U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2017

 

OR

 

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

 

For the transition period from _______ to _______

 

Commission file number 000-14319

 

STANDARD METALS PROCESSING, INC.

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

 

Nevada		84-0991764
(State or Other Jurisdiction of		(I.R.S. Employer Identification Number)
Incorporation or Organization)

 

611 Walnut Street, Gadsden, Alabama 35901

(Address of Principal Executive Offices)

 

888-960-7347

(Issuer’s Telephone Number, Including Area Code)

 

N/A

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

 

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

 

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes  ¨  No  x

 

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

 

Large accelerated filer  ¨	Accelerated filer  ¨
Non-accelerated filer    ¨	Smaller reporting company  x
	Emerging growth company  ¨

 

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

 

As of May 10, 2017, there were 124,501,581 shares of the Registrant’s common stock, par value $.001, outstanding.

 

 

STANDARD METALS PROCESSING, INC.

FORM 10-Q

TABLE OF CONTENTS

March 31, 2017

 

		Page
PART I
Item 1.	Financial Statements	4
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operation	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22
Item 4.	Controls and Procedures	22
PART II
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	24

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Form 10-Q contains certain statements which are forward-looking in nature and are based on the current beliefs of our management as well as assumptions made by and information currently available to management, including statements related to the uncertainty of the quantity or quality of minerals in our tailings, the fluctuations in the market price of such reserves, general trends in our operations or financial results, plans, expectations, estimates and beliefs. In addition, when used in this Form 10-Q, the words “may,” “could,” “should,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “predict” and similar expressions and their variants, as they relate to us or our management, may identify forward-looking statements. These statements reflect our judgment as of the date of this Form 10-Q with respect to future events, the outcome of which is subject to risks. We have attempted to identify, in context, certain of the factors that we believe may cause actual future experience and results to differ materially from our current expectations, which may have a significant impact on our business, operating results, financial condition or your investment in our common stock, as described in Part II, Item 1A entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016.

 

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

 

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

  

 

STANDARD METALS PROCESSING, INC.

Condensed Consolidated Balance Sheets

 

		March 31,				December 31,
		2017				2016
		(Unaudited)
Assets
Current assets:
Cash		$	32,858			$	1,326
Prepaid expenses			18,361				31,256
Assets held for Sale			12,000				12,000
Total current assets			63,219				44,582
Shea Mining and Milling Assets			2,108,300				2,108,300
Property, plant and equipment:
Machinery and equipment			21,000				21,000
Construction in progress			1,775,224				1,775,224
			1,796,224				1,796,224
Accumulated depreciation			(21,000	)			(21,000	)
Net property, plant and equipment			1,775,224				1,775,224
Total Assets		$	3,946,743			$	3,928,106
Liabilities and Shareholders’ Deficit
Current liabilities:
Senior secured convertible promissory note payable, related party		$	2,229,187			$	2,229,187
Promissory notes payable - related party			477,500				477,500
Convertible notes payable			175,000				175,000
Accrual for settlement of lawsuits			2,546,000				2,581,000
Due to Wits Basin Precious Minerals Inc.			16,616				16,616
Accounts payable			2,199,570				2,210,219
Accrued interest - Related party $701,860 and $678,466 at March 31,2017 and December 31, 2016			769,081				741,747
Accrued expenses			913,160				880,865
Accounts payable to related party			1,000				1,000
Total current liabilities			9,327,114				9,313,134
Convertible Notes payable, net of Discount of $39,644 at March 31, 2017 and $47,507 at December 31, 2016.			80,356				12,493
Commitments and Contingencies (Note 9)
Preferred stock, 50,000,000 shares authorized:
Series A, $.001 par value, 10,000,000 and 10,000,000 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively			10,000,000				10,000,000
Shareholders’ deficit:
Common stock, $0.001 par value, 500,000,000 shares authorized: 124,501,581 issued and 119,501,581 outstanding at March 31, 2017 and 121,492,869 issued and 116,492,869 outstanding at December 31, 2016, respectively			119,502				116,493
Additional paid-in capital			87,181,267				87,064,101
Accumulated deficit			(102,761,496	)			(102,578,115	)
Total shareholders’ deficit			(15,460,727	)			(15,397,521	)
Total Liabilities and Shareholders’ Deficit		$	3,946,743			$	3,928,106

 

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

 

 

STANDARD METALS PROCESSING, INC.

Condensed Consolidated Statements of Operations

(unaudited)

 

		Three months ended
		March 31, 2017				March 31, 2016
Revenues		$	-			$	-
Operating expenses:
General and administrative			69,629				74,239
Total operating expenses			69,629				74,239
Loss from operations			(69,629	)			(74,239	)
Other income (expense):
Other income			2,354				1,825
Interest expense			(48,243	)			(72,139	)
Amortization of debt discount			(67,863	)			(17,556	)
Total other income (expense)			(113,752	)			(87,870	)
Loss before income tax provision			(183,381	)			(162,109	)
Income tax provision			-				-
Net loss		$	(183,381	)		$	(162,109	)
Basic and diluted net loss per common share		$	(0.00	)		$	(0.00	)
Basic and diluted weighted average common shares outstanding			117,328,622				106,933,079

 

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

 

 

STANDARD METALS PROCESSING, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

		For the three month periods ended
		March 31, 2017				March 31, 2016
OPERATING ACTIVITIES:
Net loss		$	(183,381	)		$	(162,109	)
Adjustments to reconcile net loss to cash flows used in operating activities:
Amortization of debt issuance costs			67,863				17,556
Changes in operating assets and liabilities:
Prepaid expenses			12,895				13,416
Accounts payable			(10,649	)			(67,887	)
Accrued expenses			59,804				12,311
Accounts payable related party			-				13,134
Accrual for settlement of lawsuits			-				(7,350	)
Net cash used in operating activities			(53,468	)			(180,929	)
INVESTING ACTIVITIES:
Proceeds from the sale of assets			-				56,500
Net cash provided by investing activities			-				56,500
FINANCING ACTIVITIES:
Cash proceeds from Senior secured convertible notes payable - related party			85,000				160,000
Net cash provided by financing activities			85,000				160,000
INCREASE IN CASH AND CASH EQUIVALENTS			31,532				35,571
CASH AND CASH EQUIVALENTS, beginning of period			1,326				1,747
CASH AND CASH EQUIVALENTS, end of period		$	32,858			$	37,318
Supplemental cash flow disclosures
Cash paid for interest cost		$	1,177			$	22,005
Income taxes paid			-				-
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Debt discount on convertible notes payable		$	-			$	160,000
Common stock issued		$	-			$	40,000
Warrants issued in settlement of lawsuit		$	-			$	62,335
Conversions into common stock of convertible debt and accrued interest		$	60,175			$	-
Accrual for settlement of lawsuits paid through issuance of convertible note payable		$	35,000			$	-

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

STANDARD METALS PROCESSING, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2016

(unaudited)

 

NOTE 1 - OVERVIEW

 

Standard Metals Processing, Inc. (“we,” “us,” “our,” “Standard Metals” or the “Company”) is an exploration stage company having offices in Gadsden, Alabama and through its subsidiary, a property in Tonopah, Nevada. Our business plan is to purchase equipment and build a facility on our Tonopah property to serve as a permitted custom processing toll milling facility (which includes an analytical lab, pyrometallugircal 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.

 

Any reference herein to “Standard Metals,” “the Company,” “we,” “our,” or “us” is intended to mean Standard Metals Processing, Inc. a Nevada corporation, and all of our subsidiaries unless otherwise indicated.

 

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 three months ended March 31, 2017, the Company incurred losses from operations of $183,381. At March 31, 2017, the Company had an accumulated deficit of $102,761,496 and a working capital deficit of $9,263,895. Our ability to continue as a going concern is dependent on our ability to raise the required additional capital or debt financing to meet short and long-term operating requirements. During the three months ended March 31, 2017, the Company received net cash proceeds of $120,000 from the convertible promissory notes payable. Management believes that private placements of equity capital and/or additional debt financing will be needed to fund our long-term operating requirements. The Company may also encounter business endeavors that require significant cash commitments or unanticipated problems or expenses that could result in a requirement for additional cash. If the Company raises additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our current shareholders could be reduced, and such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available 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. 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 financial statements include the accounts of Standard Metals Processing, Inc., its’ wholly owned subsidiary Tonopah Milling and Metals Group, Inc. (“TMMG”), and TMMG’s wholly owned subsidiaries Tonopah Custom Processing, Inc. and Tonopah Resources, Inc. All significant intercompany transactions, accounts and balances have been eliminated in consolidation.

 

Basis of Presentation

 

The accompanying unaudited condensed 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 of the information and footnotes required by US GAAP for complete financial statements. The unaudited condensed 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, 2016 filed April 14, 2017. In the opinion of management, all adjustments (consisting of normal recurring adjustments unless otherwise indicated) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year as a whole.

 

 

Shea Mining and Milling Assets

 

The Company recorded the estimated fair value of the Shea Mining and Milling assets as an aggregate amount on the condensed balance sheets. The assets include the mine tailings and dumps, the land, water rights and the milling facility (the buildings and equipment). None of the assets have been put into production, nor has the Company performed any repair or updates to any of the equipment or buildings. As such, the Company will continue to classify them under a single listing.

 

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 depleted on the unit of production basis.

 

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

 

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

 

The Company does not own any mining claims. It owns tailings located on the Tonopah property and some tailings located in Manhattan, Nevada. The Company has not disturbed or processed any of this material and does not intend to do so in the foreseeable future.

 

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 to dispose.

 

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 the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Recent Accounting Pronouncements

 

During the period ended March 31, 2017 and through May 12, 2017, there were several additional 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.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) The standard requires all leases that have a term of over 12 months to be recognized on the balance sheet with the liability for lease payments and the corresponding right-of-use asset initially measured at the present value of amounts expected to be paid over the term. Recognition of the costs of these leases on the income statement will be dependent upon their classification as either an operating or a financing lease. Costs of an operating lease will continue to be recognized as a single operating expense on a straight-line basis over the lease term. Costs for a financing lease will be disaggregated and recognized as both an operating expense (for the amortization of the right-of-use asset) and interest expense (for interest on the lease liability). This standard will be effective for our interim and annual periods beginning January 1, 2019, and must be applied on a modified retrospective basis to leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. We are currently evaluating the timing of adoption and the potential impact of this standard on our financial position, but we do not expect it to have a material impact on our results of operations.

 

Management’s Evaluation of Subsequent Events

 

The Company evaluates events that have occurred after the balance sheet date of March 31, 2017, through the date which the condensed consolidated financial statements were issued. Based upon the review, other than described in Note 12 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.

 

 

NOTE 3 –SHEA MILLING AND MINING ASSETS

 

On March 15, 2011, the Company entered into an exchange agreement by and between the Company, Shea Mining, Afignis, LLC, Leslie Lucas Partners, LLC, Wits Basin and Alfred A. Rapetti (the “Shea Exchange Agreement”) whereby the Company acquired certain assets from Shea Mining, which assets include those located in Tonopah financed through a note payable assigned to the Company, mine dumps, a property lease and a contract agreement in exchange for 35,000,000 shares of our unregistered shares. The Shea Exchange Agreement did not include any operable toll milling equipment, employees or operational processes and therefore has been accounted for as a purchase of a group of assets. The Company completed the Shea Exchange Agreement to acquire the Shea assets and develop a toll milling services business of precious minerals.

 

Pursuant to the assignment of a note payable, the Company executed an Assignment and Assumption of Loan Documents and Loan Modification Agreement, by and between us, Shea Mining and NJB Mining, Inc. (the “Loan Modification Agreement”), dated March 15, 2011, for those assets located in Tonopah, Nevada (“Tonopah”), consisting of land, buildings, mining tailings, a dormant milling facility, abandoned milling equipment and water permits. The land encompasses 1,186 deeded acres, one of the largest private land holdings in Esmeralda County, Nevada. An estimated 2,200,000 tons of tailings known as the Millers Tailings from the historic gold rush of Goldfield and Tonopah, Nevada sits on approximately 334 acres of this land. The Company has not processed any of these tailings and has no intention to do so in the near future.

 

The Tonopah property was subject to an existing $2,500,000 first deed of trust, which was in default at the time of the Shea Exchange Agreement and included accrued interest of $375,645, which was also assumed in the transaction. As part of the assignment, NJB Mining, Inc. (“NJB”) modified the related note to allow the Company until May 14, 2011 to refinance this mortgage, which was subsequently extended numerous times. As of August 31, 2011, the Company was still in default under the terms of the Loan Modification Agreement, and therefore entered into a forbearance agreement with NJB, (the “NJB Forbearance Agreement”), in which NJB agreed to forbear from initiating legal proceedings, including forbearance of the deed of trust and enforcement of its collection remedies. The NJB Forbearance Agreement further provided for additional extensions up through December 9, 2011. On December 9, 2011, Pure Path Capital Management Company, LLC (“Pure Path”) purchased the Loan Modification Agreement and the NJB Forbearance Agreement directly from NJB. On December 21, 2011, we entered into an amended and restated forbearance agreement with Pure Path (the “A&R Forbearance”), whereby Pure Path extended the provisions of the NJB Forbearance Agreement. Pure Path provided an additional extension to stay any action of the A&R Forbearance until June 8, 2012, on which date, if not paid or another agreement was not executed, the Company would be required to issue 5,000,000 shares of its common stock to Pure Path; such extension was provided without additional consideration. The Company did not pay the balance of the mortgage on June 8, 2012 and pursuant to the terms of the A&R Forbearance Agreement, the Company was required to issue 5,000,000 shares to Pure Path. The 5,000,000 shares were approved for issuance by the Board of Directors on October 9, 2012 and were issued to Pure Path on December 6, 2012. Pure Path provided additional extensions to stay any action of the Forbearance Agreement until August 31, 2013; such extensions were provided without additional consideration. On October 10, 2013, the Company entered into a Settlement and Release Agreement (the “Agreement”) with Pure Path. Pursuant to the Agreement, Pure Path relinquished the rights and obligations owed to it and agreed to forbear collection remedies and legal proceedings against the Company including foreclosure on the Deed of Trust. In connection with the settlement and release of various debts of approximately $1,500,000, consulting fees owed by the Company, and relinquishment of rights by Pure Path, the Company issued 27,000,000 restricted shares and a promissory note for up to $2,500,000 with a principal amount on the date of issuance of $1,933,345 bearing interest of 8% per year for the amounts owed under the Pure Path Agreements.

 

In connection with the Shea Exchange Agreement, the Company was also assigned the ownership of approximately a six square mile section of mine dump material in Manhattan, Nevada (“Manhattan”). The Company has not disturbed, moved or processed any of this material and currently has no intention to do so.

 

The purchase consideration of the assets acquired was calculated as follows:

 

Issuance of 35,000,000 shares of common stock with an estimated fair value of $0.89 per share (closing sales price on March 15, 2011)		$	31,150,000
Cash consideration			700,000
Assumption of NJB Mining mortgage			2,500,000
Assumption of accrued interest and other liabilities			463,184
Legal costs (includes issuance of 100,000 shares of common stock valued at $89,000)			205,258
Other direct expenses incurred in connection with the Shea Exchange Agreement			140,985
		$	35,159,427

 

In conformity with accounting principles generally accepted in the United States of America, cost of acquiring a group of assets is allocated to the individual assets within the group based on the relative fair values of the individual assets.

 

The table below sets forth the final purchase price allocation. The fair value of the mineral properties and property and equipment was determined based on level 3 inputs using cost and market value approaches.

 

Tonopah mine tailings		$	24,888,252
Tonopah dormant milling facility			8,062,875
Tonopah land			1,760,000
Tonopah water rights			348,300
Manhattan mine dumps			100,000
Total		$	35,159,427

 

 

Simultaneous with these transactions, pursuant to the Shea Exchange Agreement, Wits Basin exchanged 19,713,544 shares of the Company’s common stock it held for 10,000,000 shares of our Series A Preferred Stock. The Series A Preferred Stock has a liquidation preference of $10,000,000, payable only upon certain liquidity events or upon achievement of a market value of our equity equaling $200,000,000 or more. Additional details regarding the Series A Preferred Stock can be found in the Company’s Articles of Amendment, which were filed with the Colorado Secretary of State on January 4, 2013. Additionally, the Company obtained the right to transfer the entire interest and related debt of the Bates-Hunter Mine, at any time prior to June 13, 2011, to Wits Basin in exchange for the cancellation of a promissory note issued by Hunter Bates payable in favor of Wits Basin in the approximate amount of $2,500,000. On April 29, 2011, our Board of Directors approved this transfer.

 

Management analyzed the Shea Mining and Milling assets and determined that the Tonopah mine tailings of $24,888,252, Tonopah dormant milling facility of $8,062,875 and Manhattan mine dumps of $100,000 were fully impaired and recorded an impairment of $33,051,127 and reduced the net carrying value of the Miller’s Landing assets to $2,108,300.

 

The Company does not conduct any mining activity.

 

NOTE 4 – ASSET HELD FOR SALE

 

During the year ended December 31, 2015 the Company determined that certain equipment with a historic cost of $282,587 had a fair value of $12,000 and was no longer required. The Company evaluated this event using the guidance provided by ASC 360-10 “ Property, Plant and Equipment – Impairment or disposal of long-life assets ” and concluded an impairment of machinery and equipment of $270,587.

 

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

 

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

 

Components of our property, plant and equipment are as follows:

 

		March 31,				December 31,
		2017				2016
Equipment		$	21,000			$	21,000
Construction in Progress			1,775,224				1,775,224
Less accumulated depreciation			(21,000	)			(21,000	)
		$	1,775,224			$	1,775,224

 

NOTE 6 – CONVERTIBLE NOTES PAYABLE

 

On March 14, 2017, the Company received cash proceeds of $60,000, and on April 18, 2017, the Company issued a promissory note in exchange for the cash proceeds. The promissory note accrues interest at 6% per annum and is due one year from the date of issuance. The note is convertible into shares of common stock at $0.075 per share. The Company analyzed the conversion feature under ASC 470-20 Debt with conversion and other options, and based on the market price of the common stock of the Company on the date of funding as compared to the conversion price, determined there was no beneficial conversion feature to recognize.

 

On February 15, 2017 and March 1, 2017 the Company issued convertible promissory notes in the aggregate principal amount of $60,000. The notes are due one year after issuance, accrue interest at 6% per annum and are convertible into shares of common stock at a price of $0.02 per share. The Company then analyzed the conversion under ASC 470-20 Debt with conversion and other options for consideration of a benefical conversion feature. The Company recorded a discount for the intrinsic value of the conversion feature of $60,000 and will amortize this debt discount over the term of the note.

 

On March 7, 2017, the February 15, 2017 and March 1, 2017 convertible promissory notes payable totaling $60,174, including accrued interest, were converted into 3,008,712 shares of restricted common stock and the remaining debt discount of $58,164 was recorded as amortization of debt discount.

 

 

The following table summarizes the Company’s remaining convertible promissory notes (convertible into common stock):

 

		March 31,				December 31,
		2017				2016
Convertible notes at March 31, 2017; interest rate of 8%;		$	60,000			$	60,000
Convertible notes at March 31, 2017; interest rate of 6%;			60,000
Less unamortized debt discount			(39,644	)			(47,507	)
Convertible promissory notes net of unamortized discount of $0 at March 31, 2017; interest rate of 6%; accrued interest of $36,665 at December 31, 2016 and all of these Notes are past due and original terms apply in the default period.		$	175,000			$	175,000
Less current portion of Convertible Notes Payable			(175,000	)			(175,000	)
		$	80,356			$	12,493

 

NOTE 7 – PROMISSORY NOTES PAYABLE - RELATED PARTY

 

The following table summarizes the Company’s notes payable related party:

 

		March 31,				December 31,
		2017				2016
Promissory note issued on February 11, 2015, in the principal amount of up to $750,000 with tranches received as follows: $200,000 on February 11, 2015; $48,000 on February 13, 2015; $50,000 on April 13, 2015; $150,000 on July 31, 2015, $2,500 on October 20, 2015, $12,000 on October 29, 2015 and $15,000 on November 4, 2015; the note has a stated interest rate of 8%; with a maturity of 1 year from the date of the tranche. The note is now in default.		$	477,500			$	477,500
Less discount			(-	)			(-	)
Totals		$	477,500			$	477,500

 

On February 11, 2015, the Company issued an unsecured promissory note to Tina Gregerson Family Properties, LLC, an entity controlled by a former director of the Company. The Note for up to $750,000 will be provided in tranches. Maturity of each tranche is one year from the date of receipt. Interest will accrue at 8% per annum on each tranche. As consideration, the Company agreed to issue common stock purchase warrants for the purchase of up to 250,000 shares of common stock exercisable for seven years at $1.23 per share. The Company then analyzed the warrant under ASC 470-20-25 Debt with conversion and other options for consideration of a warrants issue. The Company recorded a discount from the relative fair value of the warrants of $116,560. The Company valued the warrants using the Black-Scholes option pricing model with the following assumptions: stock price on the measurement date of $1.25; warrant term of 7 years; expected volatility of 75%; and discount rate of 1.83% and accounted for them as debt discount, which will be amortized over the term of the loan.

 

 

NOTE 8 – SHAREHOLDERS’ EQUITY

 

Preferred Stock

 

Series A Preferred Stock

 

Simultaneous with the Shea Exchange Agreement, Wits Basin exchanged 19,713,544 shares of our common stock it held for 10,000,000 shares ($.001 par value each) of “Series A Preferred Stock” with an original issue price of $1.00 per share. The Company executed an Agreement with Wits to exchange these preferred shares for shares of common stock.

 

Attributes of Series A Preferred Stock include but are not limited to the following:

 

Distribution in Liquidation

 

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

 

• The Corporation has an average market capitalization (calculated by adding the value of all outstanding shares of Common Stock valued at the Corporation’s closing sale price on the OTCQB or other applicable bulletin board or exchange, plus the value of the outstanding Series A Preferred Stock at the Original Issues Price per share) of $200,000,000 or more over any 90 day period. The holders of the Series A Preferred Stock would have the right, for 30 days after the end of such qualifying 90 day measurement period, to require the Corporation to purchase the Series A Preferred Stock for an amount equal to the Liquidation Value.

 

• Any Liquidity Event in which the Corporation receives proceeds of $50,000,000 or more. For purposes hereof, a “Liquidity Event” means any (a) liquidation, dissolution or winding up of the Corporation; (b) acquisition of the Corporation by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, share exchange, share purchase or consolidation) provided that the applicable transaction shall not be deemed a liquidation unless the Corporation’s stockholders constituted immediately prior to such transaction hold less than 50% of the voting power of the surviving or acquiring entity; or (c) the sale, lease, transfer or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries.

 

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

 

Redemption

 

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

 

Voting Rights

 

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

 

Conversion Rights

 

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

 

The Company entered into an Agreement on July 29, 2016 with the holder of the Series A Preferred Stock, Wits Basin Precious Minerals, Inc., (“Wits”) and Wits’ secured creditor regarding exchange options for the Series A Preferred Stock. Under the terms of the Agreement, upon the occurrence of a Triggering Event (as defined below), the holders of the Preferred Stock will receive the corresponding compensation, the “Triggering Events” and their corresponding compensation.

 

Agreement with Holder of Series A Preferred Stock

 

As disclosed in a Form 8-K filed with the SEC on August 1, 2016, the Company entered into an Agreement on July 29, 2016 with the holder of the Series A Preferred Stock, Wits Basin Precious Minerals, Inc., (“Wits”) and Wits’ secured creditor regarding exchange options for the Series A Preferred Stock. Under the terms of the Agreement, upon the occurrence of a Triggering Event (as defined below), the holders of the Preferred Stock will receive the corresponding compensation, the “Triggering Events” and their corresponding compensation are set forth below:

 

 

3. Liquidation Rights, Stated Value and Redemption . The Series A Preferred Stock has a stated value of Ten Million Dollars ($10,000,000) (referred to herein as “Stated Value”), payable only upon certain events.

 

(a) Upon any liquidation, dissolution or winding up of the Corporation, and after paying or adequately providing for the payment of all its obligations, the remainder of the assets of the Corporation shall be distributed, either in cash or in kind, first pro rata to the holders of the Series A Preferred Stock in an amount equal to the Stated Value (as described below); then, to any other series of Preferred Stock, until an amount to be determined by a resolution of the Board of Directors prior to issuances of such Preferred Stock, has been distributed per share, and, then, the remainder pro rata to the holders of the Common Stock.

 

(b) Upon the occurrence of a Triggering Event (as defined below), the holders of the Preferred Stock will receive the corresponding compensation, The “Triggering Events” and their corresponding compensation are set forth below:

 

(1) If either of the following occur:

(i) the Corporation receives proceeds of $10,000,000 or more in a cash offering; OR

(ii) the Corporation’s Common Stock trades at $3.00 or more (with proportionate adjustments for stock splits) for 90 consecutive trading days;

then all of the 10,000,000 shares of the Preferred Stock will be exchanged for 5,000,000 shares of Common Stock.

 

(2) If the Corporation has an average market capitalization (calculated by adding the value of all outstanding shares of Common Stock valued at the Corporation’s closing sale price on the Over the Counter Markets (or other applicable exchange) (the “Market”) of $200,000,000 or more over any consecutive 95 day period following the effective date of this agreement and the effective date of any required duly authorized amendment to the Standard’s Articles of Incorporation, the terms of the Preferred Stock and the subsequent consent of the holder’s secured creditor to the final form and terms of such amendment, and items (1)(i) or (1)(ii) of Section (b) have not been met, then the Corporation has the right to:

 

(A) issue the number of shares of Common Stock equal to the Stated Value using the average closing sale price of the Common Stock on the Over the Counter Markets of the prior 15 trading days from the date of the notice. The Corporation will provide 10 days’ prior written notice to the holder and any known secured party of such holder of the Series A Stock of its intention to proceed with this option; or

 

(B) issue a portion of the Stated Value in shares of Common Stock based on the valuation formula in 3(b)(2)(A) and pay the remaining Stated Value in cash.

 

If this Section (3)(b)(2) is triggered, the Corporation has three years to choose option Section (3)(b)(2)(A) or (B) and pay the Stated Value. The Corporation has 60 days from the date of notice of its election to pay under either Section (3)(b)(2)(A) or (B).

 

Upon payment of the Stated Value, the Series A Shares will be retired.

 

(c) If Section (3)(b)(2) is triggered and the Corporation fails to pay the Stated Value within the three year time frame, the Corporation will take all necessary action to return the Series A Preferred Shares in their original form (containing all original terms and conditions) to the holder with the exception that the Stated Value will be increased to $10,100,000 upon delivery and the Corporation will lose the exchange options provided in Section (3)(b).

 

The previous terms of the Series A Preferred Stock would have required the Company to make a payment of $10,000,000 upon the Company having an average market capitalization of $200,000,000. This Agreement gives the Company additional payment options and allows for the payment to be made completely or partially in common shares, depending on the Triggering Event.

 

The Company issued five million shares of restricted common stock on April 1, 2016 that are being held in escrow pending a Series A Preferred Stock Triggering Event.

 

 

Common Stock - Note Payable Conversion

 

On March 7, 2017, convertible promissory notes payable and accrued interest totaling $64,174 were converted into 3,008,712 shares of restricted common stock.

 

Option Grants

 

The Company uses the Black-Scholes pricing model as a method for determining the estimated fair value for stock awards. Compensation expense for stock awards is recognized on a straight-line basis over the vesting period of service awards and for performance-based awards, the Company recognizes the expense when the performance condition is probable of being met.

 

The Company reviews its current assumptions on a periodic basis and adjusts them as necessary to ensure an accurate valuation. The risk-free interest rate is based on the Federal Reserve Board’s constant maturities of the U.S. Treasury bond obligations with terms comparable to the expected life of the options at their issuance date. The Company uses historical data to estimate expected forfeitures, expected dividend yield, expected volatility of the Company’s stock and the expected life of the options.

 

The Company recorded $0 and $0 related to compensation expense for the three months ended March 31, 2017 and 2016, respectively. All compensation expense is included in general and administrative expense. There was no tax benefit from recording this non-cash expense due to our income tax valuation allowance and due to a portion of the options being incentive stock options. As of March 31, 2017, there was $0 in unrecognized compensation expense.

 

The following tables summarize information about the Company’s stock options:

 

		Number of Options				Weighted Average Exercise Price
Options outstanding - December 31, 2015			35,076,223			$	0.99
Granted			-				-
Canceled or expired			(2,500,000	)			0.88
Exercised			-				-
Options outstanding - December 31, 2016			32,576,223			$	0.99
Granted			-				-
Canceled or expired			-				-
Exercised			-				-
Options outstanding –March 31, 2017			32,576,223			$	0.98
Weighted average fair value of options granted during the period ended March 31, 2017						$	-
Weighted average fair value of options granted during the year ended December 31, 2016						$	-

 

 

The following table summarizes information about stock options outstanding and exercisable at March 31, 2017:

 

		Options Outstanding and exercisable at March 31, 2017
Range of  Exercise Prices		Number  Outstanding				Weighted  Remaining  Contractual  Life		Weighted  Average  Exercise  Price				Aggregate  Intrinsic Value(1)
$0.40 to $0.60			5,276,223			3.6 years		$	0.46			$	-
$0.61 to $1.00			9,800,000			3.5 years		$	0.67			$	-
$1.01 to $1.50			14,500,000			3.6 years		$	1.25			$	-
$1.51 to $2.25			3,000,000			4.1 years		$	1.63			$	-
$0.40 to $2.25			32,576,223			3.6 years		$	0.98			$	-

 

(1)

The aggregate intrinsic value in the table represents the difference between the closing stock price on March 31, 2017 and the exercise price, multiplied by the number of in-the-money options that would have been received by the option holders had all option holders exercised their options on March 31, 2017.

 

Common Stock Purchase Warrants

 

For warrants granted to non-employees in exchange for services, we 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 and Wits Basin executed a Settlement Agreement on January 22, 2016. Pursuant to the terms of the Settlement Agreement, the Company issued 630,000 warrants to purchase common stock at an exercise price of $0.70 and 630,000 warrants at an exercise price of $0.30 to investors of Wits Basin. The warrants are exercisable until December 31, 2018.

 

The following table summarizes information about the Company’s stock purchase warrants outstanding at March 31, 2017 and December 31, 2016:

 

		Number				Weighted  Average  Exercise  Price				Range  of  Exercise  Price				Weighted  Remaining  Contractual  Life
Outstanding at December 31, 2015			5,015,640			$	0.88			$	0.20 –  2.00			4.4 years
Granted			1,260,000			$	2.00			$	0.30 – 1.25
Cancelled or expired			-				-				-
Exercised			-			$	-			$	-
Outstanding at December 31, 2016			6,275,640			$	0.86			$	0.20 – 2.00			3.2 years
Granted			-			$	-			$	-
Cancelled or expired			-				-				-
Exercised			-			$	-			$	-
Outstanding at March 31, 2017			6,275,640			$	0.80			$	0.20 - 2.00			2.9 years
Warrants exercisable at March 31, 2016											6,425,640

 

The aggregate intrinsic value of the 6,275,640 outstanding and exercisable warrants at March 31, 2017 was $0. The intrinsic value is the difference between the closing stock price on March 31, 2017 and the exercise price, multiplied by the number of in-the-money warrants had all warrant holders exercised their warrants on March 31, 2017.

 

 

NOTE 9 – 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 Standard Metals 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, Standard Metals filed an Answer and a Motion to Dismiss or, Alternatively, to Stay or Transfer the action to the United States District Court for the Northern District of Alabama, Middle Division . On January 16, 2015, Standard Metals filed a Motion for Summary Judgment. On January 23, 2015, the Court issued an Order granting in part and denying in part Standard Metals’ Motion to Dismiss or, Alternatively, to Stay or Transfer the action to the United States 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 Standard Metals’ 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. Standard Metals Processing, Inc. intends to continue to vigorously defend against claims by Steven E. Flechner. On August 12, 2015 the United Stated 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 and Flechner entered into a Settlement Agreement on November 24, 2015, which is no longer in effect.

 

Midwest Investment Partners, LLC v. Standard Gold Holdings, Inc.

 

On September 6, 2013, Midwest Investment Partners, LLC filed suit in the United States District Court for the Southern District of Indiana, Evansville Division against Standard Gold Holdings, Inc. alleging a breach of the Company’s obligations under a $50,000 6% Convertible Promissory Note, dated April 5, 2011, and a $25,000 6% Convertible Promissory Note, dated September 2, 2011, by (i) failing to repay the April 5, 2011 Note when due on October 6, 2011, and (ii) failing to repay the September 2, 2011 Note when due on February 29, 2012. On January 10, 2014, Standard Gold filed an Answer with Affirmative and Other Defenses to Midwest’s Complaint and Demand for Jury Trial. On April 3, 2014, Midwest filed a Motion for Summary Judgment. On August 28, 2014, the Court entered an Order granting Midwest’s Motion for Summary Judgment and closed judgment in favor of Midwest against Standard Gold. On November 23, 2015, the parties executed a Settlement Agreement wherein the Company would pay or cause to be paid $130,000 to Midwest and issued 25,000 shares of restricted common stock to Blair Mielke. Additionally, the Company cooperated with Midwest to transfer a number of shares of stock owned by Midwest to Midwest’s investors. The remaining shares of stock owned by Midwest are subject to a lock up, leak out agreement. This settlement agreement settles both this action and the Blair Mielke action previously disclosed. The Company and Midwest revised the payment schedule of their Settlement Agreement. During the period ended March 31, 2017, the Company made payments of $35,000 to Midwest.

 

 

NOTE 10 – RELATED PARTY TRANSACTIONS

 

Tina Gregerson/Tina Gregerson Family Properties, LLC

 

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 will be provided in tranches. Maturity of each tranche is one year from the date of receipt. Interest will accrue at 8% per annum on each tranche. As consideration, the Company agreed to issue common stock purchase warrants for the purchase of up to 250,000 shares of common stock exercisable for seven years at $1.23 per share. Under the terms of the Note, the Company received $200,000 on February 11, 2015, $48,000 on February 13, 2015, $50,000 on April 13, 2015, $150,000 on July 31, 2015, $2,500 on October 20, 2015, $12,000 on October 29, 2015 and $15,000 on November 4, 2015. These notes are now in default.

 

Pure Path Management Company, LLC

 

Pure Path Management Company, LLC (“Pure Path”) is currently the beneficial owner of 21% of the outstanding common stock of the Company. On October 10, 2013, the Company issued 27,000,000 shares of common stock to Pure Path Management Company, LLC to settle $1,500,000 of the note payable and accrued interest by the Company.

 

In connection with the assignment of the Forbearance Agreement, the Parties executed an Agreement in Principle setting forth terms of the Forbearance Agreement (collectively the “Pure Path Agreements”). Pursuant to the Pure Path Agreements, Pure Path was to receive participation payments to be received on a quarterly basis for seven years after the final closing at a rate of 5% of adjusted gross revenue as such terms are defined in the Pure Path Agreements, past and future consulting fees for approximately $1,150,000, collection remedies and legal proceedings against the Company including foreclosure on the Deed of Trust, registration rights, rights of first refusal, tag along rights, preemptive rights, exclusive worldwide rights pertaining to financing and joint ventures, and other negative covenants regarding approval of corporate actions.

 

Pursuant to the Settlement and Release Agreement executed October 10, 2013 with the Company, Pure Path relinquished the foregoing rights and obligations owed to it and agreed to forbear collection remedies and legal proceedings against the Company including foreclosure on the Deed of Trust, and in connection with the settlement and release of various debts of approximately $1,500,000 and the consulting fees owed by the Company and relinquishment of rights by Pure Path, the Company issued 27,000,000 restricted shares and a Promissory Note (the “Pure Path Note”) for an amount of up to $2,500,000 with a beginning principal balance of $1,933,345 bearing interest of 8% per year for the current balance of the amounts owed under the Pure Path Agreements.

 

Under the terms of the Pure Path Note, the Company received $54,590 on February 4, 2015.

 

On April 11, 2016, the Company and Pure Path executed an addendum removing Pure Path’s ability to convert its note into shares of Series B Preferred Stock. Subsequently, the Company retired and cancelled the entire class of Series B Preferred Stock, such class is no longer available for issuance.

 

NOTE 11 – EARNINGS (LOSS) PER SHARE

 

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

 

At March 31, 2017, the weighted average shares from stock options of 32,576,223, warrants of 6,275,640 and Convertible Promissory note shares of 1,800,000 were excluded from the diluted weighted average common share calculation due to the antidilutive effect such shares would have on net loss per common share.

 

NOTE 12 – SUBSEQUENT EVENTS

 

Convertible Promissory Note

On April 18, 2017, the Company issued a promissory note in the amount of $60,000, interest accrues at 6% per annum and is due one year from the date of issuance. The note is convertible into shares of common stock at $0.075 per share. The note was funded on March 14, 2017. See Note 6- Convertible Notes Payable.

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following management discussion and analysis of financial condition and results of operations should be read in connection with the accompanying unaudited condensed financial statements and related notes thereto included elsewhere in this Report and the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2016.

 

 

Cautionary Notice Regarding Forward Looking Statements

 

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

 

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

 

We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. This filing contains a number of forward-looking statements, which reflect management’s current views and expectations with respect to our business, strategies, future results and events, and financial performance. All statements made in this filing other than statements of historical fact, including statements addressing any projections of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; statements expressing general optimism about future operating results; any statements of assumptions underlying any of the foregoing; and non-historical information, are forward looking statements. In particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements, and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances.

 

Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors which could cause or contribute to such differences include, but are not limited to, the risks to be discussed in our Annual Report on Form 10-K and in the press releases and other communications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors which may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

 

History

 

Standard Metals Processing, Inc. (formerly known as Standard Gold Holdings, Inc., Standard Gold, Inc. and Princeton Acquisitions, Inc.) was incorporated in the State of Colorado on July 10, 1985. On September 29, 2009, we completed a share exchange agreement with Hunter Bates Mining Corporation, a Minnesota corporation (“Hunter Bates”) and certain of its shareholders, in which Hunter Bates’ shareholders exchanged all of their capital securities into similar capital securities of ours (the “Hunter Bates Share Exchange”) and we adopted the business model of Hunter Bates of minerals exploration and mining. Accordingly, the Hunter Bates Share Exchange represented a change in control and Hunter Bates became our wholly owned subsidiary.

 

Prior to September 29, 2009, Wits Basin Precious Minerals Inc., a Minnesota corporation and public reporting company quoted on the Pink Sheets under the symbol “WITM” (“Wits Basin”) was the majority shareholder of Hunter Bates. Hunter Bates was formed in April 2008 to acquire the prior producing gold mine properties (consisting of land, buildings, equipment, mining claims and permits) located in Central City, Colorado, known as the “Bates-Hunter Mine.”

 

On March 15, 2011, we closed a series of transactions, whereby we acquired certain assets of Shea Mining & Milling, LLC (“Shea Mining”), which assets include land, buildings, a dormant milling facility, abandoned milling equipment, water permits, mine tailings, mine dumps and the assignment of a note payable, a lease and a contract agreement with permits. We completed the Shea Exchange Agreement in order to offer toll milling services of precious minerals. Toll milling is a process whereby mined material is crushed and ground into fine particles to ease the extraction of any precious minerals contained therein, such as gold, silver, and platinum group metals. Custom milling and refining can include many different processes to extract precious metals from carbon or concentrates. These toll-processing services also distill, dry, mix, or mill chemicals and bulk materials on a contractual basis and provide a chemical production outsourcing option for industrial companies which lack the expertise, capacity, or regulatory permits for in-house production.

 

The Company re-domiciled in Nevada from Colorado in March 2013. We determined that, due to a lack of connection to Colorado, it was in the best interest of the Company to move its domicile to Nevada.

 

 

Overview of the Company

 

Standard Metals Processing, Inc. (“we,” “us,” “our,” “Standard Metals” or the “Company) has an office in Gadsden, Alabama and through its subsidiary, a property in Tonopah, Nevada. Our business plan is to generating low cost, non-processing passive income by providing liquidity and specialized services to mining companies in exchange for, royalty and metal stream contracts, and, in some instances, common stock and warrants. We will also seek to provide toll milling services on a selective basis in exchange for long term feed contracts. We are also assessing the opportunity to purchase equipment and build a facility on our Tonopah property to serve as a permitted custom processing toll milling facility which includes an analytical lab, pyrometallugircal plant, and hydrometallurgical recovery plant.

 

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

 

WATER POLLUTION CONTROL PERMIT WITH THE NEVADA DEPARTMENT OF ENVIRONMENTAL PROTECTION

 

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

 

The WPCP must be approved prior to commencing the planned construction of our processing plant in Tonopah, Nevada. We are still in the technical review stage of our WPCP. While the Company awaits approval, we are preparing for construction of our processing facility which includes working with contractors that will be building the new 21,875 square foot processing plant, cleaning and preparing the property, and refurbishing a trailer that will act as our construction office.

 

In connection with our WPCP application, NDEP suggested that we take the following actions: (i) retain a Nevada Certified Environmental Manager (“CEM”), (ii) perform Meteoric Profile II water testing on ground water directly below the mill as well as surrounding wells located off site, and (iii) determine baseline values of water using the Meteoric Profile II results. NDEP regulations require that the Company delay any new construction planned for “metal extraction” until after the permits are in place. We hired Allstate-Nevada Environmental Management, Inc., as our CEM to assist us with obtaining an NDEP WPCP and to help us fulfill all the requirements of NDEP including the Meteoric Profile II analysis, as well as advise on the overall site cleanup and assisting with any other NDEP requirements.

 

Survey

 

In March 2013, Advanced Surveying & Professional Services, as our Professional Land Surveyor (“PLS”), completed surveys and testing of the Tonopah property required for the application of our required permits. After completion of the survey, it was determined the property is 1,183 acres. The scope of work our PLS completed includes: (i) setting a total of 19 permanent monuments at angle points along lines, (ii) setting eight permanent monuments locating US Hwy 95, (iii) recording a professional map indicating longitude and latitude for all corners, and (iv) providing a digital map accessible in AutoCad software.

 

Site Preparation

 

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

 

Recent Actions

The Company is working on general maintenance and updating of the Tonopah property in line with the Company’s business plan.

 

 

PRODUCTS AND SERVICES

 

Standard Metals Processing, Inc. (“Standard Metals” or the “Company” - OTCQB: SMPR), seeks to establish itself as a custom processing permitted toll milling service provider. Our business plan is to build a facility on our Tonopah property which includes an analytical lab, pyrometallurgical, and hydrometallurgical recovery plant.

 

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

 

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

 

Many junior miners are undercapitalized, have limited access to capital markets and have a large supply of mined material that requires milling be performed. Many large mining companies reserve their milling capacity for their inventory, which does not make providing third party services worthwhile. This provides the Company with an opportunity to provide these potential customers with badly needed milling and processing services.

 

Currently, the Company is waiting for the approval of pending applications for the permits required for us to commence construction of a larger scale facility to conduct permitted custom processing toll milling operations.

 

TOLL MILLING

 

Toll milling is a process whereby mined material is crushed and ground into fine particles to ease the extraction of any precious minerals contained therein, such as minerals in the gold, silver and platinum metal groups. Custom milling and refining that are designed specifically for each ore load can include many different processes to maximize the extraction of precious metals from ore, carbon or concentrates.

 

Procedure

 

Ore is sent to our facility at the responsibility and cost of the customer. The Company will take a sample of the ore through a specific ore sampling procedure. The Company’s metallurgist will test the sample on site. To obtain a quantitative determination of the amount of a given substance in a particular sample, the Company can perform wet methods and dry methods. In the wet method, the sample is dissolved in a reagent, like acid, until the purified metal is separated out. In the dry method, the sample is mixed with a flux (a substance such as borax or silica that helps lower the melting temperature) and then heated so that the impurities in the metal fuse with the flux, leaving the purified metal as residue.

 

If it is determined that the sample is approved for processing, the customer and the Company will then agree upon a value of the metal grade per ton. If there is any disagreement on the value, a third party referee determines the value by testing the sample. The Company charges either a flat fee per ton of the ore processed or a percentage of the precious metals extracted during processing, or a combination of both based on the amount of work that is performed.

 

There are various methods of extraction. The Company will determine which method to use based upon the sample received. In most situations, a series of tests will be performed on a bulk sample ranging in size from 250 to 1,000 pounds. A metallurgist will determine the best process or processes to use for the extraction based on several factors. These include the composition of the host rock, mineralization of the host rock, whether or not it is an oxide or sulphide ore body, and the particle size of the precious metal. After the metallurgist reviews these characteristics, the Company will run ore on a gold table and assays the concentrates, middlings, and tails. An assay is an investigative procedure for qualitatively assessing or quantitatively measuring the presence or amount of precious metals in ore. If there is too much gold in the middling or tails, the size of the grind is adjusted to increase yield or if there is not enough gold in the middlings or tails the Company grinds the material to a coarser mesh.

 

Some of our miner customers will be able to take their tailings (the material left over after the desired minerals have been extracted) from the material they deposited with the Company and put it back in the exact same mines those particular tailings came from. This eliminates the need for the Company to dispose of those tailings.

 

Concentrate/Leach Circuit

 

Concentration is the separation of precious minerals from other materials by utilizing different properties of the minerals to be separated including density, magnetic or electric and physiochemical. The Company will attempt to create a “concentrate” of minerals to reduce the size of each ton processed. The Company may also receive concentrates from customers, especially those where transport of tons of raw ore is not feasible.

 

 

The leaching process uses chemicals to extract the metals from the solid materials (concentrates) and bring them into a solution. Once the metals are in the solution, it is passed through carbon or resin columns where the precious metals are deposited onto the carbon/resin.

 

The metals will then be stripped from the carbon back into a different solution where they are pumped through an electrowinning circuit in a process called carbon stripping. The metals are then deposited onto stainless steel in the electrowinning circuit. After this stage, the metals are either sold or further refined off-site. The solution is recycled and used again to process additional material.

 

Recent Actions

The Company is working on general maintenance and updating of the Tonopah property in line with the Company’s business plan.

 

RESULTS OF OPERATIONS

 

FOR THE THREE MONTHS ENDED MARCH 31, 2017 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2016.

 

Revenues

 

We had no revenues from any operations for the three months ended March 31, 2017 and 2016. Furthermore, we do not anticipate any significant future revenue until we have sufficiently funded construction and begin operations.

 

General and administrative expenses were $69,629 for the three months ended March 31, 2017 as compared to $74,239 for the same period in 2016. For the three months ended March 31, 2017, the majority of general and administrative expense was for accrued compensation and professional fees. The three months ended March 31, 2016 were relatively the same. We anticipate that future compensation expenses will increase and that certain operating expenses will increase for fiscal 2017 as we continue to build the infrastructure to proceed with permitted custom processing toll milling services.

 

Other Income and Expenses

 

Other Income

 

We receive monthly payments of from $608 per month from American Tower Corporation for a cellular tower located on our Tonopah land.

 

Interest Expense

 

Interest expense for the three months ended March 31, 2017 was $48,243, compared to $72,139 for the respective period in 2016. The 2017 and 2016 amounts relate primarily to the interest due on our notes payable: (i) the $2,500,000 secured promissory note issued to Pure Path on October 10, 2013 in accordance with the settlement agreement of same date. All prior debt was subsumed under this note, the outstanding of which was $2,229,187 plus accrued interest at 8% per annum on March 31, 2017; (ii) the short-term note payable; and (iii) the convertible notes issued in 2011 and 2012 and the notes with Tina Gregerson Family Properties, LLC, an entity controlled by a former director and officer of the Company.

   

LIQUIDITY AND CAPITAL RESOURCES

 

Liquidity is a measure of an entity’s ability to secure enough cash to meet its contractual and operating needs as they arise. We have funded our operations and satisfied our capital requirements through the issuance of short-term debt, convertible debt and through equity capital we have received via certain shareholders exercising their warrants and loans from related parties during the three month periods ended March 31, 2017 and 2016. We do not anticipate generating sufficient net positive cash flows from our operations to fund the next twelve months. We had a working capital deficit of $9,263,895 at March 31, 2017. Cash and cash equivalents were $32,858 at March 31, 2017, representing a decrease of $4,460 from the cash and cash equivalents of $37,318 at March 31, 2016.

 

Our cash reserves will not be sufficient to meet our operational needs and thus, we need to raise additional capital to pay for our operational expenses and provide for capital expenditures. Our basic operational expenses are currently estimated at approximately $40,000 per month. Above the basic operational expenses, we estimate that we need approximately $17,500,000 to begin limited toll milling operations. If we are not able to raise additional working capital, we may have to cease operations altogether.

 

For the three months ended March 31, 2017, we had net cash used in operating activities of $88,468, as compared to $180,929 for the three months ended March 31, 2016.

 

For the three months ended March 31, 2017 and 2016 we had net cash provided by investing activities of $0 and net cash used in investing activities of $56,500 respectively. The amount in 2016 was from the sale of equipment.

 

For the three months ended March 31, 2017 and 2016, we had net cash provided by financing activities of $85,000 and $160,000, respectively.

 

 

Summary

 

Our existing sources of liquidity will not provide enough cash to fund our development and operations and make the required payments on our debt service for the next twelve months. Our ability to continue as a going concern is dependent entirely on raising funds through the sale of equity or debt. We will continue our attempt to raise additional capital. Some of the possibilities available to us are through private equity transactions, to develop a credit facility with a lender or the exercise of options and warrants. However, such additional capital may not be available to us at acceptable terms or at all. In the event that we are unable to obtain additional capital, we would be forced to cease operations altogether.

 

Off-Balance Sheet Arrangements

 

During the three months ended March 31, 2017, we did not engage in any off balance sheet arrangements as defined in item 303(a)(4) of the SEC’s Regulation S-K.

 

Item 3. Quantitative and Qualitative

 

Not Applicable.

 

Item 4. Controls and Procedures

 

Under the supervision of, and the participation of, our management, including our Chief Executive Officer and Chief Financial Officer, we have conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.

 

Based on this evaluation and taking into account that certain material weaknesses existed as of December 31, 2016, our Chief Executive Officer and Chief Financial Officer have each concluded that our disclosure controls and procedures were not effective. As a result of this conclusion, the financial statements for the period covered by this Quarterly Report on Form 10-Q were prepared with particular attention to the material weaknesses previously disclosed. Notwithstanding the material weaknesses in internal controls that continue to exist as of March 31, 2017, we have concluded that the financial statements included in this Quarterly Report on Form 10-Q present fairly, the financial position, results of operations and cash flows of the Company as required for interim financial statements.

 

Due to the small number of employees dealing with general administrative and financial matters and the expenses associated with increases to remediate the disclosure controls and procedures that have been identified, the Company continued to operate without changes to its internal controls over financial reporting for the period covered by this Quarterly Report on Form 10-Q while continuing to seek the expertise it needs to remediate the material weaknesses at an appropriate cost benefit basis.

 

PART II. OTHER

INFORMATION

 

Item 1.  Legal Proceedings

 

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 Standard Metals 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, Standard Metals filed an Answer and a Motion to Dismiss or, Alternatively, to Stay or Transfer the action to the United States District Court for the Northern District of Alabama, Middle Division . On January 16, 2015, Standard Metals filed a Motion for Summary Judgment. On January 23, 2015, the Court issued an Order granting in part and denying in part Standard Metals’ Motion to Dismiss or, Alternatively, to Stay or Transfer the action to the United States 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 Standard Metals’ 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. Standard Metals Processing, Inc. intends to continue to vigorously defend against claims by Steven E. Flechner. On August 12, 2015 the United Stated 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 and Flechner entered into a Settlement Agreement on November 24, 2015, which is no longer in effect.

 

Midwest Investment Partners, LLC v. Standard Gold Holdings, Inc.

 

On September 6, 2013, Midwest Investment Partners, LLC filed suit in the United States District Court for the Southern District of Indiana, Evansville Division against Standard Gold Holdings, Inc. alleging a breach of the Company’s obligations under a $50,000 6% Convertible Promissory Note, dated April 5, 2011, and a $25,000 6% Convertible Promissory Note, dated September 2, 2011, by (i) failing to repay the April 5, 2011 Note when due on October 6, 2011, and (ii) failing to repay the September 2, 2011 Note when due on February 29, 2012. On January 10, 2014, Standard Gold filed an Answer with Affirmative and Other Defenses to Midwest’s Complaint and Demand for Jury Trial. On April 3, 2014, Midwest filed a Motion for Summary Judgment. On August 28, 2014, the Court entered an Order granting Midwest’s Motion for Summary Judgment and closed judgment in favor of Midwest against Standard Gold. On November 23, 2015, the parties executed a Settlement Agreement wherein the Company would pay or cause to be paid $130,000 to Midwest and issued 25,000 shares of restricted common stock to Blair Mielke. Additionally, the Company cooperated with Midwest to transfer a number of shares of stock owned by Midwest to Midwest’s investors. The remaining shares of stock owned by Midwest are subject to a lock up, leak out agreement. This settlement agreement settles both this action and the Blair Mielke action previously disclosed. The Company and Midwest revised the payment schedule of their Settlement Agreement. During the period ended March 31, 2017, the Company made payments of $35,000 to Midwest.

 

 

Item 1A. Risk Factors

 

The most significant risk factors applicable to the Company are described in Part I Item 1A entitled “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (the “2015 Form 10-K”). There have been no material changes to the risk factors previously disclosed in the 2015 Form 10-K. The risks described in the 2015 Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to management may materially adversely affect the Company’s business, financial condition, and/or operating results.

 

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

 

Promissory Notes

 

On March 14, 2017 the Company received $60,000, on April 18, 2017, the Company issued a promissory note in the amount of $60,000, interest accrues at 6% per annum and is due one year from the date of issuance. The note is convertible into shares of common stock at $0.075 per share.

 

On February 15, 2017 and March 1, 2017 the Company issued convertible promissory notes in the aggregate principal amount of $60,000. The notes are due one year after issuance, accrues interest at 6% per annum and is convertible into shares of common stock at a price of $0.06 per share.

 

On March 7, 2017, convertible promissory notes payable totaling $64,174 and accrued interest were converted into 3,008,712 shares of restricted common stock.

 

Sales of the securities identified above were made pursuant to privately negotiated transactions that did not involve a public offering of securities and, accordingly, we believe that these transactions were exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof and rules promulgated thereunder, Based on representations from the above-referenced investors, we have determined that such investors were “accredited investors” (as defined by Rule 501 under the Securities Act) and are acquiring the securities for investment and not distribution, and that they could bear the risks of the investment and could hold the securities for an indefinite period of time, The investors received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration or an available exemption from such registration, All of the foregoing securities are deemed restricted securities for purposes of the Securities Act.

 

Item 3.  Defaults Upon Senior Securities

 

None.

 

Item 4.  Mine Safety Disclosures

 

None.

 

Item 5.  Other Information

 

None.

 

 

Item 6.  Exhibits

 

Exhibit		Description
31.1**		Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2**		Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS**		XBRL Instance Document
101.SCH**		XBRL Taxonomy Extension Schema
101.CAL**		XBRL Taxonomy Extension Calculation
101.DEF**		XBRL Taxonomy Extension Definition
101.LAB**		XBRL Taxonomy Extension Label
101.PRE**		XBRL Taxonomy Extension Presentation

 

** Filed herewith electronically

 

 

SIGNATURES

 

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	Standard Metals Processing, Inc.
Date:    May 11, 2017
	By:	/s/ J. Bryan Read
		J. Bryan Read
		Chief Executive Officer
	By:	/s/ Sharon Ullman
		Sharon Ullman
		Chief Financial Officer