ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Plan of Operation
Idaho Strategic Resources, Inc. is a gold producer focused on diversifying and building its asset base and cash flows through a portfolio of mineral properties located in historic producing gold districts in Idaho and Montana.
The Company’s plan of operation is to generate positive cash flow, increase its gold production and asset base over time while being mindful of corporate overhead. The Company’s management is focused on utilizing its in-house technical and operating skills to build a portfolio of producing mines and milling operations with a focus on gold and exploration for Rare Earth elements (REE).
The Company’s properties include: the Golden Chest Mine (currently in production), and the New Jersey Mill (majority ownership interest). Recently, the Company added three rare earth element properties in Idaho to its portfolio of exploration properties in an effort to diversify its holdings towards the anticipated demand for these elements in the electrification of motorized vehicles.
Critical Accounting Estimates
The SEC has requested that all registrants address their most critical accounting policies. The SEC has indicated that a “critical accounting policy” is one which is both important to the representation of the registrant’s financial condition and results and requires management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We base our estimates on past experience and on various other assumptions our management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results will differ and may differ materially from these estimates under different assumptions or conditions. Additionally, changes in accounting estimates could occur in the future from period to period. Our management has discussed the development and selection of our most critical financial estimates with the Audit and Finance Committee of our Board of Directors. The following paragraphs identify our most critical accounting policies:
Our concentrate sales sometimes involve variable consideration, as they can be subject to changes in metals prices between the time of shipment and their final settlement. However, we are able to reasonably estimate the transaction price for the concentrate sales at the time of shipment using forward prices for the estimated month of settlement, and previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement for financial reporting purposes. The embedded derivative contained in our concentrate sales is adjusted to fair value through earnings each period prior to final settlement. It is unlikely a significant reversal of revenue for any one concentrate lot will occur. As such, we use the expected value method to price the concentrate until the final settlement date occurs, at which time the final transaction price is known. At December 31, 2022, metals that had been sold but not final settled included 5,361 ounces of gold of which 2,500 ounces were sold at a predetermined price with the remaining 2,861 ounces exposed to future price changes. The Company has received provisional payments on the sale of these ounces with the remaining amount due reflected in gold sales receivable.
The asset retirement obligation and asset on our balance sheet is based on an estimate of the future cost to recover and remediate our properties as required by our permits upon cessation of our operations and may differ when we cease operations. At December 31, 2022, we made an estimate that the cost of the machine and man hours probable to be needed to put our properties in the condition required by our permits once we cease operations would be $103,906 for the Golden Chest property and $203,600 for the New Jersey Mine and Mill. For purposes of the estimate, we evaluated the expected life in years and costs that, initially, are comparable to rates that we would incur at the present. We are adding to the liability each year, and amortizing the asset over the estimated life, which decreases our net income in total each year. We make periodic reviews of the remaining life of the mine and other operations, and the estimated remediation costs upon closure, and adjust our account balances accordingly. At this time, we think that an adjustment in our asset recovery obligation is not required, and an adjustment in future periods would not have a material impact in the year of adjustment but would change the amount of the annual accretion and amortization costs charged to our expenses by an undetermined amount.
Highlights for 2022 include:
Table of contents
Results of Operations
Our financial performance for the years ended December 31, 2022, and 2021 is summarized below:
Table of contents
Cash Costs and All In Sustaining Costs Reconciliation to GAAP
Reconciliation of cost of sales and other direct production costs and depreciation, depletion, and amortization (GAAP) to cash cost per ounce and all-in sustaining costs (AISC) per ounce (non-GAAP).
The table below presents reconciliations between the most comparable GAAP measure of cost of sales and other direct production costs and depreciation, depletion, and amortization to the non-GAAP measures of cash cost per ounce produced and all in sustaining costs per ounce produced for the Company’s gold production for the years ended December 31, 2022, and 2021. The cost per ounce calculations are based on ounces produced. Upon sale, the Company typically receives payment at an average rate of 87% of ounces produced after smelting and refining charges are deducted.
Cash cost per ounce is an important operating measure that we utilize to measure operating performance. AISC per ounce is an important measure that we utilize to assess net cash flow after costs for pre-development, exploration, reclamation, and sustaining capital. Current GAAP measures used in the mining industry, such as cost of goods sold do not capture all the expenditures incurred to discover, develop, and sustain gold production.
December 31,
Depreciation, depletion, and amortization (984,083 ) (814,422 )
Less stock-based compensation and other non-cash items (649,409 ) (1,153,466 )
All in sustaining cost (AISC) per ounce $ 1,777.14 $ 1,818.22
Financial Condition and Liquidity
For the Years Ended December 31,
Net change in cash and cash equivalents (338,487 ) (563,427 )
The Company has accumulated deficit of approximately $18.4 million at December 31, 2022 and incurred a consolidated net loss in 2022 of $2,631,092. The Company’s working capital at December 31, 2022 is $1,729,983. The Company is currently producing from the open-pit and underground at the Golden Chest. During 2022, production generated negative cash flow from operations of $1,817,090 compared to a negative cash flow used in operations of $1,351,027 in 2021. Planned production for the next 18 months indicates a positive cash flow from operations will be renewed as underground mining overtakes the open pit as the primary source of mineralized material. In prior years, the Company has been successful in raising required funds for ongoing operations from sale of its common stock or borrowing. Management believes it has the ability to meet its contractual obligations with continuing cash flows from operations, existing cash, and potential financings for the next 18 months.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
Table of contents
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the board of directors of Idaho Strategic Resources, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Idaho Strategic Resources, Inc. (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as ofDecember 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
The Impact of Ore Reserves on Mineral Properties
As discussed in Note 2 to the consolidated financial statements, the Company’s ore reserves are estimated by management’s specialists based on the amount of metals that could be economically and legally extracted or produced at the time of the reserve determination. Management’s calculations of ore reserves are based on financial, engineering and geological estimates, including future metals prices and operating costs.
We identified the assessment of the impact of ore reserves as a critical audit matter. Costs of developing ore reserves are capitalized and amortized using the units-of-production method over estimated recoverable reserves. Reserves also serve as the basis for assessing the recoverability of the carrying value of Company’s mineral properties.
The reserve estimates are based on several significant assumptions that are developed internally by management’s specialists, including the amount of metals to be extracted, future operating costs, and estimated future capital expenditures. Auditing these elements involved especially challenging and subjective auditor judgment due to the nature and extent of audit effort required to address these matters.
Table of contents
The primary procedures we performed to address this critical audit matter included:
Assure CPA, LLC
We have served as the Company's independent auditor since 2003.
Spokane, Washington
March 31, 2023
Firm ID 444
Table of contents
Idaho Strategic Resources, Inc.
Table of Contents
Page
Notes to Financial Statements 50-62
Table of Contents
ASSETS
Current assets:
Mineral properties, net of accumulated amortization 6,527,561 5,843,186
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable related parties, current portion 12,226 10,543
Commitments and Contingencies - -
Stockholders’ equity:
The accompanying notes are an integral part of these consolidated financial statements.
Table of Contents
Cost of sales:
Other operating expenses:
Loss on write-off of equipment 68,641 -
Other (income) expense:
Gain on forgiveness of SBA loan (10,000 ) -
Equity income on investment in Buckskin (1,524 ) (3,782 )
Timber revenue - (4,338 )
Net loss attributable to non-controlling interest (95,663 ) (100,192 )
Net loss per common share-basic and diluted $ (0.22 ) $ (0.31 )
The accompanying notes are an integral part of these consolidated financial statements.
Table of Contents
Issuance of common stock for cashless option exercise 70,725 - - - -
Issuance of common stock for cashless option exercise 66,995 - - - -
The accompanying notes are an integral part of these consolidated financial statements.
Table of Contents
Cash flows from operating activities:
Adjustments to reconcile net loss to net cash used by operating activities:
Accretion of asset retirement obligation 12,691 9,953
Loss on write-off of equipment 68,641 -
Equity income on investment in Buckskin (1,524 ) (3,782 )
Gain on forgiveness of SBA loan (10,000 ) -
Change in operating assets and liabilities:
Joint venture receivable 2,516 (265 )
Accounts payable and accrued expenses (63,062 ) (33,894 )
Accrued payroll and related payroll expenses 5,039 30,625
Cash flows from investing activities:
Purchases of property, plant, and equipment (1,441,874 ) (664,645 )
Purchase of reclamation bonds (223,700 ) -
Cash flows from financing activities:
Sales of common stock and warrants, net of issuance costs 3,681,107 2,580,000
Principal payments on notes, related parties (41,428 ) (37,701 )
Issuance of convertible debt - 1,750,000
Contributions from non-controlling interest 39,494 41,305
Net change in cash and cash equivalents (338,487 ) (563,427 )
Supplemental disclosure of cash flow information:
Interest paid in cash, net of amount capitalized $ 98,218 $ 202,122
Non-cash investing and financing activities:
Deposit applied to purchase of equipment and mineral property $ 11,694 $ 12,863
Common stock issued for investment in Buckskin - 328,946
The accompanying notes are an integral part of these consolidated financial statements.
Table of Contents
Idaho Strategic Resources, Inc.
Notes to Consolidated Financial Statements
1. Description of Business
Idaho Strategic Resources, Inc. (“the Company”) was incorporated as an Idaho corporation on July 18, 1996, as New Jersey Mining Company. On December 6, 2021, New Jersey Mining Company changed its name to Idaho Strategic Resources Inc. and also finalized a 1 for 14 reverse stock split of its common stock as previously approved by shareholders at a Special Meeting of the Shareholders held on October 6, 2021. On the date of the reverse stock split, every fourteen (14) shares of New Jersey Mining Company were automatically converted into one issued and outstanding share of Idaho Strategic Resources, Inc. common stock without any change in the par value per share. The Company's primary business is exploring for, developing, and extracting gold, and to a lesser extent, silver, and base metal mineral resources in the Greater Coeur d’Alene Mining District of North Idaho. From an operational perspective, the Company produces gold at the Golden Chest Mine located in the Murray Gold Belt (MGB) area of the world-class Coeur d’Alene Mining District, north of the prolific Silver Valley. With over 7,000 acres of patented and unpatented land, the Company has the largest private land position in the area following its consolidation of the Murray Gold Belt for the first time in over 100-years.
The Company also has an expanded focus on identifying and exploring Critical Minerals (Rare Earth Minerals). Its business strategy is to grow its asset base and mineral production over time while advancing its Rare Earth Element projects. In addition to gold and gold production, the Company maintains an important strategic presence in the U.S. Critical Minerals sector, specifically focused on the more “at-risk” Rare Earth Elements (REE’s). The Company’s Diamond Creek and Roberts REE properties are included the U.S. national REE inventory as listed in USGS, IGS and DOE publications. Both projects are in central Idaho and participating in the USGS Earth MRI program, with the Diamond Creek Project also participating in the Idaho Department of Commerce’s IGEM program.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its majority-owned subsidiary, the New Jersey Mill Joint Venture (“NJMJV”). Intercompany accounts and transactions are eliminated. The portion of NJMJV partially owned by another investor is presented as non-controlling interest on the consolidated balance sheets, statements of operations, and statement of changes in stockholders’ equity.
Accounting for Investments in Joint Ventures and Equity Method Investments
Investment in Joint Ventures
For joint ventures where the Company holds more than 50% of the voting interest and has significant influence, the joint venture is consolidated with the presentation of non-controlling interest. In determining whether significant influence exists, the Company considers its participation in policy-making decisions and its representation on the venture’s management committee.
For joint ventures in which the Company does not have joint control or significant influence, the cost method is used. For those joint ventures in which there is joint control between the parties, the equity method is utilized whereby the Company’s share of the ventures’ earnings and losses is included in the statement of operations as earnings in joint ventures and its investments therein are adjusted by a similar amount. The Company periodically assesses its investments in joint ventures for impairment. If management determines that a decline in fair value is other than temporary it will write-down the investment and charge the impairment against operations.
Equity Method Investments
Investments in companies and joint ventures in which we have the ability to exercise significant influence, but do not control, are accounted for under the equity method of accounting. In determining whether significant influence exists, the Company considers its participation in policy-making decisions and representation on governing bodies. Under the equity method of accounting, our share of the net earnings or losses of the investee are included in net income (loss) in the consolidated statements of operations. Upon investment, the Company assesses whether a step up in basis of the investee’s net assets has occurred and, if so, adjust our share of net earnings or losses by related depreciation and amortization expense. We evaluate equity method investments whenever events or changes in circumstance indicate the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period. As changes in ownership percentage of our investments occur, the Company assesses whether we can exercise significant influence and account for under the equity method. If our ownership percentage of the company or venture in which we have an investment changes, we recognize a gain or loss on the investment in the period of change. At December 31, 2022, the Company's 37% common stock holding of Buckskin Gold and Silver, Inc. is accounted for using the equity method (Note 9).
Table of Contents
Idaho Strategic Resources, Inc.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies (continued)
At December 31, 2022 and 2021, the Company’s percentage ownership and method of accounting for each joint venture and equity method investment is as follows:
NJMJV 65% Yes Consolidated 65% Yes Consolidated
Butte Highlands Joint Venture (“BHJV”) 50% No Cost 50% No Cost
Buckskin Gold and Silver 37% Yes Equity 37% Yes Equity
Non-controlling Interest
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Company’s stockholders’ equity and its net income (loss). Non-controlling interests represent non-controlling investor’s initial contribution at the date of the original acquisition, ongoing contributions, and percentage share of earnings since inception.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes for items such as mineral reserves, depreciation lives and methods, potential impairment of long-lived assets, deferred income taxes, settlement pricing of gold sales, fair value of stock based compensation, estimation of asset retirement obligations and reclamation liabilities. Estimates are based on historical experience and various other assumptions that the Company believes to be reasonable. Actual results could differ from those estimates.
Revenue Recognition
Gold Revenue Recognition and Receivables-Sales of gold sold directly to customers are recorded as revenues and receivables upon completion of the performance obligations and transfer of control of the product to the customer. For concentrate sales, the performance obligation is met, the transaction price can be reasonably estimated, and revenue is recognized generally at the time of shipment at estimated forward prices for the anticipated month of settlement. The embedded derivative contained in our concentrate sales is adjusted to fair value through earnings each period prior to final settlement. Due to the time elapsed from shipment to the customer and the final settlement with the customer, prices at which sales of our concentrates will be settled are estimated. Previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement by the customer. For sales of dore’ and metals from doré, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of control of the agreed-upon metal quantities to the customer by the refiner.
Sales and accounts receivable for concentrate shipments are recorded net of charges by the customer for treatment, refining, smelting losses, and other charges negotiated with the customers. Charges are estimated upon shipment of concentrates based on contractual terms, and actual charges typically do not vary materially from estimates. Costs charged by customers include fixed costs per ton of concentrate and price escalators. Refining, selling, and shipping costs related to sales of doré and metals from doré are recorded to cost of sales as incurred. See Note 13 for more information on our sales of products.
Other Revenue Recognition-Revenue from harvest of raw timber is recognized when the performance obligation under a contract and transfer of control have both been completed. Sales of timber found on the Company’s mineral properties are not a part of normal operations.
Inventories
Inventories include concentrate inventory and supplies inventory. Concentrate inventory is valued at the lower of full cost of production or estimated net realizable value based on current metal prices. Costs consist of mining, transportation, royalties, and milling costs including applicable overhead, depreciation, depletion, and amortization relating to the operations. Costs are allocated based on the stage at which the ore is in the production process. Supplies inventory is stated at the lower of first-in, first-out weighted average cost or estimated net realizable value.
Table of Contents
Idaho Strategic Resources, Inc.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies (continued)
Income Taxes
Income taxes are recognized in accordance with Accounting Standards Codification (“ASC”) 740 Income Taxes, whereby deferred income tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.
Uncertain tax positions are evaluated in a two-step process, whereby (i) it is determined whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the related tax authority would be recognized.
Fair Value Measurements
When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period are included in earnings that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date. At December 31, 2022 and 2021, the Company did not have any assets or liabilities that were valued at a fair value measurement other than its gold sales receivable. Due to the time elapsed from shipment to the customer and the final settlement with the customer, management must estimate the prices at which sales of gold concentrates will be settled. Previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement by the customer. See Note 13 for further information.
Financial Instruments
The carrying amounts of financial instruments including cash and cash equivalents, reclamation bond, notes payable to related parties, and notes payable approximate their fair values. The fair value of the convertible notes payable at December 31, 2021 was $2,922,923 based on the convertible rate and the trading price of the Company’s stock at December 31, 2021. No convertible debt was outstanding on December 31, 2022.
Net Income (Loss) Per Share
Net income (loss) per share is computed by dividing net income (loss) attributable to the Company excluding net income (loss) attributable to a non-controlling interest by the weighted average number of common shares outstanding during the year. Diluted net income (loss) per share reflects the potential dilution that could occur from common shares issuable through stock options, warrants, and other convertible securities. For the years ended December 31, 2022, and 2021, potentially dilutive common stock equivalents excluded from the calculation of diluted earnings per share as their effect would have been anti-dilutive are as follows:
Reclassifications
Certain prior period amounts have been reclassified to conform to the 2022 financial statement presentation. Reclassifications had no effect on net income (loss), stockholders' equity, or cash flows as previously reported.
Cash and Cash Equivalents
The Company considers cash in banks and other deposits with an original maturity of three months or less when purchased to be cash and cash equivalents. These deposit balances may at times exceed federally insured limits. No losses have been recognized because of these balances.
Table of Contents
Idaho Strategic Resources, Inc.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies (continued)
Property, Plant and Equipment
Property, plant, and equipment are stated at cost. Depreciation and amortization are based on the estimated useful lives of the assets and are computed using straight-line or units-of-production methods. The expected useful lives of most of the Company’s buildings are up to 50 years and equipment life expectancy ranges between 2 and 10 years. When assets are retired or sold, the costs and related allowances for depreciation and amortization are eliminated from the accounts and any resulting gain or loss is reflected in operations.
Mineral Properties
Significant payments related to the acquisition of mineral properties, mineral rights, and mineral leases are capitalized. If a commercially mineable ore body is discovered, such costs are amortized when production begins using the units-of-production method based on estimated reserves. If no commercially mineable ore body is discovered, or such rights are otherwise determined to have no value, such costs are expensed in the period in which it is determined the property has no future economic value.
Consideration received by the Company pursuant to joint ventures or mineral interest agreements is applied against the carrying value of the related mineral interest. When and if payments received exceed the carrying value, the excess amount is recognized as a gain in the consolidated statement of operations in the period the consideration is received.
Interest Capitalization
When capital projects are funded within the reporting period for which cash is paid which could have been used for debt reduction an amount equal to a weighted average interest rate of qualifying outstanding debt of the capital project expenditure in interest expense is capitalized.
Mine Exploration and Development Costs
The Company expenses exploration costs as such in the period they occur. The mine development stage begins once the Company identifies ore reserves which is based on a determination whether an ore body can be economically developed. Expenditures incurred during the development stage are capitalized as deferred development costs and include such costs for drifts, ramps, and infrastructure. Costs to improve, alter, or rehabilitate primary development assets which appreciably extend the life, increase capacity, or improve the efficiency or safety of such assets are also capitalized. The development stage ends when the production stage of ore reserves begins. Amortization of deferred development costs is calculated using the units-of-production method over the expected life of the operation based on the estimated recoverable mineral ounces.
Claim Fees
Unpatented claim fees paid at time of staking are expensed when incurred. Recurring renewal fees which are paid annually are recorded as other current assets and expensed over the course of the year.
Impairment of Long-Lived Assets
The Company evaluates the carrying amounts of its long-lived assets for impairment whenever events and circumstances indicate the carrying value may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. Estimated undiscounted future net cash flows from each mineral property are calculated using estimated future production, three-year average metals prices, operating capital and costs, and reclamations costs. An impairment loss is recognized when the estimated discounted future cash flows expected to result from the use of an asset are less than the carrying amount of the specific asset group. The Company’s estimates of future cash flows are subject to risks and uncertainties. It is reasonably possible that changes in estimates could occur which may affect the expected recoverability of the Company’s investments in mineral properties.
Table of Contents
Idaho Strategic Resources, Inc.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies (continued)
Asset Retirement Obligations and Remediation Costs
Mineral properties are subject to standards for mine reclamation that have been established by various governmental agencies. Asset retirement obligations are related to the retirement of the mine when a contractual obligation has been established and a reasonable estimate of fair value can be determined. These obligations are initially measured at fair value with the resulting cost recognized at the present value of estimated reclamation costs The liability is accreted, and the asset amortized over the life of the related asset. Adjustments are made for changes resulting from either the timing or amount of the original estimate underlying the obligation. Separate from asset retirement obligations, the Company records liability for remediation costs when a reasonable estimate of fair value can be determined. Accrued remediation costs are not discounted.
Reclamation Bond
Various laws and permits require that financial assurances be in place for certain environmental and reclamation obligations and other potential liabilities. At December 31, 2021 the Company had a $103,320 reclamation bond for the Golden Chest Mine. In 2022 the Company added additional bonds of $132,000 associated with milling operations, and an additional $91,700 in bonds for various exploration and drilling projects for a total reclamation bond balance at December 31, 2022 of $327,020.
Stock Based Compensation
All transactions in which goods or services are received for the issuance of shares of the Company’s common stock or options to purchase shares of common stock are measured at fair value of the equity interest issued. The fair value of common stock awards is determined based upon the closing price of the Company’s stock on the date of the award. The Company estimates the fair value of stock-based compensation of options using the Black-Scholes model, which requires the input of some subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (“expected life”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”), the risk-free interest rate and the dividend yield. Changes in the subjective assumptions can materially affect the estimate of the fair value of stock-based compensation. Any forfeitures of stock options are recognized as they occur.
Going Concern
The Company is currently producing from both the open-pit and underground at the Golden Chest Mine. In the past, the Company has been successful in raising required capital from sale of common stock, forward gold contracts, and debt. As a result of its planned production, equity sales and potential debt borrowings or restructurings, management believes cash flows from operations and existing cash are sufficient to conduct planned operations and meet contractual obligations for the next 12 months.
Recent Accounting Pronouncements
Accounting Standards Updates Adopted
In August 2020, the FASB issued ASU No.2020-06Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The update is to address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. The update is effective for fiscal years beginning after December 15, 2023 for smaller reporting companies, including interim periods within those fiscal years and with early adoption permitted. The early adoption of this update on January 1, 2022, did not have a material impact on our consolidated financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
Table of Contents
Idaho Strategic Resources, Inc.
Notes to Consolidated Financial Statements
3. Inventories
At December 31, 2022 and 2021, inventories consisted of the following:
Concentrate inventory
Supplies inventory
Core drilling supplies and materials 77,570 -
4. Property, Plant and Equipment
Property, plant and equipment at December 31, 2022 and 2021 consisted of the following:
Mill
Buildings and equipment
Land
5. Mineral Properties
Mineral properties at December 31, 2022 and 2021 are as follows:
Golden Chest
For the years ended December 31, 2022 and 2021, $48,281 and $49,273, respectively, of interest expense was capitalized in association with the ramp access project at the Golden Chest.
Golden Chest
The Golden Chest is an open pit and underground mine project currently producing for the Company located near Murray, Idaho consisting of 86 patented and 217 unpatented mining claims. A 2% Net Smelter Royalty is payable on production at certain portions of the Golden Chest to a former joint venture partner. Royalty expense of $181,300 and $151,763 was recognized as costs of sales and other direct production costs in the years ended December 31, 2022, and 2021, respectively.
New Jersey
The Coleman property is located at the New Jersey Mine area of interest and consists of 62 acres of patented mining claims, mineral rights to 108 acres of fee land, 80 acres of land for which the Company owns the surface but not the mineral rights, and approximately 130 acres of unpatented mining claims.
McKinley-Monarch
The McKinley-Monarch project is located near the town of Lucille, Idaho. The project consists of 28 unpatented claims totaling 560 acres. The Company started exploring the property in 2013.
Butte Gulch
In 2018, the Company purchased the Butte Gulch property near its Golden Chest mine. This property consists of 177 acres of patented mining claims some of which include both the surface and mineral rights and some of which include only the mineral rights. There is an underlying 2% net smelter return on all ores mined and shipped from any lode production from the patented claims on the Butte property.
Potosi
In 2018, the Company purchased the Potosi property near its Golden Chest mine. This property consists of 71 acres of patented mining claims.
Park Copper
In August 2021, the Company paid $78,000 in cash for 100 acres of patented mineral property in Shoshone County referred to as Park Copper.
Table of Contents
Idaho Strategic Resources, Inc.
Notes to Consolidated Financial Statements
6. Notes Payable
At December 31, 2022 and 2021, notes payable are as follows:
Table of Contents
Idaho Strategic Resources, Inc.
Notes to Consolidated Financial Statements
6. Notes Payable, continued
All notes are collateralized by the property or equipment purchased in connection with each note. Future principal payments of debt at December 31, 2022 are as follows:
In the second quarter of 2020 the Company received a loan of $149,900 pursuant to the Small Business Act Section 7(b). The loan which was in the form of a Note dated May 16, 2020, matures May 16, 2050, and bears interest at a rate of 3.75% per annum. Payments of $731 are due monthly began in November 2022. At December 31, 2022 and 2021 accrued interest on the loan was $13,925 and $9,311, respectively and is included in the Small Business Administration Loan balance on the previous page. In the second quarter of 2022, it was determined that an additional $10,000 also received in the second quarter of 2020 was a grant that was forgiven as part of the Covid-19 relief program. This $10,000 was recorded as a gain on forgiveness of the SBA loan in the statement of operations during the second quarter of 2022.
7. Asset Retirement Obligations
The Company has established asset retirement obligations associated with the ultimate closing of its mineral properties where there has been or currently is operations. Obligations were established for the New Jersey mill in 2014 and the Golden Chest mine in 2016. Activity for the years ended December 31, 2022 and 2021 is as follows:
Change in asset retirement obligation estimate 77,178 (10,606 )
The change in the asset retirement obligation estimate during the year ended December 31, 2022 related to the addition of and asset retirement obligation with our New Jersey Mill Tailings expansion and a revision to the estimated start of the reclamation process to a later date at our Golden Chest properties. The change in the asset retirement obligation estimate during the year ended December 31, 2021 related to a revision to the estimated start of the reclamation process to a later date at our Golden Chest properties.
8. Joint Venture Arrangements
New Jersey Mill Venture Agreement (“NJMJV”)
In January 2011, the Company and United Mine Services, Inc. (“UMS”) now Crescent Silver, LLC (Crescent) entered into a joint venture agreement relating to the New Jersey mineral processing plant. To earn a 35 percent interest in the venture, UMS provided $3.2 million funding to expand the processing plant to 15 tonnes/hr. The Company is the operator of the venture and charges operating costs to Crescent for milling its ore up to 7,000 tonnes/month, retain a milling capacity of 3,000 tonnes/month, and as the operator of the venture receive a fee of $2.50/tonne milled. No ore has been milled for Crescent in the last two years. As of December 31, 2022 and 2021, an account receivable existed with the Mill Joint Venture from Crescent for $1,926 and $4,442, respectively.
Butte Highlands Joint Venture
On January 29, 2016, the Company purchased a 50% interest in Butte Highlands JV, LLC (“BHJV”) for a total consideration of $435,000. Highland Mining, LLC (“Highland”) is the other 50% owner and manager of the joint venture. Under the operating agreement, Highland will fund all future project exploration and mine development costs. The Agreement stipulates that Highland is manager of BHJV and will manage BHJV until such time as all mine development costs, less $2 million are distributed to Highland out of the proceeds from future mine production. The Company has determined that because it does not currently have significant influence over the joint venture’s activities, it will account for its investment on a cost basis.
Table of Contents
Idaho Strategic Resources, Inc.
Notes to Consolidated Financial Statements
9. Investment in Buckskin
In August 2021 the Company exchanged 45,940 shares of the Company’s common stock for 22% of Buckskin Gold and Silver Inc. (“Buckskin”). The Company’s closing share price on the date of the agreement (August 18, 2021) was recorded as the cost basis for the investment. In October 2021 the Company exchanged an additional 30,358 shares of the Company’s common stock for an additional 15% of Buckskin. The Company’s closing share price on the date of the exchange (October 15, 2021) was recorded as the cost basis for the investment addition. This investment in Buckskin is being accounted for using the equity method and resulted in recognition of equity income on the investment of $1,524 and $3,782 during the years ended December 31, 2022 and 2021, respectively. The Company makes an annual payment of $12,000 to Buckskin per a lease covering 218 acres of patented mining claims. As of December 31, 2022, the Company holds 37% of Buckskins outstanding shares.
10. Income Taxes
The Company did not recognize a provision (benefit) for income taxes for the years ended December 31, 2022 and 2021.
The significant components of net deferred tax assets at December 31, 2022 and 2021 were as follows:
Deferred tax assets
Asset retirement obligation - 4,600
Deferred tax liabilities
Asset retirement obligation (1,500 ) -
Net deferred tax assets $ - $ -
At December 31, 2022 and 2021, the Company had net deferred tax assets principally arising from the net operating loss carryforward for income tax purposes. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the deferred tax assets, a valuation allowance equal to 100% of the net deferred tax asset exists at December 31, 2022 and 2021.
At December 31, 2022, the Company had net operating loss carry forwards of approximately $20,778,000 for both federal and state purposes, $11,100,000 of which expire between 2021 through 2037. The remaining balance of $9,678,000 will never expire but its utilization is limited to 80% of taxable income in any future year.
The income tax provision (benefit) for the years ended December 31, 2022 and 2021 differ from the statutory rate of 21% as follows:
Provision (benefit) at statutory rate for the period $ (552,500 ) $ (683,600 )
Adjustment of prior year tax estimates (458,900 ) 73,100
Total provision (benefit) $ - $ -
The Company is open to examination of our income tax filings in the United States and state jurisdictions for the 2020 through 2022 tax years. Tax attributes from years prior to that can be adjusted as a result of examinations. In the event that the Company is assessed penalties and or interest, penalties will be charged to other operating expense and interest will be charged to interest expense. The Company has reviewed its tax positions and believes it has not taken a position that would not be sustained under examination.
Table of Contents
Idaho Strategic Resources, Inc.
Notes to Consolidated Financial Statements
11. Equity
The Company has authorized 200,000,000 shares of no-par common stock at December 31, 2022 and 2021. In addition, the Company has authorized 1,000,000 shares of no-par preferred stock, none of which had been issued at December 31, 2022 or 2021.
Stock Purchase Warrants Outstanding
Transactions in common stock purchase warrants for the years ended December 31, 2022 and 2021 are as follows:
Number of Warrants Exercise Prices
These warrants expire as follows:
Shares Exercise Price Expiration Date
Stock Options
In April 2014, the Board of Directors of the Company established a stock option plan to authorize the granting of stock options to officers and employees. Upon exercise of the options, shares are issued from the available authorized shares of the Company. Options reserved to any one related person on an annual basis may not, upon exercise, exceed 5% and the aggregate number of all options outstanding will not exceed 10% of the issued outstanding common shares in total as calculated at that time.
In September 2022, the board granted 165,000 stock options to officers, board members and employees. These options vested immediately and are exercisable at $5.25 for 3 years. Total stock-based compensation recognized on these options was $505,476 and was recognized in management ($64,333), professional services ($27,571), and general and administrative ($413,572) expenses in the consolidated statement of operations. In September 2022, the board granted an additional 15,000 stock options, 7,500 each to our independent board members. These options vested immediately and are exercisable at $4.75 for 3 years. Total stock-based compensation recognized on these options was $41,799 and was recognized in management expenses in the consolidated statement of operations.
In February 2021, the board granted 283,936 stock options to officers, board members, and employees. These options vested immediately and are exercisable at $5.60 for 3 years. Total stock-based compensation recognized on these options was $604,572 and was recognized in management ($147,457), professional services ($44,237), and general and administrative ($412,878) expenses in the consolidated statement of operations. In March 2021, the Company granted 3,572 stock options to an individual for services rendered to the Company. These options vested immediately and are exercisable at $5.60 for 3 years. Total stock-based compensation recognized on these options was $9,860. In October 2021 the Company granted 182,166 stock options to officers, board members, and employees. These options vested immediately and are exercisable at $5.60 for 3 years. Total stock-based compensation recognized on these options was $473,143 and was recognized in management ($92,772), professional services ($27,832), and general and administrative ($352,539) expenses in the consolidated statement of operations. An additional 32 options were recorded in 2021 representing fractional share issuances related to the 1-14 reverse stock split.
The fair value of stock option awards granted, and the key assumptions used in the Black-Scholes valuation model to calculate the fair value of the options are as follows:
Table of Contents
Idaho Strategic Resources, Inc.
Notes to Consolidated Financial Statements
11. Equity, continued
Transactions in stock options for the years ended December 31, 2022, and 2021 are as follows:
Number of Options Weighted Average Exercise Prices
At December 31, 2022 and 2021, the outstanding stock options have an intrinsic value of approximately $123,045 ($1,108,000 in 2021) and have a weighted average remaining term of 1.82 years (2.2 in 2021). Cashless options exercised in the year ended December 31, 2022 had an intrinsic value of $677,928 ($445,290 in 2021).
12. Related Party Transactions
At December 31, 2022 and 2021, the Company had a note payable to Ophir Holdings, LLC, a company owned by two officers and one former officer of the Company, at 6% interest, with monthly payments of $3,777 and a balloon payment of $60,871 in February 2024 The balance due on the note was $75,183 and $116,611 at December 31, 2022 and 2021, respectively. At December 31, 2022, $12,226 of related party debt is payable in 2023 and the remaining $62,957 is payable in 2024. Related party interest expense for the years ending December 31, 2022 and 2021 was $3,901 and $7,627, respectively. No interest was accrued at the end of either period.
The Company leases office space from certain related parties on a month-to-month basis. Payments under these short-term lease arrangements totaled $24,868 and $25,008 for the years ended December 31, 2022 and 2021, respectively, and are included in general and administrative expenses on the consolidated statement of operations.
Table of Contents
Idaho Strategic Resources, Inc.
Notes to Consolidated Financial Statements
13. Sales of Products
Our products consist of both gold flotation concentrates which in 2021 and 2022 we sold to a broker (H&H Metals), and an unrefined gold-silver product known as doré which we sell to a precious metal refinery. Revenue is recognized upon the completion of the performance obligations and transfer of control of the product to the customer, and the transaction price can be determined or reasonably estimated.
For gold flotation concentrate sales, the performance obligation is met when the transaction price can be reasonably estimated, and revenue is recognized generally at the time when risk is transferred to H&H Metals based on contractual terms. Based on contractual terms, the Company has determined the performance obligation is met and title is transferred to H&H Metals when the Company receives its first provisional payment on the concentrate because, at that time, 1) legal title is transferred to the customer, 2) the customer has accepted the concentrate lot and obtained the ability to realize all of the benefits from the product, 3) the concentrate content specifications are known, have been communicated to H&H Metals, and H&H Metals has the significant risks and rewards of ownership to it, 4) it is very unlikely a concentrate will be rejected by H&H Metals upon physical receipt, and 5) we have the right to payment for the concentrate. Concentrates lots that have been sold are held at our mill up to 60 days, until H&H Metals provides shipping instructions.
Our concentrate sales sometimes involve variable consideration, as they can be subject to changes in metals prices between the time of shipment and their final settlement. However, we can reasonably estimate the transaction price for the concentrate sales at the time of shipment using forward prices for the estimated month of settlement, and previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement for financial reporting purposes. The embedded derivative contained in our concentrate sales is adjusted to fair value through earnings each period prior to final settlement. It is unlikely a significant reversal of revenue for any one concentrate lot will occur. As such, we use the expected value method to price the concentrate until the final settlement date occurs, at which time the final transaction price is known. At December 31, 2022, metals that had been sold but not final settled included 5,361 ounces of gold of which 2,500 ounces were sold at a predetermined price with the remaining 2,861 ounces exposed to future price changes. The Company has received provisional payments on the sale of these ounces with the remaining amount due reflected in gold sales receivable.
Sales and accounts receivable for concentrate shipments are recorded net of charges for treatment and other charges negotiated by us with H&H Metals, which represent components of the transaction price. Charges are estimated by us upon transfer of risk of the concentrates based on contractual terms, and actual charges typically do not vary materially from our estimates. Costs charged by the customer include fixed treatment, refining and costs per ton of concentrate and may include penalty charges for lead and zinc content above a negotiated baseline as well as excessive moisture.
For sales of doré and of metals from doré, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of control of the agreed-upon metal quantities to the customer.
Sales of products by metal for the years ended December 31, 2022 and 2021 were as follows:
Sales by significant product type for the years ended December 31, 2022 and 2021 were as follows:
In 2022, floatation concentrates sold to H&H Metals accounted 97% of all gold sales. The remaining 3% in 2022 was doré sold to a third party. In 2021, floatation concentrates sold to H&H Metals accounted 95% of all gold sales. The remaining 5% in 2021was doré sold to a third party. At December 31, 2022 and 2021, our gold sales receivable balance related to contracts with customers of $909,997 and $408,187, respectively, consist only of amounts due from H&H Metals. There is no allowance for doubtful accounts. We have determined our contracts do not include a significant financing component. For doré sales, payment is received at the time the performance obligation is satisfied. Consideration for concentrate sales is variable, and we receive payment for a significant portion of the estimated value of concentrate parcels at the time the performance obligation is satisfied.
Table of Contents
Idaho Strategic Resources, Inc.
Notes to Consolidated Financial Statements
14. Convertible Debt
In July 2020, the Company issued a convertible promissory note for a principal balance of $200,000 which funds were utilized for the purchase of a new jumbo underground drill. The note was collateralized by the drill. The outstanding principal amount of the note bore interest at an annual rate of 6.0% with interest payments due monthly and the unpaid principal due in June 2023. The principal amount of the note was convertible at the option of the note holder into shares of the Company’s common stock at a price of $5.60 per share (35,715 shares) prior to the maturity date of the note. Interest expense for this note was $4,000 and $12,000 for the years ended December 31, 2022 and 2021, respectively. This note was converted to Common shares as provided in the agreement in March 2022.
In March 2021, the Company issued convertible promissory notes of $1,750,000 from which funds were utilized for the purchase of an addition to the Golden Chest property. The notes were collateralized by the property as well as other unencumbered real property that the Company currently owns. The outstanding principal amount of the notes bore interest at an annual rate of 8.0% with interest payments due monthly and the principal due in March 2024. The principal amount of the notes was convertible at the option of the note holders into shares of the Company’s common stock at a price of $4.90 per share (357,151 shares) prior to the maturity date of the notes. Interest expense for this note was $34,521 and $109,775 for the years ended December 31, 2022 and 2021, respectively. These notes were converted to Common shares as provided in the agreement in March 2022.
15. Subsequent Events
The Company closed a private placement in February 2023. Under the private placement, the Company sold 123,365 shares at $5.50 per share and 35,088 shares at $5.70 for net proceeds of $878,509.
Table of Contents
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
At the end of the period covered by this Annual Report on Form 10-K, our President who also serves as our Chief Accounting Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, it was concluded that our disclosure controls were effective as of the end of the period covered by this report, to ensure that: (i) information required to be disclosed by the Company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within required time periods specified by the Securities & Exchange Commission rules and forms, and (ii) material information required to be disclosed in reports filed under the Exchange Act is accumulated and communicated to our management, including our President and Chief Accounting Officer, as appropriate, to allow for accurate and timely decision regarding required disclosure.
Internal Control over Financial Reporting
Management’s Annual Report on Internal Control Over Financial Reporting
The management of Idaho Strategic Resources, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. This internal control system has been designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of the Company’s published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
The management of Idaho Strategic Resources, Inc. has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022. To make this assessment, we used the criteria for effective internal control over financial reporting described in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, we believe that, as of December 31, 2022, the Company’s internal control over financial reporting is effective.
Changes in internal control over financial reporting
There was no material change in internal control over financial reporting in the quarter ended December 31, 2022.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INPECTIONS
Not applicable.
Table of Contents
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Name & Address Age Position Term
Directors are elected by shareholders at each annual shareholders meeting to hold office until the next annual meeting of shareholders or until their respective successors are elected and qualified.
Executive Officers and Key Employees
John Swallow was named Chief Executive Officer and President on January 10, 2017. Prior to being named as CEO, Mr. Swallow was appointed as the President and a Director of the Company on August 29, 2013. He resigned as president in December 2014, and subsequently reappointed as President on May 5, 2015, following the resignation of Mr. Highsmith. Following Mr. Steiner’s resignation on July 11, 2019, Mr. Swallow became the Chairman of the Board. He holds a B.S. in Finance from Arizona State University. Mr. Swallow was the Vice President of Timberline Drilling, Inc. from November 2011 until accepting the role of President with the Company. From September 2009, until November 2011, Mr. Swallow was self-employed. From January 2006 until September 2009, he served as chairman of Timberline Resources Corporation. He brings wide-ranging experience from within the local mineral exploration industry as well as extensive knowledge of the junior equity markets. Mr. Swallow’s extensive experience in the drilling industry, his previous roles as a chairman of a board and as a vice president of a corporation qualify him to sit on the Board of the Company.
Grant A. Brackebusch, P.E. has served as the Vice President and a Director of the Company since 1996. He holds a B.S. in Mining Engineering from the University of Idaho. He is registered in Idaho as a Professional Engineer. He has worked for Idaho Strategic Resources, Inc. since 1996 and worked for Newmont Mining previously. Currently, he supervises the mining operation at the Golden Chest Mine including the operation of the New Jersey Mill. He has experience with permitting, exploration, open pit, and underground mining as well as mineral processing. Mr. Brackebusch’s extensive mining background, knowledge of the Company’s daily operations, and industry expertise qualifies him to sit on the Board of the Company.
Kevin Shiell has more than 35 years of operating and management experience in the mining and mineral processing industries, primarily in Montana, Idaho, and Nevada. He has held executive leadership positions at several public companies, including General Manager and Vice President of Mine Operations at Stillwater Mining Company, Chief Operating Officer at MDM Gold, and various mine supervisory positions at Hecla Mining Company. Mr. Shiell is currently the General Manager of the Hollister and Midas Gold Mines which are owned and operated by Hecla Mines. He brings vast operational knowledge and management experience at a transformational time in the Company’s development.
Rich Beaven joined the Idaho Strategic Resources Board on January 12, 2022. Mr. Beaven is Lead Portfolio Manager and Principal at Signia Capital. Signia is a small-cap value asset manager with a largely institutional (pension fund) client base. Prior to co-founding Signia Capital Management in 2002, Rich was the Assistant Director of Research and a Portfolio Manager for a $2B Pacific Northwest asset management firm. With blue-collar roots, Rich went on to get a BA in business administration from the University of Kentucky and an MBA from Gonzaga University. In addition, he is a CFA charter holder and has served as President of the CFA Society of Spokane.
Table of Contents
Robert Morgan has served as the Vice President Exploration of the Company since January 2018. Mr. Morgan has over 22 years of exploration experience, including 20 years focused on gold exploration, of which 12 years were in Northern Idaho and Montana. Mr. Morgan has worked for some of the world's leading gold exploration and mining companies including Newmont and ASARCO throughout the western United States, Alaska, and South America. He is practiced in designing, implementing, and managing large exploration programs for gold, silver, base metals and rare earth elements. His technical work has included geologic mapping, logging of drill holes, compilation, and interpretation of multiple data sets for target identification. Mr. Morgan earned his Bachelor of Science degree in geology from California State University at Chico. He has an extensive environmental background with emphasis on wetlands and water management. Mr. Morgan is a registered professional geologist with the State of Idaho and Professional Land Surveyor registered with the State of Montana.
Monique Hayes was appointed Corporate Secretary in November 2016. She has over 10 years of investor relations corporate governance experience in the mining industry and over 10 years of communications and brand management experience. Prior to joining Idaho Strategic Resources, Inc., Ms. Hayes worked for Hecla Mining Company, Revett Mining Company and Sterling Mining. Her advertising and communications experience includes working for Publicis Dialog Direct and White Runkle Associates where she worked with national accounts including AT&T Wireless, Bell Atlantic and NordicTrack. Ms. Hayes attended City University where she studied business management, brand strategy and communications.
Legal Proceedings
No Director or Officer has been involved in any legal action involving the Company for the past five years.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Securities Exchange Act of 1934, as amended, and the regulations thereunder, the Company’s Directors, Executive Officers and beneficial owners of more than 10% of any registered class of the Company’s equity securities are required to file reports of their ownership of the Company’s securities and any changes in that ownership with the SEC.
Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended December 31, 2022, all filing requirements applicable to its officers, directors and greater than 10% percent beneficial owners were complied with.
Code of Ethics
The Company adopted a Code of Ethics at a Board of Directors meeting on December 9, 2003, that applies to the Company’s executive officers. The Company also adopted a Code of Ethics for all employees at the Board of Directors meeting on February 18, 2008.
Board Nomination Procedures
There have been no material changes to the procedures by which security holders may recommend nominees to the registrant’s board of directors.
ITEM 11. EXECUTIVE COMPENSATION
Compensation of Officers
A summary of cash and other compensation for John Swallow, the Company’s President, Chief Executive Officer, and Chairman of the Board, Grant Brackebusch, the Company’s Vice President, and Robert Morgan, the Company’s Vice President (the “Named Executive Officers”), for the two most recent years is as follows:
Executive Officer Summary Compensation Table
The Company does not have a retirement plan for its executive officers and there is no agreement, plan or arrangement that provides for payments to executive officers in connection with resignation, retirement, termination, or a change in control of the Company.
Table of Contents
Outstanding Equity Awards at Fiscal Year-end
As of December 31, 2022, 69,858 Options were vested and outstanding to directors Grant Brackebusch, John Swallow, Kevin Shiell and Rich Beaven.
Director Compensation
Director Summary Compensation Table
Director 2021 - - - - - - - -
No additional fees are paid for attendance at Board of Directors’ meetings, committee membership or committee chairmanship. On occasion, Directors are retained for consulting services unrelated to their duties as Directors. These consulting services are either paid in cash or with unregistered Common Stock according to the Company’s policy for share-based payment of services.
The Company does not have a retirement plan for its Directors and there is no agreement, plan or arrangement that provides for payments to Directors in connection with resignation, retirement, termination or a change in control of the Company.
Table of Contents
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information as of March 1, 2023 regarding the shares of Company Common Stock beneficially owned by: (i) each person known by the Company to own beneficially more than 5% of the Company’s Common Stock; (ii) each Director of the Company; (iii) the CEO and CFO of the Company (the “Named Executive Officers”); and (iv) all Directors and the Named Executive Officers of the Company as a group. Except as noted below, each holder has sole voting and investment power with respect to the shares of the Company Common Stock listed as owned by that person.
Security Ownership of Certain Beneficial Owners
Security Ownership of Management
None of the Directors or Officers has the right to acquire any additional securities pursuant to options, warrants, conversion privileges or other rights. No shares are pledged as security.
Securities Authorized for Issuance under Equity Plans
In April 2014, the Company established a stock option plan to authorize the granting of stock options to officers and employees. The Company occasionally pays for goods or services with unregistered Common Stock and uses the average bid price of the stock, as quoted on the NYSE American, at the time to determine the number of shares to be issued.
Changes in Control
None.
Table of Contents
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
None
Director Independence
The Board of Directors has determined that John Swallow and Grant Brackebusch are not independent directors. Kevin Schiell and Rich Beaven are independent directors.
The Board of Directors does not have separately designated nominating or compensation committees. The entire Board performs these functions. The Company’s audit committee is comprised of two non-executive members, Kevin Shiell and Rich Beaven.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The aggregate fees billed for professional services rendered by the Company’s principal accountant for the audit of the annual financial statements included in the Company’s annual report on Form 10-K for the fiscal years ended December 31, 2022 and December 31, 2021 and the review for the financial statements included in the Company’s quarterly reports on Form 10-Q during those fiscal years, were $69,846 and $60,856 respectively.
Audit Related Fees
The Company incurred no fees during the last two fiscal years for assurance and related services by the Company’s principal accountant that were reasonably related to the performance of the audit or review of the Company’s financial statements, and not reported under “Audit Fees” above.
Tax Fees
$7,431 in 2022 and $5,200 in 2021 was paid to the Company's principal accountant for tax compliance, tax advice, and tax planning services.
All Other Fees
$7,194 in other fees were incurred during 2022 and $600 in 2021 for other services rendered by the Company’s principal accountant.
Audit Committee Pre-Approval Policies
The Board of Directors has adopted an audit committee pre-approval policy. The audit committee is required to pre-approve the audit and non-audit services performed by the independent auditor in order to assure that the provision of such services do not impair the auditor’s independence.
Table of Contents
PART IV
ITEM 15. EXHIBITS
Financial Statements
The following Consolidated Financial Statements of the Corporation are filed as a part of this report:
1. Report of Independent Registered Public Accounting Firm dated March 31, 2023.
2. Consolidated Balance Sheets—December 31, 2022 and 2021.
3. Consolidated Statements of Operations—Years ended December 31, 2022 and 2021.
6. Notes to Consolidated Financial Statements.
Exhibits
Exhibits Description of Document
3.0* Articles of Incorporation of New Jersey Mining Company filed July 18, 1996
3.1* Articles of Amendment filed September 29, 2003
3.2* Articles of Amendment filed November 10, 2011
3.3* Bylaws of New Jersey Mining Company
10.1* Venture Agreement with United Mine Services, Inc. dated January 7, 2011.
14* Code of Ethical Conduct.
95**** Mine safety information listed in Section 1503 of the Dodd-Frank Act.
96.1**** Technical Report Summary For the Golden Chest Mine, Idaho, U.S.A.
101.INS**** XBRL Instance Document
101.SCH**** XBRL Taxonomy Extension Schema Document
101.CAL**** XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**** XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**** XBRL Taxonomy Extension Label Linkbase Document
101.PRE**** XBRL Taxonomy Extension Presentation Linkbase Document
* Filed with the Registrant’s Form 10 on June 4, 2014.
**** Filed herewith.
Table of Contents
SIGNATURES
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Idaho Strategic Resources, Inc.
Date: March 31, 2023 By /s/ JOHN SWALLOW
John Swallow, President, Chief Executive Officer
Date: March 31, 2023 By /s/ GRANT A. BRACKEBUSCH
Grant A. Brackebusch, Vice President, Chief Financial Officer