UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

 

OR

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____________ to ____________

 

Commission File No. 000-28837

 

NEW JERSEY MINING COMPANY

(Exact name of Registrant as specified in its charter)

 

Idaho

 

82-0490295

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

201 N. Third Street, Coeur d’Alene, ID 83814

(Address of principal executive offices)

 

Registrant’s telephone number:  (208) 625-9001

 

Securities registered pursuant to Section 12(g) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, no par value

NJMC

OTCQB

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant 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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

 

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

 

Large Accelerated Filer  ¨

Accelerated Filer  ¨

Non-Accelerated Filer    x

Small Reporting Company   x

Emerging Growth Company  ¨

 

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes ¨  No x

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

At November 1, 2020, 136,998,309 shares of the registrant’s common stock were outstanding.


1


 

NEW JERSEY MINING COMPANY 

QUARTERLY REPORT ON FORM 10-Q 

FOR THE QUARTERLY PERIOD  

ENDED SEPTEMBER 30, 2020 

 

 

TABLE OF CONTENTS 

 

 

PART I - FINANCIAL INFORMATION3 

ITEM 1: Consolidated Financial Statements3 

ITEM 2: Management's Discussion AND Analysis of Financial Condition and Results of Operations16 

ITEM 3: Quantitative and Qualitative Disclosures about Market Risk19 

ITEM 4: Controls and Procedures19 

PART II - OTHER INFORMATION19 

ITEM 1. Legal Proceedings19 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.19 

ITEM 3. Defaults upon Senior Securities19 

ITEM 4. Mine Safety Disclosures19 

ITEM 5. Other Information20 

ITEM 6. Exhibits20 


2



PART I - FINANCIAL INFORMATION

ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS

 

New Jersey Mining Company

Consolidated Balance Sheets (Unaudited)

 

 

 

September 30,

2020

 

December 31,

2019

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

$

3,150,812

$

217,796

Gold sales receivable

 

292,162

 

305,924

Inventories

 

220,067

 

225,146

Joint venture receivable

 

2,830

 

2,410

Other current assets

 

139,432

 

158,833

Total current assets

 

3,805,303

 

910,109

 

 

 

 

 

Property, plant and equipment, net of accumulated depreciation

 

7,092,418

 

7,015,734

Mineral properties, net of accumulated amortization

 

3,242,823

 

2,363,018

Investment in joint venture

 

435,000

 

435,000

Reclamation bond

 

103,320

 

103,320

Deposit on equipment

 

-

 

25,000

Total assets

$

14,678,864

$

10,852,181

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable and other accrued liabilities

$

519,417

$

529,235

Accrued payroll and related payroll expenses

 

111,735

 

80,402

Notes payable related parties, current portion

 

36,528

 

34,924

Notes payable, current portion

 

319,294

 

303,987

Small Business Administration loan, current portion

 

1,243

 

-

Total current liabilities

 

988,217

 

948,548

 

 

 

 

 

Asset retirement obligation

 

170,539

 

163,369

Notes payable related parties, long term

 

126,712

 

181,750

Convertible debt

 

1,010,000

 

-

Convertible debt-related party

 

25,000

 

-

Notes payable, long term

 

742,590

 

901,537

Small Business Administration loan, long term

 

150,735

 

-

Total long-term liabilities

 

2,225,576

 

1,246,656

 

 

 

 

 

Total liabilities

 

3,213,793

 

2,195,204

 

 

 

 

 

Commitments (Note 10)

 

-

 

-

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

Preferred stock, no par value, 1,000,000 shares authorized; no shares issued or outstanding

 

-

 

-

Common stock, no par value, 200,000,000 shares authorized; September 30, 2020 – 136,331,642 and December 31, 2019 - 123,812,144 shares issued and outstanding

 

20,848,229

 

17,682,999

Accumulated deficit

 

(12,345,684)

 

(12,029,910)

Total New Jersey Mining Company stockholders’ equity

 

8,502,545

 

5,653,089

Non-controlling interest

 

2,962,526

 

3,003,888

Total stockholders' equity

 

11,465,071

 

8,656,977

 

 

 

 

 

Total liabilities and stockholders’ equity

$

14,678,864

$

10,852,181

 

 

 

 

 


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

 

3



New Jersey Mining Company

Consolidated Statements of Operations (Unaudited)

For the Three and Nine Month Periods Ended September 30, 2020 and 2019

 

 

September 30, 2020

September 30, 2019

 

 

Three

Months

 

Nine

Months

 

Three

Months

 

Nine

Months

Revenue:

 

 

 

 

 

 

 

 

Gold sales

$

1,556,070

$

4,281,401

$

1,852,636

$

4,544,964

Total revenue

 

1,556,070

 

4,281,401

 

1,852,636

 

4,544,964

 

 

 

 

 

 

 

 

 

Costs of Sales:

 

 

 

 

 

 

 

 

Cost of sales and other direct production costs

 

1,506,982

 

3,831,727

 

1,246,683

 

3,530,689

Depreciation and amortization

 

156,325

 

425,641

 

158,768

 

429,626

Total costs of sales

 

1,663,307

 

4,257,368

 

1,405,451

 

3,960,315

Gross profit (loss)

 

(107,237)

 

24,033

 

447,185

 

584,649

 

 

 

 

 

 

 

 

 

Other operating expenses:

 

 

 

 

 

 

 

 

Pre-development expense

 

-

 

-

 

51,873

 

117,440

Exploration

 

44,613

 

133,529

 

55,625

 

182,830

Loss on write off of equipment

 

-

 

9,537

 

-

 

-

Management

 

38,812

 

112,236

 

39,441

 

114,970

Professional services

 

33,709

 

146,917

 

32,423

 

113,834

General and administrative

 

117,762

 

308,232

 

75,971

 

396,316

Total other operating expenses

 

234,896

 

710,451

 

255,333

 

925,390

Operating income (loss)

 

(342,132)

 

(686,418)

 

191,852

 

(340,741)

 

 

 

 

 

 

 

 

 

Other (income) expense:

 

 

 

 

 

 

 

 

Small Business Administration grant income

 

(360,054)

 

(370,054)

 

-

 

-

Timber revenue net of costs

 

(14,961)

 

(46,613)

 

-

 

(10,571)

Interest income

 

(38)

 

(1,626)

 

(350)

 

(32,889)

Interest expense

 

40,247

 

113,903

 

26,960

 

59,959

Total other (income) expense

 

(334,806)

 

(304,390)

 

26,610

 

16,499

 

 

 

 

 

 

 

 

 

Net income (loss)

 

(7,327)

 

(382,028)

 

165,242

 

(357,240)

Net income (loss) attributable to non-controlling interest

 

(18,034)

 

(66,254)

 

(22,086)

 

(79,396)

Net income (loss) attributable to New Jersey Mining Company

$

10,707

$

(315,774)

$

187,328

$

(277,844)

 

 

 

 

 

 

 

 

 

Net income (loss) per common share-basic and diluted

$

0.00

$

(0.00)

$

0.00

$

(0.00)

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding-basic

 

129,394,027

 

126,059,427

 

123,812,144

 

123,606,287

Weighted average common shares outstanding-diluted

 

133,092,547

 

126,059,427

 

124,786,628

 

123,606,287


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

 

4



 

New Jersey Mining Company

Consolidated Statement of Changes in Stockholders' Equity (Unaudited)

For the Three and Nine Month Periods Ended September 30, 2020 and 2019

 

Common Stock Shares

 

Common Stock Amount

 

Accumulated Deficit Attributable to New Jersey Mining Company

 

Non-Controlling Interest

 

Stockholders’ Equity

Balance, January 1, 2019

123,413,569

$

17,492,980

$

(11,420,305)

$

3,073,232

$

9,145,907

Contribution from non-controlling interest in Mill JV

-

 

-

 

-

 

2,357

 

2,357

Net income (loss)

-

 

-

 

(205,404)

 

(17,718)

 

(223,122)

Balance, March 31, 2019

123,413,569

$

17,492,980

$

(11,625,709)

$

3,057,871

$

8,925,142

Contribution from non-controlling interest in Mill JV

-

 

-

 

-

 

21,876

 

21,876

Issuance of common stock for cashless warrant exercise

398,575

 

-

 

-

 

-

 

-

Stock based compensation relating to options

-

 

190,019

 

-

 

-

 

190,019

Net income (loss)

-

 

-

 

(259,768)

 

(39,592)

 

(299,360)

Balance June 30, 2019

123,812,144

$

17,682,999

$

(11,885,477)

$

3,040,155

$

8,837,677

Contribution from non-controlling interest in Mill JV

-

 

-

 

-

 

3,979

 

3,979

Net income (loss)

-

 

-

 

187,328

 

(22,086)

 

165,242

Balance September 30, 2019

123,812,144

$

17,682,999

$

(11,698,149)

$

3,022,048

$

9,006,898

 

 

 

 

 

 

 

 

 

 

Balance January 1, 2020

123,812,144

$

17,682,999

$

(12,029,910)

$

3,003,888

$

8,656,977

Contribution from non-controlling interest in Mill JV

-

 

-

 

-

 

2,659

 

2,659

Net income (loss)

-

 

-

 

(146,268)

 

(15,921)

 

(162,189)

Balance, March 31, 2020

123,812,144

$

17,682,999

$

(12,176,178)

$

2,990,626

$

8,497,447

Contribution from non-controlling interest in Mill JV

-

 

-

 

-

 

19,403

 

19,403

Issuance of common stock and warrants for cash

1,481,481

 

200,000

 

-

 

-

 

200,000

Net income (loss)

-

 

-

 

(180,213)

 

(32,299)

 

(212,512)

Balance June 30, 2020

125,293,625

$

17,882,999

$

(12,356,391)

$

2,977,730

$

8,504,338

Contribution from non-controlling interest in Mill JV

-

 

-

 

-

 

2,830

 

2,830

Issuance of common stock and warrants for cash

9,718,572

 

2,706,896

 

-

 

-

 

2,706,896

Exercise of common stock warrants for cash

1,041,667

 

208,334

 

-

 

-

 

208,334

Conversion of convertible debt to common stock

277,778

 

50,000

 

-

 

-

 

50,000

Net income (loss)

-

 

-

 

10,707

 

(18,034)

 

(7,327)

Balance September 30, 2020

136,331,642

$

20,848,229

$

(12,345,684)

$

2,962,526

$

11,465,071


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

 

5



New Jersey Mining Company

Consolidated Statements of Cash Flows (Unaudited)

For the Nine Month Periods Ended September 30, 2020 and 2019

 

September 30,

 

 

2020

 

2019

Cash flows from operating activities:

 

 

 

 

Net income (loss)

$

(382,028)

$

(357,240)

Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:

 

 

 

 

Depreciation and amortization

 

425,641

 

429,626

Loss on write off of equipment

 

9,537

 

-

Adjustment of inventory to net realizable value

 

32,098

 

-

Accretion of asset retirement obligation

 

7,170

 

6,757

Stock based compensation

 

-

 

190,019

Change in operating assets and liabilities:

 

 

 

 

Gold sales receivable

 

13,762

 

(107,931)

Inventories

 

(27,019)

 

15,060

Joint venture receivable

 

(420)

 

(4,351)

Other current assets

 

19,401

 

(46,091)

Accounts payable and other accrued liabilities

 

(7,738)

 

(6,154)

Accrued payroll and related payroll expenses

 

31,333

 

19,372

Interest payable to related parties

 

-

 

1,688

Net cash provided (used) by operating activities

 

121,737

 

140,755

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Payment received on note receivable

 

-

 

150,000

Proceeds from sale of mineral property

 

 

 

50,000

Purchases of property, plant and equipment

 

(286,889)

 

(71,655)

Purchase of mineral property

 

(798,088)

 

-

Additions to mineral property

 

(64,692)

 

-

Net cash provided (used) by investing activities

 

(1,149,669)

 

128,345

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Exercise of stock purchase warrants

 

208,334

 

-

Proceeds from sale of common stock and warrants net of issuance cost

 

2,906,896

 

-

Principal payments on notes payable

 

(360,640)

 

(226,232)

Principal payments on notes payable, related parties

 

(53,434)

 

(39,180)

Issuance of convertible debt

 

1,085,000

 

-

Proceeds from Small Business Administration loan

 

149,900

 

-

Contributions from non-controlling interest

 

24,892

 

28,212

Net cash provided (used) by financing activities

 

3,960,948

 

(237,200)

 

 

 

 

 

Net change in cash and cash equivalents

 

2,933,016

 

31,900

Cash and cash equivalents, beginning of period

 

217,796

 

248,766

Cash and cash equivalents, end of period

$

3,150,812

$

280,666

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

 

Deposit on property applied to purchase of mineral property

$

25,000

$

-

Note payable for equipment purchase

 

217,000

 

858,223

Conversion of convertible debt to common stock

 

50,000

 

-

Note from related party for equipment purchase

 

-

 

50,000


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

 

6


New Jersey Mining Company

Notes to Consolidated Financial Statements (Unaudited)


1. The Company and Significant Accounting Policies 

These unaudited interim consolidated financial statements have been prepared by the management of New Jersey Mining Company (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the interim consolidated financial statements have been included.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of the Company's financial position and results of operations. Operating results for the three and nine month periods ended September 30, 2020 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2020.

For further information refer to the financial statements and footnotes thereto in the Company’s audited consolidated financial statements for the year ended December 31, 2019 as filed with the Securities and Exchange Commission.

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 entities owned by other investors is presented as non-controlling interests on the consolidated balance sheets and statements of operations.

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. 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 4 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 of the timber have both been completed. Sales of timber found on the Company’s mineral properties are not a part of normal operations.

Inventories

Inventories are stated at the lower of full cost of production or estimated net realizable value based on current metal prices. Costs consist of mining, transportation, 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 cost or estimated net realizable value.


7


New Jersey Mining Company

Notes to Consolidated Financial Statements (Unaudited)


1. The Company and Significant Accounting Policies, Continued 

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 that are included in earnings are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date.

At September 30, 2020 and December 31, 2019, the Company determined they had no assets or liabilities that required measurement at fair value on a recurring basis.

Reclassifications

Certain prior period amounts have been reclassified to conform to the 2020 financial statement presentation. Reclassifications had no effect on net income (loss), stockholders’ equity, or cash flows as previously reported.

New Accounting Pronouncement

Accounting Standards Updates Adopted

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Auditing Standards Update (“ASU”) No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The update removes, modifies and makes additions to the disclosure requirements on fair value measurements. The update was adopted as of January 1, 2020, and its adoption did not have a material impact on the Company’s consolidated financial statements.

Accounting Standards Updates to Become Effective in Future Periods

In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update contains a number of provisions intended to simplify the accounting for income taxes. The update is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. Management is evaluating the impact of this update on the Company’s consolidated financial statements.

In August 2020, the FASB issued ASU No. 2020-06 Debt 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, 2021, including interim periods within those fiscal years and with early adoption permitted. Management is evaluating the impact of this update on the Company’s consolidated financial statements.

2.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.

3. Inventories 

At September 30, 2020 and December 31, 2019, the Company’s inventories consisted of the following:

 

 

 

September 30,

2020

 

December 31, 2019

 

 

 

 

 

Gold concentrate

$

164,455

$

197,862

Materials and supplies

 

55,612

 

27,284

Total

$

220,067

$

225,146

The carrying value of inventory is determined each period based on the lower of cost or net realizable value. At September 30, 2020 gold concentrate is carried at net realizable value. At December 31, 2019, gold concentrate inventory is carried at allocated production costs.


8


New Jersey Mining Company

Notes to Consolidated Financial Statements (Unaudited)


4. Sales of Products 

Our products consist of both gold flotation concentrates which we sell to a single broker (H&H Metal), 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 Metal based on contractual terms. Based on contractual terms, we have determined the performance obligation is met and title is transferred to H&H Metal 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 Metal, and H&H Metal has the significant risks and rewards of ownership to it, 4) it is very unlikely a concentrate will be rejected by H&H Metal 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 from 30 to 60 days, until H&H Metal 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 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. Also, 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 September 30, 2020, metals that had been sold but not final settled thus exposed to future price changes totaled 1,415 ounces of gold. 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 Metal, 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 arsenic, lead and zinc content above a negotiated baseline as well as excessive moisture.

For sales of metals from 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 three and nine month periods ended September 30, 2020 and 2019 were as follows:

 

 

September 30, 2020

September 30, 2019

 

Three Months

Nine Months

Three Months

Nine Months

Gold

$

1,654,334

$

4,629,816

$

1,979,595

$

4,870,402

Silver

 

2,593

 

6,881

 

6,899

 

14,556

Less: Smelter and refining charges

 

(100,857)

 

(355,296)

 

(133,858)

 

(339,994)

Total

$

1,556,070

$

4,281,401

 

1,852,636

$

4,544,964

Sales by significant product type for the three and nine month periods ended September 30, 2020 and 2019 were as follows:

 

 

September 30, 2020

September 30, 2019

 

Three Months

Nine Months

Three Months

Nine Months

Concentrate sales to H&H Metal

$

1,476,395

$

4,144,583

$

1,788,031

$

4,390,686

Dore sales to refinery

 

79,675

 

136,818

 

64,605

 

154,278

Total

$

1,556,070

$

4,281,401

$

1,852,636

$

4,544,964

At September 30, 2020 and December 31, 2019, our gold sales receivable balance related to contracts with customers of $292,162 and $305,924, respectively, consist only of amounts due from H&H Metal. 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.


9


New Jersey Mining Company

Notes to Consolidated Financial Statements (Unaudited)


5.Related Party Transactions 

At September 30, 2020 and December 31, 2019, the Company had the following notes and interest payable to related parties:

 

 

 

September 30,

2020

 

December 31,

2019

Ophir Holdings LLC, a company owned by two officers and one former officer of the Company, 6% interest, monthly payments of $3,777 with a balloon payment of $110,835 in February 2022

$

163,240

$

189,236

H&H Metals, shareholder and concentrate broker, 8% interest, balance due April 2021

 

-

 

27,438

Total

 

163,240

 

216,674

Current portion

 

(36,528)

 

(34,924)

Long term portion

$

126,712

$

181,750

As of September 30, 2020 and December 31, 2019, there was no accrued interest payable to related parties. Related party interest expense for the three and nine months ended September 30, 2020 and 2019 is as follows.

 

2020

2019

Three Months

Nine Months

Three Months

Nine Months

$

2,537

$

8,588

$

4,068

$

11,497

During 2019, the Company made three $3,000 payments for a total of $9,000 to the Company’s chairman of the board, Del Steiner for consulting purposes. Mr. Steiner retired in July 2019.

All sales of concentrate and the Company’s gold sales receivable are with H&H Metals, owner of 4.5% of the Company’s outstanding common stock. See Note 4.

In February 2020, the Company’s corporate secretary, Monique Hayes, participated in the Company’s convertible debt offering for $25,000. During the three and nine month periods ended September 30, 2020, interest expense on her note was $504 and $1,238, respectively. See Note 16.

The Company leases office space from certain related parties on a month to month basis. Payments under these short-term lease arrangements are included in general and administrative expenses on the Consolidated Statement of Operations and are as follows:

 

2020

2019

Three Months

Nine Months

Three Months

Nine Months

$

6,210

$

18,630

$

6,151

$

18,395

 

6. Joint Ventures 

New Jersey Mill Joint Venture Agreement

The Company owns 65% of the New Jersey Mill Joint Venture and has significant influence in its operations. Thus the venture is included in the consolidated financial statements along with presentation of the non-controlling interest. At September 30, 2020 and December 31, 2019, an account receivable existed with Crescent Silver, LLC, the other joint venture participant (“Crescent”), for $2,830 and $2,410, respectively, for shared operating costs as defined in the JV agreement.

Butte Highlands JV, LLC (“BHJV”)

On January 29, 2016, the Company purchased a 50% interest in Butte Highlands JV, LLC (“BHJV”) from Timberline Resources Corporation for $225,000 in cash and 3,000,000 restricted shares of the Company’s common stock valued at $210,000 for a total consideration of $435,000. Highland Mining, LLC (“Highland”) is the other 50% owner and manager of the joint venture. Under the 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 accounts for its investment on a cost basis. The Company purchased the interest in the BHJV to provide additional opportunities for exploration and development and expand the Company’s mineral property portfolio.  


10


New Jersey Mining Company

Notes to Consolidated Financial Statements (Unaudited)


7.Earnings per Share 

Net income (loss) per share is computed by dividing the net amount excluding net income (loss) attributable to a non-controlling interest by the weighted average number of common shares outstanding during the period. 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. Such common stock equivalents are included or excluded from the calculation of diluted net income (loss) per share for each period as follows:

 

 

September 30, 2020

September 30, 2019

 

Three Months

Nine Months

Three Months

Nine Months

Incremental shares included in diluted net income (loss) per share

 

 

 

 

 

 

 

 

   Stock options

 

2,669,034

 

-

 

974,484

 

-

   Stock purchase warrants

 

1,029,486

 

-

 

-

 

-

 

 

3,698,520

 

-

 

974,484

 

-

Excluded in diluted net income (loss) per share as inclusion would have an antidilutive effect:

 

 

 

 

 

 

 

 

   Convertible debt

 

5,138,889

 

5,138,889

 

-

 

-

   Stock options

 

-

 

4,612,500

 

262,500

 

8,404,500

   Stock purchase warrants

 

4,859,286

 

6,641,694

 

12,900,123

 

12,900,123

 

 

9,998,175

 

16,393,083

 

13,162,623

 

21,304,623

8. Property, Plant, and Equipment 

Property, plant and equipment at September 30, 2020 and December 31, 2019 consisted of the following:

 

 

 

September 30,

2020

 

December

31, 2019

Mill

 

 

 

 

Land

$

225,289

$

225,289

Building

 

536,193

 

536,193

Equipment

 

4,192,940

 

4,192,940

 

 

4,954,422

 

4,954,422

Less accumulated depreciation

 

(880,175)

 

(759,617)

Total mill

 

4,074,247

 

4,194,805

 

 

 

 

 

Building and equipment

 

 

 

 

Buildings

 

153,265

 

143,725

Equipment

 

3,113,073

 

2,628,261

 

 

3,266,338

 

2,771,986

Less accumulated depreciation

 

(1,115,637)

 

(818,527)

Total building and equipment

 

2,150,701

 

1,953,459

 

 

 

 

 

Land

 

 

 

 

Bear Creek

 

266,934

 

266,934

BOW

 

230,449

 

230,449

Eastern Star

 

250,817

 

250,817

Gillig

 

79,137

 

79,137

Highwater

 

40,133

 

40,133

Total land

 

867,470

 

867,470

Total

$

7,092,418

$

7,015,734


11


New Jersey Mining Company

Notes to Consolidated Financial Statements (Unaudited)


9.Mineral Properties 

Mineral properties at September 30, 2020 and December 31, 2019 consisted of the following:

 

 

 

September 30,

2020

 

December 31,

2019

Golden Chest

 

 

 

 

Mineral Property

$

1,539,002

$

1,524,002

Infrastructure

 

253,649

 

153,970

Total Golden Chest

 

1,792,651

 

1,677,972

New Jersey

 

248,289

 

248,289

McKinley

 

200,000

 

200,000

Butte Potosi

 

274,440

 

274,440

Alder Gulch

 

773,101

 

-

Less accumulated amortization

 

(45,658)

 

(37,683)

Total

$

3,242,823

$

2,363,018

The Company received a non-refundable down payment of $50,000 toward the sale of the McKinley property in the third quarter of 2019 which was deducted from the carrying value of the mineral property. As of September 30, 2020, negotiations with the interested parties involving this sale continue.

In December of 2019, the Company abandoned its Crown Point property and recognized a loss of $333,333.

In February 2020, the Company purchased property located in Alder Gulch in Shoshone County, Idaho which consists of 368 acres of real property, including patented mining claims with both surface and mineral rights.

10. Notes Payable 

At September 30, 2020 and December 31, 2019, notes payable are as follows:

 

 

September 30, 2020

 

December 31, 2019

Paus 2 yrd. LHD, 48 month note payable, 3.45% interest rate payable through September 2024, monthly payments of $5,181

$

230,197

$

267,820

Paus 2 yrd. LHD, 60 month note payable, 4.78% interest rate payable through July 2024, monthly payments of $4,847

 

208,544

 

-

Compressor, 48 month note payable, 5.25% interest rate payable monthly through November 2021, monthly payments of $813

 

12,268

 

19,018

Caterpillar excavator and skid steer, 48 month note payable, 6.8% interest rate payable monthly through June 2022, monthly payments of $2,392

 

-

 

65,835

Atlas Copco loader, 60 month note payable, 10.5% interest rate payable monthly through June 2023, monthly payments of $3,550

 

101,316

 

124,238

2018 pick-up, 72 month note payable, 9.0% interest rate payable monthly through June 2024, monthly payments of $701

 

-

 

30,863

Property with shop, 48 month note payable, 6.49% interest rate payable monthly through August 2023, monthly payments of $707

 

-

 

27,624

2008 pick-up, 60 month note payable, 9.0% interest rate payable monthly through June 2023, monthly payments of $562

 

-

 

20,088

Caterpillar 938 loader, 60 month note payable, 6.8% interest rate payable monthly through August 2023, monthly payments of $3,751

 

118,778

 

145,709

MultiQuip DCA70 Generator, 48 month note payable, 7.25% interest rate payable through August 2022, monthly payments of $635

 

-

 

18,433

CaterpillarAD22 underground truck, 48 month note payable, 6.45% interest rate payable through June 2023, monthly payments of $12,979

 

390,781

 

485,896

Total notes payable

 

1,061,884

 

1,205,524

Due within one year

 

319,294

 

303,987

Due after one year

$

742,590

$

901,537


12


New Jersey Mining Company

Notes to Consolidated Financial Statements (Unaudited)


10. Notes Payable, continued 

All notes are collateralized by the property or equipment purchased in connection with each note. Future principal payments of notes payable at September 30, 2020 are as follows:

 

12 months ended September 30,

 

 

2021

$

319,294

2022

 

332,496

2023

 

296,891

2024

 

108,063

2025

 

5,140

Total

$

1,061,884

11. Small Business Administration Loans and Grant 

On April 10, 2020, the Company received a loan of $358,346 pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The loan, which was in the form of a Note dated April 10, 2020 matures on April 9, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing on October 9, 2020. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. This loan was forgiven after being used for qualifying expenses under the provisions of the CARES Act prior to the filing of this quarterly financial statement. Qualifying expenses included payroll costs, costs used to continue group health care benefits, rent, and utilities. The amount of the loan that was recognized as grant income in the Company’s consolidated income statement included the original $358,346 in principal and $1,708 in accrued interest.

On May 19, 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 and will begin twelve months from the date of the Note. At September 30, 2020, total accrued interest on the remaining loan is $2,078 which is included in the Small Business Administration loan balance on the consolidated balance sheet.

During the three months ended June 30, 2020, the Company received $10,000 under Division A, Title I, Section 1110 of the CARES Act. The Company is not required to pay this amount back and thus recognized $10,000 as government grant income during the period.

12. Stockholders’ Equity 

The Company closed a private placement in April 2020. Under the private placement, the Company sold 1,481,481 units at $0.135 per unit for net proceeds of $200,000. Each unit consisted of one share of the Company’s stock and one half of one stock purchase warrant with each whole warrant exercisable for one share of the Company’s stock at $0.18 for 24 months.

The Company closed a private placement in August 2020. Under the private placement, the Company sold 9,718,573 units at $0.28 per unit for net proceeds of $2,706,896. Each unit consisted of one share of the Company’s stock and one half of one stock purchase warrant with each whole warrant exercisable for one share of the Company’s stock at $0.40 for 24 months.

In July 2020, a holder of convertible debt converted $50,000 of debt to 277,778 shares of common stock.

In the third quarter of 2020 warrants were exercised whereby 1,041,667 shares of common stock were issued for net proceeds of $208,334. In the second quarter of 2019, 1,200,000 warrants were exercised in exchange for 398,575 shares of the Company’s common stock in a cashless warrant exercise.

Stock Purchase Warrants Outstanding

The activity in stock purchase warrants is as follows:

 

 

Number of

Warrants

 

Exercise Prices

Balance December 31, 2018

 

14,100,123

 

0.10-0.20

Exercised

 

(1,200,000)

 

0.10

Balance December 31, 2019

 

12,900,123

 

0.18-0.22

Issued

 

5,600,027

 

0.18-0.40

Expired

 

(10,816,789)

 

0.20-0.22

Excised

 

(1,041,667)

 

0.20

Balance September 30, 2020

 

6,641,694

 

$0.18-0.40


13


New Jersey Mining Company

Notes to Consolidated Financial Statements (Unaudited)


12. Stockholders’ Equity, continued 

These warrants expire as follows:

 

Shares

Exercise Price

Expiration Date

666,667

$0.20

November 3, 2020

375,000

$0.18

December 14, 2023

740,741

$0.18

April 21, 2022

4,859,286

$0.40

August 28, 2022

6,641,694

-

-

13. Stock Options 

No options were granted in the first nine months of 2020. In June 2019, the board granted 2,100,000 stock options to non-officer employees. These options vested immediately and are exercisable at $0.14 for 3 years. Total stock based compensation recognized on these options was $190,019. The weighted average 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: volatility of 98.6%, risk-free interest rate of 1.81%, and an expected term of three years.

Activity in the Company’s stock options is as follows:

 

 

Number of Options

 

Exercise Prices

Balance December 31, 2018

7,054,500

$

0.10-0.18

Granted

2,100,000

 

0.14

Expired

(3,892,000)

 

0.10-0.15

Balance December 31, 2019

5,262,500

 

0.10-0.18

Expired

(650,000)

 

0.15

Balance September 30, 2020

4,612,500

 

0.10-0.18

Exercisable at September 30, 2020

4,612,500

$

0.10-0.18

At September 30, 2020, outstanding stock options have a weighted average remaining term of approximately 1.06 years and an intrinsic value of approximately $780,000.

14. Asset Retirement Obligation 

The Company has established asset retirement obligations associated with the ultimate closing of its mineral properties where there has been or currently are operations. Activity for the nine months ended September 30, 2020 and 2019 is as follows:

 

 

Nine Months Ended

September 30,

 

 

2020

 

2019

 

 

 

 

 

Balance at beginning of period

$

163,369

$

154,292

Accretion expense

 

7,170

 

6,757

Balance at end of period

$

170,539

$

161,049

15. Note Receivable 

On June 6, 2018, the Company loaned $250,000 to West Materials, Inc. and William J. West (collectively “West”) which bore interest at 8% if the loan went into default and had a term of fifteen months. Five equal payments were due quarterly with the first two payments received in cash during 2018 and the remaining outstanding $150,000 received in 2019. The note receivable was collateralized by a mortgage on the Butte Gulch real property and a related net smelter royalty rights.


14


New Jersey Mining Company

Notes to Consolidated Financial Statements (Unaudited)


16. Convertible Debt 

In February 2020, the Company issued convertible promissory notes with an aggregate principal value of $885,000 from which funds were utilized for the purchase of the Alder Gulch property (Note 9). The notes are collateralized by the Alder Gulch property as well as other unencumbered real property that the Company currently owns. The outstanding principal amount of the notes bears interest at an annual rate of 8.0% with interest payments due monthly and the principal due in February 2023. The principal amount of the notes is convertible at the option of the note holders into shares of the Company’s common stock at a price of $0.18 per share (4,916,667 shares) prior to the maturity date of the notes. In July 2020, one of the participants converted $50,000 in debt for 277,778 shares of the Company’s common stock.

The Company’s corporate secretary, Monique Hayes, participated in the Company’s convertible debt offering for $25,000. During the three and nine month periods ended September 30, 2020, interest expense on her note was $504 and $1,238, respectively.

In July 2020, a current participant was issued a new promissory note for a principal balance of $200,000 which funds were utilized for the purchase of a new jumbo underground drill. The note is collateralized by the drill. The outstanding principal amount of the note bears 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 is convertible at the option of the note holder into shares of the Company’s common stock at a price of $0.40 per share (500,000 shares) prior to the maturity date of the note.

17.Subsequent Events 

In October 2020, holders exercised 666,667 warrants at $0.20 per share of the Company’s common with net proceeds of $133,333.

in November 2020 the Company was notified that the PPP loan funded on April 10, 2020 for $358,346 had been forgiven for qualifying expenses under the provisions of the CARES Act. (Note 11)


15



ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Plan of Operation

New Jersey Mining Company 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, while reducing debt and growing its production and asset base over time while being mindful of corporate overhead. The Companies management is focused on utilizing its in-house skills to build a portfolio of producing mines and milling operations with a primary focus on gold and secondary focus on silver and base metals.

The Company’s properties include: the Golden Chest Mine (currently in production), the New Jersey Mill (majority ownership interest), and a 50% carried to production interest in the past producing Butte Highlands Mine located in Montana. In addition to its producing and near-term production projects, New Jersey Mining Company has additional exploration prospects, including the McKinley and Eastern Star located in Central Idaho, and additional holdings near the Golden Chest in the Murray Gold Belt including the 368 acres of patented claims in Alder Gulch purchased in the first quarter of 2020. The Company also added the Roberts Rare Earth project in Lemhi county Idaho in the third quarter of 2020.

COVID-19 Coronavirus Pandemic Response and Impact

Following the outbreak of the COVID-19 coronavirus global pandemic ("COVID-19") in early 2020, in March 2020 the U.S. Centers for Disease Control issued guidelines to mitigate the spread and health consequences of COVID-19. The Company implemented changes to its operations and business practices to follow the guidelines and minimize physical interaction, including using technology to allow employees to work from home when possible and altering production procedures and schedules, asset maintenance, and limiting discretionary spending. As long as they are required, the operational practices implemented could have an adverse impact on our operating results due to deferred production and revenues or additional costs. The negative impact of COVID-19 remains uncertain, including on overall business and market conditions. There is uncertainty related to the potential additional impacts COVID-19 could have on our operations and financial results for the year.

Highlights during the third quarter of 2020 include:

·The quarter was a largely a transitional time for operations at the Golden Chest. Production from the lower portion of the Idaho Pit had concluded in the 2nd quarter and subsequent development and production began from a nearby area. In addition to moving waste material prior to mining, as anticipated, this portion of the pit was comprised of lower grade material. Typically lower grade ore is combined with higher grade underground ore, however the underground were focused on backfill and new development - and instead of mostly mining ore, a significant amount of time was spent by the underground crews placing cemented rock fill (CRF) in mined out stopes to prepare for mining the lower cuts on those stopes. To better illustrate, a total of 2,920 cubic meters of CRF were placed which was 2.4 times more CRF than was placed in the prior quarter. And the underground mining rate has increased considerably since that work was completed. 

·As part of our pivot toward increased underground mining and development, a second crew of underground miners were hired to increase the production rate of the underground mine. Furthermore, additional mining equipment such as a loader and jumbo drill were acquired to facilitate the increased mining rate. A night shift was added just after Labor Day and a significant increase in production has been observed since that time. A total of 5,750 tonnes were mined (mineralized material and waste) in the quarter doubling the previous quarter as well as increasing the backfilling rate as mentioned above. Deepening of the Main Access Ramp (MAR) also started with the addition of the second mining crew. Focus on the Main Access Ramp is critical to underground expansion and given the ongoing potential impact of Covid and development costs we chose this quarter as the time to increase backfill rates while also conducting development on the surface and underground. 

·During the quarter, the Company hired a driller and drill helper as its designated in-house drill crew. One of the Company drills is now focusing on the lower reaches of the Katie Dora and Klondike shoots and will expand its focus toward step-out exploration drilling in the coming months. 

·For the quarter ending September 30, 2020 a total of 11,440 dry metric tonnes (dmt) were processed at the Company’s New Jersey mill with a flotation feed head grade of 2.18 grams gold per tonne (gpt) with gold recovery of 84.3%. Interestingly, the ball mill feed grade for the quarter was 3.05 gpt gold indicating there may a  


16



significant quantity of gold trapped in the grinding circuit. It is planned to clean out the ball mill in the fourth quarter to determine how much gold is trapped in the mill. Gold sales for the quarter were 836 ounces.

·Open pit mining progressed from the 1056 bench to the 1044 bench as production averaged 1,785 tonnes per day. 

·As part of its dual-pronged approach, the Company further expanded its strategic Critical Minerals focus with the addition of the Roberts Rare Earth Element (REE) Project, located near its Diamond Creek Project in central Idaho. The Roberts REE Project is comprised of 12 unpatented mining claims covering an area of approximately 89 hectares (219acres). This Project is located within the Mineral Hill Mining District, approximately 48 kilometers (30 miles) northwest of the town of Salmon, Idaho. Recent sampling by Company geologists returned grades in excess of 12% combined rare earths elements. Similarly, as with NJMC’s Diamond Creek project, REE’s are not the only valuable commodities found on the properties; gold and niobium are also present according to historic information and NJMC sampling, and both may prove to be desirable by-products if these properties advance to production. Recently collected samples from the Roberts property show assays with gold values up to 8.8 grams per tonne (0.25 ounce per ton) and niobium as high as 0.50%. 

Results of Operations

Our financial performance during the quarter is summarized below:

·The Company had a gross loss for the three and a gross profit for the nine month periods ending September 30, 2020 of ($107,237) and $24,033 respectively, compared to a gross profit of $447,185 and $584,649 for the comparable periods in 2019. Gross profit decreased as a result of expected lower gold grades and development of the new open pit area and the transition of underground operations focused on development and expansion. 

·Cash costs and all in sustaining costs per ounce increased for the periods ending September 30, 2020 compared to 2019. Cash cost per ounce increased to $1,856 and $1,373 in the three and nine month periods ending September 30, 2020 compared to $927 and $984 in 2019. The all in sustaining costs increased to $2,368 and $1,629 for the periods ending September 30, 2020 compared to $1,071 and $1,146 in 2019 per ounce for the same periods ending September 30, 2019. The increase in per ounce costs in 2020 was the result of expected lower gold grades and development of the new open pit area and the transition of underground operations focused on development and expansion. 

·Revenue was $1,556,070 and $4,281,401 for the three and nine month periods ending September 30, 2020 compared to $1,852,636 and $4,544,964 for the comparable periods of 2019. The 2020 decrease was a result of expected lower gold grades and development of the new open pit area and the transition of underground operations focused on development and expansion. 

·An operating loss of $342,132 and $686,418 for the three month and nine periods ending September 30, 2020 compared to operating income of $191,852 and loss of $340,741 in the comparable periods of 2019. 

·Net loss of $7,327 and $382,028 for the three and nine month periods ending September 30, 2020, respectively, compared to net income of $165,242 and net loss of $357,240 for the three and nine month periods ending September 30, 2019 was the result of expected lower gold grades and development of the new open pit area and the transition of underground operations focused on development and expansion. 

·The Company was able to secure Small Business Administration grant income from the CARES Act in 2020 that was not available in 2019 resulting in grant income of $360,054 and $370,054 for the three and nine months periods ending September 30, 2020, respectively, compared to non in 2019. 

·Timber revenue increased in 2020 from sale of timber at the Company’s Alder Gulch property. 

·Interest expense increased in 2020 compared to 2019 due to greater outstanding debt in 2020 compared to the same period in 2019, in particular new convertible debt and the new Caterpillar haul truck. 

·The consolidated net loss for the nine months ended September 30, 2020 and 2019 included non-cash charges as follows: depreciation and amortization of $425,641 ($429,626 in 2019), write off of equipment of $9,537 (none in 2019), accretion of asset retirement obligation of $7,170 ($6,757 in 2019), and stock based compensation of $0 in 2020 ($190,019 in 2019). 

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 and all in


17



sustaining costs per ounce for the Company’s gold production in the three month periods ending September 30, 2020 and 2019.

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 of the expenditures incurred to discover, develop, and sustain gold production.

 

2020

2019

 

  Three Months

 Nine Months

    Three Months

 Nine Months

Cost of sales and other direct production costs and depreciation and amortization

$

1,663,306

$

4,257,368

$

1,405,451

$

3,960,315

Depreciation and amortization

 

(156,324)

 

(425,641)

 

(158,768)

 

(429,626)

Change in concentrate inventory

 

64,526

 

33,407

 

49,781

 

(2,185)

Cash Cost

$

1,571,508

$

3,865,134

$

1,296,464

$

3,528,504

Pre-development expense

 

-

 

-

 

51,873

 

117,440

Exploration

 

44,613

 

133,529

 

55,625

 

182,830

Sustaining capital

 

274,199

 

286,889

 

19,660

 

83,612

General and administrative

 

117,762

 

308,233

 

75,971

 

396,316

Less stock based compensation and other non cash items

 

(2,426)

 

(7,170)

 

(2,286)

 

(196,776)

All in sustaining costs

$

2,005,657

$

4,586,614

$

1,497,307

$

4,111,926

Divided by ounces produced

 

847

 

2,816

 

1,398

 

3,586

Cash cost per ounce

$

1,855.58

$

1,372.68

$

927.37

$

983.97

All in sustaining cost (AISC) per ounce

$

2,368.21

$

1,628.91

$

1,071.05

$

1,146.66

Financial Condition and Liquidity

 

For the Nine Months Ended September 30,

Net cash provided (used) by:

 

2020

 

2019

Operating activities

$

121,737

$

140,755

Investing activities

 

(1,149,669)

 

128,345

Financing activities

 

3,960,948

 

(237,200)

Net change in cash and cash equivalents

 

2,933,016

 

31,900

Cash and cash equivalents, beginning of period

 

217,796

 

248,766

Cash and cash equivalents, end of period

$

3,150,812

$

280,666

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.

On April 10, 2020, the Company received a loan of $358,346 pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The loan, which was in the form of a Note dated April 10, 2020 matures on April 9, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing on October 9, 2020. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. This loan was forgiven after being used for qualifying expenses under the provisions of the CARES Act prior to the filing of this quarterly financial statement. Qualifying expenses included payroll costs, costs used to continue group health care benefits, rent, and utilities. The amount of the loan that was recognized as such in the Company’s income statement included the original $358,346 in principal and $1,708 in accrued interest that was recognized at June 30, 2020.

On May 19, 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 and will begin twelve months from the date of the Note.

At September 30, 2020, total accrued interest on the remaining loan is $2,078 which is included in the Small Business Administration loan balance of the consolidated balance on the consolidated balance sheet.

During the three months ended September 30, 2020, the Company received $10,000 under Division A, Title I, Section 1110 of the CARES Act. The Company is not required to pay this amount back and thus recognized $10,000 as grant income during the period.


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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not required for small reporting companies.

 

ITEM 4: CONTROLS AND PROCEDURES 

 

Disclosure Controls and Procedures

 

At September 30, 2020, our Vice 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) of the Securities Exchange Act of 1934 (the “Exchange Act”), which disclosure controls and procedures are designed to insure that information required to be disclosed by a 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.

 

Based upon that evaluation, it was concluded that our disclosure controls were effective as of September 30, 2020, to ensure timely reporting with the Securities and Exchange Commission. Specifically, the Company’s corporate governance and disclosure controls and procedures provided reasonable assurance that required reports were timely and accurately reported in our periodic reports filed with the Securities and Exchange Commission.

 

Changes in internal control over financial reporting

 

There was no material change in internal control over financial reporting in the quarter ended September 30, 2020.

 

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS 

 

None.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. 

 

Neither the constituent instruments defining the rights of the Company’s securities filers nor the rights evidenced by the Company’s outstanding common stock have been modified, limited or qualified.

 

The Company closed a private placement in April 2020. Under the private placement, the Company sold 1,481,481 units at $0.135 per unit for net proceeds of $200,000. Each unit consisted of one share of the Company’s stock and one half of one stock purchase warrant with each whole warrant exercisable for one share of the Company’s stock at $0.18 for 24 months. The Company closed a private placement in August 2020. Under the private placement, the Company sold 9,718,572 units at $0.28 per unit for net proceeds of $2,706,896. Each unit consisted of one share of the Company’s stock and one half of one stock purchase warrant with each whole warrant exercisable for one share of the Company’s stock at $0.18 for 24 months. In July of 2020 277,778 shares of the Company’s stock were issued by a holder of convertible debt at a rate of $0.18 per share in exchange for $50,000 in debt. In the third quarter of 2020 1,041,667 shares were issued in exchange for outstanding warrants for net proceeds of $208,334. In the second quarter of 2019, 1,200,000 warrants were exercised in exchange for 398,575 shares of the Company’s common stock in a cashless warrant exercise.

 

The Company relied on the transaction exemption afforded by Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D Rule 506(b). The common shares are restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Securities Act of 1933, as amended.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES 

 

The Company has no outstanding senior securities.

 

ITEM 4. MINE SAFETY DISCLOSURES 

 

Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the quarter


19



ended September 30, 2020, the Company had no citations for a violation of mandatory health or safety standards that could significantly and substantially (S&S citation) contribute to the cause and effect a mine safety or health hazard under section 104 of the Federal Mine Safety and Health Act of 1977. There were no legal actions, mining-related fatalities, or similar events in relation to the Company’s United States operations requiring disclosure pursuant to Section 1503(a) of the Dodd-Frank Act.

 

ITEM 5. OTHER INFORMATION 

 

None.

 

ITEM 6. EXHIBITS 

 

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. 

10.2*Idaho Champion Resources Lease with Cox dated September 4, 2013 

10.3**Rupp Mining Lease dated May 3, 2013 

10.4**Mining Lease with Hecla Silver Valley, Inc. Little Baldy prospect dated September 12, 2012 

10.5***Consent, Waiver and Assumption of Venture Agreement by Crescent dated February 14, 2014 

10.6Form of Forward Gold Purchase Agreement dated July 13, 2016 between the Registrant and Ophir Holdings LLC and incorporated by reference to the Company’s Form 8-K as filed with the Securities and Exchange Commission on July 18, 2016

10.7Form of Forward Gold Purchase Agreement dated July 29, 2016 between the Registrant and Investors and incorporated by reference to the Company’s Form 8-K as filed with the Securities and Exchange Commission on August 2, 2016

10.8Registrant’s Grant of Options to Directors and Officers dated December 30, 2016, incorporated by reference to the Company’s Form 8-K as filed with the Securities and Exchange Commission on January 4, 2017

10.9Form of Agreement to Purchase the “Four Square Property Group” of Patented and Un-Patented Mining Claims dated March 2, 2018, incorporated by reference to the Company’s Form 8-K as filed with the Securities and exchange Commission on March 7, 2018 

10.10Asset Purchase Agreement with Hecla Silver Valley, Inc. to Sell Patented and Un-Patented Mining Claims dated May 18th, 2018 and reported on the Company’s Form 8-K filed with the Securities and Exchange Commission on May 24, 2018

14*Code of Ethical Conduct

21*Subsidiaries of the Registrant 

31.1****Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2****Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1****Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2****Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99(i)Audit Committee Pre-Approval Policies-Filed as an exhibit to the registrant’s annual report on Form 10-KSB for the year ended December 31, 2003 and incorporated by reference herein. 

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 July 2, 2014 

***Filed March 31, 2015. 

****Filed herewith. 


20



SIGNATURES

 

Pursuant to 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. 

 

 

 

NEW JERSEY MINING COMPANY 

 

By:   /s/ John Swallow 

 

John Swallow, 

its: President and Chief Executive Officer 

Date November 16, 2020 

 

 

By:   /s/ Grant Brackebusch 

 

Grant Brackebusch, 

its: Vice President and Chief Financial Officer 

Date: November 16, 2020 


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