle Division. The Court in its Order stayed further proceedings in Colorado pending the issuance
of orders by the Alabama court. Thereafter, on January 26, 2015, the Court issued an Order vacating the February 20, 2015 Trial Preparation
Conference and the March 9, 2015 Bench Trial. On March 23, 2015, the Court issued an Order denying the Company’s Motion for Summary
Judgment. On March 30, 2015, Flechner filed a Motion to Lift the Stay. On March 31, 2015, the Court issued an Order granting Flechner’s
Motion to Lift the Stay. On April 6, 2015, the Court issued an Order scheduling a Bench Trial for July 29, 2015. On April 9, 2015, Flechner
filed a Motion for Reconsideration of the Court’s March 23, 2015 Order Denying Flechner’s Motion to Enforce the Confidential
Settlement Agreement to Settle Certain Issues. On May 1, 2015, the Court issued an Order Granting Flechner’s Motion to Enforce the
Confidential Settlement Agreement to Settle Certain Issues. On August 12, 2015 the U.S. District Court for the District of Colorado issued
a judgment in favor of Stephen E. Flechner for $2,157,000. An amended final judgment was ordered in adjudication of the Complaint by the
U.S. District Court for the District of Colorado (the “Court”) on August 28, 2015 in favor of Flechner in the amount of $2,157,000,
plus interest through the date of judgment of $235,246, plus interest of $472.76/day from August 28, 2015 until paid in full. The Company,
in good faith anticipation of a settlement did not appeal the judgment and therefore, the Company’s notice of appeal was dismissed
on November 17, 2015. This judgment is now non-appealable. The Company has recognized the daily interest due from the date of the August
28, 2015 judgment through September 30, 2021, totaling $1,094,439, resulting in a total amount of $3,486,685 being included in the Accrual
for settlement of lawsuits relating to this matter in the accompanying September 30, 2021 condensed consolidated balance sheet.
NOTE 7 – related
party TRANSACTIONS
During March 2019, the Company
was informed that a change of control of the Company had occurred. Granite Peak Resources, LLC, through its members, including Pure Path
Capital Management LLC (“GPR”) acquired 1,389,289 shares of common stock (including 90,000 warrants to purchase common stock).
The members transferred their shares of common stock of the Company in exchange for a pro-rata ownership interest in GPR and are listed
in the Schedule 13D filed by GPR on March 29, 2019. Since March 2019, through September 30, 2021, GPR and its members, through several
unsolicited transactions purchased another 43,206 shares of common stock. GPR has not communicated to the Company any plans to change
any of the current officers or directors or governing documents. GPR has expressed the purpose of its acquisition is to assist the Company
in resolving its current obligations and claims, as a critical step in determining its future business plans.
GPR also acquired the senior
secured creditor position previously held by Pure Path Capital Group LLC (the “Senior Secured Note”), which includes a $2,500,000
first deed of trust on the Tonopah property and an outstanding promissory note with a principal balance of $2,229,187 as of both September
30, 2021, and December 31, 2020, and related accrued interest of $1,463,381 and $1,329,303 respectively. The Senior Secured Note is securitized
by all the Company’s tangible or intangible assets, already or hereinafter acquired, including but not limited to machinery, inventory,
accounts receivable, cash, computers, hardware, land and mineral rights, etc., and all of the outstanding shares of the Company’s
subsidiary AE and its subsidiaries TCP and TR which are held in Pledge by GPR’s Nevada counsel. The outstanding principal balance
on the Senior Secured Note of $2,229,187 together with related accrued interest of $1,463,381 at September 30, 2021 has had its default
stayed until December 31, 2021.
As further detailed in Note
4, in March 2020, the Company executed a LOC with GPR, a related party, evidenced by a 10% convertible promissory note. On July 12, 2021,
the LOC’s availability was increased from $2,500,000 to $5,000,000; its maturity extended from March 16, 2023 to March 16, 2025;
GPR’s right to increase the LOC by another $1,000,000 and extend two additional years was increased to $5,000,000 and extended for
an additional five years; and GPR agreed to forebear exercising its foreclosure rights under its defaulted Senior Secured Note and accrued
interest of $3,647,532 at June 30, 2021 until December 31, 2021. In exchange for the foregoing accommodations the Company revised GPR’s
price at which the LOC can be converted to common stock from $2.00 to $1.65 per share. Disclosure of the common share equivalent of the
principal and accrued interest outstanding under the LOC has been revised accordingly.
The LOC is for funding operating
expenses critical to the Company’s redirection and all requests for funds may be approved or disapproved in GPR’s sole discretion.
The LOC bears interest at 10% per annum, and is secured by the real and personal property, and subsidiaries’ stock GPR’s Senior
Secured Note has under lien. During the nine months ended September 30, 2021, GPR advanced $580,828 pursuant to the LOC in direct payments
on the Company’s behalf, to pay for certain operating expenses and reduce certain accounts payable. At September 30, 2021, the balance
due GPR under the LOC is $800,425 principal and $58,138 accrued interest. (See Note 4)
Although the LOC is for funding
operating expenses critical to the Company’s redirection and the resolution of certain creditors’ claims under GPR’s
sole discretion, neither GPR nor the Company can give any assurances that such creditors or claimants may be amicably resolved. As of
the date of this filing, GPR is the beneficial owner of 53.6% (61.2% including the common share equivalent of GPR’s conversion rights)
of the Company’s common stock and the holder of $5,441,750 of the Company’s debt and related interest, which is secured by
all of the Company’s assets. At September 30, 2021, $5,441,750 of the Company’s debt and related interest was either in default
or will likely return to being in default by December 31, 2021.
On February 11, 2015, the
Company issued an unsecured promissory note (the “Note”) to Tina Gregerson Family Properties, LLC, an entity controlled by
a former director of the Company. The Note for up to $750,000 was provided in tranches. Maturity of each tranche is one year from the
date of receipt. Interest accrues at 8% per annum on each tranche. Under the terms of the Note, the Company received $477,500. At September
30, 2021 and December 31, 2020, accrued interest on the Note is $248,960 and $220,029, respectively. This Note was in default and was
assigned to GPR in a private transaction during September 2021.
NOTE 8 – EARNINGS (LOSS) PER SHARE
Basic net loss per common
share is computed by dividing net loss applicable to common shareholders by the weighted average number of common shares outstanding during
the periods presented. Diluted net loss per common share is determined using the weighted average number of common shares outstanding
during the periods presented, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued
upon exercise of options, warrants and conversion of convertible debt. In periods where losses are reported, the weighted average number
of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.
At September 30, 2021 the
weighted average shares from stock options of -0-, warrants of 5,000 and Convertible Promissory note equivalent shares of 526,908, and
at December 31, 2020 the weighted average shares from stock options of 65,000, warrants of 5,000 and Convertible Promissory note equivalent
shares of 147,207 were excluded from the diluted weighted average common share calculation, respectively, due to the antidilutive effect
such shares would have on net loss per common share.