Company Quick10K Filing
General Moly
Price0.20 EPS-0
Shares138 P/E-3
MCap28 P/FCF-5
Net Debt-5 EBIT-8
TEV22 TEV/EBIT-3
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-15
10-K 2019-12-31 Filed 2020-05-04
10-Q 2019-09-30 Filed 2019-11-19
10-Q 2019-06-30 Filed 2019-08-13
10-Q 2019-03-31 Filed 2019-05-14
10-K 2018-12-31 Filed 2019-03-21
10-Q 2018-09-30 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-08
10-K 2017-12-31 Filed 2018-03-13
10-Q 2017-09-30 Filed 2017-11-06
10-Q 2017-06-30 Filed 2017-08-14
10-Q 2017-03-31 Filed 2017-05-01
10-K 2016-12-31 Filed 2017-03-16
10-Q 2016-09-30 Filed 2016-11-07
10-Q 2016-06-30 Filed 2016-08-08
10-Q 2016-03-31 Filed 2016-05-05
10-K 2015-12-31 Filed 2016-03-11
10-Q 2015-09-30 Filed 2015-11-04
10-Q 2015-06-30 Filed 2015-08-04
10-Q 2015-03-31 Filed 2015-05-04
10-K 2014-12-31 Filed 2015-03-11
10-Q 2014-09-30 Filed 2014-11-03
10-Q 2014-06-30 Filed 2014-08-04
10-Q 2014-03-31 Filed 2014-05-06
10-K 2013-12-31 Filed 2014-03-13
10-Q 2013-09-30 Filed 2013-11-04
10-Q 2013-06-30 Filed 2013-08-05
10-Q 2013-03-31 Filed 2013-05-03
10-K 2012-12-31 Filed 2013-03-08
10-Q 2012-09-30 Filed 2012-11-07
10-Q 2012-06-30 Filed 2012-08-07
10-Q 2012-03-31 Filed 2012-05-02
10-Q 2011-09-30 Filed 2011-11-01
10-Q 2011-06-30 Filed 2011-08-03
10-Q 2011-03-31 Filed 2011-05-02
10-K 2010-12-31 Filed 2011-03-02
10-Q 2010-09-30 Filed 2010-10-29
10-Q 2010-06-30 Filed 2010-07-30
10-Q 2010-03-31 Filed 2010-05-06
10-K 2009-12-31 Filed 2010-03-05
8-K 2020-04-28 Officers
8-K 2020-04-24 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2020-03-27 Amend Bylaw, Exhibits
8-K 2020-03-25 Other Events
8-K 2020-03-12 Exhibits
8-K 2019-12-27 Enter Agreement, Off-BS Arrangement, Sale of Shares, Other Events, Exhibits
8-K 2019-12-09 Enter Agreement, Leave Agreement, Sale of Shares, Officers, Exhibits
8-K 2019-12-05 Officers
8-K 2019-11-05 Other Events, Exhibits
8-K 2019-09-25 Enter Agreement, Other Events, Exhibits
8-K 2019-09-12 Exhibits
8-K 2019-08-01 Leave Agreement
8-K 2019-08-01 Enter Agreement, Sale of Shares, Amend Bylaw, Other Events, Exhibits
8-K 2019-07-29 Officers, Other Events, Exhibits
8-K 2019-06-24 Shareholder Vote, Other Events, Exhibits
8-K 2019-06-10 Other Events, Exhibits
8-K 2019-05-17 Sale of Shares, Other Events, Exhibits
8-K 2019-03-22 Enter Agreement, Sale of Shares, Amend Bylaw, Exhibits
8-K 2019-03-13 Other Events, Exhibits
8-K 2019-01-16 Accountant, Exhibits
8-K 2018-12-12 Exhibits
8-K 2018-12-01 Officers, Exhibits
8-K 2018-10-22 Other Events, Exhibits
8-K 2018-10-17 Enter Agreement, Other Events, Exhibits
8-K 2018-10-17 Other Events, Exhibits
8-K 2018-10-15 Other Events, Exhibits
8-K 2018-09-13 Other Events, Exhibits
8-K 2018-08-21 Other Events, Exhibits
8-K 2018-06-21 Shareholder Vote, Other Events, Exhibits
8-K 2018-02-28 Enter Agreement, Exhibits
8-K 2018-01-16 Officers

GMO 10Q Quarterly Report

Part I - Financial Information
Item 1.Financial Statements
Note 1 — Description of Business
Note 2 — Summary of Significant Accounting Policies
Note 3 — Mining Properties, Land and Water Rights
Note 4 — Asset Retirement Obligations
Note 5 — Current Debt
Note 6 — Common Stock Units, Common Stock and Common Stock Warrants
Note 7 — Redeemable Preferred Stock
Note 8 — Equity Incentives
Note 9 — Changes in Contingently Redeemable Noncontrolling Interest and Equity
Note 10 — Income Taxes
Note 11 — Commitments and Contingencies
Note 12 — Subsequent Events
Item 2.Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
Part II - Other Information
Item 1.Legal Proceedings
Item 1A.Risk Factors.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
EX-31.1 gmo-20200331ex311d571ab.htm
EX-32.1 gmo-20200331ex3218d66a1.htm

General Moly Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
4003202401608002012201420172020
Assets, Equity
-1.9-4.5-7.1-9.8-12.4-15.02011201220132015
Rev, G Profit, Net Income
10573419-23-552012201420172020
Ops, Inv, Fin

10-Q 1 gmo-20200331x10q.htm 10-Q gmo_Current folio_10Q

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March  31, 2020

 

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

 

For the transition period from                  to                  

 

Commission File Number: 001-32986

 

General Moly, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

 

DELAWARE

 

91-0232000

(State or other jurisdiction

 

(I.R.S. Employer

of incorporation or organization)

 

Identification No.)

 

1726 Cole Blvd., Suite 115
Lakewood, CO 80401
Telephone:  (303) 928-8599
(Address and telephone number of principal executive offices)

 

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

 

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

GMO

NYSE American and Toronto Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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   NO ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted 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 such files). YES   NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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

 

 

 

 

 

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 Section 13(a) of the Exchange Act.  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES  NO ☒

 

The number of shares outstanding of issuer’s common stock as of May 10, 2020, was 152,685,255.

 

 

 

 

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1.FINANCIAL STATEMENTS

 

GENERAL MOLY, INC.

CONSOLIDATED BALANCE SHEETS

 

(In thousands, except par value amounts)

 

 

 

 

 

 

 

 

 

 

    

March 31,

    

December 31,

 

 

 

2020

 

2019

 

 

 

(unaudited)

 

 

 

ASSETS:

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,055

 

$

4,614

 

Deposits, prepaid expenses and other current assets

 

 

332

 

 

272

 

Total Current Assets

 

 

3,387

 

 

4,886

 

Mining properties, land and water rights

 

 

244,845

 

 

244,137

 

Deposits on project property, plant and equipment

 

 

87,972

 

 

87,972

 

Restricted cash held at EMLLC

 

 

3,684

 

 

3,388

 

Restricted cash and investments held for reclamation bonds

 

 

708

 

 

708

 

Non-mining property and equipment, net

 

 

-

 

 

32

 

Other assets

 

 

3,104

 

 

3,104

 

TOTAL ASSETS

 

$

343,700

 

$

344,227

 

LIABILITIES, CRNCI, AND EQUITY:

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

1,179

 

$

1,223

 

Return of Contributions Payable to POS-Minerals, current portion

 

 

33,641

 

 

33,641

 

Accrued advance royalties

 

 

500

 

 

500

 

Total Current Liabilities

 

 

35,320

 

 

35,364

 

Provision for post closure reclamation and remediation costs

 

 

2,000

 

 

1,953

 

Accrued advance royalties

 

 

6,888

 

 

6,388

 

Accrued payments to Agricultural Sustainability Trust

 

 

5,500

 

 

5,500

 

Accrued water rights payments

 

 

14,000

 

 

14,000

 

Senior Promissory Notes

 

 

8,368

 

 

7,883

 

Other accrued liabilities

 

 

2,676

 

 

3,447

 

Total Liabilities

 

 

74,752

 

 

74,535

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES - NOTE 12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONTINGENTLY REDEEMABLE NONCONTROLLING INTEREST ("CRNCI")

 

 

172,314

 

 

172,239

 

CONVERTIBLE PREFERRED SHARES

 

 

1,300

 

 

1,300

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

Common stock, $0.001 par value; 650,000,000 and 650,000,000 shares authorized, respectively, 152,685,255 and 152,033,515

 

 

152

 

 

152

 

Additional paid-in capital

 

 

295,387

 

 

295,005

 

Accumulated deficit during exploration and development stage

 

 

(200,205)

 

 

(199,004)

 

Total Equity

 

 

95,334

 

 

96,153

 

TOTAL LIABILITIES, CRNCI, AND EQUITY

 

$

343,700

 

$

344,227

 

 

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

2

GENERAL MOLY, INC. (“GMI”)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

(Unaudited — In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

    

March 31,

    

March 31,

    

 

 

2020

 

2019

 

REVENUES

 

$

 

$

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

Exploration and evaluation

 

 

173

 

 

103

 

General and administrative expense

 

 

1,493

 

 

1,299

 

Gain on Sale of non-core properties and assets

 

 

(547)

 

 

 

TOTAL OPERATING EXPENSES

 

 

1,119

 

 

1,402

 

 

 

 

 

 

 

 

 

(LOSS) FROM OPERATIONS

 

 

(1,119)

 

 

(1,402)

 

 

 

 

 

 

 

 

 

OTHER INCOME/(EXPENSE):

 

 

 

 

 

 

 

Interest expense

 

 

(759)

 

 

(55)

 

Other income

 

 

752

 

 

 

 

TOTAL OTHER (EXPENSE)/INCOME, NET

 

 

(7)

 

 

(55)

 

 

 

 

 

 

 

 

 

(LOSS) BEFORE INCOME TAXES

 

 

(1,126)

 

 

(1,457)

 

 

 

 

 

 

 

 

 

Income Taxes

 

 

 —

 

 

 —

 

 

 

 

 

 

 

 

 

CONSOLIDATED NET (LOSS)

 

$

(1,126)

 

$

(1,457)

 

Less: Net loss attributable to CRNCI

 

 

(75)

 

 

36

 

NET LOSS ATTRIBUTABLE TO GMI

 

$

(1,201)

 

$

(1,421)

 

Basic and diluted net loss attributable to GMI per share of common stock

 

$

(0.01)

 

$

(0.01)

 

Weighted average number of shares outstanding — basic and diluted

 

 

152,669

 

 

137,471

 

 

 

 

 

 

 

 

 

COMPREHENSIVE (LOSS)

 

$

(1,201)

 

$

(1,421)

 

 

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

 

 

3

GENERAL MOLY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

 

(Unaudited — In thousands, except number of shares and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common

 

Preferred

 

 

 

 

Additional

 

Accumulated

 

 

 

 

 

    

Shares

    

Shares

    

Amount

    

Paid-In Capital

    

Deficit

    

Total

 

Balances, December 31, 2018

 

137,114,804

 

 —

 

$

137

 

$

291,266

 

$

(191,126)

 

$

100,277

 

Issuance of Units of Common Stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued pursuant to stock awards

 

135,000

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Stock-based compensation

 

 —

 

 —

 

 

 —

 

 

25

 

 

 —

 

 

25

 

Restricted stock net share settlement

 

276,328

 

 —

 

 

 —

 

 

(1)

 

 

 —

 

 

(1)

 

Public Offering

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Issued under at-the-market trading mechanism

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Net loss for the period ended March 31, 2019

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(1,421)

 

 

(1,421)

 

Balances, March 31, 2019

 

137,526,132

 

 

 

$

137

 

$

291,290

 

$

(192,547)

 

$

98,880

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common

 

Preferred

 

 

 

 

Additional

 

Accumulated

 

 

 

 

 

 

Shares

 

Shares

 

Amount

 

Paid-In Capital

 

Deficit

 

Total

 

Balances, December 31, 2019

 

152,316,255

 

1,300

 

$

152

 

$

295,005

 

$

(199,004)

 

$

96,153

 

Issuance of Units of Common Stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued pursuant to stock awards

 

369,000

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Stock-based compensation

 

 —

 

 —

 

 

 —

 

 

382

 

 

 —

 

 

382

 

Net loss for the period ended March 31, 2020

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(1,201)

 

 

(1,201)

 

Balances, March 31, 2020

 

152,685,255

 

1,300

 

$

152

 

$

295,387

 

$

(200,205)

 

$

95,334

 

 

 

4

GENERAL MOLY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Unaudited — In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

    

March 31,

    

March 31,

 

 

 

2020

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Consolidated net loss

 

$

(1,126)

 

$

(1,457)

 

Adjustments to reconcile net loss to net cash used by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

24

 

 

 7

 

Non-cash interest expense

 

 

485

 

 

(126)

 

Gain on decrease in warrant liability

 

 

(771)

 

 

 —

 

Income realized on lease of water rights

 

 

 —

 

 

(13)

 

Gain on sale of non-core assets

 

 

(547)

 

 

 —

 

Stock-based compensation for employees and directors

 

 

318

 

 

24

 

Decrease (increase) in deposits, prepaid expenses and other

 

 

(60)

 

 

(191)

 

Decrease in accounts payable and accrued liabilities

 

 

(91)

 

 

519

 

(Decrease) increase in post closure reclamation and remediation costs

 

 

20

 

 

27

 

Net cash used by operating activities

 

 

(1,748)

 

 

(1,210)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchase and development of mining properties, land and water rights

 

 

(200)

 

 

(576)

 

Deposits on property, plant and equipment

 

 

 —

 

 

152

 

Proceeds from sale of non-core assets

 

 

685

 

 

 —

 

Increase in investments for reclamation bonds

 

 

 —

 

 

(17)

 

Net cash used by investing activities

 

 

485

 

 

(441)

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Stock proceeds, net of issuance costs

 

 

 —

 

 

299

 

Net cash provided/(used) by financing activities:

 

 

 —

 

 

299

 

Net (decrease) in cash, cash equivalents and restricted cash

 

 

(1,263)

 

 

(1,352)

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

8,002

 

 

8,617

 

Cash, cash equivalents and restricted cash, end of period

 

$

6,739

 

$

7,265

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

Cash paid for interest, net of capitalized

 

$

274

 

$

181

 

 

 

 

 

 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Equity compensation capitalized as development

 

$

64

 

$

1

 

Accrued portion of advance royalties

 

 

500

 

 

 —

 

 

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

 

 

 

5

GENERAL MOLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 — DESCRIPTION OF BUSINESS

 

General Moly, Inc. (“we,” “us,” “our,” “Company,” ”GMI,” or “General Moly”) is a Delaware corporation originally incorporated as General Mines Corporation on November 23, 1925.  We have gone through several name changes and on October 5, 2007, we reincorporated in the State of Delaware (“Reincorporation”) through a merger involving Idaho General Mines, Inc. and General Moly, Inc., a Delaware corporation that was a wholly owned subsidiary of Idaho General Mines, Inc.  The Reincorporation was effected by merging Idaho General Mines, Inc. with and into General Moly, with General Moly being the surviving entity.  For purposes of the Company’s reporting status with the United States Securities and Exchange Commission (“SEC”), General Moly is deemed a successor to Idaho General Mines, Inc.

 

The Company conducted exploration and evaluation activities from January 1, 2002 until October 4, 2007, when our Board of Directors (“Board”) approved the development of the Mt. Hope molybdenum property (“Mt. Hope Project”) in Eureka County, Nevada.  The Mt. Hope Project is leased and operated by Eureka Moly, LLC, an indirectly held 80% subsidiary of the Company (“EMLLC” or the “LLC”).  The Company is continuing its efforts to both obtain financing for and develop the Mt. Hope Project.  However, the combination of ongoing depressed molybdenum prices, challenges to our permits and current liquidity concerns have further delayed development at the Mt. Hope Project. 

 

Additionally, in late 2018 we completed a 9-hole drill program on the Mt. Hope property, focused on the area where previously identified copper-silver-zinc-mineralized skarns have been identified, immediately adjacent to the Mt. Hope molybdenum deposit.

 

We also continue to evaluate our Liberty molybdenum and copper property (“Liberty Project”) in Nye County, Nevada.

 

Liquidity and Management’s Plans

 

Our current working capital is negative.  Based on our current operating forecast, which takes into consideration the fact that we currently do not generate any revenue, the Company does not expect to be able to fund its current operations and meet its financial obligations for a period of at least 12 months from the issuance of these financials.  These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  If we are unable to meet our obligations, we would be forced to cease operations and pursue restructuring or liquidation alternatives, including the potential to seek a bankruptcy filing, in which event investors may lose their entire investment in our Company.  Without additional funding, the Company has inadequate cash to continue operations past the third quarter of 2020 and will have to find funding going forward including pursuing asset sales, short term financing options and, if unsuccessful in obtaining sufficient financing, the possibility of seeking bankruptcy protection.  There can be no assurance that the Company will be successful in obtaining the financing required to complete the Mt. Hope Project, or in raising additional financing in the future on terms acceptable to the Company, or at all.

 

The Company is currently pursuing a number of options to extend its liquidity beyond the third quarter of 2020 and into 2021.  On March 13, 2019, the Company announced that its Board of Directors has retained XMS Capital Partners, Headwall Partners, and Odinbrook Global Advisors (collectively, the “Advisors”), as financial advisors to assist the Board and management with evaluating and recommending strategic alternatives.

 

The range of strategic alternatives being evaluated include the potential addition of new Mt. Hope Project partners, additional Corporate strategic investors, merger opportunities, and/or the possible sale or privatization of the Company.  The Advisors assisted the Company in successfully restructuring the Convertible and Non-Convertible Promissory Notes issued in a 2014 private placement, extending maturity until December 2022 as well as providing an additional $1.3 million in interim funding.

 

Additional potential funding sources for the Company include public or private equity offerings, including the sale of other assets wholly-owned by the Company or with EMLLC partner POS-Minerals at the Mt. Hope Project.  However, there is no assurance that the Company will be successful in securing additional funding in the future on terms acceptable to the Company, or at all.  This could result in further cost reductions, contract cancellations, and potential delays which ultimately may jeopardize the development of the Mt. Hope Project.

 

Beginning in early 2020, there has been an outbreak of coronavirus (COVID-19), initially in China and which has spread to other jurisdictions, including locations where the Company does business. The full extent of the outbreak, related business and travel restrictions and changes to behavior intended to reduce its spread are uncertain as of the date of this quarterly report as this continues to evolve globally. COVID – 19 has had a direct impact on the Company’s financing efforts and potential solutions to its liquidity position.  Currently, the Company believes that it will be able to sustain its corporate and Liberty Project operations only

6

into the fourth quarter 2020.  Management continues to seek financing opportunities notwithstanding the impacts associated with the COVID-19 pandemic, however the Company anticipates that its financing efforts and liquidity may continue to be materially impacted by the coronavirus outbreak.

 

Currently the Company has no plans or intentions to enter into restructuring or liquidation. The Company has engaged the Advisors to assist in securing interim financing and negotiating with potential stakeholders. While the Advisors would have the capability to assist with a restructuring if needed, we do not intend to engage them (or other parties) for these services at this time.

 

Other Financing Actions Taken

 

On April 12, 2017, the Company filed a prospectus supplement in both Canada and the United States which enabled the Company, at its discretion from time to time, to sell up to $20 million worth of common shares by way of an “at-the-market” offering (the “ATM”).  Since the effectiveness of the prospectus supplement by the SEC on April 26, 2017 to September 30, 2019, a total of 1,168,300 common shares have been sold under the ATM, for net proceeds to the Company of $0.5 million.  In October 2018, the Company completed a public offering of 9,125,000 units consisting of one share of common stock and one warrant to purchase one share of common stock resulting in net proceeds to the Company of $1,900,000.  In conjunction with the public offering in October 2018, the Company agreed to suspend the ATM facility for a period of 2 years.

 

Additionally, on March 28, 2019, the Company executed a Securities Purchase Agreement (the “Series A Purchase Agreement”) with Bruce D. Hansen, the Company’s Chief Executive Officer, and Robert I. Pennington, the Company’s Chief Operating Officer (collectively the “Investors”), effective as of March 21, 2019.  Pursuant to the Series A Purchase Agreement, the Investors agreed to purchase up to $900,000 of convertible shares of Series A Preferred Stock, par value $0.001 per share (the “Series A Convertible Preferred Shares”), of the Company.  The Company requested three separate closings of sales of Series A Convertible Preferred Shares to the Investors between the date of the Series A Purchase Agreement and June 30, 2019.  Each closing was in the amount of $300,000 of Series A Convertible Preferred Shares. 

The Series A Convertible Preferred Shares were priced at $100.00/preferred share, convertible at any time at the holder’s discretion into common shares whereby one preferred share converts at a price of $0.27/common share to 370.37 common shares. The conversion price was set as the closing price of the common stock on March 12, 2019, which was the day before announcement of the private placement. The Series A Convertible Preferred Shares carry a 5% annual dividend, which may be paid, in the Company’s sole discretion, in cash, additional shares or a combination thereof.  Upon maturity or full repayment of the $7.2 million Convertible Note debt, described below, currently outstanding, there will be mandatory redemption of the Series A Convertible Preferred Shares into equivalent cash for the principal invested, plus any accrued and unpaid dividends.

On May 2, 2019, the Company also executed a Securities Purchase Agreement (the “MHMI Series A Purchase Agreement”) with Mount Hope Mines, Inc. (“MHMI”), later assigned in part to members of MHMI individually.  Pursuant to the MHMI Series A Purchase Agreement, MHMI agreed to  purchase $500,000 of Series A Convertible Preferred Shares, as  described above.  These shares were fully converted in the fourth quarter of 2019.

 

On August 5, 2019, the Company executed a Securities Purchase Agreement (the “Series B Purchase Agreement”) with the Investors.  Pursuant to the Series B Purchase Agreement, the Investors agreed to purchase up to $400,000 of convertible shares of Series B Preferred Stock, par value $0.001 per share (the “Series B Convertible Preferred Shares”), of the Company.  This transaction closed on August 7, 2019. 

The Series B Convertible Preferred Shares were issued at a price of $100.00 per share, and each Series B Convertible Preferred Share will be convertible at any time at the holder’s discretion into 500 shares of common stock of the Company.  The Series B Convertible Preferred Shares carry a 5% annual dividend, which may be paid, in the Company’s sole discretion, in cash, additional shares of Series B Convertible Preferred Shares or a combination thereof.  The Series B Convertible Preferred Shares, like the Series A Convertible Preferred Shares, are mandatorily redeemable upon maturity or full repayment of the Exchange Note and Supplemental Note debt discussed in Note 5 below.

 

In December 2019, the Company completed an exchange offer with the holder of $5 million of the Company’s Senior Convertible Promissory Notes and certain other holders of Senior Convertible Notes and Senior Promissory Notes (collectively, the “Old Notes”) to exchange the Old Notes for new units consisting of new senior non-convertible promissory notes having a principal amount equal to the original principal amount of the Old Notes exchanged plus accrued and unpaid interest (including deferred interest), bearing an interest rate between 12-14% and otherwise providing for similar terms (the “Exchange Notes”) and a three-year warrant to purchase Company common stock at $0.35 share (each a “Unit”).  The Exchange Notes extend the maturity date until December 2022.  A majority of the remaining holders also agreed to the terms of the Exchange Notes, with approximately $0.4 million repaid at maturity to those who chose not to participate in the exchange.

7

In addition to the exchange of Old Notes, the largest holder of the Old Notes, as well as the Company’s CEO/CFO, Bruce Hansen and other noteholders, purchased new 13% Senior Promissory Notes due 2022 in the principal amount of $1.3 million (representing approximately 20% of the original principal amount of the Old Notes to be exchanged) providing additional capital to the Company. 

 

The Company paid at maturity the unpaid principal and all accrued and unpaid interest in the approximate amount of $368,000 to those eligible holders that elected not to participate in the Exchange Offer.  The original principal amount of Old Notes paid at maturity represented approximately 5% of the total outstanding.  The maturity date was December 26, 2019. The Warrants issued in connection with the Old Notes expired by their terms on December 26, 2019.

 

The Company believes these transactions will assist with very near-term liquidity necessary for the Company to operate into the fourth quarter of 2020.  However, this does not alleviate the substantial doubt about our ability to continue to operate as a going concern.

 

The Mt. Hope Project

 

From October 2005 to January 2008, we owned the rights to 100% of the Mt. Hope Project.  Effective as of January 1, 2008, we contributed all of our interest in the assets related to the Mt. Hope Project, including the Mt. Hope Lease, into EMLLC, and in February 2008 entered into a joint venture agreement (“LLC Agreement”) for the development and operation of the Mt. Hope Project with POS-Minerals Corporation (“POS-Minerals”).  Under the LLC Agreement, POS-Minerals owns a 20% interest in the LLC and General Moly, through Nevada Moly, LLC (“Nevada Moly”), a wholly-owned subsidiary, owns an 80% interest.  The ownership interests and/or required capital contributions under the LLC Agreement can change as discussed below.

 

In addition, under the terms of the LLC Agreement, since commercial production at the Mt. Hope Project was not achieved by December 31, 2011, the LLC will be required to return to POS-Minerals $36.0 million, since reduced to $33.6 million as discussed below, of its capital contributions (“Return of Contributions”), with no corresponding reduction in POS-Minerals’ ownership percentage.  Effective January 1, 2015, as part of a comprehensive agreement concerning the release of the reserve account described below, Nevada Moly and POS-Minerals agreed that the Return of Contributions will be payable to POS-Minerals on December 31, 2020; provided that, at any time on or before November 30, 2020, Nevada Moly and POS-Minerals may agree in writing to extend the due date to December 31, 2021; and if the due date has been so extended, at any time on or before November 30, 2021, Nevada Moly and POS-Minerals may agree in writing to extend the due date to December 31, 2022.  If the repayment date is extended, the unpaid amount will bear interest at a rate per annum of LIBOR plus 5%, which interest shall compound quarterly, commencing on December 31, 2020 through the date of payment in full.  Payments of accrued but unpaid interest, if any, shall be made on the repayment date.  Nevada Moly may elect, on behalf of the Company, to cause the Company to prepay, in whole or in part, the Return of Contributions at any time, without premium or penalty, along with accrued and unpaid interest, if any.

 

The original Return of Contributions amount due to POS-Minerals is reduced, dollar for dollar, by the amount of capital contributions for equipment payments required from POS-Minerals under approved budgets of the LLC, as discussed further below.  During the period January 1, 2015 to March 31, 2020, this amount has been reduced by $2.4 million, consisting of 20% of an $8.4 million principal payment made on milling equipment in March 2015, a $2.2 million principal payment made on electrical transformers in April 2015, and a $1.2 million principal payment made on milling equipment in April 2016, such that the remaining amount due to POS-Minerals is $33.6 million.  If Nevada Moly does not fund its additional capital contribution in order for the LLC to make the required Return of Contributions to POS-Minerals set forth above, POS-Minerals has an election to either make a secured loan to the LLC to fund the Return of Contributions, or receive an additional interest in the LLC estimated to be 5%.  In the latter case, Nevada Moly’s interest in the LLC is subject to dilution by a percentage equal to the ratio of 1.5 times the amount of the unpaid Return of Contributions over the aggregate amount of deemed capital contributions (as determined under the LLC Agreement) of both parties to the LLC (“Dilution Formula”).  At March 31, 2020, the aggregate amount of deemed capital contributions of both parties was $1,090.8 million.

 

Furthermore, the LLC Agreement authorizes POS-Minerals to put/sell its interest in the LLC to Nevada Moly after a change of control of Nevada Moly or the Company, as defined in the LLC Agreement, followed by a failure by us or our successor company to use standard mining industry practice in connection with the development and operation of the Mt. Hope Project as contemplated by the parties for a period of twelve (12) consecutive months.  If POS-Minerals exercises its option to put or sell its interest, Nevada Moly or its transferee or surviving entity would be required to purchase the interest for 120% of POS-Minerals’ total contributions to the LLC, which, if not paid timely, would be subject to 10% interest per annum.

 

Effective January 1, 2015,  Nevada Moly and POS-Minerals signed an amendment to the LLC Agreement under which a separate $36.0 million owed to Nevada Moly, held by the LLC in a reserve account established in December 2012, is being released for the mutual benefit of both members related to the jointly approved Mt. Hope Project expenses through 2021.  In

8

January 2015, the reserve account funded a reimbursement of contributions made by the members during the fourth quarter of 2014, inclusive of $0.7 million to POS-Minerals and $2.7 million to Nevada Moly.  The remaining reserve account funds are now being used to pay ongoing jointly approved expenses of the LLC until the Company obtains full financing for its portion of the Mt. Hope Project construction cost, or until the reserve account is exhausted.  Any remaining funds after financing is obtained will be returned to the Company.  The balance of the reserve account was $3.7 million and $3.4 million at March 31, 2020 and December 31, 2019, respectively, increasing as a result of the sale of non-core assets during the first quarter of 2020.

 

As the cash needs for the development of the Mt. Hope Project are significant, we and/or the LLC will be required to arrange for financing to be combined with funds anticipated to be received from POS-Minerals in order to retain its 20% LLC membership interest.  If we are unsuccessful in obtaining financing, we will not be able to proceed with the development of the Mt. Hope Project.  Additional funding for the Mt. Hope Project would allow us to restart equipment procurement and agreements that were suspended or terminated would be renegotiated under current market terms and conditions, as necessary.  In the event of an extended delay related to availability of the Company’s portion of full financing for the Mt. Hope Project, the Company will continue using its best efforts to work with its LLC joint venture partner POS-Minerals to revise procurement and construction commitments to preserve liquidity, including Mt. Hope Project equipment deposits and pricing structures.  There can be no assurance that additional funding will be obtained.

 

Purchase Commitments

 

We continue to work with our long-lead vendors to manage the timing of contractual payments for milling equipment.  The following table sets forth the LLC’s remaining cash commitments under these equipment contracts (collectively, “Purchase Contracts”) at March 31, 2020 (in millions):

 

 

 

 

 

 

 

    

As of

 

 

 

March 31,

 

Year

 

2020 *

 

2020

 

$

 —

 

2021

 

 

0.6

 

Total

 

$

0.6

 


*All amounts are commitments of the LLC, and as a result of the agreement between Nevada Moly and POS-Minerals are to be funded by the reserve account, now $3.7 million, until such time that the Company obtains financing for its portion of construction costs at the Mt. Hope Project or until the reserve account balance is exhausted, and thereafter are to be funded 80% by Nevada Moly and 20% by POS-Minerals.  POS-Minerals remains obligated to make capital contributions for its 20% portion of equipment payments required by approved budgets of the LLC, and such amounts contributed by the reserve account on behalf of POS-Minerals will reduce, dollar for dollar, the amount of capital contributions that the LLC is required to return to POS-Minerals.

 

If the LLC does not make the payments contractually required under these purchase contracts, it could be subject to claims for breach of contract or to cancellation of the respective purchase contract.  In addition, the LLC may proceed to selectively suspend, cancel or attempt to renegotiate additional purchase contracts, if necessary, to further conserve cash.  If the LLC cancels or breaches any contracts, the LLC will take all appropriate action to minimize any losses, but could be subject to liability under the contracts or applicable law.  The cancellation of certain key contracts could cause a delay in the commencement of operations, and could add to the cost to develop the Company’s interest in the Mt. Hope Project.

 

Through March 31, 2020, the LLC has made deposits and/or final payments of $88.0 million on equipment orders.  Of these deposits, $71.7 million relate to fully fabricated items, primarily milling equipment, for which the LLC has additional contractual commitments of $0.6 million noted in the table above.  The remaining $16.3 million reflects both partially fabricated milling equipment, and non-refundable deposits on mining equipment.  As discussed in Note 11, the mining equipment agreements remain cancellable with no further liability to the LLC.  The underlying value and recoverability of these deposits and our mining properties in our consolidated balance sheets are dependent on the LLC’s ability to fund development activities that would lead to profitable production and positive cash flow from operations, or proceeds from the sale of these assets. There can be no assurance that the LLC will be successful in generating future profitable operations, selling these assets or that the Company will secure additional funding in the future on terms acceptable to us or at all.  Our consolidated financial statements do not include any adjustments relating to recoverability and classification of recorded assets or liabilities.

 

All Mt. Hope Project related funding is payable out of the reserve account until exhausted, the balance of which was $3.7 million and $3.4 million at March 31, 2020 and December 31, 2019, respectively.  Corporate general and administrative expenses and costs associated with the maintenance of the Liberty Project are not covered by the Reserve Account.  Additional potential funding sources include public or private equity offerings or sale of other assets owned by the Company and/or the LLC, although

9

all funds received from sale of LLC assets are owed to the Reserve Account until the March 31, 2020 balance of $0.7 million is repaid as discussed below in Note 11.

 

Agreement with AMER International Group (“AMER”) 

 

Private Placement

 

As announced in April 2015, the Company and AMER entered into a private placement for 40.0 million shares of the Company’s common stock and warrants to purchase 80.0 million shares of the Company’s common stock, priced using the trailing 90-day volume weighted average price (“VWAP”) of $0.50 on April 17, 2015, the date the Investment and Securities Purchase Agreement (“AMER Investment Agreement”) was signed. General Moly received stockholder approval of the transaction at its 2015 Annual Meeting, and of material amendments to the transaction at a special meeting held in December 2017.

 

On November 2, 2015, the Company and AMER entered into an amendment to the AMER Investment Agreement, utilizing a three-tranche investment.  The first tranche of the amended AMER Investment Agreement closed on November 24, 2015 for a $4.0 million private placement representing 13.3 million shares, priced at $0.30 per share, and warrants (“the AMER Warrants”) to purchase 80.0 million shares of common stock at $0.50 per share, which will become exercisable upon availability of an approximately $700.0 million senior secured loan (“Bank Loan”). The funds received from the $4.0 million private placement were divided evenly between general corporate purposes and an expense reimbursement account available to both AMER and the Company to cover anticipated Mt. Hope financing costs and other jointly sourced business development opportunities. In addition, AMER and General Moly entered into a Stockholder Agreement allowing AMER to nominate a director to the General Moly Board of Directors and additional directors following the close of Tranche 3, discussed below, and drawdown of the Bank Loan.  The Stockholder Agreement also governs amer’s acquisition and transfer of General Moly shares.  Prior to closing the first tranche the parties agreed to eliminate certain conditions to closing.  Following the closing, AMER nominated Tong Zhang to serve as a director of the Company, and he was appointed by the Board of Directors on December 3, 2015.  Mr. Zhang was nominated by the Board of Directors to stand for election at the 2018 General Meeting of Stockholders and was elected by the stockholders to serve as a Class II director for a three (3) year term expiring in 2021, subject to re-election.  On July 29, 2019, Mr. Zhang resigned from the Board of Directors.  AMER nominated Mr. Siong Tek (“Terry”) Lee, a Chartered Accountant based in Singapore, to serve the remaining term of AMER’s previous director nominee (Tong Zhang) expiring at the Company’s annual meeting in 2021.  AMER may nominate a second director to the Board so long as its shareholding exceeds 20% of the Company’s shares outstanding. 

 

On October 16, 2017, the Company and AMER announced the closure of the second tranche of the parties’ three-tranche financing agreement.  At the close of the second tranche, General Moly issued 14.6 million shares to AMER, priced at the volume weighted average price (“VWAP”) for the 30-day period ending August 7, 2017 (the date of the parties’ Amendment No. 2 to the AMER Investment Agreement) of $0.41 per share for a private placement of $6.0 million by AMER.  $5.5 million of the equity sale proceeds were available for general corporate purposes, while $0.5 million was held in the expense reimbursement account established at the close of the first tranche to cover costs related to the Mt. Hope Project financing and other jointly sourced business development opportunities.

 

The third tranche of the amended investment agreement was to include a $10.0 million private placement representing 20.0 million shares, priced at $0.50 per share (“Tranche 3”).  Closing of Tranche 3 was conditioned upon the earlier of the reissuance of water permits for the Mt. Hope Project or completion of a joint business opportunity involving use of 10.0 million shares of General Moly stock.

 

The issuance of shares in connection with the third tranche of the AMER Investment Agreement was approved by General Moly stockholders in December 2017 at a Special Meeting of Stockholders.

 

AMER Disputes Obligation to Close Tranche 3 Private Placement Obligation

 

The last closing conditions for Tranche 3 under the AMER Investment Agreement included issuance of water permits for the Mt. Hope Project.  The water permits were issued by the Nevada State Engineer on July 24, 2019.  On July 26, 2019, the Company provided formal notice to AMER that the conditions to closing of Tranche 3 had been satisfied, and that AMER would have two business days (until the close of business on Tuesday, July 30, 2019) to close the transaction.  On July 31, 2019, the Company sent a Notice of Default, as AMER failed to fund and close Tranche 3 by the July 30, 2019 deadline.

 

On August 1, 2019, the Company received a letter from AMER dated July 30, 2019, purporting to terminate the AMER Investment Agreement, referencing its earlier letter received by the Company on July 18, 2019, in which AMER has alleged uncured material adverse effects and alleged breaches of the AMER Investment Agreement by the Company (which include concerns related to US/China relations, concerns regarding the delay in obtaining environmental permits and solvency concerns).  The Company believed that such assertions were inaccurate and wholly without merit under the terms of the AMER Investment

10

Agreement.  Additionally, as AMER disputed its obligation to fund the close of Tranche 3, the Company believed that AMER’s attempted termination of the AMER Investment Agreement was ineffective.  With AMER’s failure to fund Tranche 3, the Company had inadequate cash to continue operations and was forced to evaluate its options, including pursuing asset sales, short-term financing options and, if unsuccessful in obtaining sufficient financing, the possibility of seeking bankruptcy protection. 

 

On August 28, 2019, the Company engaged King & Spalding, an international arbitration and litigation firm, to represent the Company in its dispute against AMER for AMER’s default.  The Company formally notified AMER that a dispute, as defined by the AMER Investment Agreement existed between the parties as a result of AMER’s failure to close Tranche 3.  The notification required that one representative of each of the executive management of the parties be designated and authorized to attempt to settle the Dispute and the representatives were to meet in good faith to resolve the Dispute.  If the designated representatives did not resolve the Dispute within 10 business days after delivery of the Notice, the Dispute was subject to resolution by binding arbitration, pursuant to the AMER Investment Agreement in Hong Kong SAR under the rules of the International Chamber of Commerce.

 

On October 14, 2019, the Company announced that it had entered into an agreement with AMER to extend the dispute negotiation period (“Extension Agreement”).  Under the terms of the Extension Agreement, the Company received $300,000 from AMER in exchange for an extension of the negotiation period to November 15, 2019, on which date the Company’s CEO Bruce Hansen and AMER Chairman Wang Wenyin met to discuss settlement options.  With the payment, AMER shall have the right, at its option, to credit the Extension Fee among the following: (1) credit against a final negotiated settlement; (2) credit against any AMER payment obligation to the Company, pursuant to an arbitration award; or (3) apply the Extension Fee as consideration for the purchase of the Company’s common stock, priced at the 30-day volume weighted average price, as of the date immediately prior to the date that AMER demands delivery of such shares. 

 

On December 9, 2019, the Company and an affiliate of AMER announced the closure of a $4 million private placement at a price of $0.40 per common share of General Moly under a new Securities Purchase Agreement (“SPA”) and amended and restated warrant agreement (“New AMER Warrant”), resolving the Dispute.  Additionally, the parties agreed to a mutual release, terminating the previous AMER Investment Agreement, the prior Warrant, and the Dispute Negotiation Extension Agreement (“Extension Agreement”).  The parties’ previous Stockholder Agreement expired by its terms on November 24, 2019.  In addition to the 10.0 million shares issued by General Moly to AMER in the private placement, AMER also received 1.1 million General Moly common shares priced at $0.27/share, the 30-day volume weighted average price of the Company’s NYSE American-traded shares on December 6, 2019 utilizing the Extension Fee, pursuant to the terms of the Extension Agreement.  Additionally, for every $100 million of sourced Chinese bank lending that Amer has assisted in contributing to a completed $700 million project debt financing, Amer may exercise 12 million warrants issued under the New Amer Warrant at an exercise price of $0.50 per share, up to 80 million warrants. 

 

Supply Agreement

 

Furthermore, upon closing of a minimum of $100 million from AMER’s efforts toward the completion of a Chinese bank $700 million project financing, AMER has the option to enter into a molybdenum supply agreement with General Moly to purchase Mt. Hope Project sourced molybdenum at a small discount to spot pricing when the Mt. Hope Project achieves full commercial production.  The saleable amount of molybdenum to AMER escalates from an aggregate 3 million pounds per year to 20 million pounds per year over the first five years of mine production based on the level of project financing assisted by AMER towards the $700 million project financing. 

 

Exploring Other Potential Joint Opportunities

 

The Company and AMER have jointly evaluated other potential opportunities, ranging from outright acquisitions and privatizations, or significant minority interest investments with a focus on base metal and ferro-alloy prospects, where the Company would benefit from management fees, minority equity interests, or the acquisition of both core and non-core assets.  The Company and AMER have considered but not completed any such transactions to date and we are not currently evaluating potential opportunities with AMER.  From commencement of the AMER Investment Agreement in 2015 to March 31, 2020, the Company and AMER spent approximately $2.5 million from the expense reimbursement account described above in connection with such evaluations.     

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The interim consolidated financial statements (“interim statements”) of the Company are unaudited.  In the opinion of management, all adjustments and disclosures necessary for a fair statement of these interim statements have been included.  All such adjustments are, in the opinion of management, of a normal recurring nature.  The results reported in these interim statements are not necessarily indicative of the results that may be presented for the entire year.  These interim statements should be read in

11

conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (“SEC”) on May 4, 2020.

 

This summary of significant accounting policies is presented to assist in understanding the financial statements.  The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity.  These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) and have been consistently applied in the preparation of the financial statements.

 

Accounting Method

 

Our financial statements are prepared using the accrual basis of accounting in accordance with GAAP.  With the exception of the LLC, all of our subsidiaries are wholly owned.  In February 2008, we entered into the LLC Agreement, which established our ownership interest in the LLC at 80%.  The consolidated financial statements include all of our wholly owned subsidiaries and the LLC.  The POS-Minerals contributions attributable to their 20% interest are shown as Contingently Redeemable Noncontrolling Interest on the Consolidated Balance Sheet.  The net loss attributable to contingently redeemable noncontrolling interest is reflected separately on the Consolidated Statement of Operations and reduces the Contingently Redeemable Noncontrolling Interest on the Consolidated Balance Sheet.  Net losses of the LLC are attributable to the members of the LLC based on their respective ownership percentages in the LLC.  During the three months ended March 31, 2020, the LLC had a $374,000 gain, primarily associated with the sale of non-core assets offset by accretion of its reclamation obligations and care and maintenance costs incurred which do not qualify for capitalization under U.S. GAAP, of which $75,000, was attributed to the Contingently Redeemable Noncontrolling Interest.

 

Contingently Redeemable Noncontrolling Interest (“CRNCI”)

 

Under GAAP, certain noncontrolling interests in consolidated entities meet the definition of mandatorily redeemable financial instruments if the ability to redeem the interest is outside of the control of the consolidating entity.  As described in Note 1 — “Description of Business”, the LLC Agreement permits POS-Minerals the option to put its interest in the LLC to Nevada Moly upon a change of control, as defined in the LLC Agreement, followed by a failure by us to use standard mining industry practice in connection with the development and operation of the Mt. Hope Project as contemplated by the parties for a period of 12 consecutive months.  As such, the CRNCI has continued to be shown as a separate caption between liabilities and equity based on accounting standards which require equity instruments with redemption features that are not solely within the control of the issuer to be classified outside of permanent equity (referred to as mezzanine equity).  The carrying value of the CRNCI has historically included the Return of Contributions, now $33.6 million, that will be returned to POS-Minerals in 2020, unless further extended by the members of the LLC as discussed above.  The expected Return of Contributions to POS-Minerals was carried at redemption value as we believed redemption of this amount was probable.  Effective January 1, 2015, Nevada Moly and POS-Minerals agreed that the Return of Contributions will be due to POS-Minerals on December 31, 2020, unless further extended by the members of the LLC as discussed above.  As a result, we have reclassified the Return of Contributions payable to POS-Minerals from CRNCI to a non-current liability at redemption value, and subsequently reduced it by $2.4 million, consisting of 20% of an $8.4 million principal payment made on milling equipment in March 2015, a $2.2 million principal payment made on electrical transformers in April 2015, and a $1.2 million principal payment made on milling equipment in April 2016, such that the remaining amount due to POS-Minerals is $33.6 million.

 

The remaining carrying value of the CRNCI has not been adjusted to its redemption value as the contingencies that may allow POS-Minerals to require redemption of its noncontrolling interest are not probable of occurring.  Under GAAP, until such time as that contingency has been eliminated and redemption is no longer contingent upon anything other than the passage of time, no adjustment to the CRNCI balance should be made.  Future changes in the redemption value will be recognized immediately as they occur and the Company will adjust the carrying amount of the CRNCI to equal the redemption value at the end of each reporting period.

 

Estimates

 

The process of preparing consolidated financial statements requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses.  Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements.  Accordingly, upon settlement, actual results may differ from estimated amounts.

 

Asset Impairments

 

We evaluate the carrying value of long-lived assets to be held and used, using a fair-value based approach when events and circumstances indicate that the related carrying amount of our assets may not be recoverable.  Significant declines in the overall economic environment, molybdenum and copper prices may be considered as impairment indicators for the purposes of these

12

impairment assessments.  Additionally, failure to secure our mining permits, including our water rights, or revocation of our permits, may be considered as impairment indicators for the purposes of these impairment assessments.  In accordance with U.S. GAAP, the carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flows from such asset is less than its carrying value.  In that event, an impairment charge will be recorded in our Consolidated Statement of Operations and Comprehensive Loss based on the difference between book value and the estimated fair value of the asset computed using discounted future cash flows, or the application of an expected fair value technique in the absence of an observable market price.  Future cash flows include estimates of recoverable quantities to be produced from estimated proven and probable mineral reserves, commodity prices (considering current and historical prices, price trends and related factors), production quantities and capital expenditures, all based on life-of-mine plans and projections.  In estimating future cash flows, assets are grouped at the lowest level for which identifiable cash flows exist that are largely independent of cash flows from other asset groups.  Generally, in estimating future cash flows, all assets are grouped at a particular mine for which there are identifiable cash flows.  Management evaluated the circumstances of the July 30, 2019 AMER default and concluded the default was a triggering event in the third quarter of 2019 which continues to exist at March 31, 2020.  We evaluated and determined the carrying value of the asset groups were recoverable as the probability-weighted undiscounted cash flows exceeded the carrying values for each of our asset groups.  While at March 31, 2020, we have not identified any impairment of our long-lived assets, there can be no assurance that there will not be asset impairments if commodity prices experience a sustained decline and/or if there are significant downward adjustments to estimates of recoverable quantities to be produced from proven and probable mineral reserves or production quantities, and/or upward adjustments to estimated operating costs and capital expenditures, all based on life-of-mine plans and projections.  Additionally, should we be unable to secure additional financing follo, we may be required to modify our cash flow projections which could result in a significant reduction in the valuation of our assets thereby causing an impairment to our assets at that time.

 

Cash and Cash Equivalents and Restricted Cash

 

We consider all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company’s cash equivalent instruments are classified within Level 1 of the fair value hierarchy established by FASB guidance for Fair Value Measurements because they are valued based on quoted market prices in active markets.

 

We consider all restricted cash, inclusive of the reserve account discussed above and reclamation surety bonds, to be long-term. 

 

 

 

 

 

 

 

 

 

    

March 31, 2020

    

December 31, 2019

 

 

(in thousands)

Cash and cash equivalents

 

$

3,055

 

$

4,614

Restricted cash held at EMLLC

 

 

3,684

 

 

3,388

Total cash, cash equivalents and restricted cash shown in the statement of cash flows

 

$

6,739

 

$

8,002

 

As of March 31, 2020, the LLC had $0.3 million in cash deposits associated with reclamation bonds, which are accounted for as restricted cash.  Another $0.1 million in cash collateral is associated with surety bonds at the Liberty Project.  These amounts are considered investments and are not included in cash and cash equivalents for purposes of the Statement of Cash Flows. 

 

Basic and Diluted Net Loss Per Share

 

Net loss per share was computed by dividing the net loss attributable to the Company by the weighted average number of shares outstanding during the period. The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Outstanding awards as of March 31, 2020 and December 31, 2019, respectively, were as follows:

 

 

 

 

 

 

 

 

    

March 31, 2020

    

December 31, 2019

 

Warrants

 

98,013,256

 

98,013,256

 

Unvested Stock Awards

 

2,621,268

 

421,268

 

Stock Appreciation Rights

 

909,837

 

909,837

 

 

These awards were not included in the computation of diluted loss per share for the three months ended March 31, 2020 and December 31, 2019, respectively, because to do so would have been anti-dilutive.  Therefore, basic loss per share is the same as diluted loss per share.

 

13

Mineral Exploration and Development Costs

 

All exploration expenditures are expensed as incurred.  If no economic ore body is discovered, previously capitalized costs are expensed in the period the property is abandoned.  Expenditures to develop new mines, to define further mineralization in existing ore bodies, and to expand the capacity of operating mines, are capitalized and amortized on a units-of-production basis over proven and probable reserves.

 

Should a property be abandoned, its capitalized costs are charged to operations.  The Company charges to the consolidated statement of operations the allocable portion of capitalized costs attributable to properties sold.  Capitalized costs are allocated to properties sold based on the proportion of claims sold to the claims remaining within the project area.

 

Mining Properties, Land and Water Rights

 

Costs of acquiring and developing mining properties, land and water rights are capitalized as appropriate by project area.  Exploration and related costs and costs to maintain mining properties, land and water rights are expensed as incurred while the property is in the exploration and evaluation stage.  Development and related costs and costs to maintain mining properties, land and water rights are capitalized as incurred while the property is in the development stage.  When a property reaches the production stage, the related capitalized costs are amortized using the units-of-production basis over proven and probable reserves.  Mining properties, land and water rights are periodically assessed for impairment of value, and any subsequent losses are charged to operations at the time of impairment.  If a property is abandoned or sold, a gain or loss is recognized and included in the consolidated statement of operations.

 

The Company has capitalized royalty payments made to Mt. Hope Mines, Inc. (“MHMI”) (discussed in Note 11 below) during the development stage.  The amounts will be applied to production royalties owed upon the commencement of production.

 

Depreciation and Amortization

 

Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Property and equipment are depreciated using the following estimated useful lives:

 

 

 

 

 

Field equipment

    

Four to ten years

 

Office furniture, fixtures, and equipment

 

Five to seven years

 

Vehicles

 

Three to five years

 

Leasehold improvements

 

Three years or the term of the lease, whichever is shorter

 

Residential trailers

 

Ten to twenty years

 

Buildings and improvements

 

Ten to twenty seven and one-half years

 

 

Provision for Taxes

 

Income taxes are provided based upon the asset and liability method of accounting.  Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end.  In accordance with authoritative guidance under Accounting Standards Codification (“ASC”) 740, Income Taxes, a valuation allowance is recorded against the deferred tax asset if management does not believe the Company has met the “more likely than not” standard to allow recognition of such an asset.

 

Reclamation and Remediation

 

Expenditures for ongoing compliance with environmental regulations that relate to current operations are expensed or capitalized as appropriate.  Future obligations to retire an asset, including reclamation, site closure, dismantling, remediation and ongoing treatment and monitoring, are recorded as a liability at fair value at the time of construction or development.  The fair value determination is based on estimated future cash flows, the current credit-adjusted risk-free discount rate and an estimated inflation factor.  The value of asset retirement obligations is evaluated on a quarterly basis or as new information becomes available on the expected amounts and timing of cash flows required to discharge the liability.  The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount will be depreciated or amortized over the estimated life of the asset upon the commencement of commercial production.  An accretion cost, representing the increase over time in the present value of the liability, will also be recorded each period as accretion expense.  As reclamation work is performed or liabilities are otherwise settled, the recorded amount of the liability is reduced.  Certain collateral amounts associated with our reclamation obligations are held in investment accounts, for which the fair value is estimated based on Level 1 inputs.

 

14

Stock-based Compensation

 

Stock-based compensation represents the fair value related to stock-based awards granted to members of the Board, officers and employees.  The Company uses the Black-Scholes model to determine the fair value of stock-based awards under authoritative guidance for Stock-Based Compensation.  For stock-based compensation that is earned upon the satisfaction of a service condition, the cost is recognized on a straight-line basis (net of estimated forfeitures) over the requisite vesting period (up to three years).  Awards expire five years from the date of vesting.

 

Further information regarding stock-based compensation can be found in Note 8 — “Equity Incentives.”

 

Warrants

 

The Company has issued warrants in connection with several financing transactions and uses the Black-Scholes model or a lattice to determine the fair value of these transactions based on the features included in each.

 

Leases

 

The Company adopted Accounting Standards Codification (“ASC”) 842, Leases, on January 1, 2019. Changes to the Company’s accounting policy as a result of adoption are discussed below.

The Company determines if a contractual arrangement represents or contains a lease at inception. Operating leases are included in Deposits, prepaids and other Current Assets and Other accrued liabilities in the Consolidated Balance Sheets. No finance leases have been identified to date.

Operating and finance lease right-of-use ("ROU") assets and lease liabilities are recognized at the commencement date based on the present value of the future lease payments over the lease term. When the rate implicit to the lease cannot be readily determined, the Company utilizes its incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is derived from information available at the lease commencement date and represents the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. The ROU asset includes any lease payments made and lease incentives received prior to the commencement date. Operating lease ROU assets also include any cumulative prepaid or accrued rent when the lease payments are uneven throughout the lease term. The ROU assets and lease liabilities may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. 

Recently Adopted Accounting Pronouncements   

 

Fair Value Measurement (Topic 820)

 

In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820).  The update modifies the disclosure requirements on fair value measurements, including amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measures and the narrative description of measurement uncertainty.  The amendments in ASU 2018-13 are effective for public entities for annual reporting periods beginning after December 31, 2019, and for interim periods within that reporting period.  The Company adopted this standard as of January 1, 2020.  The adoption had no effect on our financial statements.

 

NOTE 3 — MINING PROPERTIES, LAND AND WATER RIGHTS

 

We currently have interests in two mining properties that are the primary focus of our operations, the Mt. Hope Project and the Liberty Project.  We also have certain other, non-core, mining properties that are being evaluated for future development or sale.

 

The Mt. Hope Project.  We are currently in the process of developing the Mt. Hope Project, and have recently obtained all permits required for construction. In January 2014, the Company published an updated Technical Report on the Mt. Hope Project using Canadian Instrument NI 43-101 guidelines, which provided data on the viability and expected economics of the project.  In early 2017, we re-examined the Mt. Hope proven and probable mineral reserves and updated the reserve and resource estimates using an $8.40/lb molybdenum (“Mo”) three-year backward average price.  No further adjustments have been required.

The Company has also identified a potential high-grade, copper-silver exploration target along with a significant zinc mineralized area at the Mt. Hope Project site, southeast of the Mt. Hope Project’s molybdenum deposit in central Nevada (the “Cu-Ag Target”).

15

A high-intensity, ground-based Induced Polarization (“IP”) survey completed in February 2018 by Quantec Geoscience indicates a fairly continuous group of high chargeability anomalies that appear aligned with the recently identified Cu-Ag Target. These anomalies lie between 100 feet and 1,000-plus feet from the surface and trend northeast for over 1,000 feet. The IP survey indicates that the anomalies could continue further to the north-northeast and to the south where they appear to dip to the east.

To date the preliminary Cu-Ag Target exploration work was undertaken solely by General Moly. The Company has presented the promising findings to its 20% joint venture partner at the Mt. Hope Project, POS-Minerals. Any mining operation to exploit economic mineralization will require the approval of POS-Minerals.

Geological review of historic logs and core was completed by Mine Mappers, LLC of Tucson, Arizona to update the geologic interpretation of the skarn area.  Mine Mappers reviewed the geologic interpretations in conjunction with the IP results and recommended a 10-hole, 9,400 foot drilling confirmation and exploration program. 

 

In September 2018, the Company commenced a 10 hole drill program on the patented claims at the Mt. Hope Project.  The drilling program is focused on copper-silver-zinc mineralized skarns and designed to confirm and extend the target defined by historical drilling as well as test for extensions of zinc mineralization horizons which were historically mined.  The drill program is was completed in late 2018 and the Company concluded that this minzeralization may have economic potential but requires further drilling and analysis and may be best explored in conjunction with or after the molybdenum project is developed. 

 

Liberty Project.  We continue to evaluate opportunities at the Liberty Project as they arise.  The Liberty Project remains largely in care and maintenance at this time.  In July 2014, the Company published an updated NI 43-101 compliant pre-feasibility study, which more closely examined the use of existing infrastructure and the copper potential of the property. 

 

In February 2017, Liberty Moly entered into a lease agreement with WK Mining Ltd. (“WK”) for the lease of water rights for the purpose of mining and milling.  The term of the lease is six years which WK can extend for an additional four years.  As compensation for the leased water rights, WK has issued $124,000 in common shares to Liberty Moly, consisting of $100,000 at signing of the agreement and shares equal to $12,000 in both its first and second annual installments, and is required to pay an annual fee on the anniversary date of the lease in either cash or WK common shares.  The third installment (due February 2020) was paid in cash.

 

In December, 2019, Liberty Moly, LLC (“Liberty Moly”) entered into a lease agreement with SR Minerals, Inc. (SRM) for the lease of water rights for the purpose of mining and milling.  The term of the lease is five years, after which SRM can extend annually for an additional five years.  As compensation for the leased water rights, SRM has paid $16,000 in cash to Liberty Moly, and is required to pay an annual fee on the anniversary date of the lease in cash.

 

Liberty Moly continues to work with the Nevada Division of Environmental Protection (“NDEP”) to address environmental concerns with some Liberty Project facilities acquired with the property.   We have implemented remedial treatment of the Liberty pit lake and developed and implemented procedures to manage process solutions draining from the pre-existing leach pad, as required by NDEP.  We may be required to treat the pit lake again, and/or revise our systems to manage heap leach solution.  At this time we are working with NDEP to  reasonably estimate the scope and costs of addressing these issues.

 

Other Mining Properties.  We also have mining claims and land purchased prior to 2006 which consist in part of (a) six patented mining claims known as the Chicago-London group, located near the town of Murray in Shoshone County, Idaho and (b) 34 unpatented mining claims in Marion County, Oregon, known as the Detroit property.  The costs associated with these claims and properties are minimal and primarily relate to claim fees and property taxes.  Historically, our efforts at these properties were minimal and consumed no significant financial resources.  The total book value of these properties was approximately $0.1 million and the Company has retained production royalties of 1.5% of all net smelter returns on future production from two undeveloped properties in Skamania County, Washington and Josephine County, Oregon, which were sold in 2012 and 2013, respectively.  The Chicago-London property ((a) above) was sold in January 2020. 

 

16

Summary. The following is a summary of mining properties, land and water rights at March 31, 2020 and December 31, 2019 (in thousands):

 

 

 

 

 

 

 

 

 

 

    

At

    

At

 

 

 

March 31,

 

December 31,

 

 

 

2020

 

2019

 

Mt. Hope Project:

 

 

 

 

 

 

 

Development costs

 

$

179,672

 

$

179,356

 

Mineral, land and water rights

 

 

23,396

 

 

23,423

 

Advance royalties

 

 

33,488

 

 

32,988

 

Total Mt. Hope Project

 

 

236,556

 

 

235,767

 

Total Liberty Project

 

 

8,289

 

 

8,370

 

Other Properties

 

 

0

 

 

0

 

Total

 

$

244,845

 

$

244,137

 

 

Development costs of $179.7 million as of March 31, 2020 include hydrology and drilling costs, expenditures to further the permitting process, capitalized salaries, project engineering costs, and other expenditures required to fully develop the Mt. Hope Project.  Deposits on project property, plant and equipment of $88.0 million as of March 31, 2020 represent ongoing progress payments on equipment orders for the custom-built grinding and milling equipment, related electric mill drives, and other processing equipment that require the longest lead times.

 

NOTE 4 — ASSET RETIREMENT OBLIGATIONS

 

Asset retirement obligations (“ARO”) arise from the acquisition, development, construction and normal operation of mining property, plant and equipment due to government controls that protect the environment, and are primarily related to closure and reclamation of mining properties.  The exact nature of environmental issues and costs, if any, which the Company or the LLC may encounter in the future are subject to change, primarily because of the changing character of environmental requirements that may be enacted by governmental authorities.

 

The following table shows asset retirement obligations for future mine closure and reclamation costs in connection with the Mt. Hope Project and within the boundaries of the Plan of Operations (“PoO”):

 

 

 

 

 

 

 

 

(in thousands)

 

At January 1, 2019

 

$

1,633

 

Accretion Expense

 

 

108

 

Adjustments*

 

 

62

 

At December 31, 2019

 

$

1,803

 

Accretion Expense

 

 

27

 

Adjustments*

 

 

 —

 

At March 31, 2020

 

$

1,830

 


*Includes additions, annual changes to the escalation rate, the market-risk premium rate, or reclamation time periods.

 

The estimated future reclamation costs for the Mt. Hope Project have been discounted using a rate of 8%,  which is the rate that existed at the time the liability was originally measured.  The total inflated and undiscounted estimated reclamation costs associated with current disturbance under the PoO at the Mt. Hope Project were $5.8 million at March 31, 2020, inclusive of $2.6 million for mitigation of sage grouse habitat that would be affected by development of the Mt. Hope Project.  Increases in ARO liabilities resulting from the passage of time are recognized as accretion expense.

 

As of March 31, 2020, the LLC had provided the appropriate regulatory authorities with $2.8 million in reclamation financial guarantees through the posting of surety bonds for reclamation of the Mt. Hope Project as approved in the ROD.  As of March 31, 2020, we had $0.3 million in cash deposits associated with these bonds which are specific to the PoO disturbance and recorded in Restricted cash and investments held for reclamation bonds and are unrelated to the inflated and undiscounted liability referenced above.  The LLC posted an additional $0.3 million as a cash bond with the BLM in April 2019 as a result of a required three-year update to the reclamation bond calculation.

 

The LLC has a smaller liability at the Mt. Hope Project for disturbance associated with exploration drilling which occurred outside the PoO boundaries.  The LLC has not discounted this reclamation liability as the total amount is approximately $0.2 million.

 

17

Total restricted cash for surety bond collateral requirements and other long-term reclamation obligations at the Mt. Hope Project equal $0.6 million.  Another $0.1 million in cash collateral is associated with surety bonds at the Liberty Project.

 

The Company’s Liberty Project is currently in the exploration stage. As the Company is not currently performing any exploration activity at the Liberty Project, the reclamation liability incurred for historical disturbance from previous operations and more recent exploration conducted by the Company of approximately $0.1 million has not been discounted as shown in the table below.

 

 

 

 

 

 

 

 

 

    

Mt. Hope Project

    

 

 

 

 

 

outside PoO

 

 

 

 

 

 

boundary

 

Liberty

 

 

 

(in thousands)

 

At January 1, 2019

 

$

15

 

$

121

 

Adjustments *

 

 

 2

 

 

13

 

At December 31, 2019

 

$

17

 

$

134

 

Adjustments *

 

 

 —

 

 

20

 

At March 31, 2020

 

$

17

 

$

154

 


*Includes reduced / reclaimed disturbance

 

NOTE 5 — CURRENT DEBT

 

In December 2014, the Company sold and issued 85,350 Units of Convertible Notes (the “Notes”) with warrants (the “Notes Warrants”) to qualified buyers pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, of which 23,750 Units were sold and issued to related parties, including several directors and each of our named executive officers. The Convertible Notes were unsecured obligations and were senior to any of the Company’s future secured obligations to the extent of the value of the collateral securing such obligations.

 

The transaction value of $8.5 million was allocated between debt for the Convertible Notes and equity for the Notes Warrants based on the relative fair value of the two instruments.   This resulted in recording $0.8 million in Additional Paid In Capital for the relative fair value of the Warrants and $7.7 million as Convertible Notes.  The Company received net proceeds from the sale of the Convertible Notes of approximately $8.0 million, after deducting offering expenses of approximately $0.5 million, which was allocated between debt and equity. As a result, the Company recognized $0.4 million as Debt Issuance Costs to be amortized over the expected redemption period, and $0.1 million recognized as a reduction to Additional Paid in Capital. Net proceeds from the sale were used to fund ongoing operations.

 

The Convertible Notes bore interest at a rate of 10.0% per annum, payable in cash quarterly in arrears on each March 31, June 30, September 30, and December 31. The Convertible Notes mature on December 26, 2019 unless earlier redeemed, repurchased or converted.  Ninety-five percent of the outstanding maturity balance was converted on December 26, 2019, as described below.  The Convertible Notes were redeemable by the Company for cash, either in whole or in part, at any time, in exchange for the sum of (i) a cash payment equal to the unpaid principal plus all accrued but unpaid interest through the date of redemption and (ii) the present value of the remaining scheduled interest payments discounted to the maturity date at the annual percentage yield on U.S. Treasury securities with maturity similar to the notes plus 25 basis points (the “Optional Redemption”). The Convertible Notes were mandatorily redeemable at par plus the present value of remaining coupons upon (i) the availability of cash from a financing for Mt. Hope and (ii) any other debt financing by the Company. In addition, 50% of any proceeds from the sale of assets cumulatively exceeding $250,000 were to be used to prepay the Convertible Notes at par plus the present value of remaining coupons (the “Mandatory Redemption”).

 

The Convertible Notes were convertible at any time in an amount equal to 80% of the greater of (i) the average VWAP for the 30 Business Day period ending on the Business Day prior to the date of the conversion, or (ii) the average VWAP for the 30 Business Day period ending on the original issuance date of the note.  Each Convertible Note could convert into a maximum of 100 shares per note, resulting in the issuance of 8,535,000 shares, or 9.3% of shares outstanding as of December 31, 2014 (the “Conversion Option”). General Moly’s executive management team and board of directors who participated in the offering were restricted from converting at a price less than $0.32, the most recent closing price at the time that the Notes were issued.

 

If the Company underwent a “fundamental change”, the Convertible Notes were to be redeemed for cash at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased plus accrued and unpaid interest, including contingent interest and additional amounts, if any. Examples of a “fundamental change” include the reclassification of the common stock, consolidation or merger of the Company with another entity or sale of all or substantially all of the Company’s assets.

 

18

During the year ended December 31, 2015, certain holders of the Convertible Notes, including both directors and named executive officers of the Company, elected to convert notes totaling $2.6 million, reducing the principal balance of the Convertible Notes to $5.9 million. Upon conversion, the Convertible Notes holders received 2,625,000 shares of common stock, at conversion prices ranging from $0.3462 to $0.5485, and were issued non-convertible Senior Promissory Notes (“Promissory Notes”) of $1.3 million, pursuant to the terms of the share maximum provision of the Conversion Option.  The Promissory Notes had identical terms to the Convertible Notes, with the exception that the holder no longer had a Conversion Option. Accordingly, the Promissory Notes bore interest equal to 10.0% per annum, payable in cash quarterly in arrears on each March 31, June 30, September 30, and December 31 and mature on December 26, 2019.  The conversions resulted in a $0.2 million annual reduction in interest payments made by the Company in the servicing of the Notes. 

 

On December 27, 2019, the Company closed the Exchange Offer, upon the terms and subject to the conditions set forth in the confidential Offer to Exchange and Subscription Offer dated November 27, 2019. 

Eligible holders tendered Old Notes with an original principal amount of $6.89 million of the total outstanding of $7.25 million, representing 95% of the outstanding, in the Exchange Offer.  For each $1 principal amount of, and accrued and unpaid interest on, Old Notes tendered and accepted by the Company, one unit consisting of $1 principal amount of Exchange Notes and one New Warrant was settled.  The Exchange Notes bear interest at an initial rate of 12% per annum. Interest on the Exchange Notes will be paid on March 31, June 30, September 30 and December 31 of each year, commencing on March 31, 2020. The Exchange Notes will mature on December 26, 2022, unless otherwise earlier redeemed.  Each New Warrant is exercisable for one share of Common Stock at a price of $0.35 per share for a period of three years.  One New Warrant was issued for each dollar of original principal amount of, and accrued and unpaid interest on, Old Notes exchanged for Exchange Notes for a total of 7.2 million New Warrants issued.

The Company paid at maturity the unpaid principal and all accrued and unpaid interest in the approximate amount of $368,000 to those eligible holders that elected not to participate in the Exchange Offer.  The original principal amount of Old Notes paid at maturity represented approximately 5% of the total outstanding.  The maturity date was December 26, 2019.    The Notes Warrants issued in connection with the Old Notes expired by their terms on December 26, 2019.

The Company may redeem the Exchange Notes for cash, either in whole or in part, at any time, in exchange for the sum of (i) 101% of the amount of unpaid principal and (ii) all accrued but unpaid interest through the date of redemption.   The Exchange Notes are mandatorily redeemable (i) upon obtaining debt or equity financing sufficient to cover the construction of Mt. Hope and (ii) upon a “fundamental change” such as a reclassification of the common stock, consolidation or merger of the Company with another entity or sale of all or substantially all of the Company’s assets.  In addition, 50% of the proceeds exceeding a specified threshold amount of approximately $6.3 million from a financing in which the Company issues debt securities senior to the Exchange Notes will be used to redeem Exchange Notes.  In all cases of mandatory redemption, the redemption amount is equal to the sum of (i) the unpaid principal plus all accrued but unpaid interest through the date of redemption and (ii) the present value of the remaining scheduled interest payments discounted to maturity date at the annual percentage yield on U.S. Treasury securities with maturity similar to the Exchange Notes plus 25 basis points. 

The Company accounted for the Exchange Offer as an extinguishment of the Old Notes and recorded a gain on extinguishment of $0.1 million.  The Exchange Notes and the Exchange Warrants were recorded at fair value at December 27, 2019 of $6.8 million and $0.3 million, respectively.   The Company incurred $0.2 million of offering expenses related to the Exchange Offer which was allocated between debt and equity.  As a result, the Company recognized $0.2 million as Debt Issuance Costs to be amortized over the term of the Exchange Notes and recognized $8,000 as a reduction of Additional Paid In Capital.

 

New 13% Senior Promissory Notes due December 2022

In addition to the Exchange Offer, certain Participating Holders also elected to participate in the accompanying Subscription Offer to purchase 13,355 units for $100 each, consisting of its newly issued Supplemental Notes and accompanying Warrant, including participation by the largest Old Noteholder investor, as well as the Company’s CEO, Bruce Hansen.  One Warrant was also issued for each dollar invested in the Supplemental Notes.  The New Warrants have an exercise price of $0.35 per share and have a three-year term.  The Participating Holders increased their respective note investment by approximately 20% as additional consideration for the Supplemental Notes, resulting in approximately $1.34 million of new capital to the Company.  The supplemental notes are redeemable at any time at the Company’s option, and must be redeemed by the Company under certain circumstances.  The Company has agreed not to issue, assume or guarantee any indebtedness that is senior to or pari passu with the Supplemental Notes, provided, however, that the Company may issue no more than $15 million of additional debt securities that rank pari passu with the Supplemental Notes. 

19

The transaction value of $1.3 million was allocated between debt for the Supplemental Notes and equity for the accompanying Warrants based on their relative fair value.   This resulted in recording $47,000 in Additional Paid in Capital for the Warrants and the remainder as Supplemental Notes.    The Company incurred $40,000 of offering expenses related to the Subscription Offer which was allocated between debt and equity.  As a result, the Company recognized $38,000 as Debt Issuance Costs to be amortized over the term of the Supplemental Notes and recognized $2,000 as a reduction to Additional Paid in Capital.   

The Supplemental Notes bear interest at a rate of 13.0% per annum, payable in cash quarterly in arrears on each March 31, June 30, September 30, and December 31.  The Supplemental Notes mature December 26, 2022 unless earlier redeemed.  The Company may redeem the Supplemental Notes for cash, either in whole or in part, at any time, in exchange for the sum of (i) 101% of the amount of unpaid principal and (ii) all accrued but unpaid interest through the date of redemption.   The Supplemental Notes are mandatorily redeemable (i) upon obtaining debt or equity financing sufficient to cover the construction of Mt. Hope and (ii) upon a “fundamental change” such as a reclassification of the common stock, consolidation or merger of the Company with another entity or sale of all or substantially all of the Company’s assets.   In either case, the mandatory redemption amount is equal to the sum of (i) the unpaid principal plus all accrued but unpaid interest through the date of redemption and (ii) the present value of the remaining scheduled interest payments discounted to maturity date at the annual percentage yield on U.S. Treasury securities with maturity similar to the Supplemental Notes plus 25 basis points.

Embedded Derivatives 

 

Based on the redemption and conversion features discussed above, the Company determined that there were embedded derivatives that require bifurcation from the debt instrument and should be accounted for under ASC 815. Embedded derivatives are separated from the host contract, the Convertible Notes, and carried at fair value when: (a) the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract; and (b) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument. The Company has concluded that the Mandatory Redemption and Conversion Option features embedded within the Convertible Notes meet these criteria and, as such, must be valued separate and apart from the Convertible Notes as one embedded derivative and recorded at fair value each reporting period (the “Embedded Derivatives”).

 

A probability-weighted calculation was utilized to estimate the fair value of the Mandatory Redemption. 

 

The Company used a binomial lattice model in order to estimate the fair value of the Conversion Option in the Convertible Notes. A binomial lattice model generates two probable outcomes, arising at each point in time, starting from the date of valuation until the maturity date. A lattice was initially used to determine if the Convertible Notes would be converted or held at each decision point. Within the lattice model, the Company assumes that the Convertible Notes will be converted early if the conversion value is greater than the holding value.

 

As of March 31, 2020 and December 31, 2019, the carrying value of the Exchange Notes, absent the embedded derivative, was $6.3 and $6.2 million, respectively, inclusive of an unamortized debt discount of $1.0 and $1.1 million.  The fair value of the Exchange Notes was $5.8 and $6.2 million at March 31, 2020 and December 31, 2019.  As of March 31, 2020 and December 31, 2019, the carrying value of the Supplemental Notes, absent the embedded derivative, was $1.2 and $1.2 million inclusive of an unamortized debt discount of $0.2 and $0.2 million, respectively.  The fair value of the Supplemental Notes was $1.1 and $1.2 million at March 31, 2020 and December 31, 2019. 

 

The changes in the estimated fair value of the embedded derivatives during the year ended December 31, 2019 resulted in a loss of $14,150.  The embedded derivatives in the Exchange Notes and the Supplemental Notes had a fair value of $1.0 million and $0.2 million, respectively, at March 31, 2020.  The embedded derivatives in the Exchange Notes and the Supplemental Notes had a fair value of $0.6 million and $0.1 million, respectively, at December 31, 2019.  Gain or loss on embedded derivatives is recognized as Interest Expense in the Statement of Operations.

 

The Company has estimated the fair value of the Convertible Notes, Promissory Notes, Exchange Notes, Supplement Notes, and embedded derivatives based on Level 3 inputs. Changes in certain inputs into the valuation models can have a significant impact on changes in the estimated fair value. For example, the estimated fair value of the embedded derivatives will generally decrease with: (1) a decline in the stock price; (2) increases in the estimated stock volatility; and (3) an increase in the estimated credit spread.

 

The following inputs were utilized to measure the fair value of the Notes and embedded derivatives: (i) price of the Company’s common stock; (ii) Conversion Rate (as defined in the Convertible Note); (iii) Conversion Price (as defined in the Convertible Notes); (iv) maturity date; (v) risk-free interest rate; (vi) estimated stock volatility; (vii) estimated credit spread for the Company; (viii) default intensity; and (ix) recovery rate.

20

 

The following tables set forth the inputs to the models that were used to value the embedded derivatives:

 

 

 

 

 

 

 

 

 

    

March 31, 2020

    

December 31, 2019

 

Stock Price

 

0.16

 

$

0.24

 

Exercise Price

 

0.50

 

 

0.50

 

Expected Term

 

7.8 years

 

 

7.8 years

 

Stock Volatility

 

40.0

%  

 

40.0

%  

Risk-Free Interest Rate

 

0.6

%  

 

1.8

%  

 

 

 

 

 

 

 

Type of Event

    

Expected Date

    

Probability of Event

 

Mandatory Redemption

 

October 17, 2019

 

10%

 

Conversion Option

 

March 31, 2019

 

0%

 

Note Reaches Maturity

 

December 31, 2019

 

90%

 

 

 

The following assumptions were utilized to measure the fair value of the Exchange Notes, the Supplemental Notes, and the embedded derivatives at March 31, 2020 and December 31, 2019: (i) estimated market yield; and (ii) estimated probabilities of mandatory redemption.

 

 

 

NOTE 6 — COMMON STOCK UNITS, COMMON STOCK AND COMMON STOCK WARRANTS

 

During the three months ended March 31, 2020, we issued 369,000 shares of common stock pursuant to stock awards under the 2006 Equity Incentive Plan. 

 

During the year ended December 31, 2019, 1,544,926 shares of common stock were issued pursuant to stock awards under the 2006 Equity Incentive Plan.

 

We currently have 98,013,256 warrants outstanding at an exercise price between $0.35 and $5.00 per share. 

 

On May 5, 2020, the Company filed a prospectus supplement in both Canada and the United States to its U.S. base shelf prospectus and U.S. registration statement on Form S-3 which enabled the Company, at its discretion from time to time, to sell up to $20 million worth of common shares by way of an at-the-market offering.  The S-3 has not been declared effective by the SEC as of May 9, 2020. 

 

On March 12, 2020, the Company was advised by the NYSE American that the price deficiency had not been cured by the end of the six-month period, but that the NYSE American has granted the Company additional time until its 2020 Annual Meeting of Stockholders to implement a reverse stock split.  The Company plans to seek shareholder approval of a reverse stock split proposal at its 2020 Annual Meeting of Stockholders.  In the interim, the Company’s common stock remains listed on the NYSE American, under the trading symbol “GMO”, subject to the Company’s compliance with other continued listing requirements and subject to the trading price remaining above a required $0.06 minimum per share.  The NYSE American has added the designation of “.BC” to indicate that the Company is below compliance with the listing standards set forth in the Company Guide.

 

On October 17, 2018, the Company announced an underwritten public offering of 9,151,000 units at a price of $0.25 per share, with each unit consisting of one share of common stock accompanied by one warrant exercisable for one share of common stock immediately upon closing at a price of $0.35 per share.  The offering provided net proceeds of approximately $1.9 million after underwriting commissions and expenses.  Mr. Bruce Hansen, Chief Executive Officer of the Company and a related party, participated in the offering for a total of $0.5 million.  The Company used the proceeds for general corporate purposes, including the ongoing preliminary drilling program for the exploration of zinc, copper and silver mineralization at the southeast area of the Mt. Hope Project.

 

On December 9, 2019, the Company and an affiliate of AMER announced the closure of a $4 million private placement at a price of $0.40 per common share of General Moly under a new Securities Purchase Agreement (“SPA”) and amended and restated warrant agreement for the purchase of up to 80 million shares of common stock at $0.50 per share (“New AMER Warrant”), resolving the Dispute.  Additionally, the parties agreed to a mutual release, terminating the previous AMER Investment Agreement, the prior Warrant, and the Dispute Negotiation Extension Agreement (“Extension Agreement”).  These warrants are not indexed to the Company’s own stock.  Therefore, these warrants are classified as a liability and subsequently measured at fair value with changes in fair value recorded as other income/expense in the Statements of Operations.   The Company uses a Monte Carlo Simulation to determine the fair value of the warrants at the end of each reporting period based on the number of warrants

21

expected to vest.  At March 31, 2020 and December 31, 2019, the warrants had a fair value of $0.4 million and $1.1 million, respectively, resulting in a non-cash gain of $0.7 million recorded as other income in the Statement of Operations.  The following inputs to the model were used at March 31, 2020 and December 31, 2019:

 

 

 

 

 

 

 

 

 

    

March 31, 2020

    

December 31, 2019

 

Stock Price

 

0.16

 

$

0.24

 

Exercise Price

 

0.50

 

 

0.50

 

Expected Term

 

7.8 years

 

 

7.8 years

 

Stock Volatility

 

40.0

%  

 

40.0

%  

Risk-Free Interest Rate

 

0.6

%  

 

1.8

%  

 

On December 27, 2019, the Company issued warrants to purchase 8,556,456 shares of common stock in connection with the exchange of its senior notes as discussed above at an exercise price of $0.35 with a three-year term.  These warrants are equity-classified.  The Company used a Black-Scholes model to determine the fair value of the warrants at the date of issuance using the following inputs to the model:

 

 

 

 

 

 

 

    

December 27, 2019

 

Stock Price

 

$

0.23

 

Exercise Price

 

$

0.35

 

Expected Term

 

 

3.0 years

 

Stock Volatility

 

 

40.0

%  

Risk-Free Interest Rate

 

 

1.6

%  

 

Of the warrants outstanding at March 31, 2020, 8.6 million are exercisable at $0.35 per share at any time from December 27, 2019 through their expiration on December 26, 2022, 1.0 million are exercisable at $5.00 per share once General Moly has received financing necessary for the commencement of commercial production at the Mt. Hope Project and will expire one year thereafter, and the 80.0 million shares of the AMER Warrant will become exercisable in increments of 12 million shares for each $100 million in Bank Loan financing AMER assists in arranging.

 

Pursuant to our amended Certificate of Incorporation, approved by the stockholders at the general meeting of June 30, 2015, we are authorized to issue 650.0 million shares of $0.001 par value common stock.  All shares have equal voting rights, are non-assessable and have one vote per share.  Voting rights are not cumulative and therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company. 

 

NOTE 7 — REDEEMABLE PREFERRED STOCK

 

Pursuant to our Certificate of Incorporation we are authorized to issue 10,000,000 shares of $0.001 per share par value preferred stock, of which 55,000 shares are designated as Series A Preferred Stock Shares and 5,000 are designated as Series B Preferred Stock Shares as of March 31, 2020.  The authorized but unissued shares of preferred stock may be issued in designated series from time to time by one or more resolutions adopted by the Board.  The Board has the authority to determine the preferences, limitations and relative rights of each series of preferred stock. 

 

During the year ended December 31, 2019, the Company issued 14,000 shares of Series A Preferred in a series of private placement agreements.  The Series A Preferred Shares were priced at $100.00/ share and are convertible at any time at the holder’s discretion into common shares whereby one preferred share converts at a price of $0.27/common share to 370.37 common shares. The conversion price was set at the closing price of the Company’s common stock on March 12, 2019, which was the day before announcement of the private placement. Upon maturity or full repayment of the Senior Convertible Notes and Promissory Notes currently outstanding, there will be mandatory redemption of the preferred shares in exchange for equivalent cash for the principal invested, plus any accrued and unpaid dividends.  The holders of the Series A Preferred Shares are entitled to receive, when and if declared by the Board of Directors and in preference to the common stock, cumulative cash or in-kind dividends at a rate per annum of 5% of the original issue price.   In the event of a liquidation, dissolution, or winding up of the Company, the proceeds would be distributed first to the holders of Series A Preferred Shares prior to any distributions to holders of other stock in an amount per share equal to the original issue price plus any declared but unpaid dividends.  The holders of Series A Preferred Shares are entitled to vote, together with the holders of common stock, as if the Series A Preferred Shares had been converted to common stock on all matters submitted to stockholders for vote.  In addition, the Series A Preferred Shares contains certain protective rights that require the vote or consent of the holders of at least a majority of the shares of Series A Preferred Shares. 

 

Of the 14,000 shares issued during the year ended December 31, 2019, 5,000 shares were issued to MHMI.  On May 29, 2019, MHMI assigned their interest in 4,500 of the shares to various investors in their entity.  MHMI retained 500 shares.  In addition to the Series A Convertible Preferred Shares terms described in Note 1 above, MHMI and their investors had a one-time

22

right to require the Company to redeem all or a portion of the Series A Convertible Preferred Shares upon the receipt of a minimum of $5,000,000 from the close of Tranche 3 of the amended AMER Investment Agreement.  MHMI and their investors converted all of their preferred shares to 1,851,844 common shares during the fourth quarter of 2019.

 

As the Series A Preferred Shares are redeemable upon maturity or full repayment of the Senior Convertible Notes and Promissory Notes, it has been classified as mezzanine equity in our Consolidated Balance Sheets.  The Company recognizes change in the redemption value as they occur by adjusting the carrying amount of the mezzanine equity at each reporting date.  The change in the redemption value of the Series A due to accrued and unpaid dividends since its issuance is insignificant.

 

On August 2, 2019, the Company filed a Certificate of Designation of Series B Preferred Stock with the Delaware Secretary of State, designating 5,000 shares of preferred stock the Series B Convertible Preferred Shares.  On August 5, 2019, the Company executed the Series B Purchase Agreement with the Investors.  Pursuant to the Series B Purchase Agreement, the Investors agreed to purchase up to $400,000 of Series B Convertible Preferred Shares.  This transaction closed on August 7, 2019. 

The Series B Convertible Preferred Shares were issued at a price of $100.00 per share, and each Series B Convertible Preferred Share will be convertible at any time at the holder’s discretion into 500 shares of common stock of the Company.  The Series B Convertible Preferred Shares carry a 5% annual dividend, which may be paid, in the Company’s sole discretion, in cash, additional shares of Series B Convertible Preferred Shares or a combination thereof.  The Series B Convertible Preferred Shares, like the Series A Convertible Preferred Shares, are mandatorily redeemable at such time that the Company’s $7.2 million Convertible Note debt currently outstanding become due and payable in accordance with their terms, as such terms may be modified from time to time.

On March 27, 2020, the Company filed Certificates of Amendment to the Certificates of Designation for the Series A and B Convertible Preferred Stock clarifying that the private exchange offer completed by the Company in December 2019, constituted a modification of the Old Notes for purposes of the mandatory redemption provisions of the Series A and B Preferred Shares.  Accordingly, the Series A and B Preferred Shares are mandatorily redeemable on such date as a majority of the then-outstanding principal amount of the Exchange Notes become due and payable in accordance with their terms (as may be altered by modification, amendment, exchange or otherwise, from time to time).

 

NOTE 8 — EQUITY INCENTIVES

 

In 2006, the Board and shareholders of the Company approved the 2006 Equity Incentive Plan (“2006 Plan”), and in May 2010, our shareholders approved an amendment and restatement of the 2006 Plan increasing the number of shares that may be issued under the plan by 4,500,000 shares to 9,600,000 shares and extend the expiration date of the 2006 Plan to May 2020, as well as making other technical changes related to tax law and accounting rule changes, and to make administrative clarifying changes.  In June 2016, our shareholders approved an additional amendment to the 2006 Plan increasing the number of shares that may be issued under the plan by 5,000,000 shares to 14,600,000 shares.  In June 2019, our shareholders approved an amendment and restatement of the 2006 Plan increasing the number of shares that may be issued under the plan by 6,500,000 shares to 21,100,000 shares.  The 2006 Plan authorizes the Board, or a committee of the Board, to issue or transfer up to an aggregate of 21,100,000 shares of common stock, of which 7,855,920 remain available for issuance as of March 31, 2020.  Awards under the 2006 Plan may include incentive stock options, non-statutory stock options, restricted stock units, restricted stock awards, and stock appreciation rights (“SARs”).  At the option of the Board, SARs may be settled with cash, shares, or a combination of cash and shares.  The Company settles the exercise of other stock-based compensation with newly issued common shares.

 

Stock-based compensation cost is estimated at the grant date based on the award’s fair value as calculated by the Black-Scholes option pricing model and is recognized as compensation ratably on a straight-line basis over the requisite vesting/service period.  As of March 31, 2020, there was $0.4 million of total unrecognized compensation cost related to share-based compensation arrangements, which is expected to be recognized over a weighted-average period of 1.4 years.

 

Stock Options and Stock Appreciation Rights

 

All stock options and SARs are approved by the Board prior to or on the date of grant.  Stock options and SARs are granted at an exercise price equal to or greater than the Company’s closing stock price on the date of grant.  Both award types vest over a period of zero to three years with a contractual term of five years after vesting.  The Company estimates the fair value of stock options and SARs using the Black-Scholes valuation model.  Key inputs and assumptions used to estimate the fair value of stock options and SARs include the grant price of the award, expected option term, volatility of the Company’s stock, the risk-free rate and the Company’s dividend yield.

 

23

At March 31, 2020, the outstanding and exercisable (fully vested) SARs had an aggregate intrinsic value of nil and had a weighted-average remaining contractual term of 1.1  years.  No SARs were exercised during the three months ended March 31, 2020.

 

Restricted Stock Units and Stock Awards

 

Grants of restricted stock units and stock awards (“Stock Awards”) have been granted as performance based awards, earned over a required service period, or to Board members and the Company Secretary without any service requirement.  Performance based grants are recognized as compensation based on the probable outcome of achieving the performance condition.  Stock Awards issued to members of the Board of Directors and the Company Secretary that are fully vested at the time of issuance are recognized as compensation upon grant of the award.

 

The compensation expense recognized by the Company for Stock Awards is based on the closing market price of the Company’s common stock on the date of grant.  For the three months ended March 31, 2020, the weighted-average grant date fair value for Stock Awards was $0.24.  The total fair value of stock awards vested during the three months ended March 31, 2020 is $0.1 million.

 

Summary of Equity Incentive Awards

 

The following table summarizes activity under the Plans during the three months ended March 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SARs

 

Stock Awards

 

 

    

Weighted

    

Number

    

Weighted

    

 

 

 

 

Average

 

of Shares

 

Average

 

 

 

 

 

Strike