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<P STYLE="margin: 0">&nbsp;</P>
<P STYLE="margin: 0pt"><A HREF="#toc">Table of Contents</A></P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt; text-align: center"><B>UNITED STATES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITIES AND EXCHANGE COMMISSION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt; text-align: center"><B>WASHINGTON, DC 20549</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FORM 10-Q</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(Mark One)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; font-size: 10pt"><FONT STYLE="font-family: Wingdings; font-size: 10pt">x</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
    EXCHANGE ACT OF 1934</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51pt; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51pt; text-indent: -0.5in"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 31%; font-size: 10pt"><FONT STYLE="font-size: 10pt">For the quarterly period ended</FONT></TD>
    <TD STYLE="width: 35%; border-bottom: black 1pt solid; padding-bottom: 0.4pt; font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">September
    30, 2018</FONT></TD>
    <TD STYLE="width: 34%; font-size: 10pt; text-align: center">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51pt; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; font-size: 10pt"><FONT STYLE="font-family: Wingdings; font-size: 10pt">&uml;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">Transition report under section 13 or 15(d) of the Exchange Act</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 87pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 87pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">For the transition period from &nbsp;&nbsp;_____________________&nbsp;&nbsp;&nbsp;&nbsp;to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;_____________________</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 87pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 87pt">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 22%"><FONT STYLE="font-size: 10pt">Commission File Number</FONT></TD>
    <TD STYLE="width: 22%; border-bottom: black 1pt solid; padding-bottom: 0.4pt; text-align: center"><FONT STYLE="font-size: 10pt">000-31380</FONT></TD>
    <TD STYLE="width: 56%; text-align: center">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51pt; text-indent: -0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 51pt; text-indent: -0.5in">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; border-bottom: black 1pt solid; padding-bottom: 0.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>APPLIED
    MINERALS, INC.</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">(Exact name of registrant as specified in its charter)</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 45%; border-bottom: black 1pt solid; padding-bottom: 0.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>Delaware</B></FONT></TD>
    <TD STYLE="width: 10%">&nbsp;</TD>
    <TD STYLE="width: 45%; border-bottom: black 1pt solid; padding-bottom: 0.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>82-0096527</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">(State or other jurisdiction of incorporation or organization)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">(I. R. S. Employer Identification No.)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: black 1pt solid; padding-bottom: 0.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>55
    Washington Street - Suite 301, Brooklyn, NY</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; padding-bottom: 0.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>11201</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">(Address of principal executive offices)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">(Zip Code)</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 31%">&nbsp;</TD>
    <TD STYLE="width: 38%; border-bottom: black 1pt solid; padding-bottom: 0.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>(212)
    226-4265</B></FONT></TD>
    <TD STYLE="width: 31%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">(Issuer&rsquo;s Telephone Number, Including Area Code)</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt; text-align: center">Former name, former address, and
former fiscal year, if changed since last report</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 59%">&nbsp;</TD>
    <TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 10pt">YES&nbsp;</FONT></TD>
    <TD STYLE="width: 2%; text-align: center"><FONT STYLE="font-family: Wingdings; font-size: 10pt">x</FONT></TD>
    <TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 10pt">NO</FONT></TD>
    <TD STYLE="width: 2%; text-align: center"><FONT STYLE="font-family: Wingdings; font-size: 10pt">&uml;</FONT></TD>
    <TD STYLE="width: 23%">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;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 (&sect;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&nbsp;<FONT STYLE="font-family: Wingdings">x</FONT>&nbsp;
No <FONT STYLE="font-family: Wingdings">&uml;</FONT>&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0in 0in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth
company. See the definitions of &ldquo;large accelerated filer,&rdquo; &ldquo;accelerated filer&rdquo;, &ldquo;smaller-reporting
company&rdquo; and &ldquo;emerging growth company&rdquo; in Rule 12b-2 of the Exchange Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 20%"><FONT STYLE="font-size: 10pt">Large Accelerated Filer</FONT></TD>
    <TD STYLE="width: 3%; text-align: justify"><FONT STYLE="font-family: Wingdings; font-size: 10pt">&uml;</FONT></TD>
    <TD STYLE="width: 24%; text-align: justify"><FONT STYLE="font-size: 10pt">Accelerated Filer</FONT></TD>
    <TD STYLE="width: 3%; text-align: justify"><FONT STYLE="font-family: Wingdings; font-size: 10pt">&uml;</FONT></TD>
    <TD STYLE="width: 22%"><FONT STYLE="font-size: 10pt">Non-accelerated Filer</FONT></TD>
    <TD STYLE="width: 3%; text-align: justify"><FONT STYLE="font-family: Wingdings; font-size: 10pt">&uml;</FONT></TD>
    <TD STYLE="width: 22%"><FONT STYLE="font-size: 10pt">Smaller Reporting Company</FONT></TD>
    <TD STYLE="width: 3%"><FONT STYLE="font-family: Wingdings; font-size: 10pt">x</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Emerging growth company</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Wingdings; font-size: 10pt">&uml;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to <FONT STYLE="font-family: Wingdings">x</FONT> Section 13(a) of the Exchange Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Indicate by checkmark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 59%">&nbsp;</TD>
    <TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 10pt">YES</FONT></TD>
    <TD STYLE="width: 2%; text-align: center"><FONT STYLE="font-family: Wingdings; font-size: 10pt">&uml;</FONT></TD>
    <TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 10pt">NO</FONT></TD>
    <TD STYLE="width: 2%; text-align: center"><FONT STYLE="font-family: Wingdings; font-size: 10pt">x</FONT></TD>
    <TD STYLE="width: 23%">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The number of shares of the registrant&rsquo;s
common stock, $0.001 par value per share, outstanding as of November 14, 2018 was 175,513,549.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">DOCUMENTS INCORPORATED BY REFERENCE: None.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>APPLIED MINERALS, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">THIRD QUARTER 2018 REPORT ON FORM 10-Q</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="toc"></A><B><I>TABLE OF CONTENTS</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 6%">&nbsp;</TD>
    <TD STYLE="width: 87%">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; padding-bottom: 0.4pt; text-align: center; width: 7%"><FONT STYLE="font-size: 10pt">Page(s)</FONT></TD></TR>
<TR STYLE="text-align: left; background-color: rgb(204,238,255); vertical-align: bottom">
    <TD COLSPAN="3" STYLE="text-align: center"><A HREF="#a_001"><FONT STYLE="font-size: 10pt"><B>PART I. FINANCIAL INFORMATION</B></FONT></a></TD></TR>
<TR STYLE="text-align: left; background-color: White; vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="text-align: left; background-color: rgb(204,238,255); vertical-align: bottom">
    <TD><A HREF="#a_001"><FONT STYLE="font-size: 10pt">Item 1.</FONT></A></TD>
    <TD><A HREF="#a_001"><FONT STYLE="font-size: 10pt">Consolidated Financial Statements</FONT></A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_001"><FONT STYLE="font-size: 10pt">3</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255); text-align: left; vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 21.25pt"><A HREF="#a_020"><FONT STYLE="font-size: 10pt">Consolidated Balance Sheets as
    of September 30, 2018 (unaudited) and December 31, 2017</FONT></A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_020"><FONT STYLE="font-size: 10pt">3</FONT></A></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255); text-align: left; vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 21.25pt"><A HREF="#a_004"><FONT STYLE="font-size: 10pt">Consolidated Statements of Operations
    for the Three and Nine Months Ended September 30, 2018 and 2017 (unaudited)</FONT></A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_004"><FONT STYLE="font-size: 10pt">4</FONT></A></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255); text-align: left; vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 21.25pt"><A HREF="#a_005"><FONT STYLE="font-size: 10pt">Consolidated Statements of Stockholders&rsquo;
    Deficit for the Nine Months Ended September 30, 2018 (unaudited)</FONT></A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_005"><FONT STYLE="font-size: 10pt">5</FONT></A></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255); text-align: left; vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 21.25pt"><A HREF="#a_006"><FONT STYLE="font-size: 10pt">Consolidated Statements of Cash
    Flows for the Nine Months Ended September 30, 2018 and 2017 (unaudited)</FONT></A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_006"><FONT STYLE="font-size: 10pt">6</FONT></A></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255); text-align: left; vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 21.25pt"><A HREF="#a_007"><FONT STYLE="font-size: 10pt">Notes to the Consolidated Financial
    Statements (unaudited)</FONT></A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_007"><FONT STYLE="font-size: 10pt">7</FONT></A></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255); text-align: left; vertical-align: bottom">
    <TD><A HREF="#a_008"><FONT STYLE="font-size: 10pt">Item 2.</FONT></A></TD>
    <TD><A HREF="#a_008"><FONT STYLE="font-size: 10pt">Management&rsquo;s Discussion and Analysis of Financial Condition and Results
    of Operations</FONT></A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_008"><FONT STYLE="font-size: 10pt">21</FONT></A></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255); text-align: left; vertical-align: bottom">
    <TD><A HREF="#a_009"><FONT STYLE="font-size: 10pt">Item 3.</FONT></A></TD>
    <TD><A HREF="#a_009"><FONT STYLE="font-size: 10pt">Quantitative and Qualitative Disclosures About Market Risk</FONT></A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_009"><FONT STYLE="font-size: 10pt">26</FONT></A></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255); text-align: left; vertical-align: bottom">
    <TD><A HREF="#a_010"><FONT STYLE="font-size: 10pt">Item 4.</FONT></A></TD>
    <TD NOWRAP><A HREF="#a_010"><FONT STYLE="font-size: 10pt">Controls and Procedures</FONT></A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_010"><FONT STYLE="font-size: 10pt">27</FONT></A></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD COLSPAN="3" STYLE="text-align: center"><A HREF="#a_011"><FONT STYLE="font-size: 10pt"><B>PART II. OTHER INFORMATION</B></FONT></A></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255); text-align: left; vertical-align: bottom">
    <TD><A HREF="#a_012"><FONT STYLE="font-size: 10pt">Item 1.</FONT></A></TD>
    <TD><A HREF="#a_012"><FONT STYLE="font-size: 10pt">Legal Proceedings</FONT></A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_012"><FONT STYLE="font-size: 10pt">28</FONT></A></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255); text-align: left; vertical-align: bottom">
    <TD><A HREF="#a_013"><FONT STYLE="font-size: 10pt">Item 1A</FONT></A></TD>
    <TD><A HREF="#a_013"><FONT STYLE="font-size: 10pt">Risk Factors</FONT></A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_013"><FONT STYLE="font-size: 10pt">28</FONT></A></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255); text-align: left; vertical-align: bottom">
    <TD><A HREF="#a_014"><FONT STYLE="font-size: 10pt">Item 2.</FONT></A></TD>
    <TD><A HREF="#a_014"><FONT STYLE="font-size: 10pt">Unregistered Sales of Equity Securities and Use of Proceeds</FONT></A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_014"><FONT STYLE="font-size: 10pt">28</FONT></A></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255); text-align: left; vertical-align: bottom">
    <TD><A HREF="#a_015"><FONT STYLE="font-size: 10pt">Item 3.</FONT></A></TD>
    <TD><A HREF="#a_015"><FONT STYLE="font-size: 10pt">Defaults Upon Senior Securities</FONT></A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_015"><FONT STYLE="font-size: 10pt">28</FONT></A></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255); text-align: left; vertical-align: bottom">
    <TD><A HREF="#a_016"><FONT STYLE="font-size: 10pt">Item 4.</FONT></A></TD>
    <TD><A HREF="#a_016"><FONT STYLE="font-size: 10pt">Mine Safety Disclosures</FONT></A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_016"><FONT STYLE="font-size: 10pt">28</FONT></A></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255); text-align: left; vertical-align: bottom">
    <TD><A HREF="#a_017"><FONT STYLE="font-size: 10pt">Item 5.</FONT></A></TD>
    <TD><A HREF="#a_017"><FONT STYLE="font-size: 10pt">Other Information</FONT></A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_017"><FONT STYLE="font-size: 10pt">28</FONT></A></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255); text-align: left; vertical-align: bottom">
    <TD><A HREF="#a_018"><FONT STYLE="font-size: 10pt">Item 6.</FONT></A></TD>
    <TD><A HREF="#a_018"><FONT STYLE="font-size: 10pt">Exhibits</FONT></A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_018"><FONT STYLE="font-size: 10pt">29</FONT></A></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255); text-align: left; vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD><A HREF="#a_019"><FONT STYLE="font-size: 10pt">Signatures</FONT></A></TD>
    <TD STYLE="text-align: right"><A HREF="#a_019"><FONT STYLE="font-size: 10pt">30</FONT></A></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt"></P>

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    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt"><A HREF="#toc">Table of Contents</A></P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><A NAME="a_002"></A><A NAME="a_001"></A><B>PART I. FINANCIAL
INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="a_020"></A><B>APPLIED MINERALS,
INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Mining Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CONSOLIDATED BALANCE SHEETS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt; text-align: center"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center">September 30,</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center">December 31,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2018</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2017</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center">(Unaudited)</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; font-style: italic; text-decoration: underline">ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">Current Assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; text-align: left; padding-left: 9pt">Cash and cash equivalents</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">3,783,238</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">47,652</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">112,701</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27,265</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Deposits and prepaid expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">40,052</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">205,922</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Total Current Assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,935,991</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">280,839</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">Property and Equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,862,310</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,802,391</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt"><P STYLE="margin: 0">Other Assets &ndash; Deposits</P>


</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">253,326</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">240,934</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; font-style: italic; text-align: left; padding-bottom: 2.5pt">TOTAL ASSETS</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,051,627</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,324,164</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; font-style: italic; text-decoration: underline; text-align: left">LIABILITIES AND STOCKHOLDERS&rsquo; (DEFICIT)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left">Current Liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Accounts payable and accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">631,458</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">963,609</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">PIK Note interest accrual</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">422,919</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">57,334</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Current portion of notes payable</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,660</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">212,134</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Total Current Liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,057,037</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,233,077</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left">Long-Term Liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.25in">PIK Notes payable, net of debt discount and deferred
    financing cost of     $7,141,417 at September 30, 2018 and $9,755,832 at December 31, 2017, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">36,467,964</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">33,244,605</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">PIK Note derivative liability</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,738,106</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,047,264</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Deferred Rent</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">8,118</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Total Long-Term Liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">42,214,188</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">35,291,869</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; font-style: italic; text-align: left; padding-bottom: 1pt">TOTAL LIABILITIES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">43,271,225</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">36,524,946</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left">Stockholders&rsquo; (Deficit)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.25in">Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">- 0 -</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">- 0 -</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.25in">Common stock, $0.001 par value, 400,000,000 shares authorized, 175,513,549 and 140,763,549 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">175,514</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">140,764</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">73,957,208</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">71,152,311</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">Accumulated deficit prior to the exploration stage</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(20,009,496</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(20,009,496</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Accumulated deficit during the exploration stage</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(91,342,824</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(84,484,361</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; font-style: italic; text-align: left; padding-bottom: 1pt">Total Stockholders&rsquo; (Deficit)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(37,219,598</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(33,200,782</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; font-style: italic; text-align: left; padding-bottom: 2.5pt">TOTAL LIABILITIES AND STOCKHOLDERS&rsquo; (DEFICIT)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,051,627</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,324,164</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 22.5pt; text-align: center">The accompanying notes are an integral
part of these unaudited consolidated financial statements.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt; text-align: center">&nbsp;</P>


<!-- Field: Page; Sequence: 3 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt"><A HREF="#toc">Table of Contents</A></P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="a_004"></A><B>APPLIED MINERALS,
INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Mining Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CONSOLIDATED STATEMENTS OF OPERATIONS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Unaudited)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.2pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.2pt; text-align: center"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">For the Three Months Ended</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">For the Nine Months Ended</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">September 30,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">September 30,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2018</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2017</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2018</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2017</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 48%; font-weight: bold">REVENUES</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">4,682,003</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">148,303</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">4,820,088</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,300,998</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left">OPERATING EXPENSES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Production costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">581,072</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">412,713</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">937,614</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,125,007</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">Exploration costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">36,068</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">47,172</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">147,680</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">304,631</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">General and administrative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">613,605</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">664,217</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,687,961</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,137,655</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Depreciation expense</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">318,182</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">329,357</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">963,144</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">989,122</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Total Operating Expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,548,927</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,453,459</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,736,399</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,556,415</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Operating Income (Loss)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,133,076</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,305,156</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">83,689</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,255,417</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">OTHER INCOME (EXPENSE):</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">Interest expense, net, including amortization of deferred financing cost and debt discount</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(608,585</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,527,374</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,729,540</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6,843,524</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Gain (loss) on revaluation of PIK Note derivative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,021,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(570,473</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,557,004</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,066,368</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Other income (expense), net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(9,433</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,064</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">344,392</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">21,620</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Total Other Income (Expense)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,403,482</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,101,911</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(6,942,152</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5,755,536</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; font-style: italic; text-align: left; padding-bottom: 2.5pt">NET INCOME (LOSS)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,536,558</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(4,407,067</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(6,858,463</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(9,010,953</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Net Income Loss Per Share - Basic</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">0.03</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.04</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.04</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.08</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; padding-bottom: 2.5pt">Weighted Average Shares Outstanding - Basic</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">175,004,038</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">118,862,734</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">160,992,945</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">112,094,593</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>

<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 48%; font-weight: bold; text-align: left; padding-bottom: 2.5pt">Net Income Loss Per Share - Diluted</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; text-align: right">0.03</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; text-align: right">(0.04</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; text-align: right">(0.04</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; text-align: right">(0.08</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; padding-bottom: 2.5pt">Weighted Average Shares Outstanding - Diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">193,795,646</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">118,862,734</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">160,992,945</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">112,094,593</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.2pt; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.2pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 22.5pt; text-align: center">The accompanying notes are an integral
part of these unaudited consolidated financial statements.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt; text-align: center">&nbsp;</P>


<!-- Field: Page; Sequence: 4 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt"><A HREF="#toc">Table of Contents</A></P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="a_005"></A><B>APPLIED MINERALS,
INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Mining Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Unaudited)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="10" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Common
    Stock</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; padding-bottom: 0.4pt; text-align: center"><FONT STYLE="font-size: 8pt">Shares</FONT></TD>
    <TD STYLE="padding-bottom: 0.75pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; padding-bottom: 0.4pt; text-align: center"><FONT STYLE="font-size: 8pt">Amount</FONT></TD>
    <TD STYLE="padding-bottom: 0.75pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; padding-bottom: 0.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-size: 8pt">Additional</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-size: 8pt">Paid-In<BR>

        Capital</FONT></P></TD>
    <TD STYLE="padding-bottom: 0.75pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; padding-bottom: 0.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-size: 8pt">Accumulated</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-size: 8pt">Deficit
        Prior<BR>
 to</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-size: 8pt">Exploration</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-size: 8pt">Stage</FONT></P></TD>
    <TD STYLE="padding-bottom: 0.75pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; padding-bottom: 0.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-size: 8pt">Accumulated</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-size: 8pt">Deficit<BR>

        During</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-size: 8pt">Exploration</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-size: 8pt">Stage</FONT></P></TD>
    <TD STYLE="padding-bottom: 0.75pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; padding-bottom: 0.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-size: 8pt">Total</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-size: 8pt">Stockholders&rsquo;</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-size: 8pt">Deficit</FONT></P></TD>
    <TD STYLE="padding-bottom: 0.75pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 32%"><FONT STYLE="font-size: 8pt">Balance, December 31, 2017</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">140,763,549</FONT></TD>
    <TD NOWRAP STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">$</FONT></TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">140,764</FONT></TD>
    <TD NOWRAP STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">$</FONT></TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">71,152,311</FONT></TD>
    <TD NOWRAP STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 8pt">(20,009,496</FONT></TD>
    <TD NOWRAP STYLE="width: 1%"><FONT STYLE="font-size: 8pt">)</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">$</FONT></TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">(84,484,361</FONT></TD>
    <TD NOWRAP STYLE="width: 1%"><FONT STYLE="font-size: 8pt">)</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">$</FONT></TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 8pt">(33,200,782</FONT></TD>
    <TD NOWRAP STYLE="width: 1%"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 8pt">Shares issued for consulting services</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,500,000</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,500</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">58,500</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">- 0 -</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">- 0 -</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">60,000</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font-size: 8pt">Shares and warrants issued in private placements</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">31,250,000</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">31,250</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,703,750</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">- 0 -</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">- 0 -</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,735,000</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 8pt">Shares issued for warrant exercise</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,000,000</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2,000</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">78,000</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">- 0 -</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">- 0 -</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">80,000</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 8pt">Stock option compensation expense</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">- 0 -</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">- 0 -</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">964,647</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">- 0 -</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">- 0 -</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">964,647</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Net Loss</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">- 0 -</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">- 0 -</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">- 0 -</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">- 0 -</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">(6,858,463</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">(6,858,463</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">Balance, September 30, 2018</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">175,513,549</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">175,514</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">73,957,208</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(20,009,496</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(91,342,824</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 8pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 8pt">$</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(37,219,598</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 22.5pt; text-align: center">The accompanying notes are an integral
part of these unaudited consolidated financial statements.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt; text-align: center">&nbsp;</P>


<!-- Field: Page; Sequence: 5 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt"><A HREF="#toc">Table of Contents</A></P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="a_006"></A><B>APPLIED MINERALS,
INC. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Mining Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CONSOLIDATED STATEMENTS OF CASH FLOWS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Unaudited)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="6" STYLE="text-align: center">For the Nine Months Ended</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="6" STYLE="text-align: center">September 30,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2018</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2017</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left">Cash Flows from Operating Activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; text-align: left">Net loss</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(6,858,463</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(9,010,953</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Adjustments to reconcile net loss to net cash used in operations:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt">Depreciation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">963,144</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">989,122</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">Amortization of discount - PIK Notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,546,162</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,784,911</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Amortization of deferred financing costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">68,253</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,625</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt"> <P STYLE="margin: 0">Accrued interest on PIK Notes</P>


</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,108,367</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,704,837</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Stock issued for consulting services</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">60,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">- 0 -</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">Stock based compensation expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">964,647</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">145,887</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">(Gain) loss on revaluation of PIK Note derivative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,557,004</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,066,368</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 9pt">Other</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">- 0 -</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Change in operating assets and liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">Accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(85,436</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">304,424</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Other current receivables</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">- 0 -</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,802</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">Deposits and prepaids</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">153,478</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">296,097</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Accounts payable and accrued liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(324,033</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">413,721</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt"><P STYLE="margin: 0">Net cash provided by (used in) operating activities</P>


</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,153,123</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,414,895</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left">Cash Flows From Investing Activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Purchases of property and equipment</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(23,063</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(43,753</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Net cash used in investing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(23,063</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(43,753</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left">Cash Flows From Financing Activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Payments on notes payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(209,474</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(230,336</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Proceeds from sale of common stock</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,735,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">910,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Proceeds from exercise of options or warrants</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">80,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">- 0 -</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Net cash provided by financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,605,526</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">679,664</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Net change in cash and cash equivalents</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,735,586</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(778,984</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Cash and cash equivalents at beginning of period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">47,652</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,049,880</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Cash and cash equivalents at end of period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,783,238</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">270,896</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left">Supplemental disclosure of cash flow information:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD><P STYLE="margin: 0">Cash paid for income taxes</P>


</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left"><P STYLE="margin: 0">$&nbsp;</P>


</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left"><P STYLE="margin: 0">$&nbsp;</P>


</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Cash paid for interest</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,761</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,301</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">Supplemental disclosure of noncash financing activity:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Accrued PIK interest paid through issuance of PIK Notes</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">608,944</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,704,837</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 22.5pt; text-align: center">The accompanying notes are an integral
part of these unaudited consolidated financial statements.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt; text-align: center">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="a_007"></A><B>APPLIED MINERALS,
INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(An Exploration Stage Mining Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the Consolidated Financial Statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 1&ndash; ORGANIZATION AND DESCRIPTION
OF BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Applied Minerals, Inc. (the &ldquo;Company&rdquo;
or &ldquo;Applied Minerals&rdquo; or &ldquo;we&rdquo; or &ldquo;us&rdquo;) (OTCQB: AMNL) owns the Dragon Mine in central Utah.
From the mine we extract, process, or have processed by a third party, halloysite clay and iron oxide for sale to a range of end
markets. We market the minerals directly and through distributors and also under a profit-sharing arrangement with the Kaolin
business unit of BASF Corp. (&ldquo;BASF&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We also engage in research and development
and frequently work collaboratively with potential customers, consultants, distributors, and BASF to process and enhance our halloysite
clay products to improve the performance of existing and new products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our halloysite clay, which we market under
the DRAGONITE&trade; trade name, is an aluminosilicate mineral with a hollow tubular shape. DRAGONITE can utilize halloysite&rsquo;s
morphology, high surface area, and reactivity to add significant functionality to a number of applications such as, but not limited
to, reinforcement additives for polymer composites, flame retardant additives for polymers, catalysts, controlled release carriers
for paints and coatings, strength reinforcement additives for cement, concrete, mortars and grouts, advanced ceramics, rheology
additives for drilling fluids, environmental remediation media, and carriers of agricultural agents.&nbsp; The Company sells its
halloysite products at negotiated prices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our iron oxide, which we market under
the AMIRON&trade; trade name, is a high purity product. We have sold it on an exclusive basis to one customer at a negotiated
price for use in an oilfield application and we are continuing to offer AMIRON to that customer on an exclusive basis.&nbsp; Currently,
we are not selling AMIRON&trade; to customers on a continuing basis for use in any other application.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is classified as an &ldquo;exploration
stage&rdquo; company for purposes of Industry Guide 7 of the U.S. Securities and Exchange Commission (&ldquo;SEC&rdquo;) Under
Industry Guide 7, companies engaged in significant mining operations are classified into three categories, referred to as &ldquo;stages&rdquo;
- exploration, development, and production. Exploration stage includes all companies that do not have established reserves in
accordance with Industry Guide 7. Such companies are deemed to be &ldquo;in the search for mineral deposits.&rdquo; Notwithstanding
the nature and extent of development-type or production-type activities that have been undertaken or completed, a company cannot
be classified as a development or production stage company unless it has established reserves in accordance with Industry Guide
7.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2017, we entered into a tolling agreement
with BASF under which BASF will process the Company&rsquo;s halloysite product, utilizing a water-based system. The BASF system
is capable of eliminating impurities, such as iron oxide, and chemically treating the surface of halloysite to achieve desired
functionality<B>.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have a mineral processing plant with
a capacity of up to 45,000 tons of mineralization per annum for certain applications.&nbsp; The plant is currently dedicated to
processing its halloysite products.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Additionally, the Company has a second
processing facility with a capacity of up to 10,000 tons per annum. This smaller plant is currently dedicated to processing the
Company&rsquo;s halloysite.&nbsp; This smaller plant processes halloysite using a dry-based, micronizing system. This dry-based
system does not eliminate impurities, such as iron oxide, as effectively as a water-based system but is useful in situations where
the removal of impurities is not necessary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the foreseeable future, the Company
expects to utilize a commercial-sized crusher to process its iron oxide to satisfy any sales of its AMIRON product.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the nine months ended September
30, 2018, the Company&rsquo;s largest customer accounted for approximately 94% of total revenue and at September 30, 2018
amounts owed by the Company&rsquo;s two largest customers represented 68% of accounts receivable.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Exploration Agreement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 22, 2017, the Company and
Continental Mineral Claims, Inc. (&ldquo;CMC&rdquo;) entered into an Exploration Agreement with Option to Purchase (&ldquo;Agreement&rdquo;).
The Company granted to CMC the exclusive right and option to enter upon and conduct mineral exploration activities (the &ldquo;Exploration
License&rdquo;) for Metallic Minerals on the Company&rsquo;s Dragon Mine mine site in Utah (the &ldquo;Mining Claims&rdquo;).&nbsp;
Metallic Minerals are defined to include minerals with a high specific gravity and metallic luster, such as gold, silver, lead,
copper, zinc, molybdenum, titanium, tungsten, uranium, tin, iron, etc., but shall exclude any such Metallic Minerals that are
intermingled within any economically-recoverable, non-metallic mineral deposits located at or above an elevation of 5,590 feet
above sea level. Non-metallic minerals include clay and iron oxide, the minerals mined by the Company.&nbsp; The Company believes
that all economic recoverable non-metallic mineral deposits are well above 5,590 feet above sea level. The Exploration License
is for a period of ten years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In consideration of the Exploration License
CMC has paid the Company $350,000 and will pay it $150,000 on or before the first anniversary of the Exploration License, $250,000
on or before each subsequent anniversary during the Exploration License term following the first anniversary of the Effective
Date of this Agreement, unless the Exploration License is terminated earlier by CMC by exercising the option or failing to make
the required payment for the Exploration License.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">CMC may exercise the option at any time
during the Exploration License term. Upon exercise of the Option and the completion of the closing, CMC shall acquire 100% of
the Metallic Rights within the Mining Claims from the Company, subject to the terms and conditions of the Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The consideration to be paid by CMC to
the Company after exercising the option for the acquisition of the Metallic Rights shall be payable as follows: $3,000,000; and,
CMC shall grant to the Company a five percent (5%) Net Profits Interest (&ldquo;NPI&rdquo;) royalty over the Metallic Minerals
produced from the Mining Claims.&nbsp; The NPI royalty shall be initially capped at $20,000,000 (the &ldquo;NPI Cap&rdquo;).&nbsp;The
NPI Cap shall be subject to reduction in the event the Company elects to take the Share Contribution, as set forth below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Upon exercise of the option, the Company
shall retain the all rights and title to (1) the surface interest (with exception of those rights associated with the Metallic
Rights), and (2) all non-metallic minerals (expressly including all industrial minerals including clays and iron oxides).&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">It is anticipated that CMC will acquire
rights similar to the Metallic Rights with respect to contiguous and nearly properties and such rights will be contributed to
a new company formed or designated by CMC to own and operate CMC&rsquo;s Tintic District project, which would involve the Metallic
rights and similar rights regarding adjacent or nearby properties (&ldquo;PubCo&rdquo;) that intends to go public.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company shall have the right, at its
sole election, to convert a portion of its NPI royalty interest into $2,000,000 worth of shares in PubCo up to a maximum of Two
Percent (2%) net value of PubCo (the &ldquo;Share Contribution&rdquo;), through a reduction of the NPI Cap. The Company shall
make the determination whether to take the Share Contribution or not, and so notify CMC, within ninety (90) days, of the completion
(and delivery to the Company) of a feasibility study by CMC for the Tintic District project.&nbsp; If the Company elects <U>not
</U>to take the Share Contribution, the Company&rsquo;s NPI royalty shall remain unchanged, including the NPI Cap, which will
remain at $20,000,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Agreement contains protections in
favor of the Company against unreasonable interference of its current and future mining operations by CMC. CMC may not do anything
that may, at the Company&rsquo;s determination, adversely impact the Company&rsquo;s Mining Operations.&nbsp; &ldquo;Mining Operations&rdquo;
shall mean the activities incident to mineral extraction, permitting, and any operations by CMC or the Company relating to the
removal of minerals, respectively, that are or may reasonably be conducted on the Mining Claims, including the exploration for,
and development, active mining, removing, producing and selling of any minerals, including the Metallic Minerals.&nbsp; The Agreement
states that the parties understand that the Company is willing to enter into the Agreement only if it is assured that CMC will
not have any right to unreasonably interfere with the Company&rsquo;s current mining operations and possible future Mining Operations
on the Mining Claims.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There are no assurances that CMC will
exercise its option to purchase 100% of the Metallic Rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 2 - LIQUIDITY&nbsp;AND BASIS OF
PRESENTATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has a history of recurring
losses from operations and the use of cash in operating activities. For the nine months ended September 30, 2018, the Company&rsquo;s
net loss was $6,858,463 and cash used in operating activities was $2,153,123. As of September 30, 2018, the Company had current
assets of $3,935,991 and current liabilities of $1,057,037 of which $422,919 was accrued PIK Note interest likely to be paid in
additional PIK Notes. The Company&rsquo;s current liabilities also include (i) $157,040 of payables to a compounder for which it
has agreed to satisfy in halloysite product and (ii) $132,635 of disputed accrued expenses for which the Company believes it has
a statute of limitations defense.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Based on the Company&rsquo;s current cash
usage expectations, management believes it has sufficient liquidity to fund its operations through November 19, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 3&ndash; BASIS OF REPORTING AND
SIGNIFICANT ACCOUNTING POLICIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying unaudited consolidated
financial statements of Applied Minerals, Inc. have been prepared in accordance with generally accepted accounting principles
in the United States of America (&ldquo;GAAP&rdquo;) for interim financial information and pursuant to the rules and regulations
of the Securities and Exchange Commission (the &ldquo;SEC&rdquo;). Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In the opinion of management, these interim
unaudited  consolidated financial statements contain all of the adjustments of a normal and recurring nature which are
considered necessary for a fair presentation of the financial position of the Company and the results of its operations and cash
flows for the periods presented. The results of operations for the three and nine months ended September 30, 2018 are not necessarily
indicative of the operating results for the entire year. These financial statements should be read in conjunction with the financial
statements and related disclosures for the year ended December 31, 2017, included in the Annual Report of Applied Minerals, Inc.
on Form 10-K/A filed with the SEC on August 14, 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying interim unaudited
consolidated financial statements reflect the application of certain significant accounting policies as described below and
elsewhere in these notes. The Company&rsquo;s significant accounting policies and estimates remain unchanged from those
detailed in the Company&rsquo;s Annual Report on Form 10-K/A for the year ended December 31, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Exploration-Stage Company</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Effective January 1, 2009, the Company
was, and still is, classified as an exploration company because the existence of proven or probable reserves at the Company&rsquo;s
Dragon Mine property have not been demonstrated and no significant revenue has been earned from the mine. Under the SEC&rsquo;s
Industry Guide 7, a mining company is considered an exploration stage company until it has declared mineral reserves determined
in accordance with the guide and staff interpretations thereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Principles of Consolidation</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying consolidated financial
statements include the accounts of Applied Minerals, Inc. and its inactive subsidiary, which holds 100 acres of timber and mineral
property in northern Idaho.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Use of Estimates</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America (&ldquo;GAAP&rdquo;) requires management
to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.
In these consolidated financial statements, the warrant and PIK note derivative liabilities, stock compensation, impairment of
long-lived assets and valuation allowance on income taxes involve extensive reliance on management&rsquo;s estimates. Actual results
could differ from those estimates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Cash and Cash Equivalents</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cash and cash equivalents include all
highly liquid investments with a maturity of three months or less. The Company minimizes its credit risk by investing its cash
and cash equivalents, which sometimes exceed federally insured limits with major financial institutions located in the United
States with a high credit rating.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Receivables</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Trade receivables are reported at outstanding
principal amounts, net of an allowance for doubtful accounts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Management evaluates the collectability
of receivable account balances to determine the allowance, if any. Management considers the other party&rsquo;s credit risk and
financial condition, as well as current and projected economic and market conditions, in determining the amount of the allowance.
Receivable balances are written off when management determines that the balance is uncollectable. No allowance was required at
September 30, 2018 and December 31, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Property and Equipment</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Property and equipment are carried at
cost net of accumulated depreciation and amortization. Depreciation and amortization is computed on the straight-line method over
the estimated useful lives of the assets, or the life of the lease, whichever is shorter, as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Estimated</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Useful Life (years)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Building and Building Improvements</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">5 &ndash; 40</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Mining equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">2 &ndash; 7</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Office and shop furniture and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">3 &ndash; 7</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 87%">Vehicles</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: center">5</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Impairment of Long-lived Assets</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company periodically reviews
the carrying amounts of long-lived assets to determine whether current events or circumstances warrant adjustment to such carrying
amounts. Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that its carrying
amount may not be recoverable. When such events occur, the Company compares the sum of the undiscounted cash flows expected to
result from the use and eventual disposition of the asset to its carrying amount. If this comparison indicates that there is an
impairment, the amount of the impairment is typically calculated using discounted expected future cash flows where observable fair
values are not readily determinable. Considerable management judgment is necessary to estimate the fair value of assets. Assets
to be disposed of are carried at the lower of their financial statement carrying amount or fair value, less cost to sell. The Company
has determined that there was no impairment of its long-lived assets as of September 30, 2018 and December 31, 2017.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><U>Revenue Recognition</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenue includes sales of halloysite
clay and iron oxide and is recognized when title passes to the buyer and when collectability is reasonably assured. Title passes
to the buyer based on terms of the sales contract. Product pricing is determined based on negotiated contractual arrangements with
the Company&rsquo;s customers.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In May 2014, the Financial Accounting
Standards Board (&ldquo;FASB&rdquo;) issued guidance on revenue recognition, which provides a single, comprehensive revenue recognition
model for all contracts with customers and supersedes most existing revenue recognition guidance.&nbsp; The main principle under
this guidance is that an entity should recognize revenue at the amount it expects to be entitled to in exchange for the transfer
of goods or services to customers.&nbsp; The Company identified the predominant changes to its accounting policies resulting from
the application of this guidance and quantified the impact on its consolidated financial statements.&nbsp; The cumulative effect
of the initial adoption of this guidance did not have any significant impact on the Company&rsquo;s consolidated financial statements
as the Company did not have any significant customer contracts in place at December 31, 2017.&nbsp; The Company adopted this guidance
on January 1, 2018. For 2018, revenue is recognized when control over the&nbsp;product transfers to the customer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Mining Exploration and Development
Costs</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Land and mining property are carried at
cost. The Company expenses prospecting and mining exploration costs. At the point when a property is determined to have proven
and probable reserves, subsequent development costs will be capitalized and will be charged to operations using the units-of-production
method over proven and probable reserves. Upon abandonment or sale of a mineral property, all capitalized costs relating to the
specific property are written off in the period abandoned or sold and a gain or loss is recognized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Income taxes</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company uses an asset and liability
approach which results in the recognition of deferred tax liabilities and assets for the expected future tax consequences or benefits
of temporary differences between the financial reporting basis and the tax basis of assets and liabilities, as well as operating
loss and tax credit carry forwards, using enacted tax rates in effect in the years in which the differences are expected to reverse.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In assessing the realizability of deferred
tax assets, management considers whether it is more likely than not that some portion or all of its deferred tax assets will not
be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax
planning strategies in making this assessment. A full valuation allowance has been provided for the Company&rsquo;s net deferred
tax assets as it is more likely than not that they will not be realized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Authoritative guidance provides that the
tax effects from an uncertain tax position taken or expected to be taken in a tax return can be recognized in our financial statements
only if the position is more likely than not of being sustained on audit based on the technical merits of the position. As of
December 31, 2017 no benefit from uncertain tax positions was recognized in our financial statements. The Company has elected
to classify interest and/or penalties related to income tax matters in income tax expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Stock Options and Warrants</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company follows ASC 718 (Stock Compensation)
and 505-50 (Equity-Based Payments to Non-employees), which provide guidance in accounting for share-based awards exchanged for
services rendered and requires companies to expense the estimated fair value of these awards over the requisite service period.
The Company instituted a formal long-term and short-term incentive plan on November 20, 2012, which was approved by its shareholders.
Prior to that date, we did not have a formal equity plan, but all equity grants, including stock options and warrants, were approved
by our Board of Directors. We determine the fair value of the stock-based compensation awards granted to non-employees as either
the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.
If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions
as of the earlier of either of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments
is reached, or (2) the date at which the counterparty&rsquo;s performance is complete. Beginning in the quarter ended June 30,
2013 the Company began using the simplified method to determine the expected term for any options granted because the Company
did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The Company
previously utilized the contractual term as the expected term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Environmental Matters</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Expenditures for ongoing compliance with
environmental regulations that relate to current operations are expensed or capitalized as appropriate. Expenditures resulting
from the remediation of existing conditions caused by past operations that do not contribute to future revenue generations are
expensed. Liabilities are recognized when environmental assessments indicate that remediation efforts are probable and the costs
can be reasonably estimated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Estimates of such liabilities are based
upon currently available facts, existing technology and presently enacted laws and regulations taking into consideration the likely
effects of inflation and other societal and economic factors, and include estimates of associated legal costs. These amounts also
reflect prior experience in remediating contaminated sites, other companies&rsquo; clean-up experience and data released by The
Environmental Protection Agency or other organizations. Such estimates are by their nature imprecise and can be expected to be
revised over time because of changes in government regulations, operations, technology and inflation. Recoveries are evaluated
separately from the liability and, when recovery is assured, the Company records and reports an asset separately from the associated
liability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has posted a cash bond in the
amount of $199,000 required by the Utah Department of Oil, Gas and Minerals to cover estimated reclamation costs related the Company
large mining permit for its Dragon Mine property.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Recent Issued Accounting Pronouncements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2014, the Financial Accounting
Standards Board (&ldquo;FASB&rdquo;) issued guidance on revenue recognition, which provides a single, comprehensive revenue recognition
model for all contracts with customers and supersedes most existing revenue recognition guidance.&nbsp; The main principle under
this guidance is that an entity should recognize revenue at the amount it expects to be entitled to in exchange for the transfer
of goods or services to customers.&nbsp; The Company&nbsp;adopted this guidance on January 1, 2018 using the modified retrospective
method. The Company has elected to apply this initial application of the standard only to contracts that are not completed at the
date of initial application. The cumulative effect of initially applying the new revenue standard would be applied as an adjustment
to the opening balance of retained earnings. The cumulative effect of the initial adoption of this guidance did not have any significant
impact on the Company&rsquo;s consolidated financial statements as the Company did not have any significant customer contracts
in place at December 31, 2017 and therefore the Company did not record a cumulative catch-up to deferred revenue and accumulated
deficit upon adoption of the new standard on January 1, 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0pt;">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2016, the FASB issued
ASU 2016-02 (&ldquo;Topic 842&rdquo;) new accounting guidance for leases, which supersedes previous lease guidance. Under this
guidance, for all leases with terms in excess of one year, including operating leases, the Company will be required to recognize
on its balance sheet a lease liability and a right-of-use asset representing its right to use the underlying asset for the lease
term. The new guidance retains a distinction between finance leases and operating leases and the classification criteria is substantially
similar to previous guidance. Additionally, the recognition, measurement, and presentation of expenses and cash flows arising from
a lease by a lessee have not significantly changed. The guidance is effective for the Company beginning January 1, 2019. The Company
is currently evaluating the impact of this guidance on its consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2017, the FASB issued ASU
2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815):
(Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral
for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling
Interests with a Scope Exception. This ASU clarifies the recognition, measurement, and effect on earnings per share of certain
freestanding equity-classified financial instruments that include down round features affect entities that present earnings per
share in accordance with the guidance in Topic 260, Earnings Per Share. When determining whether certain financial instruments
should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when
assessing whether the instrument is indexed to an entity&rsquo;s own stock. The amendments also clarify existing disclosure requirements
for equity-classified instruments. This new guidance will be effective for annual reporting periods beginning after December 15,
2018, including interim periods within those periods. The Company is currently evaluating the provisions of this guidance and assessing
its impact on the Company&rsquo;s financial statements and disclosures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In June 2018, the FASB issued ASU
No. 2018-07, Compensation&mdash;Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting. ASU
2018-07 is intended to reduce the cost and complexity and to improve financial reporting for non-employee share-based payments.
The ASU expands the scope of Topic 718, Compensation-Stock Compensation (which currently only includes share-based payments to
employees), to include share-based payments issued to non-employees for goods or services. Consequently, the accounting for share-based
payments to non-employees and employees will be substantially aligned. This update is effective for annual and interim periods
beginning after December 15, 2018 with early adoption permitted. Upon transition, entities will remeasure unsettled liability-classified
awards and any unmeasured equity-classified awards for non-employees at fair value as of the adoption date. A cumulative-effect
adjustment to retained earnings will be required as of the beginning of the fiscal year of adoption. The Company is currently assessing
the impact ASU 2018-07 will have on its consolidated financial statements and footnote disclosures thereto.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 4&ndash; PROPERTY AND EQUIPMENT
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following is a summary of property,
plant, and equipment &ndash; at cost, less accumulated depreciation:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 98%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">September 30,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2018</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2017</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%">Land</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">500,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">500,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Land improvements</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">171,122</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">171,122</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Buildings</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,129,519</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,129,519</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Mining equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,784,115</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,784,115</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Milling equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,864,789</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,841,726</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Laboratory equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">607,716</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">607,716</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Office equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">70,529</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">70,529</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 1pt">Vehicles</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">150,810</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">150,810</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,278,600</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,255,537</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less: Accumulated depreciation</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(7,416,290</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(6,453,146</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 9pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,862,310</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,802,391</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Depreciation expense for the three
months ended September 30, 2018 and 2017 totaled $318,182, and $329,357, respectively, and for the nine months ended September
30, 2018 and 2017 totaled $963,144 and $989,122, respectively.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 5&ndash; FAIR VALUE MEASUREMENTS
AND FINANCIAL INSTRUMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ASC Topic 820,<I>Fair Value Measurement
and Disclosures</I>, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. This topic also establishes a fair value hierarchy, which requires classification based
on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based
on market data (observable inputs) and an entity&rsquo;s own assumptions (unobservable inputs). The hierarchy consists of three
levels:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Level
                                         1&ndash; Quoted prices in active markets for identical assets and liabilities;</FONT></TD>
</TR></TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Level
                                         2&ndash; Inputs other than level one inputs that are either directly or indirectly observable;
                                         and</FONT></TD>
</TR></TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-size: 10pt">&#9679;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Level
                                         3&ndash; Unobservable inputs developed using estimates and assumptions, which are developed
                                         by the reporting entity and reflect those assumptions that a market participant would
                                         use.</FONT></TD>
</TR></TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Liabilities measured at fair value on
a recurring basis are summarized as follows at September 30, 2018:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fair value measurement using
    inputs</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Level 1</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Level 2</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Level 3</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 61%; font-weight: bold; text-align: left">Financial instruments:</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 27pt">Series 2023 Note Derivative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">- 0 -</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">- 0 -</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">502,678</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 27pt">Series A Note Derivative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">- 0 -</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">- 0 -</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5,235,428</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table summarizes the activity
during the nine months ended September&nbsp;2018 and 2017 for financial instruments at fair value using Level 3:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 36%"><FONT STYLE="font-size: 10pt">Balance at December 31, 2017</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">2,047,264</FONT></TD>
    <TD NOWRAP STYLE="width: 1%; background-color: White">&nbsp;</TD>
    <TD NOWRAP STYLE="width: 1%; background-color: White">&nbsp;</TD>
    <TD STYLE="width: 37%"><FONT STYLE="font-size: 10pt">Balance at December 31, 2016</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">2,176,552</FONT></TD>
    <TD NOWRAP STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Issuance of additional Series 2023 Notes</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><P STYLE="margin: 0">27,858</P>


</TD>
    <TD NOWRAP STYLE="background-color: White">&nbsp;</TD>
    <TD NOWRAP STYLE="background-color: White">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Issuance of additional Series 2023 Notes</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">31,990</FONT></TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 10pt">Issuance of additional Series A Notes</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><P STYLE="margin: 0">105,980</P>


</TD>
    <TD NOWRAP STYLE="background-color: White">&nbsp;</TD>
    <TD NOWRAP STYLE="background-color: White">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Issuance of additional Series A Notes</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">- 0 -</FONT></TD>
    <TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">Net unrealized (gain) loss included in operations</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">3,557,004</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; background-color: White">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">Net unrealized (gain)&nbsp;loss included in operations</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,066,368</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD STYLE="background-color: White">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">Balance at September 30, 2018</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 10pt">5,738,106</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; background-color: White">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt; background-color: White">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">Balance at September 30, 2017</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 10pt">1,142,174</FONT></TD>
    <TD NOWRAP STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>


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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt"><A HREF="#toc">Table of Contents</A></P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The recorded value of certain financial
assets and liabilities, which consist primarily of cash and cash equivalents, receivables, and accounts payable and accrued expenses
approximate their fair value at September 30, 2018 and December 31, 2017 based upon the short-term nature of the assets and liabilities.
Based on borrowing rates currently available to the Company for loans with similar terms, and the remaining short-term period
outstanding, the carrying value of notes payable other than PIK notes approximate fair value. The estimated fair value of the
PIK Notes Payable was $13,596,790 and $11,395,208 at September 30, 2018 and December 31, 2017 (Level 3), respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the Company's warrant and PIK note
derivative liabilities, Level 3 fair value hierarchy was estimated using a Monte Carlo Model using the following assumptions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 95%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">Series 2023 Note derivative liability</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">Fair Value Measurements</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Using Inputs</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">September 30,</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">December 31,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2018</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2017</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; text-align: left">Market price and estimated fair value of stock</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">0.11</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">0.05</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Exercise price (1)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.59</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.59</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Term (years)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.83</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.58</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Dividend yield</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">- 0 -</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">- 0 -</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Expected volatility</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">135.0</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">115.3</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Risk-free interest rate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.94</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.24</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(1) Exercise price is reflective of amended
Series 2023 Notes issued in December 2017 as discussed in Note 8.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 95%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">Series A Note derivative liability</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">Fair Value Measurements</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Using Inputs</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">September 30,</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">December 31,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2018</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2017</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; text-align: left">Market price and estimated fair value of stock</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">0.11</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">0.05</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Exercise price (1)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.40</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.40</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Term (years)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.83</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.58</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Dividend yield</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">- 0 -</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">- 0 -</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Expected volatility</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">135.0</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">115.3</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Risk-free interest rate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.94</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.24</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(1) Exercise price is reflective of amended
Series A Notes issued in December 2017 as discussed in Note 7.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 6&nbsp;- NOTES AND LEASES PAYABLE
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Notes payable at September 30, 2018 and
December 31, 2017:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">September 30,</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">December 31,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2018</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2017</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; text-align: left">Note payable for equipment, payable $1,339 monthly, including interest (a)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,660</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">13,073</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Note payable to insurance companies, payable $5,045 - $17,959 monthly, (b)
    and (c)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-
                                         0 -</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">199,061</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,660</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">212,134</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less: Current Portion</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,660</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(212,134</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; font-style: italic; text-align: left; padding-bottom: 2.5pt; padding-left: 27pt">Notes Payable,
    Long-Term Portion</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-
                                         0 -</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-
                                         0 -</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 36px; text-align: justify"><FONT STYLE="font-size: 10pt">(a)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">On October 31, 2014, the Company purchased mining equipment
    for $65,120 by paying deposit and issuing a note in the amount of $57,900 with an interest rate of 5.2%. The note is collateralized
    by the mining equipment with payments of $1,339 for 48 months, which started on November 30, 2014.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 36px; text-align: justify"><FONT STYLE="font-size: 10pt">(b)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">The Company signed a note payable with an insurance company
    dated October 17, 2016 for liability insurance, payable in monthly installments, including interest ranging from 2.6% - 4.15%</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 36px; text-align: justify"><FONT STYLE="font-size: 10pt">(c)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">The Company signed a note payable with an insurance company
    dated October 17, 2017 for liability insurance, payable in monthly installments, including interest ranging from 3.1% - 5.78%</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 7.5pt; text-align: justify">During the three months ended September
30, 2018 and 2017, the Company's interest payments totaled $555 and $2,558, respectively. During the nine months ended September
30, 2018 and 2017, the Company&rsquo;s interest payments totaled $6,761 and $5,301, respectively.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 7&ndash; CONVERTIBLE DEBT (PIK
NOTES)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company raised $23 million of financing
through the issuance of two series of Paid-In-Kind (&ldquo;PIK&rdquo;)-Election Convertible Notes in 2013 (&ldquo;Series 2023
Notes&rdquo;) and 2014 (&ldquo;Series A Notes&rdquo;). The original terms of the Series A Notes included among other things: (i)
a maturity of November 1, 2018 with an option to extend to November 1, 2019, (ii) a stated interest rate of 10% paid semi-annually
and (iii) a conversion price of $0.90, adjusted downward based on an anti-dilution provision. The original terms of the Series
2023 Notes included among other things: (i) a maturity of August 1, 2023, (ii) a stated interest rate of 10% paid semi-annually
and (iii) a conversion price of $1.40, adjusted downward based on an anti-dilution provision. On December 14, 2017, an amendment
agreement, entered into between the Company and the holders of the Series A Notes and Series 2023 Notes, went into effect. The
agreement resulted in changes to certain terms of the Series A and Series 2023 Notes. The key terms of the Series A and Series
2023 Notes, as amended, are highlighted in the table below:<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; padding-bottom: 0.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>Key
    Terms</B></FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; padding-bottom: 0.4pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; padding-bottom: 0.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>Series
    2023 Notes</B></FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; padding-bottom: 0.4pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; padding-bottom: 0.4pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; padding-bottom: 0.4pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>Series
    A Notes</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 10pt">Inception Date</FONT></TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp; 08/01/2013</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp; 11/03/2014</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 34%"><FONT STYLE="font-size: 10pt">Cash Received</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 30%; text-align: center"><FONT STYLE="font-size: 10pt">$10,500,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 30%; text-align: center"><FONT STYLE="font-size: 10pt">$12,500,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 10pt">Principal (Initial Liability)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">$10,500,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">$19,848,486</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Maturity (Term)</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Matures on August 1, 2023,
    but convertible into shares of the Company&rsquo;s common stock at the discretion of the holder or by the Company based on
    the market price of the Company&rsquo;s stock;</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Matures on May 1, 2023 but
    extends to August 1, 2023 if the Series 2023 Notes are still outstanding. Convertible into shares of the Company&rsquo;s common
    stock at the discretion of the holder or by the Company based on the market price of the Company&rsquo;s stock;</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Exercise Price</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">$0.59, adjusted downward based
    on anti-dilution provisions/downround protection</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">$0.40, adjusted downward based
    on anti-dilution provisions/down-round protection;</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Stated Interest</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">10% per annum through December
    14, 2017, 3% per annum thereafter, due semiannually;</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">10% per annum through December
    14, 2017, 3% per annum thereafter, due semiannually;</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Derivative Liability</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">$2,055,000 established at inception
    due to the existence of down-round protection; revalued every quarter using Monte Carlo model</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$9,212,285 established at
    inception due to existence of down-round protection; revalued every quarter using a Monte Carlo model</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of September 30, 2018, the liability
components of the PIK Notes on the Company&rsquo;s balance sheet are listed in the following table:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Series 2023 Notes</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Series A Notes</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 61%; text-align: left">PIK Note Payable, Gross</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">16,394,688</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">27,214,693</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">43,609,381</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Less: Discount</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,427,737</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,266,239</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6,693,976</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less: Deferred Financing Cost</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(191,994</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(255,447</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(447,441</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">PIK Note Payable, Net</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">14,774,957</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">21,693,007</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">36,467,964</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">PIK Note Derivative Liability</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">502,678</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,235,428</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,738,106</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0">&nbsp;As of December 31,
2017, the liability components of the PIK Notes on the Company&rsquo;s balance sheet are listed in the following table:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Series
                                         2023 </B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes</B></P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Series A Notes</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 61%; text-align: left">PIK Note Payable, Gross</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">16,090,721</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">26,909,716</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">43,000,437</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Less: Discount</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,538,299</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,701,839</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(9,240,138</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less: Deferred Financing Cost</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(221,280</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(294,414</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(515,694</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">PIK Note Payable, Net</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">14,331,142</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">18,913,463</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">33,244,605</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">PIK Note Derivative Liability</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">163,634</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,883,630</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,047,264</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Series A Notes (Amended)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On November 3, 2014 (&ldquo;Issue Date&rdquo;),
the Company issued, in a private placement pursuant to investment agreements, $19,848,486 principal amount of 10% PIK-Election
Convertible Notes due 2018 (&quot;Series A Notes&quot;) in exchange for $12,500,000 in cash and the cancellation of previously-issued
warrants held by one investor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The original terms of the Series A Notes
included among other things: (i) a maturity of November 1, 2018 with an option to extend to November 1, 2019, (ii) a stated interest
rate of 10% paid semi-annually and (iii) a conversion price of $0.90, adjusted downward based on an anti-dilution provision.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0pt; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0pt; text-align: justify">At September 30, 2018, the fair value
of the Series A Note Derivative was estimated to be $5,235,428. During the three and nine months ended September 30, 2018, the
Company amortized $234,911 and $2,474,567, respectively of debt discount and deferred financing cost relating to the Series A Notes
Payable and issued additional PIK Notes of $304,977 in lieu of cash interest payments, increasing the net carrying value of the
Series A Notes Payable to $21,693,007 at September 30, 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0pt; text-align: justify">At December 31, 2017, the fair value
of the Series A Note Derivative was estimated to be $1,883,630, which includes the value of the derivative related to the additional
PIK Notes issued in May and November 2017 for the semi-annual interest payments due and the additional notes issued in December,
2017. During the year ended December 31, 2017, the Company amortized $5,808,294 of debt discount and deferred financing cost relating
to the Series A Notes Payable and issued additional PIK Notes in lieu of interest payments of $2,797,836, increasing the net carrying
value of the Series A Notes Payable to $18,913,463 at December 31, 2017.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0pt; text-align: justify">As of September 30, 2018, the Company
was in compliance with the covenants of the Series A Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0pt;">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0pt; text-align: justify"><U>Series 2023 Notes (Amended)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0pt; text-align: justify">In August 2013, the Company received
$10,500,000 of financing through the private placement of 10% mandatory convertible Notes due 2023 (&quot;Series 2023 Notes&quot;).
The principal amount of the Notes is due on maturity. The Company can elect to pay semi-annual interest on the Series 2023 Notes
with additional PIK Notes containing the same terms as the Series 2023 Notes, except interest will accrue from issuance of such
notes. The Company can also elect to pay interest in cash. In February, 2017 and August, 2017, the Company issued $703,550 and
$738,728, respectively, in additional Series 2023 Notes to the holders to pay the semi-annual interest. Additionally, on December
14, 2017, the Company issued $577,439 of additional 2023 Notes, which represented the accrued interest of the Series 2023 Notes
on the day on which the terms of the Series 2023 Notes were effectively amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0pt; text-align: justify">The original terms of the Series
2023 Notes included among other things: (i) a maturity of August 1, 2023, (ii) a stated interest rate of 10% paid semi-annually
and (iii) a conversion price of $1.40, adjusted downward based on an anti-dilution provision.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0pt; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0pt; text-align: justify">At September 30, 2018, the fair value
of the Series 2023 Note Derivative was estimated to be $502,678, which includes the value of the derivative related to additional
PIK Notes issued in February and August 2018. During the three and nine months ended September 30, 2018, the Company amortized
$35,566&nbsp;and $139,848, respectively of debt discount and deferred financing cost relating to the Series 2023 Notes Payable
and issued additional PIK Notes of $303,967 in lieu of cash interest payments, increasing the net carrying value of the Series
2023 Notes Payable to $14,774,957 at September 30, 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0pt; text-align: justify">At December 31, 2017, the fair value
of the Series 2023 Note Derivative was estimated to be $163,634, which includes the value of the derivative related to additional
PIK Notes issued in February and August 2016 for the semi-annual interest payments due and the additional notes issued in December,
2017. During the year ended December 31, 2017, the Company amortized $200,360 of debt discount and deferred financing cost relating
to the Series 2023 Notes Payable and issued additional PIK Notes of $2,019,717 in lieu of cash interest payments, increasing the
net carrying value of the Series 2023 Notes Payable to $14,331,142 at December 31, 2017. As part of the amendment agreement, the
holders of the Series 2023 Notes received warrants to purchase 3,720,000 million shares of common stock at $0.10 per share. The
Black Scholes value of these warrants totaled $224,290.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0pt; text-align: justify">As of September 30, 2018, the Company
was in compliance with the covenants of the Series 2023 Notes.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 8&ndash; STOCKHOLDERS&rsquo; EQUITY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Preferred Stock</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is authorized to issue 10,000,000
shares of noncumulative, non-voting, nonconvertible preferred stock, $0.001 par value per share. At September 30, 2018 and December
31, 2017, no shares of preferred stock were outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Common Stock</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 7, 2017, stockholders of the
Company approved to increase the authorized shares of common stock from 250,000,000 to 400,000,000 shares, $0.001 par value per
share. At September 30, 2018 and December 31, 2017, 175,513,549 and 140,763,549 shares were issued and outstanding, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>2018</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the nine months ended September
30, 2018 the Company issued (i) 1,500,000 shares of common stock at a price of $0.04 per share to a consultant for investor relation
services to be performed, (ii) 17,375,000 shares of common stock at a price of $0.04 per share, (iii) 3,000,000 shares of common
stock at a price of $0.05 per share, (iv) 1,000,000 shares of common stock at a price of $0.10 per share, (v) 2,000,000 shares
of common stock at a price of $0.04 per share upon the exercise of a warrant to purchase shares of common stock, and (vi) 9,875,000
units, (one unit consisting of one share of common stock and one warrant to purchase one share of common stock at a price of $0.15)
at a price of $0.08 per unit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>2017</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During 2017, the Company issued: (i) 250,000
shares of common stock, at a price of $0.36 per share, to directors; (ii) 26,500,000 units, (one unit consisting of one share
of common stock and one warrant to purchase 0.25 shares of common stock at a price of $0.04 per unit; (iii) 2,275,000 units, at
a price of $0.04 per unit, as payment for fees associated with a private placement of stock and (iv) 3,1250,000 shares of common
stock, at a price of $0.04 per share, upon the exercise of warrants to purchase common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 9&ndash; OPTIONS AND WARRANTS
TO PURCHASE COMMON STOCK</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Outstanding Stock Warrants</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A summary of the status and changes
of the warrants issued for the nine months ended September 30, 2018:</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 95%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" NOWRAP STYLE="text-align: center">Shares Issuable <BR>upon Exercise of</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="3" NOWRAP STYLE="text-align: center"><P STYLE="margin-top: 0; margin-bottom: 0">Weighted</P> <P STYLE="margin-top: 0; margin-bottom: 0"></P></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Outstanding <BR>Warrants</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-size: 10pt">Average</FONT></P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">Exercise
                                         Price</P></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%">Outstanding at January 1, 2018</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">18,813,373</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">0.14</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Issued</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,875,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.15</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Exercised</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,000,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.04</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Forfeited</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt">Outstanding at September 30, 2018</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">26,688,373</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">$</TD><TD STYLE="padding-bottom: 1pt; text-align: right">0.15</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A summary of the status of the warrants
outstanding and exercisable at September 30, 2018 is presented below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="text-align: center; border-bottom: Black 1pt solid">Warrants Outstanding and Exercisable</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Shares Issuable</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Weighted Average</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">upon Exercise of</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Remaining</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Weighted Average</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="padding-bottom: 1pt">Exercise Price</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Outstanding Warrants</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Contractual Life (years)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Exercise Price</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 23%; text-align: right">1.15</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 22%; text-align: right">461,340</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 22%; text-align: right">2.6</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 22%; text-align: right">1.15</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.25</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,283,283</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.8</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.25</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.04</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,068,750</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.04</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.10</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.3</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.10</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt; text-align: left">$</TD><TD STYLE="padding-bottom: 1pt; text-align: right">0.15</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,875,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">2.8</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">$</TD><TD STYLE="padding-bottom: 1pt; text-align: right">0.15</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">26,688,373</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">3.6</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">$</TD><TD STYLE="padding-bottom: 1pt; text-align: right">0.15</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The aggregate intrinsic value of
the outstanding warrants at September 30, 2018 was $254,813.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Outstanding Stock Options</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On November 20, 2012, the shareholders
of the Company approved the adoption of the Applied Minerals, Inc. 2012 Long-Term Incentive Plan (&ldquo;LTIP&rdquo;) and the
Short-Term Incentive Plan (&ldquo;STIP&rdquo;) and the performance criteria used in setting performance goals for awards intended
to be performance-based. Under the LTIP, 8,900,000 shares are authorized for issuance. The STIP does not refer to a particular
number of shares under the LTIP, but would use the shares authorized in the LTIP for issuance under the STIP. The CEO, the CFO,
and named executive officers, and directors, among others are eligible to participate in the LTIP and STIP. Prior to the adoption
of the LTIP and STIP, stock options were granted under individual arrangements between the Company and the grantees, and approved
by the Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In May, 2016, the Company adopted the
2016 Long-Term Incentive Plan (&ldquo;2016 LTIP&rdquo;). The number of shares of common stock for issuance or for reference purposes
subject to the 2016 LTIP was 2,000,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 7, 2016, the stockholders of
the Company approved the 2016 Incentive Plan. The purpose of the 2016 Incentive Plan is to enhance the profitability and value
of the Company for the benefit of its stockholders by enabling the Company to offer eligible employees, consultants, and non-employee
directors&rsquo; incentive awards in order to attract, retain and reward such individuals and strengthen the mutuality of interests
between such individuals and the Company&rsquo;s stockholders.&nbsp;The aggregate number of shares of Common Stock that may be
issued or used for reference purposes under the 2016 Incentive Plan or with respect to which awards may be granted may not exceed&nbsp;15,000,000
shares, which may be either (i) authorized and unissued Common Stock or (ii) Common Stock held in or acquired for the treasury
of the Company.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Compensation Committee of the Company
Board of Directors has full authority to administer and interpret the 2016 Incentive Plan, to grant awards under the 2016 Incentive
Plan, to determine the persons to whom awards will be granted, to determine the types of awards to be granted, to determine the
terms and conditions of each award, to determine the number of shares of Common Stock to be covered by each award and to make
all other determinations in connection with the 2016 Incentive Plan and the awards thereunder as the Committee, in its sole discretion,
deems necessary or desirable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 14, 2017, the Board of Directors
approved the 2017 Incentive Plan (&ldquo;2017 IP&rdquo;). Forty million (40,000,000) shares of Common Stock are subject to the
2017 IP.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The fair value of each of the Company's
stock option awards is estimated on the date of grant using the Black-Scholes option-pricing model that uses the assumptions noted
in the table below. Expected volatility is based on an average of historical volatility of the Company's common stock. The risk-free
interest rate for periods within the contractual life of the stock option award is based on the yield curve of a zero-coupon U.S.
Treasury Bond on the date the award is granted with a maturity equal to the expected term of the award.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The significant assumptions relating to
the valuation of the Company's options granted during the nine months ended September 30, 2018 were as follows on a weighted average
basis:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Dividend Yield</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="text-align: center">0%</TD>
                                            <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; width: 87%">Expected Life (in years)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 1%">&nbsp;</TD><TD NOWRAP STYLE="text-align: center; width: 10%"><FONT STYLE="font-size: 10pt">2.48
                                         &ndash; 2.96</FONT></TD><TD STYLE="text-align: left; width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Expected Volatility</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 10pt">163.73% &ndash;
                                         177.59%</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Risk Free Interest Rate</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt; text-align: center"><FONT STYLE="font-size: 10pt">2.54%
                                         &ndash; 2.62%</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A summary of the status and changes of
the options granted under stock option plans and other agreements during the nine months ended September 30, 2018:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 95%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Shares Issuable</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Weighted</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Upon Exercise of</TD><TD NOWRAP>&nbsp;</TD><TD NOWRAP>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Average</TD><TD NOWRAP>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Options</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Exercise Price</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%">Outstanding at December 31, 2017</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">57,057,768</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">0.36</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,224,999</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.11</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Exercised</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Forfeited</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(282,645</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">1.36</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt">Outstanding at September 30, 2018</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">61,000,122</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">$</TD><TD STYLE="padding-bottom: 1pt; text-align: right">0.34</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the nine months ended September
30, 2018, the Company granted 4,224,999 options to purchase the Company&rsquo;s common stock with a weighted average exercise
price of $0.11. The options vest monthly through June, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A summary of the status of the options
outstanding at September 30, 2018 is presented below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 94%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="9" STYLE="text-align: center; border-bottom: Black 1pt solid">Options Outstanding</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Options Exercisable</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">Range of Exercise <BR>Prices ($)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Number</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Weighted <BR>Average <BR>Exercise <BR>Price ($)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Number</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Weighted <BR>Average <BR>Exercise <BR>Price ($)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 26%; text-align: right">0.06 - 0.11</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 17%; text-align: right">36,245,288</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 14%; text-align: right">0.06</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 17%; text-align: right">28,920,287</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 14%; text-align: right">0.06</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: right">0.12 - 0.21</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,581,395</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.13</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,331,390</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.13</TD><TD STYLE="text-align: left">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: right">0.22 - 0.66</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,280,093</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.27</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,280,093</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left"></TD><TD STYLE="text-align: right">0/27</TD>
    <TD>&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: right">0.68 &ndash; 1.10</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,251,286</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.75</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,251,286</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.75</TD><TD STYLE="text-align: left">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: right; padding-bottom: 1pt">1.15 &ndash; 1.90</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,642,060</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">1.66</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right; border-bottom: Black 1pt solid">4,642,060</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">1.66</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD>
    </TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: right; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><P STYLE="margin: 0">61,000,122</P>


</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">0.34</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">52,425,116</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">0.39</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD>
    </TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 14, 2017, the Company&rsquo;s
management was granted performance-based options to purchase 27.5 million shares of the Company&rsquo;s common stock at $0.06
per share. The options expire on December 13, 2027. At December 31, 2017, the first fifty percent (50%) of the performance-based
options vested as management was able to (i) close the sale of an aggregate of $600,000 of units (consisting&nbsp;of a share of
common stock of the Company and a warrant to buy 0.25 of a share of common stock of the Company) at $0.04 per unit and (ii) establish
toll processing arrangements with two toll processors of halloysite that, in management&rsquo;s good faith belief, can process
halloysite to the Company&rsquo;s specifications. An additional twenty-five percent (25%) of the performance-based options vested
on February 1, 2018 when management generated $900,000 of additional cash proceeds through (i) the sale of common stock and (ii)
the licensing of a right to explore the Dragon Mine property for certain precious metals. The vesting of the remaining 8.3%, 8.3%
and 8.4% of the performance-based options occurs when (i) EBITDA is positive over a twelve-month period, (ii) EBITDA is at or
greater than $2 million over a twelve-month period and (iii) EBITDA is at or greater than $4 million over a twelve-month period,
respectively. At September 30, 2018, the achievement of the performance targets was not deemed probable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Compensation expense of $60,430 and $964,647
has been recognized for the vested options for the three and nine months ended September 30, 2018. The aggregate intrinsic value
of the outstanding options at September 30, 2018 was $1,785,196. At September 30, 2018, (i) $85,464 of unamortized compensation
expense for time-based unvested options will be recognized over the next 0.45 years on a weighted average basis; and (ii) $354,750
of unamortized compensation expense for performance-based unvested options will be recognized as the achievement of the performance
targets becomes probable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 10&nbsp;- PER SHARE DATA</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The computation of basic earnings (loss)
per share of common stock is based on the weighted average number of shares outstanding during the year. The computation of diluted
earnings per common share is based on the weighted average number of shares outstanding during the year plus the common stock
equivalents that would arise from the exercise of stock options and warrants outstanding under the treasury method and the average
market price per share during the year as well as the conversion of notes. At September 30, 2018, the weighted average shares
outstanding excluded options to purchase 61,000,122 shares of common stock of the Company, warrants to purchase 26,688,373 shares
of common stock of the Company and 96,813,732 shares of common stock of the Company issuable upon the conversion of notes because
their effect would be anti-dilutive. At September 30, 2017, the weighted average shares outstanding excluded options to purchase
21,277,479 shares of common stock of the Company, warrants to purchase 10,000,873 shares of common stock of the Company and 52,075,593
shares of common stock of the Company issuable upon the conversion of notes payable because their effect would be anti-dilutive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>NOTE 11&ndash; COMMITMENTS AND CONTINGENCIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><U>Office Lease</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 1, 2017, the Company moved
its headquarters to a temporary location. The Company paid a monthly rent of $6,000 through March 31, 2017 for the temporary office.
On April 1, 2017, the Company entered into a 5-year lease agreement for permanent office space. At September 30, 2018, the Company&rsquo;s
total monthly office rental payments, due through March 31, 2022, was $396,114. At September 30, 2018, $26,883 of total rent payments
are due through December 31, 2018, $109,953 of total rent payments are due through December 31, 2019, $113,253 of total rental
payments are due through December 31, 2020, $116,649 of total rent payments are due through December 31, 2021 and $29,376 of total
rent payments are due through March 31, 2022.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><A NAME="a_008"></A><B>ITEM 2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Forward-looking Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This Quarterly Report on Form 10-Q contains
&quot;forward-looking statements&quot; within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements are based on our current expectations, assumptions, estimates
and projections about our business and our industry. Words such as &quot;believe,&quot; &quot;anticipate,&quot; &quot;expect,&quot;
&quot;intend,&quot; &quot;plan,&quot; &quot;will,&quot; &quot;may,&quot; and other similar expressions identify forward-looking
statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or
circumstances are forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from those reflected in the forward-looking statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Applied Minerals, Inc. (the &ldquo;Company&rdquo;
or &ldquo;Applied Minerals&rdquo; or &ldquo;we&rdquo; or &ldquo;us&rdquo;) (OTCQB: AMNL) owns the Dragon Mine in central Utah.
From the mine we extract, process, or have processed by a third party, halloysite clay and iron oxide for sale to a range of end
markets. We market the minerals directly and through distributors and also under a profit-sharing arrangement with the Kaolin
business unit of BASF Corp. (&ldquo;BASF&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We also engage in research and development
and frequently work collaboratively with potential customers, consultants, distributors, and BASF to process and enhance our halloysite
clay products to improve the performance of existing and new products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our halloysite clay, which we market under
the DRAGONITE&trade; trade name, is an aluminosilicate mineral with a hollow tubular shape. DRAGONITE can utilize halloysite&rsquo;s
morphology, high surface area, and reactivity to add significant functionality to a number of applications such as, but not limited
to, reinforcement additives for polymer composites, flame retardant additives for polymers, catalysts, controlled release carriers
for paints and coatings, strength reinforcement additives for cement, concrete, mortars and grouts, advanced ceramics, rheology
additives for drilling fluids, environmental remediation media, and carriers of agricultural agents.&nbsp; The Company sells its
halloysite products at negotiated prices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our iron oxide, which we market under
the AMIRON&trade; trade name, is a high purity product. We have sold it on an exclusive basis to one customer at a negotiated
price for use in an oilfield application and we are continuing to offer AMIRON to that customer on an exclusive basis.&nbsp; Currently,
we are not selling AMIRON&trade; to customers on a continuing basis for use in any other application.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is classified as an &ldquo;exploration
stage&rdquo; company for purposes of Industry Guide 7 of the U.S. Securities and Exchange Commission (&ldquo;SEC&rdquo;) Under
Industry Guide 7, companies engaged in significant mining operations are classified into three categories, referred to as &ldquo;stages&rdquo;
- exploration, development, and production. Exploration stage includes all companies that do not have established reserves in
accordance with Industry Guide 7. Such companies are deemed to be &ldquo;in the search for mineral deposits.&rdquo; Notwithstanding
the nature and extent of development-type or production-type activities that have been undertaken or completed, a company cannot
be classified as a development or production stage company unless it has established reserves in accordance with Industry Guide
7.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2017, we entered into a tolling agreement
with BASF under which BASF will process the Company&rsquo;s halloysite product, utilizing a water-based system. The BASF system
is capable of eliminating impurities, such as iron oxide, and chemically treating the surface of halloysite to achieve desired
functionality<B>.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have a mineral processing plant with
a capacity of up to 45,000 tons of mineralization per annum for certain applications.&nbsp; The plant is currently dedicated to
processing its halloysite products.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Additionally, the Company has a second
processing facility with a capacity of up to 10,000 tons per annum. This smaller plant is currently dedicated to processing the
Company&rsquo;s halloysite.&nbsp; This smaller plant processes halloysite using a dry-based, micronizing system. This dry-based
system does not eliminate impurities, such as iron oxide, as effectively as a water-based system but is useful in situations where
the removal of impurities is not necessary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the foreseeable future, the Company
expects to utilize a commercial-sized crusher to process its iron oxide to satisfy any sales of its AMIRON product.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the nine months ended September 30,
2018, the Company&rsquo;s largest customer accounted for approximately 94% of total revenue and at September 30, 2018 amounts owed
by the Company&rsquo;s two largest customers represented 68% of accounts receivable.&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Critical Accounting Policies and
Estimates</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A complete discussion of our critical
accounting policies and estimates is included in our Form 10-K/A for the year ended December 31, 2017. There have been no material
changes in our critical accounting policies and estimates during the nine-month period ended September 30, 2018 compared to the
disclosures on Form 10-K/A for the year ended December 31, 2017.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Recent Accounting Pronouncements</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>See NOTE 3 &ndash; BASIS OF REPORTING
AND SIGNIFICANT ACCOUNTING POLICIES</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Three Months Ended September 30,
2018&nbsp;Compared to Three Months Ended September 30,&nbsp;2017</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Results of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following sets forth, for the periods
indicated, certain components of our operating earnings, including such data stated as percentage of revenues:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 98%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Three Months Ended September 30,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Variance</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2018</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2017</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">%</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 48%; font-weight: bold">REVENUES</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">4,682,003</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">148,303</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">4,533,700</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">3,057</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left">OPERATING EXPENSES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Production costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">581,072</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">412,713</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">168,359</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">41</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">Exploration costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">36,068</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">47,172</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(11,104</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(24</TD><TD STYLE="text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">General and administrative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">613,605</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">664,217</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(50,612</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(8</TD><TD STYLE="text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Depreciation expense</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">318,182</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">329,357</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(11,175</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Total Operating Expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,548,927</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,453,459</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">95,468</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Operating Income (Loss)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,133,076</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,305,156</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,438,232</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">340</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">OTHER INCOME (EXPENSE):</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.25in">Interest expense, net, including amortization of deferred financing cost and debt discount</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(608,585</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,527,374</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,918,789</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(76</TD><TD STYLE="text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Gain (loss) on revaluation of PIK Note derivative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,021,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(570,473</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,591,973</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">630</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Other expense, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(9,433</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,064</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,369</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">132</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Total Other Income (Expense)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,403,482</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,101,911</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,505,393</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">177</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; font-style: italic; text-align: left; padding-bottom: 2.5pt">NET INCOME (LOSS)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,536,558</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(4,407,067</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">9,943,625</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">226</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">%</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenue for the three months ended September
30, 2018 totaled $4,682,003, compared to $148,303 for the same period in 2017, an increase of $4,533,700 or 3,057%. The increase
was driven primarily by the sale of the Company&rsquo;s 4.5 million tons of surface pile material for $4,546,145. The five surface
piles of the Dragon Mine property were created primarily from the production of unusable clay mineral during open pit and underground
mining operations carried out between 1949 and 1976. The piles contain a mixture of halloysite, kaolinite and illite in addition
to a range of non-clay minerals. The five surface piles will be used as a natural pozzolan to extend Class F fly ash. The Company
will receive an additional $1.00 for every ton of surface pile material it removes from the Dragon Mine property.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Sales of DRAGONITE during the three months
ended September 30, 2018 totaled $131,268, a decrease of $14,635 or 10% when compared to the same period in 2017. Sales of AMIRON
during the three months ended September 30, 2018 totaled $971 compared to $1,000 during the same period in 2017. The decrease
in sales of DRAGONITE was driven by a decline in sales to three customers performing development work, partially offset by sales
to a customer preparing to commercialize a product utilizing DRAGONITE in late 2018 or early 2019. During the period the Company
recognized $3,620 of revenue related to the rental of its water truck to an exploration company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Total operating expenses for the
three months ended September 30, 2018 were $1,548,927 compared to $1,453,459 for the same period in 2017, an increase of $95,468
or 7%. The increase in operating expenses was driven by a $168,359 or 41%, increase in production expenses partially offset by
a $50,612 or 8% decrease in general and administrative expense, a $11,104 or 24% decrease in exploration costs, and a $11,175 or
3% decrease in depreciation expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Production costs include those operating
expenses which management believes are directly related to the mining and processing of the Company&rsquo;s iron oxide and halloysite
minerals, which result in the production of its AMIRON and DRAGONITE products for commercial sale. Production costs include, but
are not limited to, wages and benefits of employees who mine material and who work in the Company&rsquo;s milling operations, energy
costs associated with the operation of the Company&rsquo;s two mills, the cost of mining and milling supplies and the cost of the
maintenance and repair of the Company&rsquo;s mining and milling equipment. Wages and energy are the two largest components of
the Company&rsquo;s production costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Production costs incurred during the
three months ended September 30, 2018 totaled $581,072 compared to $412,713 of production costs incurred during the same
period in 2017. The increase of $168,359 was driven primarily by the inclusion of a commission payment of $227,307 related to
the sale of the Company&rsquo;s surface pile material. Excluding the commission payment, production costs incurred during the
three months ended September 30, 2018 totaled $353,765. Excluding the payment of the commission related to the sale of the
surface pile material, production costs for the three months ended September 30, 2018 would have decreased by $58,948
compared to the same period in 2017. The $58,948 decrease  was resulted primarily from a $72,895 decrease in employee wages
and related benefits due to a reduction in employee headcount at the Dragon Mine, the absence of $26,171 of legal fees
related to an MSHA investigation during the same period in 2017 and a $25,882 decrease in mining related expense, partially
offset by a $66,000 increase in tolling costs of DRAGONITE by BASF.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Exploration costs include operating
expenses incurred at the Dragon Mine that are not directly related to production activities. Exploration costs incurred during
the three months ended September 30, 2018 were $36,068 compared to $47,172  incurred during the same period in 2017, a decrease
of $11,104 or 24%. The decrease was driven primarily a reduction in non-production related expenses such as consulting expense
and costs associated with staffing and running the Company&rsquo;s lab at the Dragon Mine.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">General and administrative expenses
incurred during the three months ended September 30, 2018 totaled $613,605 compared to $664,217 during the same period in 2017,
a decrease of $50,612 or 8%. The Company&rsquo;s selling and administrative expenses are associated primarily with its corporate
headquarters in Brooklyn, N.Y.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The $50,612 decline in general and
administrative expense was driven by a $39,477 decline in wages and other employee expense due primarily to a reduction in total
cash compensation of certain employees, a $29,524 decrease in insurance expense related to a lower amortization of prepaid insurance
premium and $26,664 decrease in travel related expense. The decrease was partially offset by a $37,353 increase in equity-based
compensation related to the amortization of common stock options granted to employees and consultants and a $7,700 increase in
legal fees for work related to the Company&rsquo;s June, 2018 capital raise and payment made to a compensation consultant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Operating income incurred during
the three months ended September 30, 2018 was $3,133,076, an increase of $4,438,232 when compared to the same period in 2017. The
increase in operating income during the quarter was due to a 3,057% increase in revenue and a 35% decrease in exploration, general
and administrative and depreciation expense, partially offset by a 41% increase in production costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Total other income (expense) incurred
during the three months ended September 30, 2018 was $2,403,482, a decrease in expense of $5,505,393 or 177% compared to the same
period in 2017. The decrease in other expense during the period was driven by a $1,918,789 or 76% decrease in interest expense
incurred due to the restructuring of the terms of the Company&rsquo;s outstanding PIK Notes and an $3,591,973 or 630% decrease
in the loss realized on the revaluation of the PIK Note derivative liability due to a decrease in the value of the Company&rsquo;s
common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Net Income for the three-month period
ending September 30, 2018 was $5,536,558, a decrease in loss of $9,943,625 or 226%, when compared to the same period in 2017. The
decrease in loss was due primarily to a $4,533,700 increase in revenues and a $5,505,393 decrease in other expense, partially offset
by a $95,468 increase in operating expenses.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Nine Months Ended September 30,
2018 Compared to Nine Months Ended September 30, 2017</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Results of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following sets forth, for the periods
indicated, certain components of our operating earnings, including such data stated as percentage of revenues:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Nine Months Ended September 30,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Variance</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2018</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2017</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">%</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD NOWRAP COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 48%; font-weight: bold">REVENUES</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">4,820,088</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,300,998</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,519,090</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">109</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left">OPERATING EXPENSES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Production costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">937,614</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,125,007</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,187,393</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(56</TD><TD STYLE="text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">Exploration costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">147,680</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">304,631</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(156,951</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(52</TD><TD STYLE="text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">General and administrative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,687,961</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,137,655</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">550,306</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">26</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Depreciation expense</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">963,144</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">989,122</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(25,978</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Total Operating Expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,736,399</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,556,415</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(820,016</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(15</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Operating Income (Loss)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">83,689</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,255,417</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,339,106</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">103</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">OTHER INCOME (EXPENSE):</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.25in">Interest expense, net, including amortization of deferred financing cost and debt discount</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,729,540</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6,843,524</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,113,984</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(46</TD><TD STYLE="text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Gain (loss) on revaluation of PIK Note derivative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,557,004</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,066,368</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,623,372</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(434</TD><TD STYLE="text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Other income, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">344,392</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">21,620</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">322,772</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,493</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Total Other Expense</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(6,942,152</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5,755,536</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,186,616</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">21</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; font-style: italic; text-align: left; padding-bottom: 2.5pt">NET LOSS</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(6,858,463</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(9,010,953</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(2,152,490</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(24</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)%</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenue generated during the nine months
ended September 30, 2018 was $4,820,088, compared to $2,300,998 of revenue generated during the same period in 2017, an increase
of $2,519,090 or 109%. The increase was driven primarily by the sale of the Company&rsquo;s 4.5 million tons of surface pile material
for $4,546,145. The five surface piles of the Dragon Mine property were created primarily from the production of unusable clay
mineral during open pit and underground mining operations carried out between 1949 and 1976. The piles contain a mixture of halloysite,
kaolinite and illite in addition to a range of non-clay minerals. The five surface piles will be used as a natural pozzolan to
extend Class F fly ash. The Company will receive an additional $1.00 for every ton of surface pile material it removed from the
Dragon Mine property.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The increase in revenue was partially
offset by a decline in sales of AMIRON. Sales of AMIRON during the nine months ended September 30, 2018 totaled $29,492, a decline
of $1,374,620 or 98%. The decline was due primarily to the fulfillment by the Company of a 5-year, $5.0 million take-or-pay supply
agreement of AMIRON in June, 2017. Sales of DRAGONITE during for the nine months ended September 30, 2018 totaled $264,342, a
decrease of $631,771 or 71%. The decline was due primarily to a $383,240 decrease in sales to a manufacturer of advanced molecular
sieves for use as an additive, a $196,800 decline in sales for to a manufacturer of injection molded architectural products for
use as a nucleating agent, and a $138,000 decline in sales to a polymer compounder for use as a nucleating agent. The decline
was partially offset by $92,000 of sales to a manufacturer of industrial products for use as a flame retardant additive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Total operating expenses for the
nine months ended September 30, 2018 were $4,736,399 compared to $5,556,415 of operating expenses incurred during the same period
in 2017, a decrease of $820,016 or 15%. The decline in operating costs was driven primarily by a $1,187,393 or 56% decline in production
costs and a $156,951 or 52% decline in exploration costs, partially offset by a $550,306 or 26% increase in general and administrative
costs.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Production costs include those operating
expenses which management believes are directly related to the mining and processing of the Company&rsquo;s iron oxide and halloysite
minerals, which result in the production of its AMIRON and DRAGONITE products for commercial sale. Production costs include, but
are not limited to, wages and benefits of employees who mine material and who work in the Company&rsquo;s milling operations,
energy costs associated with the operation of the Company&rsquo;s two mills, the cost of mining and milling supplies and the cost
of the maintenance and repair of the Company&rsquo;s mining and milling equipment. Wages and energy are the two largest components
of the Company&rsquo;s production costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Production costs incurred during the nine months
ended September 30, 2018 were $937,614 compared to $2,125,007 of costs incurred during the same period in 2017, a decrease of $1,187,393
or 56%, when compared to the same period in 2017. The decline in production costs was driven primarily by the elimination of costs
such as employee wages and benefits, utilities, fuel and other production inputs, associated with the fulfillment in June, 2017
of the 5-year, $5 million take-or-pay contract for AMIRON. Additionally, the Company further reduced headcount on a temporary basis
at the Dragon Mine during the nine months ended September 30, 2018, which also contributed to the decline in production costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Exploration costs are associated with the Company&rsquo;s
activities at its Dragon Mine location, excluding costs directly associated with production. Exploration costs incurred during
the nine months ended September 30, 2018 were $147,680 compared to $304,631 incurred during the same period in 2017, a decrease
of $156,951, or 52%, when compared to the same period in 2017. The decrease was driven primarily a reduction in non-production
related expenses such as consulting expense and costs associated with staffing and running the Company&rsquo;s lab at the Dragon
Mine.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&rsquo;s general and administrative
expenses are associated primarily with its New York operations. General and administrative expenses incurred during the nine months
ended September 30, 2018 totaled $2,687,961 compared to $2,137,655 of expense incurred during the same period in 2017, an increase
of $550,306 or 26%. The increase was driven primarily by an $818,760, or 561%, increase in equity-based compensation expense associated
with options granted to the Company&rsquo;s management and directors during the latter half of 2017. The increase in equity-based
expense was partially offset by a $130,568, or 11%, decrease in cash compensation paid to specific executives, a $93,082 decline
in travel and entertainment expense, and a $23,496 decrease in utility expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Operating income incurred during the nine
months ended September 30, 2018 was $83,689 compared to a loss of $3,255,417 incurred during the same period in 2017, a
increase in operating  income of $3,339,106 or 103%. The increase in operating  income during the period was due to a 109%
increase in revenue, a 56% decrease in production costs and a 52% decrease in exploration costs, partially offset by a 26%
increase in general and administrative expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Total other expense during the nine months
ended September 30, 2018 totaled $6,942,152, an increase of $1,186,616 or 21%. The increase in other expense was driven primarily
by an $3,557,004 loss realized on the revaluation of the PIK Note derivative liability compared to a $1,066,368 gain realized during
the same period in 2017, partially offset by a $3,113,984, or 46%, decrease in interest expense due to a restructuring of the Company&rsquo;s
Series A and Series 2023 Notes and a $322,772, or 1,493%, increase in other income comprised primarily of lease income earned during
the three months ended March 31, 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Net Loss for the nine-month period ending September
30, 2018 was $6,858,463 compared to a loss of $9,010,953 incurred during the same period in 2017, a decrease in net loss of $2,152,490
or 24%. The decrease in net loss was driven primarily by a $2,519,090 increase in total revenue and an $820,016 decrease in total
operating expense, partially offset by a $1,186,616 increase in total other expense.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>LIQUIDITY AND CAPITAL RESOURCES&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has a history of recurring
losses from operations and the use of cash in operating activities. For the nine months ended September 30, 2018, the Company&rsquo;s
net loss was $6,858,463 and cash used in operating activities was $2,153,123. As of September 30, 2018, the Company had current
assets of $3,935,991 and current liabilities of $1,057,037 of which $422,919 was accrued PIK Note interest likely to be paid in
additional PIK Notes. The Company&rsquo;s current liabilities also include (i) $157,040 of payables to a compounder for which it
has agreed to satisfy in halloysite product and (ii) $132,635 of disputed accrued expenses for which the Company believes it has
a statute of limitations defense.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Based on the Company&rsquo;s current cash usage
expectations, management believes it has sufficient liquidity to fund its operations through November 19, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cash generated from operating activities during
the nine months ended September 30, 2018 was $2,153,123 compared to a usage of cash of $1,414,895 during the same period in 2017,
a difference of $3,568,018. Before accounting for changes in operating assets and liabilities, cash generated from operating activities
during 2018 was $2,409,114 compared to a usage of cash of $2,445,939 during the same period in 2017. The difference was driven
by the $2,519,090 increase in revenue realized during 2018 compared to 2017.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cash used in investing activities during the
nine months ended September 30, 2018 was $23,063 compared to $43,753 during the same period in 2017, a decrease of $20,690 or 47%.
The decrease was primarily due to a lower level of expenditure related to capital improvements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cash provided by financing activities during
the nine months ended September 30, 2018 was $1,605,526 compared to $679,664 during the same period in 2017. The $925,862 increase
in cash generated during the period was due primarily to $1,735,000 of proceeds generated from the sale of common stock of the
Company and $80,000 of proceeds from the exercise of warrants to purchase shares of common stock of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Total assets at September 30, 2018 were $6,051,627
compared to $3,324,164 at December 31, 2017, an increase of $2,727,463 due primarily to the increase in cash balance. Total liabilities
were $43,271,225 at September 30, 2018, compared to $36,524,946 at December 31, 2017. The increase in total liabilities was due
primarily to a $3,690,842 increase in the balance of the PIK Note derivative liability and a $3,223,359 increase in the PIK Note
balance due to the issuance of additional PIK Notes in lieu of cash interest payments.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>ISSUANCE OF CONVERTIBLE DEBT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For information with respect to issuance of
convertible debt, see Note 7 of Notes to Consolidated Financial Statements included elsewhere in this Quarterly Report.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Off-Balance Sheet Arrangements</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There are no off-balance sheet arrangements
between the Company and any other entity that have, or are reasonable likely to have, a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital
resources that is material to investors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table summarizes our contractual
obligations as of September 30, 2018 that requires us to make future cash payments:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="18" STYLE="text-align: center">Payment due by period</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">&lt; 1 year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">1 &ndash; 3 years</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">3 &ndash; 5 years</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">&gt; 5 years</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left">Contractual Obligations:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 35%; text-align: left; padding-bottom: 1pt; padding-left: 9pt">Rent obligations</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">396,114</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">109,146</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">228,216</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">58,752</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">-
                                         0 -</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; font-style: italic; padding-bottom: 2.5pt; padding-left: 0.25in">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">396,114</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">109,146</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">228,216</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">58,752</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-
                                         0 -</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><A NAME="a_009"></A><B>ITEM 3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have no exposure to fluctuations in
interest rates, foreign currencies, or other factors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><A NAME="a_010"></A><B>ITEM 4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CONTROLS
AND PROCEDURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As required by Rule 13a-15(b) of
the Securities Exchange Act of 1934 (the &ldquo;Exchange Act&rdquo;), our management, including our Chief Executive Officer and
Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the fiscal
quarter covered by this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were, as of the end
of the fiscal quarter covered by this quarterly report, ineffective to ensure that information required to be disclosed by us in
reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the SEC&rsquo;s rules and forms and is accumulated and communicated to our management, including the Chief Executive Officer
and Chief Financial Officer, to allow timely decisions regarding required disclosure.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Notwithstanding the existence of
these material weaknesses in our internal control over financial reporting, the management believes that the consolidated financial
statements included in this Form 10-Q fairly present in all material respects our financial condition, results of operations and
cash flows for the periods presented.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="a_011"></A><B>PART II.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OTHER
INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><A NAME="a_012"></A><B>ITEM 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;LEGAL
PROCEEDINGS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of the date of this report, there is
no pending or threatened litigation. We may become involved in or subject to, routine litigation, claims, disputes, proceedings
and investigations in the ordinary course of business, could have a material adverse effect on our financial condition, cash flows
or results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><A NAME="a_013"></A><B>ITEM 1A.&nbsp;&nbsp;RISK
FACTORS.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Except for the below, there were no additions
or material changes to the Company&rsquo;s risk factors disclosed in Item 1A of Part I in the Company&rsquo;s 2017 Annual Report
on Form 10-K/A.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><A NAME="a_014"></A><B>ITEM 2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During January, 2018 the Company issued
1,500,000 shares of common stock to a consultant at a price of $0.04 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During February, 2018 the Company sold
3,625,000 shares of common stock at a price of $0.04 per share. The proceeds from the sale were used to fund working capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During March, 2018 the Company sold 3,000,000
shares of common stock at a price of $0.05 per share. The proceeds from the sale were used to fund working capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During March, 2018 the Company sold 1,0000,000
shares of common stock at a price of $0.10 per share. The proceeds from the sale were used to fund working capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During March a shareholder exercised warrants
to purchase 500,000 shares of stock at $0.04 per share. The proceeds from the exercise of the warrants were used to fund working
capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During April and May 2018, the Company
sold 13,750,000 shares of common stock at a price of $0.04 per share. The proceeds from the sale were used to fund working capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During June 2018, the Company sold 8,000,000
units at a price of $0.08 per unit. Each unit consists of one share of common stock and one warrant to purchase one share of common
stock at a price of $0.15. The proceeds from the sale were used to fund working capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During July 2018, the Company sold 1,875,000
units at a price of $0.08 per unit. Each unit consists of one share of common stock and one warrant to purchase one share of common
stock at a price of $0.15. The proceeds from the sale were used to fund working capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><A NAME="a_015"></A><B>ITEM 3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DEFAULTS
UPON SENIOR SECURITIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">None</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><A NAME="a_016"></A><B>ITEM 4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MINE
SAFETY DISCLOSURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The information concerning mine safety
violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection
Act and this Item is included in Exhibit 95 to this Form 10-Q.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><A NAME="a_017"></A><B>ITEM 5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OTHER
INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">None.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>


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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt"><A HREF="#toc">Table of Contents</A></P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><A NAME="a_018"></A><B>ITEM 6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EXHIBITS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(a)&nbsp;Exhibits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following exhibits are included in
this report:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="width: 7%; border-bottom: black 1pt solid; padding-bottom: 0.4pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Exhibit</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Number</P></TD>
    <TD NOWRAP STYLE="width: 1%">&nbsp;</TD>
    <TD NOWRAP STYLE="width: 92%; border-bottom: black 1pt solid; padding-bottom: 0.4pt"><FONT STYLE="font-size: 10pt">Description
    of Exhibit</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="ex31-1.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">31.1</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify; vertical-align: top"><A HREF="ex31-1.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Certification pursuant to Rule 13a-14 of
    the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of the Principal Executive
    Officer</FONT></A></TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="ex31-2.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">31.2</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify; vertical-align: top"><A HREF="ex31-2.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Certification pursuant to Rule 13a-14 of
    the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of the Principal Financial
    Officer</FONT></A></TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="ex32-1.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">32.1</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify; vertical-align: top"><A HREF="ex32-1.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Certification pursuant to 18 U.S.C. Section
    1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Principal Executive Officer</FONT></A></TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="ex32-2.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">32.2</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify; vertical-align: top"><A HREF="ex32-2.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Certification pursuant to 18 U.S.C. Section
    1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Principal Financial Officer</FONT></A></TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><A HREF="ex95.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">95</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="ex95.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Mine Safety Disclosure</FONT></A></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 7%"><FONT STYLE="font-size: 10pt">101.INS</FONT></TD>
    <TD STYLE="width: 93%"><FONT STYLE="font-size: 10pt">XBRL Instance</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">101.SCH</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">XBRL Taxonomy Extension Schema</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">101.CAL</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">XBRL Taxonomy Extension Calculation</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">101.DEF</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">XBRL Taxonomy Extension Definition</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">101.LAB</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">XBRL Taxonomy Extension Labels</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">101.PRE</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">XBRL Taxonomy Extension Presentation</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">XBRL</FONT></TD>
    <TD STYLE="text-align: justify; vertical-align: top"><FONT STYLE="font-size: 10pt">Information is furnished and not filed
    or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended,
    is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject
    to liability under these sections.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="a_019"></A><B>SIGNATURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In accordance with the requirements of
the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 30%">&nbsp;</TD>
    <TD STYLE="width: 20%">&nbsp;</TD>
    <TD STYLE="width: 50%; border-bottom: black 1pt solid; padding-bottom: 0.4pt; text-align: center"><FONT STYLE="font-size: 10pt">APPLIED
    MINERALS, INC.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Dated: November 19, 2018</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; padding-bottom: 0.4pt"><FONT STYLE="font-size: 10pt">/s/ ANDRE ZEITOUN</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">By: Andre Zeitoun</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Chief Executive Officer</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">Dated: November 19, 2018</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; padding-bottom: 0.4pt"><FONT STYLE="font-size: 10pt">/s/ CHRISTOPHER T. CARNEY</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">By: Christopher T. Carney</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">Chief Financial Officer</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.5pt">&nbsp;</P>


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[{"type": "10-Q", "sequence": "1", "filename": "10q.htm", "description": "FORM 10-Q", "secsgml_size_bytes": 387653}]
{"company-data": {"conformed-name": "Applied Minerals, Inc.", "cik": "0000008328", "assigned-sic": "1400", "irs-number": "820096527", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-31380", "film-number": "181193388"}, "business-address": {"street1": "110 GREENE STREET", "street2": "SUITE 1101", "city": "NEW YORK", "state": "NY", "zip": "10012", "phone": "212-226-4256"}, "mail-address": {"street1": "110 GREENE STREET", "street2": "SUITE 1101", "city": "NEW YORK", "state": "NY", "zip": "10012"}, "former-company": {"former-conformed-name": "ATLAS MINING CO", "date-changed": "19990716"}}
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 2018
¨
Transition report under section 13 or 15(d) of the Exchange Act
For the transition period from   _____________________    to     _____________________
Commission File Number
000-31380
APPLIED
    MINERALS, INC.
(Exact name of registrant as specified in its charter)
Delaware
82-0096527
(State or other jurisdiction of incorporation or organization)
(I. R. S. Employer Identification No.)
55
    Washington Street - Suite 301, Brooklyn, NY
11201
(Address of principal executive offices)
(Zip Code)
(212)
    226-4265
(Issuer's Telephone Number, Including Area Code)
Former name, former address, and
former fiscal year, if changed since last report
Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the 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, or 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
¨
Smaller Reporting Company
x
Emerging growth company
¨
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to
x
Section 13(a) of the Exchange Act.
Indicate by checkmark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
YES
¨
NO
x
The number of shares of the registrant's
common stock, $0.001 par value per share, outstanding as of November 14, 2018 was 175,513,549.
DOCUMENTS INCORPORATED BY REFERENCE: None.
Table of Contents
APPLIED MINERALS, INC.
(An Exploration Stage Company)
THIRD QUARTER 2018 REPORT ON FORM 10-Q
TABLE OF CONTENTS
Page(s)
PART I. FINANCIAL INFORMATION
Item 1.
Consolidated Financial Statements
3
Consolidated Balance Sheets as
    of September 30, 2018 (unaudited) and December 31, 2017
3
Consolidated Statements of Operations
    for the Three and Nine Months Ended September 30, 2018 and 2017 (unaudited)
4
Consolidated Statements of Stockholders'
    Deficit for the Nine Months Ended September 30, 2018 (unaudited)
5
Consolidated Statements of Cash
    Flows for the Nine Months Ended September 30, 2018 and 2017 (unaudited)
6
Notes to the Consolidated Financial
    Statements (unaudited)
7
Item 2.
Management's Discussion and Analysis of Financial Condition and Results
    of Operations
21
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
26
Item 4.
Controls and Procedures
27
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
28
Item 1A
Risk Factors
28
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
28
Item 3.
Defaults Upon Senior Securities
28
Item 4.
Mine Safety Disclosures
28
Item 5.
Other Information
28
Item 6.
Exhibits
29
Signatures
30
Table of Contents
PART I. FINANCIAL
INFORMATION
APPLIED MINERALS,
INC.
(An Exploration Stage Mining Company)
CONSOLIDATED BALANCE SHEETS
September 30,
December 31,
2018
2017
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents
$
3,783,238
$
47,652
Accounts receivable
112,701
27,265
Deposits and prepaid expenses
40,052
205,922
Total Current Assets
3,935,991
280,839
Property and Equipment, net
1,862,310
2,802,391
Other Assets – Deposits
253,326
240,934
TOTAL ASSETS
$
6,051,627
$
3,324,164
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities
Accounts payable and accrued liabilities
$
631,458
$
963,609
PIK Note interest accrual
422,919
57,334
Current portion of notes payable
2,660
212,134
Total Current Liabilities
1,057,037
1,233,077
Long-Term Liabilities
PIK Notes payable, net of debt discount and deferred
    financing cost of     $7,141,417 at September 30, 2018 and $9,755,832 at December 31, 2017, respectively
36,467,964
33,244,605
PIK Note derivative liability
5,738,106
2,047,264
Deferred Rent
8,118
0
Total Long-Term Liabilities
42,214,188
35,291,869
TOTAL LIABILITIES
43,271,225
36,524,946
Stockholders' (Deficit)
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding
- 0 -
- 0 -
Common stock, $0.001 par value, 400,000,000 shares authorized, 175,513,549 and 140,763,549 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively
175,514
140,764
Additional paid-in capital
73,957,208
71,152,311
Accumulated deficit prior to the exploration stage
(20,009,496
)
(20,009,496
)
Accumulated deficit during the exploration stage
(91,342,824
)
(84,484,361
)
Total Stockholders' (Deficit)
(37,219,598
)
(33,200,782
)
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)
$
6,051,627
$
3,324,164
The accompanying notes are an integral
part of these unaudited consolidated financial statements.
3
Table of Contents
APPLIED MINERALS,
INC.
(An Exploration Stage Mining Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
For the Nine Months Ended
September 30,
September 30,
2018
2017
2018
2017
REVENUES
$
4,682,003
$
148,303
$
4,820,088
$
2,300,998
OPERATING EXPENSES:
Production costs
581,072
412,713
937,614
2,125,007
Exploration costs
36,068
47,172
147,680
304,631
General and administrative
613,605
664,217
2,687,961
2,137,655
Depreciation expense
318,182
329,357
963,144
989,122
Total Operating Expenses
1,548,927
1,453,459
4,736,399
5,556,415
Operating Income (Loss)
3,133,076
(1,305,156
)
83,689
(3,255,417
)
OTHER INCOME (EXPENSE):
Interest expense, net, including amortization of deferred financing cost and debt discount
(608,585
)
(2,527,374
)
(3,729,540
)
(6,843,524
)
Gain (loss) on revaluation of PIK Note derivative
3,021,500
(570,473
)
(3,557,004
)
1,066,368
Other income (expense), net
(9,433
)
(4,064
)
344,392
21,620
Total Other Income (Expense)
2,403,482
(3,101,911
)
(6,942,152
)
(5,755,536
)
NET INCOME (LOSS)
$
5,536,558
$
(4,407,067
)
$
(6,858,463
)
$
(9,010,953
)
Net Income Loss Per Share - Basic
$
0.03
$
(0.04
)
$
(0.04
)
$
(0.08
)
Weighted Average Shares Outstanding - Basic
175,004,038
118,862,734
160,992,945
112,094,593
Net Income Loss Per Share - Diluted
$
0.03
$
(0.04
)
$
(0.04
)
$
(0.08
)
Weighted Average Shares Outstanding - Diluted
193,795,646
118,862,734
160,992,945
112,094,593
The accompanying notes are an integral
part of these unaudited consolidated financial statements.
4
Table of Contents
APPLIED MINERALS,
INC.
(An Exploration Stage Mining Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(Unaudited)
Common
    Stock
Shares
Amount
Additional
Paid-In
Capital
Accumulated
Deficit
        Prior
to
Exploration
Stage
Accumulated
Deficit
During
Exploration
Stage
Total
Stockholders'
Deficit
Balance, December 31, 2017
140,763,549
$
140,764
$
71,152,311
$
(20,009,496
)
$
(84,484,361
)
$
(33,200,782
)
Shares issued for consulting services
1,500,000
1,500
58,500
- 0 -
- 0 -
60,000
Shares and warrants issued in private placements
31,250,000
31,250
1,703,750
- 0 -
- 0 -
1,735,000
Shares issued for warrant exercise
2,000,000
2,000
78,000
- 0 -
- 0 -
80,000
Stock option compensation expense
- 0 -
- 0 -
964,647
- 0 -
- 0 -
964,647
Net Loss
- 0 -
- 0 -
- 0 -
- 0 -
(6,858,463
)
(6,858,463
)
Balance, September 30, 2018
175,513,549
$
175,514
$
73,957,208
$
(20,009,496
)
$
(91,342,824
)
$
(37,219,598
)
The accompanying notes are an integral
part of these unaudited consolidated financial statements.
5
Table of Contents
APPLIED MINERALS,
INC.
(An Exploration Stage Mining Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
September 30,
2018
2017
Cash Flows from Operating Activities:
Net loss
$
(6,858,463
)
$
(9,010,953
)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation
963,144
989,122
Amortization of discount - PIK Notes
2,546,162
3,784,911
Amortization of deferred financing costs
68,253
5,625
Accrued interest on PIK Notes
1,108,367
2,704,837
Stock issued for consulting services
60,000
- 0 -
Stock based compensation expense
964,647
145,887
(Gain) loss on revaluation of PIK Note derivative
3,557,004
(1,066,368
)
Other
- 0 -
1,000
Change in operating assets and liabilities:
Accounts receivable
(85,436
)
304,424
Other current receivables
- 0 -
16,802
Deposits and prepaids
153,478
296,097
Accounts payable and accrued liabilities
(324,033
)
413,721
Net cash provided by (used in) operating activities
2,153,123
(1,414,895
)
Cash Flows From Investing Activities
Purchases of property and equipment
(23,063
)
(43,753
)
Net cash used in investing activities
(23,063
)
(43,753
)
Cash Flows From Financing Activities:
Payments on notes payable
(209,474
)
(230,336
)
Proceeds from sale of common stock
1,735,000
910,000
Proceeds from exercise of options or warrants
80,000
- 0 -
Net cash provided by financing activities
1,605,526
679,664
Net change in cash and cash equivalents
3,735,586
(778,984
)
Cash and cash equivalents at beginning of period
47,652
1,049,880
Cash and cash equivalents at end of period
$
3,783,238
$
270,896
Supplemental disclosure of cash flow information:
Cash paid for income taxes
$
-
$
-
Cash paid for interest
$
6,761
$
5,301
Supplemental disclosure of noncash financing activity:
Accrued PIK interest paid through issuance of PIK Notes
608,944
$
2,704,837
The accompanying notes are an integral
part of these unaudited consolidated financial statements.
6
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APPLIED MINERALS,
INC.
(An Exploration Stage Mining Company)
Notes to the Consolidated Financial Statements
NOTE 1– ORGANIZATION AND DESCRIPTION
OF BUSINESS
Applied Minerals, Inc. (the "Company"
or "Applied Minerals" or "we" or "us") (OTCQB: AMNL) owns the Dragon Mine in central Utah.
From the mine we extract, process, or have processed by a third party, halloysite clay and iron oxide for sale to a range of end
markets. We market the minerals directly and through distributors and also under a profit-sharing arrangement with the Kaolin
business unit of BASF Corp. ("BASF").
We also engage in research and development
and frequently work collaboratively with potential customers, consultants, distributors, and BASF to process and enhance our halloysite
clay products to improve the performance of existing and new products.
Our halloysite clay, which we market under
the DRAGONITE™ trade name, is an aluminosilicate mineral with a hollow tubular shape. DRAGONITE can utilize halloysite's
morphology, high surface area, and reactivity to add significant functionality to a number of applications such as, but not limited
to, reinforcement additives for polymer composites, flame retardant additives for polymers, catalysts, controlled release carriers
for paints and coatings, strength reinforcement additives for cement, concrete, mortars and grouts, advanced ceramics, rheology
additives for drilling fluids, environmental remediation media, and carriers of agricultural agents.  The Company sells its
halloysite products at negotiated prices.
Our iron oxide, which we market under
the AMIRON™ trade name, is a high purity product. We have sold it on an exclusive basis to one customer at a negotiated
price for use in an oilfield application and we are continuing to offer AMIRON to that customer on an exclusive basis.  Currently,
we are not selling AMIRON™ to customers on a continuing basis for use in any other application.
The Company is classified as an "exploration
stage" company for purposes of Industry Guide 7 of the U.S. Securities and Exchange Commission ("SEC") Under
Industry Guide 7, companies engaged in significant mining operations are classified into three categories, referred to as "stages"
- exploration, development, and production. Exploration stage includes all companies that do not have established reserves in
accordance with Industry Guide 7. Such companies are deemed to be "in the search for mineral deposits." Notwithstanding
the nature and extent of development-type or production-type activities that have been undertaken or completed, a company cannot
be classified as a development or production stage company unless it has established reserves in accordance with Industry Guide
7.
In 2017, we entered into a tolling agreement
with BASF under which BASF will process the Company's halloysite product, utilizing a water-based system. The BASF system
is capable of eliminating impurities, such as iron oxide, and chemically treating the surface of halloysite to achieve desired
functionality
.
We have a mineral processing plant with
a capacity of up to 45,000 tons of mineralization per annum for certain applications.  The plant is currently dedicated to
processing its halloysite products.
Additionally, the Company has a second
processing facility with a capacity of up to 10,000 tons per annum. This smaller plant is currently dedicated to processing the
Company's halloysite.  This smaller plant processes halloysite using a dry-based, micronizing system. This dry-based
system does not eliminate impurities, such as iron oxide, as effectively as a water-based system but is useful in situations where
the removal of impurities is not necessary.
For the foreseeable future, the Company
expects to utilize a commercial-sized crusher to process its iron oxide to satisfy any sales of its AMIRON product.
For the nine months ended September
30, 2018, the Company's largest customer accounted for approximately 94% of total revenue and at September 30, 2018
amounts owed by the Company's two largest customers represented 68% of accounts receivable.
Exploration Agreement
On December 22, 2017, the Company and
Continental Mineral Claims, Inc. ("CMC") entered into an Exploration Agreement with Option to Purchase ("Agreement").
The Company granted to CMC the exclusive right and option to enter upon and conduct mineral exploration activities (the "Exploration
License") for Metallic Minerals on the Company's Dragon Mine mine site in Utah (the "Mining Claims"). 
Metallic Minerals are defined to include minerals with a high specific gravity and metallic luster, such as gold, silver, lead,
copper, zinc, molybdenum, titanium, tungsten, uranium, tin, iron, etc., but shall exclude any such Metallic Minerals that are
intermingled within any economically-recoverable, non-metallic mineral deposits located at or above an elevation of 5,590 feet
above sea level. Non-metallic minerals include clay and iron oxide, the minerals mined by the Company.  The Company believes
that all economic recoverable non-metallic mineral deposits are well above 5,590 feet above sea level. The Exploration License
is for a period of ten years.
In consideration of the Exploration License
CMC has paid the Company $350,000 and will pay it $150,000 on or before the first anniversary of the Exploration License, $250,000
on or before each subsequent anniversary during the Exploration License term following the first anniversary of the Effective
Date of this Agreement, unless the Exploration License is terminated earlier by CMC by exercising the option or failing to make
the required payment for the Exploration License.
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CMC may exercise the option at any time
during the Exploration License term. Upon exercise of the Option and the completion of the closing, CMC shall acquire 100% of
the Metallic Rights within the Mining Claims from the Company, subject to the terms and conditions of the Agreement.
The consideration to be paid by CMC to
the Company after exercising the option for the acquisition of the Metallic Rights shall be payable as follows: $3,000,000; and,
CMC shall grant to the Company a five percent (5%) Net Profits Interest ("NPI") royalty over the Metallic Minerals
produced from the Mining Claims.  The NPI royalty shall be initially capped at $20,000,000 (the "NPI Cap"). The
NPI Cap shall be subject to reduction in the event the Company elects to take the Share Contribution, as set forth below.
Upon exercise of the option, the Company
shall retain the all rights and title to (1) the surface interest (with exception of those rights associated with the Metallic
Rights), and (2) all non-metallic minerals (expressly including all industrial minerals including clays and iron oxides).
It is anticipated that CMC will acquire
rights similar to the Metallic Rights with respect to contiguous and nearly properties and such rights will be contributed to
a new company formed or designated by CMC to own and operate CMC's Tintic District project, which would involve the Metallic
rights and similar rights regarding adjacent or nearby properties ("PubCo") that intends to go public.
8
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The Company shall have the right, at its
sole election, to convert a portion of its NPI royalty interest into $2,000,000 worth of shares in PubCo up to a maximum of Two
Percent (2%) net value of PubCo (the "Share Contribution"), through a reduction of the NPI Cap. The Company shall
make the determination whether to take the Share Contribution or not, and so notify CMC, within ninety (90) days, of the completion
(and delivery to the Company) of a feasibility study by CMC for the Tintic District project.  If the Company elects
not
to take the Share Contribution, the Company's NPI royalty shall remain unchanged, including the NPI Cap, which will
remain at $20,000,000.
The Agreement contains protections in
favor of the Company against unreasonable interference of its current and future mining operations by CMC. CMC may not do anything
that may, at the Company's determination, adversely impact the Company's Mining Operations.  "Mining Operations"
shall mean the activities incident to mineral extraction, permitting, and any operations by CMC or the Company relating to the
removal of minerals, respectively, that are or may reasonably be conducted on the Mining Claims, including the exploration for,
and development, active mining, removing, producing and selling of any minerals, including the Metallic Minerals.  The Agreement
states that the parties understand that the Company is willing to enter into the Agreement only if it is assured that CMC will
not have any right to unreasonably interfere with the Company's current mining operations and possible future Mining Operations
on the Mining Claims.
There are no assurances that CMC will
exercise its option to purchase 100% of the Metallic Rights.
NOTE 2 - LIQUIDITY AND BASIS OF
PRESENTATION
The Company has a history of recurring
losses from operations and the use of cash in operating activities. For the nine months ended September 30, 2018, the Company's
net loss was $6,858,463 and cash used in operating activities was $2,153,123. As of September 30, 2018, the Company had current
assets of $3,935,991 and current liabilities of $1,057,037 of which $422,919 was accrued PIK Note interest likely to be paid in
additional PIK Notes. The Company's current liabilities also include (i) $157,040 of payables to a compounder for which it
has agreed to satisfy in halloysite product and (ii) $132,635 of disputed accrued expenses for which the Company believes it has
a statute of limitations defense.
Based on the Company's current cash
usage expectations, management believes it has sufficient liquidity to fund its operations through November 19, 2019.
NOTE 3– BASIS OF REPORTING AND
SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated
financial statements of Applied Minerals, Inc. have been prepared in accordance with generally accepted accounting principles
in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations
of the Securities and Exchange Commission (the "SEC"). Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements.
In the opinion of management, these interim
unaudited  consolidated financial statements contain all of the adjustments of a normal and recurring nature which are
considered necessary for a fair presentation of the financial position of the Company and the results of its operations and cash
flows for the periods presented. The results of operations for the three and nine months ended September 30, 2018 are not necessarily
indicative of the operating results for the entire year. These financial statements should be read in conjunction with the financial
statements and related disclosures for the year ended December 31, 2017, included in the Annual Report of Applied Minerals, Inc.
on Form 10-K/A filed with the SEC on August 14, 2018.
The accompanying interim unaudited
consolidated financial statements reflect the application of certain significant accounting policies as described below and
elsewhere in these notes. The Company's significant accounting policies and estimates remain unchanged from those
detailed in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2017.
9
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Exploration-Stage Company
Effective January 1, 2009, the Company
was, and still is, classified as an exploration company because the existence of proven or probable reserves at the Company's
Dragon Mine property have not been demonstrated and no significant revenue has been earned from the mine. Under the SEC's
Industry Guide 7, a mining company is considered an exploration stage company until it has declared mineral reserves determined
in accordance with the guide and staff interpretations thereof.
Principles of Consolidation
The accompanying consolidated financial
statements include the accounts of Applied Minerals, Inc. and its inactive subsidiary, which holds 100 acres of timber and mineral
property in northern Idaho.
Use of Estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management
to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.
In these consolidated financial statements, the warrant and PIK note derivative liabilities, stock compensation, impairment of
long-lived assets and valuation allowance on income taxes involve extensive reliance on management's estimates. Actual results
could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include all
highly liquid investments with a maturity of three months or less. The Company minimizes its credit risk by investing its cash
and cash equivalents, which sometimes exceed federally insured limits with major financial institutions located in the United
States with a high credit rating.
Receivables
Trade receivables are reported at outstanding
principal amounts, net of an allowance for doubtful accounts.
Management evaluates the collectability
of receivable account balances to determine the allowance, if any. Management considers the other party's credit risk and
financial condition, as well as current and projected economic and market conditions, in determining the amount of the allowance.
Receivable balances are written off when management determines that the balance is uncollectable. No allowance was required at
September 30, 2018 and December 31, 2017.
Property and Equipment
Property and equipment are carried at
cost net of accumulated depreciation and amortization. Depreciation and amortization is computed on the straight-line method over
the estimated useful lives of the assets, or the life of the lease, whichever is shorter, as follows:
Estimated
Useful Life (years)
Building and Building Improvements
5 – 40
Mining equipment
2 – 7
Office and shop furniture and equipment
3 – 7
Vehicles
5
Impairment of Long-lived Assets
The Company periodically reviews
the carrying amounts of long-lived assets to determine whether current events or circumstances warrant adjustment to such carrying
amounts. Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that its carrying
amount may not be recoverable. When such events occur, the Company compares the sum of the undiscounted cash flows expected to
result from the use and eventual disposition of the asset to its carrying amount. If this comparison indicates that there is an
impairment, the amount of the impairment is typically calculated using discounted expected future cash flows where observable fair
values are not readily determinable. Considerable management judgment is necessary to estimate the fair value of assets. Assets
to be disposed of are carried at the lower of their financial statement carrying amount or fair value, less cost to sell. The Company
has determined that there was no impairment of its long-lived assets as of September 30, 2018 and December 31, 2017.
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Revenue Recognition
Revenue includes sales of halloysite
clay and iron oxide and is recognized when title passes to the buyer and when collectability is reasonably assured. Title passes
to the buyer based on terms of the sales contract. Product pricing is determined based on negotiated contractual arrangements with
the Company's customers.
In May 2014, the Financial Accounting
Standards Board ("FASB") issued guidance on revenue recognition, which provides a single, comprehensive revenue recognition
model for all contracts with customers and supersedes most existing revenue recognition guidance.  The main principle under
this guidance is that an entity should recognize revenue at the amount it expects to be entitled to in exchange for the transfer
of goods or services to customers.  The Company identified the predominant changes to its accounting policies resulting from
the application of this guidance and quantified the impact on its consolidated financial statements.  The cumulative effect
of the initial adoption of this guidance did not have any significant impact on the Company's consolidated financial statements
as the Company did not have any significant customer contracts in place at December 31, 2017.  The Company adopted this guidance
on January 1, 2018. For 2018, revenue is recognized when control over the product transfers to the customer.
Mining Exploration and Development
Costs
Land and mining property are carried at
cost. The Company expenses prospecting and mining exploration costs. At the point when a property is determined to have proven
and probable reserves, subsequent development costs will be capitalized and will be charged to operations using the units-of-production
method over proven and probable reserves. Upon abandonment or sale of a mineral property, all capitalized costs relating to the
specific property are written off in the period abandoned or sold and a gain or loss is recognized.
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Table of Contents
Income taxes
The Company uses an asset and liability
approach which results in the recognition of deferred tax liabilities and assets for the expected future tax consequences or benefits
of temporary differences between the financial reporting basis and the tax basis of assets and liabilities, as well as operating
loss and tax credit carry forwards, using enacted tax rates in effect in the years in which the differences are expected to reverse.
In assessing the realizability of deferred
tax assets, management considers whether it is more likely than not that some portion or all of its deferred tax assets will not
be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax
planning strategies in making this assessment. A full valuation allowance has been provided for the Company's net deferred
tax assets as it is more likely than not that they will not be realized.
Authoritative guidance provides that the
tax effects from an uncertain tax position taken or expected to be taken in a tax return can be recognized in our financial statements
only if the position is more likely than not of being sustained on audit based on the technical merits of the position. As of
December 31, 2017 no benefit from uncertain tax positions was recognized in our financial statements. The Company has elected
to classify interest and/or penalties related to income tax matters in income tax expense.
Stock Options and Warrants
The Company follows ASC 718 (Stock Compensation)
and 505-50 (Equity-Based Payments to Non-employees), which provide guidance in accounting for share-based awards exchanged for
services rendered and requires companies to expense the estimated fair value of these awards over the requisite service period.
The Company instituted a formal long-term and short-term incentive plan on November 20, 2012, which was approved by its shareholders.
Prior to that date, we did not have a formal equity plan, but all equity grants, including stock options and warrants, were approved
by our Board of Directors. We determine the fair value of the stock-based compensation awards granted to non-employees as either
the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.
If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions
as of the earlier of either of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments
is reached, or (2) the date at which the counterparty's performance is complete. Beginning in the quarter ended June 30,
2013 the Company began using the simplified method to determine the expected term for any options granted because the Company
did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The Company
previously utilized the contractual term as the expected term.
Environmental Matters
Expenditures for ongoing compliance with
environmental regulations that relate to current operations are expensed or capitalized as appropriate. Expenditures resulting
from the remediation of existing conditions caused by past operations that do not contribute to future revenue generations are
expensed. Liabilities are recognized when environmental assessments indicate that remediation efforts are probable and the costs
can be reasonably estimated.
Estimates of such liabilities are based
upon currently available facts, existing technology and presently enacted laws and regulations taking into consideration the likely
effects of inflation and other societal and economic factors, and include estimates of associated legal costs. These amounts also
reflect prior experience in remediating contaminated sites, other companies' clean-up experience and data released by The
Environmental Protection Agency or other organizations. Such estimates are by their nature imprecise and can be expected to be
revised over time because of changes in government regulations, operations, technology and inflation. Recoveries are evaluated
separately from the liability and, when recovery is assured, the Company records and reports an asset separately from the associated
liability.
The Company has posted a cash bond in the
amount of $199,000 required by the Utah Department of Oil, Gas and Minerals to cover estimated reclamation costs related the Company
large mining permit for its Dragon Mine property.
Recent Issued Accounting Pronouncements
In May 2014, the Financial Accounting
Standards Board ("FASB") issued guidance on revenue recognition, which provides a single, comprehensive revenue recognition
model for all contracts with customers and supersedes most existing revenue recognition guidance.  The main principle under
this guidance is that an entity should recognize revenue at the amount it expects to be entitled to in exchange for the transfer
of goods or services to customers.  The Company adopted this guidance on January 1, 2018 using the modified retrospective
method. The Company has elected to apply this initial application of the standard only to contracts that are not completed at the
date of initial application. The cumulative effect of initially applying the new revenue standard would be applied as an adjustment
to the opening balance of retained earnings. The cumulative effect of the initial adoption of this guidance did not have any significant
impact on the Company's consolidated financial statements as the Company did not have any significant customer contracts
in place at December 31, 2017 and therefore the Company did not record a cumulative catch-up to deferred revenue and accumulated
deficit upon adoption of the new standard on January 1, 2018.
In February 2016, the FASB issued
ASU 2016-02 ("Topic 842") new accounting guidance for leases, which supersedes previous lease guidance. Under this
guidance, for all leases with terms in excess of one year, including operating leases, the Company will be required to recognize
on its balance sheet a lease liability and a right-of-use asset representing its right to use the underlying asset for the lease
term. The new guidance retains a distinction between finance leases and operating leases and the classification criteria is substantially
similar to previous guidance. Additionally, the recognition, measurement, and presentation of expenses and cash flows arising from
a lease by a lessee have not significantly changed. The guidance is effective for the Company beginning January 1, 2019. The Company
is currently evaluating the impact of this guidance on its consolidated financial statements.
In July 2017, the FASB issued ASU
2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815):
(Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral
for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling
Interests with a Scope Exception. This ASU clarifies the recognition, measurement, and effect on earnings per share of certain
freestanding equity-classified financial instruments that include down round features affect entities that present earnings per
share in accordance with the guidance in Topic 260, Earnings Per Share. When determining whether certain financial instruments
should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when
assessing whether the instrument is indexed to an entity's own stock. The amendments also clarify existing disclosure requirements
for equity-classified instruments. This new guidance will be effective for annual reporting periods beginning after December 15,
2018, including interim periods within those periods. The Company is currently evaluating the provisions of this guidance and assessing
its impact on the Company's financial statements and disclosures.
In June 2018, the FASB issued ASU
No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting. ASU
2018-07 is intended to reduce the cost and complexity and to improve financial reporting for non-employee share-based payments.
The ASU expands the scope of Topic 718, Compensation-Stock Compensation (which currently only includes share-based payments to
employees), to include share-based payments issued to non-employees for goods or services. Consequently, the accounting for share-based
payments to non-employees and employees will be substantially aligned. This update is effective for annual and interim periods
beginning after December 15, 2018 with early adoption permitted. Upon transition, entities will remeasure unsettled liability-classified
awards and any unmeasured equity-classified awards for non-employees at fair value as of the adoption date. A cumulative-effect
adjustment to retained earnings will be required as of the beginning of the fiscal year of adoption. The Company is currently assessing
the impact ASU 2018-07 will have on its consolidated financial statements and footnote disclosures thereto.
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NOTE 4– PROPERTY AND EQUIPMENT
The following is a summary of property,
plant, and equipment – at cost, less accumulated depreciation:
September 30,
December 31,
2018
2017
Land
$
500,000
$
500,000
Land improvements
171,122
171,122
Buildings
3,129,519
3,129,519
Mining equipment
1,784,115
1,784,115
Milling equipment
2,864,789
2,841,726
Laboratory equipment
607,716
607,716
Office equipment
70,529
70,529
Vehicles
150,810
150,810
9,278,600
9,255,537
Less: Accumulated depreciation
(7,416,290
)
(6,453,146
)
Total
$
1,862,310
$
2,802,391
Depreciation expense for the three
months ended September 30, 2018 and 2017 totaled $318,182, and $329,357, respectively, and for the nine months ended September
30, 2018 and 2017 totaled $963,144 and $989,122, respectively.
NOTE 5– FAIR VALUE MEASUREMENTS
AND FINANCIAL INSTRUMENTS
ASC Topic 820,
Fair Value Measurement
and Disclosures
, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. This topic also establishes a fair value hierarchy, which requires classification based
on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based
on market data (observable inputs) and an entity's own assumptions (unobservable inputs). The hierarchy consists of three
levels:
●
Level
                                         1– Quoted prices in active markets for identical assets and liabilities;
●
Level
                                         2– Inputs other than level one inputs that are either directly or indirectly observable;
                                         and
●
Level
                                         3– Unobservable inputs developed using estimates and assumptions, which are developed
                                         by the reporting entity and reflect those assumptions that a market participant would
                                         use.
Liabilities measured at fair value on
a recurring basis are summarized as follows at September 30, 2018:
Fair value measurement using
    inputs
Level 1
Level 2
Level 3
Financial instruments:
Series 2023 Note Derivative
$
- 0 -
$
- 0 -
$
502,678
Series A Note Derivative
$
- 0 -
$
- 0 -
$
5,235,428
The following table summarizes the activity
during the nine months ended September 2018 and 2017 for financial instruments at fair value using Level 3:
Balance at December 31, 2017
$
2,047,264
Balance at December 31, 2016
$
2,176,552
Issuance of additional Series 2023 Notes
27,858
Issuance of additional Series 2023 Notes
31,990
Issuance of additional Series A Notes
105,980
Issuance of additional Series A Notes
- 0 -
Net unrealized (gain) loss included in operations
3,557,004
Net unrealized (gain) loss included in operations
(1,066,368
)
Balance at September 30, 2018
$
5,738,106
Balance at September 30, 2017
$
1,142,174
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The recorded value of certain financial
assets and liabilities, which consist primarily of cash and cash equivalents, receivables, and accounts payable and accrued expenses
approximate their fair value at September 30, 2018 and December 31, 2017 based upon the short-term nature of the assets and liabilities.
Based on borrowing rates currently available to the Company for loans with similar terms, and the remaining short-term period
outstanding, the carrying value of notes payable other than PIK notes approximate fair value. The estimated fair value of the
PIK Notes Payable was $13,596,790 and $11,395,208 at September 30, 2018 and December 31, 2017 (Level 3), respectively.
For the Company's warrant and PIK note
derivative liabilities, Level 3 fair value hierarchy was estimated using a Monte Carlo Model using the following assumptions:
Series 2023 Note derivative liability
Fair Value Measurements
Using Inputs
September 30,
December 31,
2018
2017
Market price and estimated fair value of stock
$
0.11
$
0.05
Exercise price (1)
$
0.59
$
0.59
Term (years)
4.83
5.58
Dividend yield
- 0 -
- 0 -
Expected volatility
135.0
%
115.3
%
Risk-free interest rate
2.94
%
2.24
%
(1) Exercise price is reflective of amended
Series 2023 Notes issued in December 2017 as discussed in Note 8.
Series A Note derivative liability
Fair Value Measurements
Using Inputs
September 30,
December 31,
2018
2017
Market price and estimated fair value of stock
$
0.11
$
0.05
Exercise price (1)
$
0.40
$
0.40
Term (years)
4.83
5.58
Dividend yield
- 0 -
- 0 -
Expected volatility
135.0
%
115.3
%
Risk-free interest rate
2.94
%
2.24
%
(1) Exercise price is reflective of amended
Series A Notes issued in December 2017 as discussed in Note 7.
NOTE 6 - NOTES AND LEASES PAYABLE
Notes payable at September 30, 2018 and
December 31, 2017:
September 30,
December 31,
2018
2017
Note payable for equipment, payable $1,339 monthly, including interest (a)
$
2,660
$
13,073
Note payable to insurance companies, payable $5,045 - $17,959 monthly, (b)
    and (c)
-
                                         0 -
199,061
2,660
212,134
Less: Current Portion
(2,660
)
(212,134
)
Notes Payable,
    Long-Term Portion
$
-
                                         0 -
$
-
                                         0 -
(a)
On October 31, 2014, the Company purchased mining equipment
    for $65,120 by paying deposit and issuing a note in the amount of $57,900 with an interest rate of 5.2%. The note is collateralized
    by the mining equipment with payments of $1,339 for 48 months, which started on November 30, 2014.
(b)
The Company signed a note payable with an insurance company
    dated October 17, 2016 for liability insurance, payable in monthly installments, including interest ranging from 2.6% - 4.15%
(c)
The Company signed a note payable with an insurance company
    dated October 17, 2017 for liability insurance, payable in monthly installments, including interest ranging from 3.1% - 5.78%
During the three months ended September
30, 2018 and 2017, the Company's interest payments totaled $555 and $2,558, respectively. During the nine months ended September
30, 2018 and 2017, the Company's interest payments totaled $6,761 and $5,301, respectively.
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NOTE 7– CONVERTIBLE DEBT (PIK
NOTES)
The Company raised $23 million of financing
through the issuance of two series of Paid-In-Kind ("PIK")-Election Convertible Notes in 2013 ("Series 2023
Notes") and 2014 ("Series A Notes"). The original terms of the Series A Notes included among other things: (i)
a maturity of November 1, 2018 with an option to extend to November 1, 2019, (ii) a stated interest rate of 10% paid semi-annually
and (iii) a conversion price of $0.90, adjusted downward based on an anti-dilution provision. The original terms of the Series
2023 Notes included among other things: (i) a maturity of August 1, 2023, (ii) a stated interest rate of 10% paid semi-annually
and (iii) a conversion price of $1.40, adjusted downward based on an anti-dilution provision. On December 14, 2017, an amendment
agreement, entered into between the Company and the holders of the Series A Notes and Series 2023 Notes, went into effect. The
agreement resulted in changes to certain terms of the Series A and Series 2023 Notes. The key terms of the Series A and Series
2023 Notes, as amended, are highlighted in the table below:
Key
    Terms
Series
    2023 Notes
Series
    A Notes
Inception Date
08/01/2013
11/03/2014
Cash Received
$10,500,000
$12,500,000
Principal (Initial Liability)
$10,500,000
$19,848,486
Maturity (Term)
Matures on August 1, 2023,
    but convertible into shares of the Company's common stock at the discretion of the holder or by the Company based on
    the market price of the Company's stock;
Matures on May 1, 2023 but
    extends to August 1, 2023 if the Series 2023 Notes are still outstanding. Convertible into shares of the Company's common
    stock at the discretion of the holder or by the Company based on the market price of the Company's stock;
Exercise Price
$0.59, adjusted downward based
    on anti-dilution provisions/downround protection
$0.40, adjusted downward based
    on anti-dilution provisions/down-round protection;
Stated Interest
10% per annum through December
    14, 2017, 3% per annum thereafter, due semiannually;
10% per annum through December
    14, 2017, 3% per annum thereafter, due semiannually;
Derivative Liability
$2,055,000 established at inception
    due to the existence of down-round protection; revalued every quarter using Monte Carlo model
$9,212,285 established at
    inception due to existence of down-round protection; revalued every quarter using a Monte Carlo model
As of September 30, 2018, the liability
components of the PIK Notes on the Company's balance sheet are listed in the following table:
Series 2023 Notes
Series A Notes
Total
PIK Note Payable, Gross
$
16,394,688
$
27,214,693
$
43,609,381
Less: Discount
(1,427,737
)
(5,266,239
)
(6,693,976
)
Less: Deferred Financing Cost
(191,994
)
(255,447
)
(447,441
)
PIK Note Payable, Net
$
14,774,957
$
21,693,007
$
36,467,964
PIK Note Derivative Liability
$
502,678
$
5,235,428
$
5,738,106
As of December 31,
2017, the liability components of the PIK Notes on the Company's balance sheet are listed in the following table:
Series
                                         2023
Notes
Series A Notes
Total
PIK Note Payable, Gross
$
16,090,721
$
26,909,716
$
43,000,437
Less: Discount
(1,538,299
)
(7,701,839
)
(9,240,138
)
Less: Deferred Financing Cost
(221,280
)
(294,414
)
(515,694
)
PIK Note Payable, Net
$
14,331,142
$
18,913,463
$
33,244,605
PIK Note Derivative Liability
$
163,634
$
1,883,630
$
2,047,264
Series A Notes (Amended)
On November 3, 2014 ("Issue Date"),
the Company issued, in a private placement pursuant to investment agreements, $19,848,486 principal amount of 10% PIK-Election
Convertible Notes due 2018 ("Series A Notes") in exchange for $12,500,000 in cash and the cancellation of previously-issued
warrants held by one investor.
The original terms of the Series A Notes
included among other things: (i) a maturity of November 1, 2018 with an option to extend to November 1, 2019, (ii) a stated interest
rate of 10% paid semi-annually and (iii) a conversion price of $0.90, adjusted downward based on an anti-dilution provision.
15
Table of Contents
At September 30, 2018, the fair value
of the Series A Note Derivative was estimated to be $5,235,428. During the three and nine months ended September 30, 2018, the
Company amortized $234,911 and $2,474,567, respectively of debt discount and deferred financing cost relating to the Series A Notes
Payable and issued additional PIK Notes of $304,977 in lieu of cash interest payments, increasing the net carrying value of the
Series A Notes Payable to $21,693,007 at September 30, 2018.
At December 31, 2017, the fair value
of the Series A Note Derivative was estimated to be $1,883,630, which includes the value of the derivative related to the additional
PIK Notes issued in May and November 2017 for the semi-annual interest payments due and the additional notes issued in December,
2017. During the year ended December 31, 2017, the Company amortized $5,808,294 of debt discount and deferred financing cost relating
to the Series A Notes Payable and issued additional PIK Notes in lieu of interest payments of $2,797,836, increasing the net carrying
value of the Series A Notes Payable to $18,913,463 at December 31, 2017.
As of September 30, 2018, the Company
was in compliance with the covenants of the Series A Notes.
Series 2023 Notes (Amended)
In August 2013, the Company received
$10,500,000 of financing through the private placement of 10% mandatory convertible Notes due 2023 ("Series 2023 Notes").
The principal amount of the Notes is due on maturity. The Company can elect to pay semi-annual interest on the Series 2023 Notes
with additional PIK Notes containing the same terms as the Series 2023 Notes, except interest will accrue from issuance of such
notes. The Company can also elect to pay interest in cash. In February, 2017 and August, 2017, the Company issued $703,550 and
$738,728, respectively, in additional Series 2023 Notes to the holders to pay the semi-annual interest. Additionally, on December
14, 2017, the Company issued $577,439 of additional 2023 Notes, which represented the accrued interest of the Series 2023 Notes
on the day on which the terms of the Series 2023 Notes were effectively amended.
The original terms of the Series
2023 Notes included among other things: (i) a maturity of August 1, 2023, (ii) a stated interest rate of 10% paid semi-annually
and (iii) a conversion price of $1.40, adjusted downward based on an anti-dilution provision.
At September 30, 2018, the fair value
of the Series 2023 Note Derivative was estimated to be $502,678, which includes the value of the derivative related to additional
PIK Notes issued in February and August 2018. During the three and nine months ended September 30, 2018, the Company amortized
$35,566 and $139,848, respectively of debt discount and deferred financing cost relating to the Series 2023 Notes Payable
and issued additional PIK Notes of $303,967 in lieu of cash interest payments, increasing the net carrying value of the Series
2023 Notes Payable to $14,774,957 at September 30, 2018.
At December 31, 2017, the fair value
of the Series 2023 Note Derivative was estimated to be $163,634, which includes the value of the derivative related to additional
PIK Notes issued in February and August 2016 for the semi-annual interest payments due and the additional notes issued in December,
2017. During the year ended December 31, 2017, the Company amortized $200,360 of debt discount and deferred financing cost relating
to the Series 2023 Notes Payable and issued additional PIK Notes of $2,019,717 in lieu of cash interest payments, increasing the
net carrying value of the Series 2023 Notes Payable to $14,331,142 at December 31, 2017. As part of the amendment agreement, the
holders of the Series 2023 Notes received warrants to purchase 3,720,000 million shares of common stock at $0.10 per share. The
Black Scholes value of these warrants totaled $224,290.
As of September 30, 2018, the Company
was in compliance with the covenants of the Series 2023 Notes.
NOTE 8– STOCKHOLDERS' EQUITY
Preferred Stock
The Company is authorized to issue 10,000,000
shares of noncumulative, non-voting, nonconvertible preferred stock, $0.001 par value per share. At September 30, 2018 and December
31, 2017, no shares of preferred stock were outstanding.
Common Stock
On December 7, 2017, stockholders of the
Company approved to increase the authorized shares of common stock from 250,000,000 to 400,000,000 shares, $0.001 par value per
share. At September 30, 2018 and December 31, 2017, 175,513,549 and 140,763,549 shares were issued and outstanding, respectively.
2018
During the nine months ended September
30, 2018 the Company issued (i) 1,500,000 shares of common stock at a price of $0.04 per share to a consultant for investor relation
services to be performed, (ii) 17,375,000 shares of common stock at a price of $0.04 per share, (iii) 3,000,000 shares of common
stock at a price of $0.05 per share, (iv) 1,000,000 shares of common stock at a price of $0.10 per share, (v) 2,000,000 shares
of common stock at a price of $0.04 per share upon the exercise of a warrant to purchase shares of common stock, and (vi) 9,875,000
units, (one unit consisting of one share of common stock and one warrant to purchase one share of common stock at a price of $0.15)
at a price of $0.08 per unit.
2017
During 2017, the Company issued: (i) 250,000
shares of common stock, at a price of $0.36 per share, to directors; (ii) 26,500,000 units, (one unit consisting of one share
of common stock and one warrant to purchase 0.25 shares of common stock at a price of $0.04 per unit; (iii) 2,275,000 units, at
a price of $0.04 per unit, as payment for fees associated with a private placement of stock and (iv) 3,1250,000 shares of common
stock, at a price of $0.04 per share, upon the exercise of warrants to purchase common stock.
16
Table of Contents
NOTE 9– OPTIONS AND WARRANTS
TO PURCHASE COMMON STOCK
Outstanding Stock Warrants
A summary of the status and changes
of the warrants issued for the nine months ended September 30, 2018:
Shares Issuable
upon Exercise of
Weighted
Outstanding
Warrants
Average
Exercise
                                         Price
Outstanding at January 1, 2018
18,813,373
$
0.14
Issued
9,875,000
$
0.15
Exercised
(2,000,000
)
$
0.04
Forfeited
—
—
Outstanding at September 30, 2018
26,688,373
$
0.15
A summary of the status of the warrants
outstanding and exercisable at September 30, 2018 is presented below:
Warrants Outstanding and Exercisable
Shares Issuable
Weighted Average
upon Exercise of
Remaining
Weighted Average
Exercise Price
Outstanding Warrants
Contractual Life (years)
Exercise Price
$
1.15
461,340
2.6
$
1.15
$
0.25
3,283,283
3.8
$
0.25
$
0.04
2,068,750
4.1
$
0.04
$
0.10
11,000,000
4.3
$
0.10
$
0.15
9,875,000
2.8
$
0.15
26,688,373
3.6
$
0.15
The aggregate intrinsic value of
the outstanding warrants at September 30, 2018 was $254,813.
Outstanding Stock Options
On November 20, 2012, the shareholders
of the Company approved the adoption of the Applied Minerals, Inc. 2012 Long-Term Incentive Plan ("LTIP") and the
Short-Term Incentive Plan ("STIP") and the performance criteria used in setting performance goals for awards intended
to be performance-based. Under the LTIP, 8,900,000 shares are authorized for issuance. The STIP does not refer to a particular
number of shares under the LTIP, but would use the shares authorized in the LTIP for issuance under the STIP. The CEO, the CFO,
and named executive officers, and directors, among others are eligible to participate in the LTIP and STIP. Prior to the adoption
of the LTIP and STIP, stock options were granted under individual arrangements between the Company and the grantees, and approved
by the Board of Directors.
In May, 2016, the Company adopted the
2016 Long-Term Incentive Plan ("2016 LTIP"). The number of shares of common stock for issuance or for reference purposes
subject to the 2016 LTIP was 2,000,000.
On December 7, 2016, the stockholders of
the Company approved the 2016 Incentive Plan. The purpose of the 2016 Incentive Plan is to enhance the profitability and value
of the Company for the benefit of its stockholders by enabling the Company to offer eligible employees, consultants, and non-employee
directors' incentive awards in order to attract, retain and reward such individuals and strengthen the mutuality of interests
between such individuals and the Company's stockholders. The aggregate number of shares of Common Stock that may be
issued or used for reference purposes under the 2016 Incentive Plan or with respect to which awards may be granted may not exceed 15,000,000
shares, which may be either (i) authorized and unissued Common Stock or (ii) Common Stock held in or acquired for the treasury
of the Company.
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Table of Contents
The Compensation Committee of the Company
Board of Directors has full authority to administer and interpret the 2016 Incentive Plan, to grant awards under the 2016 Incentive
Plan, to determine the persons to whom awards will be granted, to determine the types of awards to be granted, to determine the
terms and conditions of each award, to determine the number of shares of Common Stock to be covered by each award and to make
all other determinations in connection with the 2016 Incentive Plan and the awards thereunder as the Committee, in its sole discretion,
deems necessary or desirable.
On December 14, 2017, the Board of Directors
approved the 2017 Incentive Plan ("2017 IP"). Forty million (40,000,000) shares of Common Stock are subject to the
2017 IP.
The fair value of each of the Company's
stock option awards is estimated on the date of grant using the Black-Scholes option-pricing model that uses the assumptions noted
in the table below. Expected volatility is based on an average of historical volatility of the Company's common stock. The risk-free
interest rate for periods within the contractual life of the stock option award is based on the yield curve of a zero-coupon U.S.
Treasury Bond on the date the award is granted with a maturity equal to the expected term of the award.
The significant assumptions relating to
the valuation of the Company's options granted during the nine months ended September 30, 2018 were as follows on a weighted average
basis:
Dividend Yield
0%
Expected Life (in years)
2.48
                                         – 2.96
Expected Volatility
163.73% –
                                         177.59%
Risk Free Interest Rate
2.54%
                                         – 2.62%
A summary of the status and changes of
the options granted under stock option plans and other agreements during the nine months ended September 30, 2018:
Shares Issuable
Weighted
Upon Exercise of
Average
Options
Exercise Price
Outstanding at December 31, 2017
57,057,768
$
0.36
Granted
4,224,999
$
0.11
Exercised
—
—
Forfeited
(282,645
)
1.36
Outstanding at September 30, 2018
61,000,122
$
0.34
During the nine months ended September
30, 2018, the Company granted 4,224,999 options to purchase the Company's common stock with a weighted average exercise
price of $0.11. The options vest monthly through June, 2019.
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Table of Contents
A summary of the status of the options
outstanding at September 30, 2018 is presented below:
Options Outstanding
Options Exercisable
Range of Exercise
Prices ($)
Number
Weighted
Average
Exercise
Price ($)
Number
Weighted
Average
Exercise
Price ($)
0.06 - 0.11
36,245,288
0.06
28,920,287
0.06
0.12 - 0.21
3,581,395
0.13
2,331,390
0.13
0.22 - 0.66
4,280,093
0.27
4,280,093
0/27
0.68 – 1.10
12,251,286
0.75
12,251,286
0.75
1.15 – 1.90
4,642,060
1.66
4,642,060
1.66
61,000,122
0.34
52,425,116
0.39
On December 14, 2017, the Company's
management was granted performance-based options to purchase 27.5 million shares of the Company's common stock at $0.06
per share. The options expire on December 13, 2027. At December 31, 2017, the first fifty percent (50%) of the performance-based
options vested as management was able to (i) close the sale of an aggregate of $600,000 of units (consisting of a share of
common stock of the Company and a warrant to buy 0.25 of a share of common stock of the Company) at $0.04 per unit and (ii) establish
toll processing arrangements with two toll processors of halloysite that, in management's good faith belief, can process
halloysite to the Company's specifications. An additional twenty-five percent (25%) of the performance-based options vested
on February 1, 2018 when management generated $900,000 of additional cash proceeds through (i) the sale of common stock and (ii)
the licensing of a right to explore the Dragon Mine property for certain precious metals. The vesting of the remaining 8.3%, 8.3%
and 8.4% of the performance-based options occurs when (i) EBITDA is positive over a twelve-month period, (ii) EBITDA is at or
greater than $2 million over a twelve-month period and (iii) EBITDA is at or greater than $4 million over a twelve-month period,
respectively. At September 30, 2018, the achievement of the performance targets was not deemed probable.
Compensation expense of $60,430 and $964,647
has been recognized for the vested options for the three and nine months ended September 30, 2018. The aggregate intrinsic value
of the outstanding options at September 30, 2018 was $1,785,196. At September 30, 2018, (i) $85,464 of unamortized compensation
expense for time-based unvested options will be recognized over the next 0.45 years on a weighted average basis; and (ii) $354,750
of unamortized compensation expense for performance-based unvested options will be recognized as the achievement of the performance
targets becomes probable.
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Table of Contents
NOTE 10 - PER SHARE DATA
The computation of basic earnings (loss)
per share of common stock is based on the weighted average number of shares outstanding during the year. The computation of diluted
earnings per common share is based on the weighted average number of shares outstanding during the year plus the common stock
equivalents that would arise from the exercise of stock options and warrants outstanding under the treasury method and the average
market price per share during the year as well as the conversion of notes. At September 30, 2018, the weighted average shares
outstanding excluded options to purchase 61,000,122 shares of common stock of the Company, warrants to purchase 26,688,373 shares
of common stock of the Company and 96,813,732 shares of common stock of the Company issuable upon the conversion of notes because
their effect would be anti-dilutive. At September 30, 2017, the weighted average shares outstanding excluded options to purchase
21,277,479 shares of common stock of the Company, warrants to purchase 10,000,873 shares of common stock of the Company and 52,075,593
shares of common stock of the Company issuable upon the conversion of notes payable because their effect would be anti-dilutive.
NOTE 11– COMMITMENTS AND CONTINGENCIES
Office Lease
On January 1, 2017, the Company moved
its headquarters to a temporary location. The Company paid a monthly rent of $6,000 through March 31, 2017 for the temporary office.
On April 1, 2017, the Company entered into a 5-year lease agreement for permanent office space. At September 30, 2018, the Company's
total monthly office rental payments, due through March 31, 2022, was $396,114. At September 30, 2018, $26,883 of total rent payments
are due through December 31, 2018, $109,953 of total rent payments are due through December 31, 2019, $113,253 of total rental
payments are due through December 31, 2020, $116,649 of total rent payments are due through December 31, 2021 and $29,376 of total
rent payments are due through March 31, 2022.
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Table of Contents
ITEM 2     MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-looking Statements
This Quarterly Report on Form 10-Q contains
"forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements are based on our current expectations, assumptions, estimates
and projections about our business and our industry. Words such as "believe," "anticipate," "expect,"
"intend," "plan," "will," "may," and other similar expressions identify forward-looking
statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or
circumstances are forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from those reflected in the forward-looking statements.
Overview
Applied Minerals, Inc. (the "Company"
or "Applied Minerals" or "we" or "us") (OTCQB: AMNL) owns the Dragon Mine in central Utah.
From the mine we extract, process, or have processed by a third party, halloysite clay and iron oxide for sale to a range of end
markets. We market the minerals directly and through distributors and also under a profit-sharing arrangement with the Kaolin
business unit of BASF Corp. ("BASF").
We also engage in research and development
and frequently work collaboratively with potential customers, consultants, distributors, and BASF to process and enhance our halloysite
clay products to improve the performance of existing and new products.
Our halloysite clay, which we market under
the DRAGONITE™ trade name, is an aluminosilicate mineral with a hollow tubular shape. DRAGONITE can utilize halloysite's
morphology, high surface area, and reactivity to add significant functionality to a number of applications such as, but not limited
to, reinforcement additives for polymer composites, flame retardant additives for polymers, catalysts, controlled release carriers
for paints and coatings, strength reinforcement additives for cement, concrete, mortars and grouts, advanced ceramics, rheology
additives for drilling fluids, environmental remediation media, and carriers of agricultural agents.  The Company sells its
halloysite products at negotiated prices.
Our iron oxide, which we market under
the AMIRON™ trade name, is a high purity product. We have sold it on an exclusive basis to one customer at a negotiated
price for use in an oilfield application and we are continuing to offer AMIRON to that customer on an exclusive basis.  Currently,
we are not selling AMIRON™ to customers on a continuing basis for use in any other application.
The Company is classified as an "exploration
stage" company for purposes of Industry Guide 7 of the U.S. Securities and Exchange Commission ("SEC") Under
Industry Guide 7, companies engaged in significant mining operations are classified into three categories, referred to as "stages"
- exploration, development, and production. Exploration stage includes all companies that do not have established reserves in
accordance with Industry Guide 7. Such companies are deemed to be "in the search for mineral deposits." Notwithstanding
the nature and extent of development-type or production-type activities that have been undertaken or completed, a company cannot
be classified as a development or production stage company unless it has established reserves in accordance with Industry Guide
7.
In 2017, we entered into a tolling agreement
with BASF under which BASF will process the Company's halloysite product, utilizing a water-based system. The BASF system
is capable of eliminating impurities, such as iron oxide, and chemically treating the surface of halloysite to achieve desired
functionality
.
We have a mineral processing plant with
a capacity of up to 45,000 tons of mineralization per annum for certain applications.  The plant is currently dedicated to
processing its halloysite products.
Additionally, the Company has a second
processing facility with a capacity of up to 10,000 tons per annum. This smaller plant is currently dedicated to processing the
Company's halloysite.  This smaller plant processes halloysite using a dry-based, micronizing system. This dry-based
system does not eliminate impurities, such as iron oxide, as effectively as a water-based system but is useful in situations where
the removal of impurities is not necessary.
For the foreseeable future, the Company
expects to utilize a commercial-sized crusher to process its iron oxide to satisfy any sales of its AMIRON product.
For the nine months ended September 30,
2018, the Company's largest customer accounted for approximately 94% of total revenue and at September 30, 2018 amounts owed
by the Company's two largest customers represented 68% of accounts receivable.
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Table of Contents
Critical Accounting Policies and
Estimates
A complete discussion of our critical
accounting policies and estimates is included in our Form 10-K/A for the year ended December 31, 2017. There have been no material
changes in our critical accounting policies and estimates during the nine-month period ended September 30, 2018 compared to the
disclosures on Form 10-K/A for the year ended December 31, 2017.
Recent Accounting Pronouncements
See NOTE 3 – BASIS OF REPORTING
AND SIGNIFICANT ACCOUNTING POLICIES
Three Months Ended September 30,
2018 Compared to Three Months Ended September 30, 2017
Results of Operations
The following sets forth, for the periods
indicated, certain components of our operating earnings, including such data stated as percentage of revenues:
Three Months Ended September 30,
Variance
2018
2017
Amount
%
REVENUES
$
4,682,003
$
148,303
$
4,533,700
3,057
%
OPERATING EXPENSES:
Production costs
581,072
412,713
168,359
41
%
Exploration costs
36,068
47,172
(11,104
)
(24
)%
General and administrative
613,605
664,217
(50,612
)
(8
)%
Depreciation expense
318,182
329,357
(11,175
)
(3
)%
Total Operating Expenses
1,548,927
1,453,459
95,468
7
%
Operating Income (Loss)
3,133,076
(1,305,156
)
4,438,232
340
%
OTHER INCOME (EXPENSE):
Interest expense, net, including amortization of deferred financing cost and debt discount
(608,585
)
(2,527,374
)
(1,918,789
)
(76
)%
Gain (loss) on revaluation of PIK Note derivative
3,021,500
(570,473
)
3,591,973
630
%
Other expense, net
(9,433
)
(4,064
)
5,369
132
%
Total Other Income (Expense)
2,403,482
(3,101,911
)
5,505,393
177
%
NET INCOME (LOSS)
$
5,536,558
$
(4,407,067
)
$
9,943,625
226
%
Revenue for the three months ended September
30, 2018 totaled $4,682,003, compared to $148,303 for the same period in 2017, an increase of $4,533,700 or 3,057%. The increase
was driven primarily by the sale of the Company's 4.5 million tons of surface pile material for $4,546,145. The five surface
piles of the Dragon Mine property were created primarily from the production of unusable clay mineral during open pit and underground
mining operations carried out between 1949 and 1976. The piles contain a mixture of halloysite, kaolinite and illite in addition
to a range of non-clay minerals. The five surface piles will be used as a natural pozzolan to extend Class F fly ash. The Company
will receive an additional $1.00 for every ton of surface pile material it removes from the Dragon Mine property.
Sales of DRAGONITE during the three months
ended September 30, 2018 totaled $131,268, a decrease of $14,635 or 10% when compared to the same period in 2017. Sales of AMIRON
during the three months ended September 30, 2018 totaled $971 compared to $1,000 during the same period in 2017. The decrease
in sales of DRAGONITE was driven by a decline in sales to three customers performing development work, partially offset by sales
to a customer preparing to commercialize a product utilizing DRAGONITE in late 2018 or early 2019. During the period the Company
recognized $3,620 of revenue related to the rental of its water truck to an exploration company.
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Table of Contents
Total operating expenses for the
three months ended September 30, 2018 were $1,548,927 compared to $1,453,459 for the same period in 2017, an increase of $95,468
or 7%. The increase in operating expenses was driven by a $168,359 or 41%, increase in production expenses partially offset by
a $50,612 or 8% decrease in general and administrative expense, a $11,104 or 24% decrease in exploration costs, and a $11,175 or
3% decrease in depreciation expense.
Production costs include those operating
expenses which management believes are directly related to the mining and processing of the Company's iron oxide and halloysite
minerals, which result in the production of its AMIRON and DRAGONITE products for commercial sale. Production costs include, but
are not limited to, wages and benefits of employees who mine material and who work in the Company's milling operations, energy
costs associated with the operation of the Company's two mills, the cost of mining and milling supplies and the cost of the
maintenance and repair of the Company's mining and milling equipment. Wages and energy are the two largest components of
the Company's production costs.
Production costs incurred during the
three months ended September 30, 2018 totaled $581,072 compared to $412,713 of production costs incurred during the same
period in 2017. The increase of $168,359 was driven primarily by the inclusion of a commission payment of $227,307 related to
the sale of the Company's surface pile material. Excluding the commission payment, production costs incurred during the
three months ended September 30, 2018 totaled $353,765. Excluding the payment of the commission related to the sale of the
surface pile material, production costs for the three months ended September 30, 2018 would have decreased by $58,948
compared to the same period in 2017. The $58,948 decrease  was resulted primarily from a $72,895 decrease in employee wages
and related benefits due to a reduction in employee headcount at the Dragon Mine, the absence of $26,171 of legal fees
related to an MSHA investigation during the same period in 2017 and a $25,882 decrease in mining related expense, partially
offset by a $66,000 increase in tolling costs of DRAGONITE by BASF.
Exploration costs include operating
expenses incurred at the Dragon Mine that are not directly related to production activities. Exploration costs incurred during
the three months ended September 30, 2018 were $36,068 compared to $47,172  incurred during the same period in 2017, a decrease
of $11,104 or 24%. The decrease was driven primarily a reduction in non-production related expenses such as consulting expense
and costs associated with staffing and running the Company's lab at the Dragon Mine.
General and administrative expenses
incurred during the three months ended September 30, 2018 totaled $613,605 compared to $664,217 during the same period in 2017,
a decrease of $50,612 or 8%. The Company's selling and administrative expenses are associated primarily with its corporate
headquarters in Brooklyn, N.Y.
The $50,612 decline in general and
administrative expense was driven by a $39,477 decline in wages and other employee expense due primarily to a reduction in total
cash compensation of certain employees, a $29,524 decrease in insurance expense related to a lower amortization of prepaid insurance
premium and $26,664 decrease in travel related expense. The decrease was partially offset by a $37,353 increase in equity-based
compensation related to the amortization of common stock options granted to employees and consultants and a $7,700 increase in
legal fees for work related to the Company's June, 2018 capital raise and payment made to a compensation consultant.
Operating income incurred during
the three months ended September 30, 2018 was $3,133,076, an increase of $4,438,232 when compared to the same period in 2017. The
increase in operating income during the quarter was due to a 3,057% increase in revenue and a 35% decrease in exploration, general
and administrative and depreciation expense, partially offset by a 41% increase in production costs.
Total other income (expense) incurred
during the three months ended September 30, 2018 was $2,403,482, a decrease in expense of $5,505,393 or 177% compared to the same
period in 2017. The decrease in other expense during the period was driven by a $1,918,789 or 76% decrease in interest expense
incurred due to the restructuring of the terms of the Company's outstanding PIK Notes and an $3,591,973 or 630% decrease
in the loss realized on the revaluation of the PIK Note derivative liability due to a decrease in the value of the Company's
common stock.
Net Income for the three-month period
ending September 30, 2018 was $5,536,558, a decrease in loss of $9,943,625 or 226%, when compared to the same period in 2017. The
decrease in loss was due primarily to a $4,533,700 increase in revenues and a $5,505,393 decrease in other expense, partially offset
by a $95,468 increase in operating expenses.
23
Table of Contents
Nine Months Ended September 30,
2018 Compared to Nine Months Ended September 30, 2017
Results of Operations
The following sets forth, for the periods
indicated, certain components of our operating earnings, including such data stated as percentage of revenues:
Nine Months Ended September 30,
Variance
2018
2017
Amount
%
REVENUES
$
4,820,088
$
2,300,998
$
2,519,090
109
%
OPERATING EXPENSES:
Production costs
937,614
2,125,007
(1,187,393
)
(56
)%
Exploration costs
147,680
304,631
(156,951
)
(52
)%
General and administrative
2,687,961
2,137,655
550,306
26
%
Depreciation expense
963,144
989,122
(25,978
)
(3
)%
Total Operating Expenses
4,736,399
5,556,415
(820,016
)
(15
)%
Operating Income (Loss)
83,689
(3,255,417
)
3,339,106
103
%
OTHER INCOME (EXPENSE):
Interest expense, net, including amortization of deferred financing cost and debt discount
(3,729,540
)
(6,843,524
)
(3,113,984
)
(46
)%
Gain (loss) on revaluation of PIK Note derivative
(3,557,004
)
1,066,368
(4,623,372
)
(434
)%
Other income, net
344,392
21,620
322,772
1,493
%
Total Other Expense
(6,942,152
)
(5,755,536
)
1,186,616
21
%
NET LOSS
$
(6,858,463
)
$
(9,010,953
)
$
(2,152,490
)
(24
)%
Revenue generated during the nine months
ended September 30, 2018 was $4,820,088, compared to $2,300,998 of revenue generated during the same period in 2017, an increase
of $2,519,090 or 109%. The increase was driven primarily by the sale of the Company's 4.5 million tons of surface pile material
for $4,546,145. The five surface piles of the Dragon Mine property were created primarily from the production of unusable clay
mineral during open pit and underground mining operations carried out between 1949 and 1976. The piles contain a mixture of halloysite,
kaolinite and illite in addition to a range of non-clay minerals. The five surface piles will be used as a natural pozzolan to
extend Class F fly ash. The Company will receive an additional $1.00 for every ton of surface pile material it removed from the
Dragon Mine property.
The increase in revenue was partially
offset by a decline in sales of AMIRON. Sales of AMIRON during the nine months ended September 30, 2018 totaled $29,492, a decline
of $1,374,620 or 98%. The decline was due primarily to the fulfillment by the Company of a 5-year, $5.0 million take-or-pay supply
agreement of AMIRON in June, 2017. Sales of DRAGONITE during for the nine months ended September 30, 2018 totaled $264,342, a
decrease of $631,771 or 71%. The decline was due primarily to a $383,240 decrease in sales to a manufacturer of advanced molecular
sieves for use as an additive, a $196,800 decline in sales for to a manufacturer of injection molded architectural products for
use as a nucleating agent, and a $138,000 decline in sales to a polymer compounder for use as a nucleating agent. The decline
was partially offset by $92,000 of sales to a manufacturer of industrial products for use as a flame retardant additive.
Total operating expenses for the
nine months ended September 30, 2018 were $4,736,399 compared to $5,556,415 of operating expenses incurred during the same period
in 2017, a decrease of $820,016 or 15%. The decline in operating costs was driven primarily by a $1,187,393 or 56% decline in production
costs and a $156,951 or 52% decline in exploration costs, partially offset by a $550,306 or 26% increase in general and administrative
costs.
24
Table of Contents
Production costs include those operating
expenses which management believes are directly related to the mining and processing of the Company's iron oxide and halloysite
minerals, which result in the production of its AMIRON and DRAGONITE products for commercial sale. Production costs include, but
are not limited to, wages and benefits of employees who mine material and who work in the Company's milling operations,
energy costs associated with the operation of the Company's two mills, the cost of mining and milling supplies and the cost
of the maintenance and repair of the Company's mining and milling equipment. Wages and energy are the two largest components
of the Company's production costs.
Production costs incurred during the nine months
ended September 30, 2018 were $937,614 compared to $2,125,007 of costs incurred during the same period in 2017, a decrease of $1,187,393
or 56%, when compared to the same period in 2017. The decline in production costs was driven primarily by the elimination of costs
such as employee wages and benefits, utilities, fuel and other production inputs, associated with the fulfillment in June, 2017
of the 5-year, $5 million take-or-pay contract for AMIRON. Additionally, the Company further reduced headcount on a temporary basis
at the Dragon Mine during the nine months ended September 30, 2018, which also contributed to the decline in production costs.
Exploration costs are associated with the Company's
activities at its Dragon Mine location, excluding costs directly associated with production. Exploration costs incurred during
the nine months ended September 30, 2018 were $147,680 compared to $304,631 incurred during the same period in 2017, a decrease
of $156,951, or 52%, when compared to the same period in 2017. The decrease was driven primarily a reduction in non-production
related expenses such as consulting expense and costs associated with staffing and running the Company's lab at the Dragon
Mine.
The Company's general and administrative
expenses are associated primarily with its New York operations. General and administrative expenses incurred during the nine months
ended September 30, 2018 totaled $2,687,961 compared to $2,137,655 of expense incurred during the same period in 2017, an increase
of $550,306 or 26%. The increase was driven primarily by an $818,760, or 561%, increase in equity-based compensation expense associated
with options granted to the Company's management and directors during the latter half of 2017. The increase in equity-based
expense was partially offset by a $130,568, or 11%, decrease in cash compensation paid to specific executives, a $93,082 decline
in travel and entertainment expense, and a $23,496 decrease in utility expense.
Operating income incurred during the nine
months ended September 30, 2018 was $83,689 compared to a loss of $3,255,417 incurred during the same period in 2017, a
increase in operating  income of $3,339,106 or 103%. The increase in operating  income during the period was due to a 109%
increase in revenue, a 56% decrease in production costs and a 52% decrease in exploration costs, partially offset by a 26%
increase in general and administrative expense.
Total other expense during the nine months
ended September 30, 2018 totaled $6,942,152, an increase of $1,186,616 or 21%. The increase in other expense was driven primarily
by an $3,557,004 loss realized on the revaluation of the PIK Note derivative liability compared to a $1,066,368 gain realized during
the same period in 2017, partially offset by a $3,113,984, or 46%, decrease in interest expense due to a restructuring of the Company's
Series A and Series 2023 Notes and a $322,772, or 1,493%, increase in other income comprised primarily of lease income earned during
the three months ended March 31, 2018.
Net Loss for the nine-month period ending September
30, 2018 was $6,858,463 compared to a loss of $9,010,953 incurred during the same period in 2017, a decrease in net loss of $2,152,490
or 24%. The decrease in net loss was driven primarily by a $2,519,090 increase in total revenue and an $820,016 decrease in total
operating expense, partially offset by a $1,186,616 increase in total other expense.
25
Table of Contents
LIQUIDITY AND CAPITAL RESOURCES
The Company has a history of recurring
losses from operations and the use of cash in operating activities. For the nine months ended September 30, 2018, the Company's
net loss was $6,858,463 and cash used in operating activities was $2,153,123. As of September 30, 2018, the Company had current
assets of $3,935,991 and current liabilities of $1,057,037 of which $422,919 was accrued PIK Note interest likely to be paid in
additional PIK Notes. The Company's current liabilities also include (i) $157,040 of payables to a compounder for which it
has agreed to satisfy in halloysite product and (ii) $132,635 of disputed accrued expenses for which the Company believes it has
a statute of limitations defense.
Based on the Company's current cash usage
expectations, management believes it has sufficient liquidity to fund its operations through November 19, 2019.
Cash generated from operating activities during
the nine months ended September 30, 2018 was $2,153,123 compared to a usage of cash of $1,414,895 during the same period in 2017,
a difference of $3,568,018. Before accounting for changes in operating assets and liabilities, cash generated from operating activities
during 2018 was $2,409,114 compared to a usage of cash of $2,445,939 during the same period in 2017. The difference was driven
by the $2,519,090 increase in revenue realized during 2018 compared to 2017.
Cash used in investing activities during the
nine months ended September 30, 2018 was $23,063 compared to $43,753 during the same period in 2017, a decrease of $20,690 or 47%.
The decrease was primarily due to a lower level of expenditure related to capital improvements.
Cash provided by financing activities during
the nine months ended September 30, 2018 was $1,605,526 compared to $679,664 during the same period in 2017. The $925,862 increase
in cash generated during the period was due primarily to $1,735,000 of proceeds generated from the sale of common stock of the
Company and $80,000 of proceeds from the exercise of warrants to purchase shares of common stock of the Company.
Total assets at September 30, 2018 were $6,051,627
compared to $3,324,164 at December 31, 2017, an increase of $2,727,463 due primarily to the increase in cash balance. Total liabilities
were $43,271,225 at September 30, 2018, compared to $36,524,946 at December 31, 2017. The increase in total liabilities was due
primarily to a $3,690,842 increase in the balance of the PIK Note derivative liability and a $3,223,359 increase in the PIK Note
balance due to the issuance of additional PIK Notes in lieu of cash interest payments.
ISSUANCE OF CONVERTIBLE DEBT
For information with respect to issuance of
convertible debt, see Note 7 of Notes to Consolidated Financial Statements included elsewhere in this Quarterly Report.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements
between the Company and any other entity that have, or are reasonable likely to have, a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital
resources that is material to investors.
The following table summarizes our contractual
obligations as of September 30, 2018 that requires us to make future cash payments:
Payment due by period
Total
< 1 year
1 – 3 years
3 – 5 years
> 5 years
Contractual Obligations:
Rent obligations
$
396,114
$
109,146
$
228,216
$
58,752
$
-
                                         0 -
Total
$
396,114
$
109,146
$
228,216
$
58,752
$
-
                                         0 -
ITEM 3.     QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have no exposure to fluctuations in
interest rates, foreign currencies, or other factors.
26
Table of Contents
ITEM 4.     CONTROLS
AND PROCEDURES
As required by Rule 13a-15(b) of
the Securities Exchange Act of 1934 (the "Exchange Act"), our management, including our Chief Executive Officer and
Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the fiscal
quarter covered by this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were, as of the end
of the fiscal quarter covered by this quarterly report, ineffective to ensure that information required to be disclosed by us in
reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms and is accumulated and communicated to our management, including the Chief Executive Officer
and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Notwithstanding the existence of
these material weaknesses in our internal control over financial reporting, the management believes that the consolidated financial
statements included in this Form 10-Q fairly present in all material respects our financial condition, results of operations and
cash flows for the periods presented.
27
Table of Contents
PART II.     OTHER
INFORMATION
ITEM 1.     LEGAL
PROCEEDINGS
As of the date of this report, there is
no pending or threatened litigation. We may become involved in or subject to, routine litigation, claims, disputes, proceedings
and investigations in the ordinary course of business, could have a material adverse effect on our financial condition, cash flows
or results of operations.
ITEM 1A.  RISK
FACTORS.
Except for the below, there were no additions
or material changes to the Company's risk factors disclosed in Item 1A of Part I in the Company's 2017 Annual Report
on Form 10-K/A.
ITEM 2.     UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During January, 2018 the Company issued
1,500,000 shares of common stock to a consultant at a price of $0.04 per share.
During February, 2018 the Company sold
3,625,000 shares of common stock at a price of $0.04 per share. The proceeds from the sale were used to fund working capital.
During March, 2018 the Company sold 3,000,000
shares of common stock at a price of $0.05 per share. The proceeds from the sale were used to fund working capital.
During March, 2018 the Company sold 1,0000,000
shares of common stock at a price of $0.10 per share. The proceeds from the sale were used to fund working capital.
During March a shareholder exercised warrants
to purchase 500,000 shares of stock at $0.04 per share. The proceeds from the exercise of the warrants were used to fund working
capital.
During April and May 2018, the Company
sold 13,750,000 shares of common stock at a price of $0.04 per share. The proceeds from the sale were used to fund working capital.
During June 2018, the Company sold 8,000,000
units at a price of $0.08 per unit. Each unit consists of one share of common stock and one warrant to purchase one share of common
stock at a price of $0.15. The proceeds from the sale were used to fund working capital.
During July 2018, the Company sold 1,875,000
units at a price of $0.08 per unit. Each unit consists of one share of common stock and one warrant to purchase one share of common
stock at a price of $0.15. The proceeds from the sale were used to fund working capital.
ITEM 3.     DEFAULTS
UPON SENIOR SECURITIES
None
ITEM 4.     MINE
SAFETY DISCLOSURES
The information concerning mine safety
violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection
Act and this Item is included in Exhibit 95 to this Form 10-Q.
ITEM 5.     OTHER
INFORMATION
None.
28
Table of Contents
ITEM 6.     EXHIBITS
(a) Exhibits.
The following exhibits are included in
this report:
Exhibit
Number
Description
    of Exhibit
31.1
Certification pursuant to Rule 13a-14 of
    the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of the Principal Executive
    Officer
31.2
Certification pursuant to Rule 13a-14 of
    the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of the Principal Financial
    Officer
32.1
Certification pursuant to 18 U.S.C. Section
    1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Principal Executive Officer
32.2
Certification pursuant to 18 U.S.C. Section
    1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Principal Financial Officer
95
Mine Safety Disclosure
101.INS
XBRL Instance
101.SCH
XBRL Taxonomy Extension Schema
101.CAL
XBRL Taxonomy Extension Calculation
101.DEF
XBRL Taxonomy Extension Definition
101.LAB
XBRL Taxonomy Extension Labels
101.PRE
XBRL Taxonomy Extension Presentation
XBRL
Information is furnished and not filed
    or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended,
    is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject
    to liability under these sections.
29
Table of Contents
SIGNATURES
In accordance with the requirements of
the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
APPLIED
    MINERALS, INC.
Dated: November 19, 2018
/s/ ANDRE ZEITOUN
By: Andre Zeitoun
Chief Executive Officer
Dated: November 19, 2018
/s/ CHRISTOPHER T. CARNEY
By: Christopher T. Carney
Chief Financial Officer
30