U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q/A

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

For the quarterly period ended September 30, 2016

OR

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

For the transition period from _______ to _______

Commission file number 000-14319

STANDARD METALS PROCESSING, INC.

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

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

611 Walnut Street, Gadsden, Alabama 35901

(Address of Principal Executive Offices)

888-960-7347

(Issuer’s Telephone Number, Including Area Code)

N/A

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

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

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

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

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

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

As of December 13, 2016, there were 117,955,003 shares of the Registrant’s common stock, par value $.001, outstanding.

EXPLANATORY NOTE

This 10-Q/A is being filed solely to include the XBRL formatted components of this quarterly statement.

STANDARD METALS PROCESSING, INC.

FORM 10-Q

TABLE OF CONTENTS

September 30, 2016

		Page
PART I
Item 1.	Financial Statements	4
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operation	19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24
Item 4.	Controls and Procedures	24
PART II
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	25

2 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains certain statements which are forward-looking in nature and are based on the current beliefs of our management as well as assumptions made by and information currently available to management, including statements related to the uncertainty of the quantity or quality of minerals in our tailings, the fluctuations in the market price of such reserves, general trends in our operations or financial results, plans, expectations, estimates and beliefs. In addition, when used in this Form 10-Q, the words “may,” “could,” “should,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “predict” and similar expressions and their variants, as they relate to us or our management, may identify forward-looking statements. These statements reflect our judgment as of the date of this Form 10-Q with respect to future events, the outcome of which is subject to risks. We have attempted to identify, in context, certain of the factors that we believe may cause actual future experience and results to differ materially from our current expectations, which may have a significant impact on our business, operating results, financial condition or your investment in our common stock, as described in Part II, Item 1A entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015.

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

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

3 

STANDARD METALS PROCESSING, INC.

Consolidated Balance Sheet              

	September 30,			December 31,
	2016			2015
	(unaudited)			(audited)
Assets
Current assets:
Cash	$	1,035		$	1,747
Prepaid expenses		42,274			30,037
Assets held for Sale		12,000			68,500
Total current assets		55,309			100,284
Shea Mining and Milling Assets		2,108,300			2,108,300
Property, plant and equipment:
Machinery and equipment		21,000			21,000
Construction in progress		1,775,224			1,775,224
		1,796,224			1,796,224
Accumulated depreciation		(21,000	)		(21,000	)
Net property, plant and equipment		1,775,224			1,775,224
Total Assets	$	3,938,833		$	3,983,808
Liabilities and Shareholders’ Equity (Deficit)
Current liabilities:
Senior secured convertible promissory note payable, related party	$	2,229,187		$	2,229,187
Promissory notes payable - related party, net of debt discount of $0 Septebmer 30, 2016 and $11,577 December 31, 2015		477,500			465,923
Convertible notes payable		175,000			175,000
Accrual for settlement of lawsuits		2,581,000			2,658,000
Due to Wits Basin Precious Minerals Inc.		16,616			16,616
Accounts payable		2,170,285			2,053,376
Accrued interest - Related party $598,393 and $478,222 at September 30,2016 and December 31, 2015		657,818			530,103
Accrued expenses		870,100			907,922
Accounts payable to related party		1,000			1,874
Total current liabilities		9,178,506			9,038,001
Long-term debt
Convertible Notes payable, net of $35,068 discount		24,932			-
Commitments and Contingencies (Note 9)
Preferred stock, 50,000,000 shares authorized:
Series A, $.001 par value, 10,000,000 and 10,000,000 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively		10,000,000			10,000,000
Shareholders’ equity (deficit):
Series B preferred stock, no shares issued and outstanding		-			-
Common stock, $0.001 par value, 500,000,000 shares authorized: 117,955,003 issued and 112,955,003 outstanding  at September 30, 2016 and 104,075,936 shares issued and outstanding at December 31, 2015, respectively		112,955			104,076
Additional paid-in capital		86,897,286			86,438,911
Common stock subscribed		20,000			40,000
Accumulated deficit		(102,294,846	)		(101,637,180	)
Total shareholders’ equity (deficit)		(15,264,605	)		(15,054,193	)
Total Liabilities and Shareholders’ Equity (Deficit)	$	3,938,833		$	3,983,808

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

4 

STANDARD METALS PROCESSING, INC.

Consolidated Statements of Operations
(Unaudited)

	Three months ended						Nine months ended
	September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015
Revenues	$	-		$	-		$	-		$	-
Operating expenses:
General and administrative		59,502			895,510			276,161			13,649,311
Impairment of Shea Mining and Milling assets		-			-			-			33,051,127
Impairment of Machinery and Equipment		-			809,675			-			809,675
Depreciation and amortization		-			-			-			3,387
Judgement on legal actions		-			-			-			2,257,000
Total operating expenses		59,502			1,705,185			276,161			49,770,500
Loss from operations		(59,502	)		(1,705,185	)		(276,161	)		(49,770,500	)
Other income (expense):
Other income		1,825			1,826			5,475			6,084
Loss on extinguishment of debt		-			(150,000	)		-			(150,000	)
Interest expense		(62,267	)		(78,096	)		(210,471	)		(196,253	)
Amortization of debt discount		(139,008	)		(130,202	)		(176,509	)		(207,643	)
Change in accrued expense mark-to-market		-			35,532			-			35,532
Total other income (expense)		(199,450	)		(320,940	)		(381,505	)		(512,280	)
Loss before income tax provision		(258,952	)		(2,026,125	)		(657,666	)		(50,282,780	)
Income tax provision		-			-			-			-
Net loss	$	(258,952	)	$	(2,026,125	)	$	(657,666	)	$	(50,282,780	)
Basic net loss per common share	$	(0.00	)	$	(0.02	)	$	(0.01	)	$	(0.48	)
Basic weighted average common shares outstanding		109,322,413			104,066,697			108,942,851			103,818,042

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

5 

STANDARD METALS PROCESSING, INC.

Consolidated Statements of Cash Flows
(Unaudited)

	For the Nine months ended
	September 30, 2016			September 30, 2015
OPERATING ACTIVITIES:
Net loss	$	(657,666	)	$	(50,282,780	)
Adjustments to reconcile net loss to cash flows used in operating activities:
Depreciation and amortization		-			3,387
Amortization of debt issuance costs		176,509			207,656
Compensation expense related to issuance of common stock, warrants and stock option grants		-			12,242,135
Impairment of Shea Mining and Milling assets		-			33,051,127
Impairment on machinery & equipment		-			809,675
Judgement on legal actions		-			2,257,000
Change in accrued expense mark-to-market		-			(35,532	)
Changes in operating assets and liabilities:
Prepaid expenses		(12,237	)		13,695
Accounts payable		109,594			500,325
Accrued expenses		94,812			475,094
Accounts payable including accrued interest related party		(874	)		(4,883	)
Accrual for settlement of lawsuits		(7,350	)		150,000
Net cash used in operating activities		(297,212	)		(613,101	)
INVESTING ACTIVITIES:
Payment for construction in progress		-			(43,528	)
Proceeds from the sale of assets		56,500			-
Net cash provided by (used in) investing activities		56,500			(43,528	)
FINANCING ACTIVITIES:
Cash proceeds from issuance of common stock, warrants and exercise of stock options and warrants, net					124,600
Cash received on common stock subscribed		20,000			-
Cash received from issuance of convertible debt		220,000			-
Cash proceeds from debt		-			54,590
Proceeds from Notes Payble from related party		-			448,000
Net cash provided by financing activities		240,000			627,190
DECREASE IN CASH AND CASH EQUIVALENTS		(712	)		(29,439	)
CASH AND CASH EQUIVALENTS, beginning of period		1,747			36,095
CASH AND CASH EQUIVALENTS, end of period	$	1,035		$	6,656
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Cash paid for interest cost	$	2,019		$	5,314
Income taxes paid
Supplemental cash flow disclosures
Debt discount on convertible notes payable	$	200,000			-
Common stock issued	$	40,000			-
Conversion of convertible debt and accrued interest to common stock	$	164,919			-
Warrants issued in settlement of lawsuit	$	62,335			-
Shares issued for accounts payable settlement		-		$	83,532
Shares and Warrants issued in connection with debt		-		$	162,967
Accounts payable converted to Long-term-debt		-		$	928,130

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

6 

STANDARD METALS PROCESSING, INC.

Notes to Condensed Consolidated Financial Statements

September 30, 2016

(unaudited)

NOTE 1 - OVERVIEW

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

The Company plans to perform permitted custom processing toll milling which is a process whereby mined material is crushed and ground into fine particles to ease the extraction of any precious minerals contained therein, such as minerals in the gold, silver and platinum metal groups. Custom milling and refining can include many different processes that are designed specifically for each ore load and to maximize the extraction of precious metals from carbon or concentrates. These toll-processing services also distill, dry, mix, or mill chemicals and bulk materials on a contractual basis and provide a chemical production outsourcing option for industrial companies, which lack the expertise, capacity, or regulatory permits for in-house production.

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

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

Going Concern

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, assuming we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the nine months ended September 30, 2016, the Company incurred losses from operations of $657,666. At September 30, 2016, the Company had an accumulated deficit of $102,294,846 and a working capital deficit of $9,123,197. These conditions raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise the required additional capital or debt financing to meet short and long-term operating requirements. During the nine months ended September 30, 2016, the Company received net cash proceeds of $220,000 from the convertible promissory notes payable. Management believes that private placements of equity capital and/or additional debt financing will be needed to fund our long-term operating requirements. The Company may also encounter business endeavors that require significant cash commitments or unanticipated problems or expenses that could result in a requirement for additional cash. If the Company raises additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our current shareholders could be reduced, and such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to take advantage of prospective business endeavors or opportunities, which could significantly and materially restrict our operations. We are continuing to pursue external financing alternatives to improve our working capital position. If the Company is unable to obtain the necessary capital, the Company may have to cease operations.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The financial statements include the accounts of Standard Metals Processing, Inc., its wholly owned subsidiary Tonopah Milling and Metals Group, Inc. (“TMMG”), and TMMG’s wholly owned subsidiaries Tonopah Custom Processing, Inc. and Tonopah Resources, Inc. All significant intercompany transactions, accounts and balances have been eliminated in consolidation.

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. The unaudited condensed financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2015 filed May 2, 2016. In the opinion of management, all adjustments (consisting of normal recurring adjustments unless otherwise indicated) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year as a whole.

7 

Shea Mining and Milling Assets

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

Mineral Properties

Mineral property acquisition costs are recorded at cost and are deferred until the viability of the property is determined. No properties have produced operating revenues at this time. Exploration, mineral property evaluation, option payments, related acquisition costs for mineral properties acquired under an option agreement, general overhead, administrative and holding costs to maintain a property on a care and maintenance basis are expensed in the period they are incurred. When reserves are determined for a property and a bankable feasibility study is completed, subsequent exploration and development costs on the property would be capitalized. If a project were to be put into production, capitalized costs would be depleted on the unit of production basis.

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

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

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

Impairment of Long-Lived Assets and Long-Lived Assets

The Company will periodically evaluate the carrying value of long-lived assets to be held and used, including but not limited to, mineral properties, mine tailings, mine dumps, capital assets and intangible assets, when events and circumstances warrant such a review and at least annually. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost to dispose.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 

Recent Accounting Pronouncements

During the period ended September 30, 2016 and through December 7, 2016, there were several new accounting pronouncements issued by the Financial Accounting Standards Board.  Each of these pronouncements, as applicable, has been or will be adopted by the Company.  Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements.

NOTE 3 –SHEA MILLING AND MINING ASSETS

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

8 

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

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

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

The other assets the Company acquired consisted of a property lease, which allowed the use of an assay lab property and the associated water permits, (with a right to purchase for $6,000,000) and a contract agreement, which allowed the Company use of processing permits, located in Amargosa Valley, Nevada (“Amargosa”). The Company paid a monthly base rent of $17,500 on this lease and $5,000 monthly on the contract agreement. In January 2012, the landlord of the Amargosa lease caused to have served a five Day Notice To Pay Rent Or Quit due to default in the monthly $17,500 lease payments. The Company began immediate communications with the landlord, which resulted in a delay of further actions by the landlord to pursue any remedies. Then on February 9, 2012, the landlord caused to have served an Order For Summary Eviction (“Eviction”) due to continued default in lease payments. Effective with the Eviction, a total of $112,500 in lease and contract payments remain unpaid as well as $10,500 in late fees required pursuant to the terms of the lease. On February 10, 2012, the Beatty County Sheriff completed the Eviction at Amargosa and the Company as such, no longer has access to the assay lab or permits at Amargosa. As a result, all remaining equipment at Amargosa with an aggregate value of $40,925 was written off as impaired.

Pursuant to the Shea Exchange Agreement, the Company issued a total of 35,000,000 shares of our common stock to the equity holders of Shea Mining in exchange for certain of their assets, resulting in those holders owning an ownership interest of approximately 87% of our then currently outstanding common stock (approximately 56% ownership interest on a fully diluted basis). Alfred A. Rapetti, then a member of our Board of Directors and our former Chief Executive Officer, was granted an irrevocable voting proxy for half of the shares issued to the Shea Mining equity holders, which continues until the affected shares are publicly sold after a period of at least nine months, and thereafter in accordance with all applicable securities laws. In August 2011, these rights were transferred to Blair Mielke, a former director of the Company. All such voting rights have since been canceled by the owners or through a transfer of ownership. The Company also agreed to indemnify Shea Mining from any liabilities arising after March 15, 2011 out of the Loan Modification Agreement or the loan agreements.

9 

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

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

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

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

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

Simultaneous with these transactions, pursuant to the Shea Exchange Agreement, Wits Basin exchanged 19,713,544 shares of the Company’s common stock it held for 10,000,000 shares of our Series A Preferred Stock. The Series A Preferred Stock has a liquidation preference of $10,000,000, payable only upon certain liquidity or triggering events. Additional details regarding the Series A Preferred Stock can be found below in “Shareholders Equity”. Additionally, the Company obtained the right to transfer the entire interest and related debt of the Bates-Hunter Mine, at any time prior to June 13, 2011, to Wits Basin in exchange for the cancellation of a promissory note issued by Hunter Bates payable in favor of Wits Basin in the approximate amount of $2,500,000. On April 29, 2011, our Board of Directors approved this transfer.

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

The Company does not conduct any mining activity.

NOTE 4 – ASSET HELD FOR SALE

During the year ended December 31, 2015 the Company determined that certain equipment with a historic cost of $2,020,415 had a fair value of $996,643 and was no longer required. The Company evaluated this event using the guidance provided by ASC 360-10 “ Property, Plant and Equipment – Impairment or disposal of long-life assets ” and concluded an impairment of machinery and equipment of $1,023,772 was required. The Company negotiated with the Vendor that originally sold the equipment to the Company to accept such certain equipment held for sale in full settlement of the Vendor’s Long-Term Trade Payable. On February 23, 2016 an auction was held in which $222,597 of other equipment was sold for $56,500. The net proceeds from this sale of $37,821 were paid to a former employee for past compensation. The Company is negotiating the sale of additional equipment with a fair value of $12,000.

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

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

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

	September 30,			December 31,
	2016			2015
Equipment	$	21,000		$	21,000
Construction in Progress		1,775,224			1,775,224
Less accumulated depreciation		(21,000	)		(21,000	)
	$	1,775,224		$	1,775,224

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NOTE 6 – CONVERTIBLE NOTES PAYABLE

Between January 22, 2016 and March 31, 2016 the Company issued Convertible Promissory Notes totaling $160,000. The Convertible promissory notes accrue interest at 8% and mature 2 years from the date of issue. At the option of the holder the Convertible Promissory Notes convert into shares of the Company’s Common Stock. The $55,000 convertible promissory note is convertible at $0.021 per share based on the ninety day VWAP ending on the date of funding, the $30,000 convertible promissory note is convertible at $0.05 per share based on the ninety day VWAP ending on the date of funding, and the $75,000 convertible promissory note is convertible at $0.05 per share based on a fifty percent discount to the closing sale price on the last trading day immediately preceding the issue date. The Company then analyzed the conversion under ASC 470-20 Debt with conversion and other options for consideration of a conversion feature. The Company recorded a discount for the intrinsic value of the conversion feature of $160,000 and will amortize this debt discount over the term of the notes.

On July 22, 2016 the convertible promissory notes payable totaling $160,000 and accrued interest of $4,919 were converted into 4,879,067 shares of restricted common stock.

 The Company issued a convertible promissory note in the principal amount of $60,000 on August 1, 2016. The note is due two years after issuance, accrues interest at 8% per annum and is convertible into shares of common stock at a price of $0.06 per share. The Company then analyzed the conversion under ASC 470-20 Debt with conversion and other options for consideration of a conversion feature. The Company recorded a discount for the intrinsic value of the conversion feature of $60,000 and will amortize this debt discount over the term of the note.

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

	September 30,			December 31,
	2016			2015
Convertible notes net of unamortized discount of $35,068 at September 30, 2016; interest rate of 8%;	$	24,932		$	-
Convertible promissory notes net of unamortized discount of $0 at December 31, 2014; interest rate of 6%; accrued interest of $36,665 at December 31, 2013 and all of these Notes are past due and original terms apply in the default period.	$	175,000		$	175,000
Less current portion of Convertible Notes Payable		(175,000	)		(175,000	)
	$	24,932		$	-

NOTE 7 – PROMISSORY NOTES PAYABLE - RELATED PARTY

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

	September 30,			December 31,
	2016			2015
Promissory note issued on February 11, 2015, in the principal amount of up to $750,000 with tranches received as follows: $200,000 on February 11, 2015; $48,000 on February 13, 2015; $50,000 on April 13, 2015; $150,000 on July 31, 2015, $2,500 on October 20, 2015, $12,000 on October 29, 2015 and $15,000 on November 4, 2015; the note has a stated interest rate of 8%; with a maturity of 1 year from the date of the tranche.	$	477,500		$	477,500
Less discount		(-	)		(11,577	)
Totals	$	477,500		$	465,923

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

NOTE 8 – SHAREHOLDERS’ EQUITY

Preferred Stock

Series A Preferred Stock  

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

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

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

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

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

(1) If either of the following occur: 

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

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

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

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

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

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

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

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

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

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

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

The Company analyzed the event under ASC 470-20 Debt with conversion and other options for consideration of a common stock. The Company believe that common stock in escrow should not be recognized in the financial statements as Wits does not have control or rights to the common shares held in escrow until the Triggering Event.

Series B Preferred Stock

There are no shares of Series B Preferred Stock issued and outstanding. The class of stock has been retired.

 On April 11, 2016 the Company and Pure Path Capital Management LLC, a related party, executed an addendum removing Pure Path’s ability to convert its note into shares of Series B Preferred Stock. Subsequently, the Company retired and cancelled the entire class of Series B Preferred Stock, which was never issued or outstanding and such class is no longer available for issuance.

Common Stock

On July 22, 2016 three convertible promissory notes payable totaling $160,000 and accrued interest of $4,919 were converted into 4,879,067 shares of restricted common stock.

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Common Stock Subscribed

On August 17, 2016 the company received a subscription agreement and $20,000 for 275,028 shares of the Company common stock, as of September 30, 2016 the shares were not issued. The shares were issued on December 13, 2016.

Option Grants

2010 Plan

The Company had one stock option plan: the 2010 Stock Incentive Plan, as amended (the “2010 Plan”). Stock options, stock appreciation rights, restricted stock and other stock and cash awards may be granted under the Plan. In general, options vest over a period ranging from immediate vesting to five years and expire 10 years from the date of grant. Effective January 21, 2011, the Company’s Board of Directors (the “Board”) authorized an amendment to the 2010 Stock Incentive Plan, to increase the number of options available for granting under the 2010 Plan from 3,000,000 to 13,500,000 and authorized the Company to file an S-8 Registration Statement with the U.S. Securities and Exchange Commission (subsequently filed on January 27, 2011) for the registration of the shares available in the Plan. On March 15, 2011, with the closing of the Shea Exchange Agreement a “change of control” event was deemed to have occurred and 13,500,000 previously granted stock options vested in full. Effective July 25, 2011, the 2010 Plan was amended to increase the total shares of stock which may be issued under the 2010 Plan from 13,500,000 to 14,500,000.

The Company has been receiving files from former officers and attorneys. Upon review of the files, the original 2010 Plan and Board Resolution were located. The 2010 Plan approved by the Board of Directors on March 22, 2010 authorized 3,000,000 shares of common stock for issuance under the 2010 Plan. The Board of Directors voted to increase the number of shares available under the 2010 Plan on January 21, 2011. Section 9.11 of the 2010 Plan as approved by the Board states:

9.11 Amendment of the Plan. The Board of Directors may amend or discontinue the Plan at any time. However, no such amendment or discontinuance shall adversely change or impair, without the consent of the recipient, an Incentive previously granted. Further, no such amendment shall, without approval of the stockholders of the Company, (a) increase the maximum number of shares of Common Stock which may be issued to all participants under the Plan, (b) change or expand the types of Incentives that may be granted under the Plan, (c) change the class of persons eligible to receive Incentives under the Plan, or (d) materially increase the benefits accruing to participants under the Plan. 

Pursuant to the terms of the 2010 Plan, the stockholders of the Company must approve this increase. As the stockholders of the Company did not approve the increase of shares available under the 2010 Plan, the increase on January 21, 2011 was not effective.

As of January 21, 2011 the Company had issued a total of 2,800,000 options to purchase shares under the 2010 Plan and had 200,000 shares remaining authorized and unissued. However, also on January 21, 2011, the Board of Directors authorized the issuance of 10,500,000 options. This issuance far exceeded the number of shares available and the excess issuances were not valid. As a correction measure, the Company has divided the 200,000 shares that were available pro-rata between the persons named in the resolution.

The Board of Directors terminated the 2010 option plan on August 23, 2013.

2014 Option Plan

By Board Resolution effective January 27, 2014, the Company adopted a 2014 Stock Incentive Plan (the “Plan”) to compensate employees and consulting groups in their efforts to enhance the long-term shareholder value of the Company. Pursuant to the Plan, selected persons are offered opportunities to participate in the Company's growth and success and are encouraged to acquire and maintain stock ownership in the Company. The Plan grants options to purchase shares of the Company’s common stock vesting at dates beginning on the date of grant and issuable at chronological or performance increments. The Plan Administrator may also grandfather in existing options granted during 2013. The shareholders approved the 2014 Plan at the 2014 annual meeting.

Under administration by the Compensation Committee (the “Plan Administrator”), a maximum of 75,000,000 shares of common stock are available for issuance under the Plan, subject to adjustment from time to time. Awards may be granted under the Plan to officers, directors, employees and consultants of the Company and as the Plan Administrator selects. The Plan Administrator is authorized, in its sole discretion, to issue options as incentive stock options, which shall be appropriately designated. The term of each option to purchase common stock of the Company is established by the Plan Administrator or, if not so established, is 10 years from the grant date. 

The Plan Administrator establishes the time at which each option shall vest and become exercisable. If not established in the instrument evidencing the option, the option shall vest and become exercisable according to the following schedule: (i) after one year of the participant’s continuous employment or service with the company or its related corporations, one quarter of the total options will be vested and exercisable; (ii) after each additional six-month period of continuous service completed thereafter, an additional one eighth of the total options will be vested and exercisable; and (iii) after four years, 100% of the options will be vested and exercisable. Under the terms of the Plan, the exercise price for shares shall be paid in cash or check to the Company unless the Plan Administrator determines otherwise.

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The Plan Administrator shall determine whether the options will continue to be exercisable, and the terms and conditions of such exercise, if a participant ceases to be employed or provide services to the Company. If not so established in the instrument evidencing such options, any portion of an option that is not vested and exercisable on the date of termination of the participant’s employment or service relationship (the “Employment Termination Date”) shall expire on such date. Any portion of an option that is vested and exercisable on the Employment Termination Date shall expire upon the earliest to occur of: (i) if the participant’s Employment Termination Date occurs by reason of retirement, disability or death, the one-year anniversary of such Employment Termination Date; (ii) if the participant’s Employment Termination Date occurs for reasons other than cause, retirement, disability or death, the three-month anniversary of such Employment Termination Date; or (iii) the last day of the option term. Notwithstanding the foregoing, if the participant dies after the Employment Termination Date while the Option is otherwise exercisable, the portion of the option that is vested and exercisable on such Employment Termination Date shall expire upon the earlier to occur of: (a) the last day of the option term; or (b) the first anniversary of the date of death, unless the Plan Administrator determines otherwise.

If a participant is terminated for cause, the options shall automatically expire at the time the Company first notifies the participant of the termination. If a participant’s employment is suspended pending investigation of whether they will be terminated for cause, the participant’s rights under any option shall be suspended during the period of investigation. Awards granted under the Plan may not be assigned, except, to the extent permitted by Section 422 of the Internal Revenue Code (the “IRC”), and the Plan Administrator may permit such assignment, transfer and exercisability, and may permit a participant to designate a beneficiary who may exercise the award or receive compensation under the award after the participant’s death. Any award permitted to be assigned shall be subject to the terms and conditions contained in the instrument evidencing the award.

The Plan may only be amended by the Company’s Board of Directors, as it deems advisable. Shareholder approval shall be required for any amendment to the extent required for compliance with Section 422 of the IRC, as amended or any applicable law or regulation. The Board may suspend or terminate the Plan at any time. Incentive stock options may not be granted more than 10 years after the later of the Plan’s adoption by the Board or the adoption by the Board of any amendment to the Plan that constitutes adoption of a new plan for the purpose of Section 422 of the IRC. Participants who are residents of California shall be subject to additional terms and conditions until the Common Stock becomes a publicly traded security, under the California Securities Code.

The Company grandfathered the following options issued to consultants during the 4^th quarter of 2013 in to the 2014 Plan:

The Company entered into a Strategic Advisory Services Agreement with P5, LLC (“P5”) dated effective October 15, 2013, to provide strategic advisory services. As consideration for such services, the Company granted P5 a total of 17,500,000 options to purchase common stock of the Company, with 7,500,000 shares available for purchase at an exercise price of $0.65 per share and 10,000,000 shares available for purchase at an exercise price of $1.25 per share, with a grant term of seven years and subject to a vesting schedule. With respect to the options to purchase up to 7,500,000 shares at $0.65 per share, 2,500,000 options vest upon each of the following: (i) October 15, 2013 (the “P5 Grant Date”); (ii) 90 days after the P5 Grant Date; and (iii) 180 days after the P5 Grant Date. With respect to the options to purchase up to 10,000,000 shares at an exercise price of $1.25 per share, 2,500,000 options vest upon each of the following: April 1, 2014, July 1, 2014, October 1, 2014 and January 1, 2015. As of November 29, 2016, Mr. Ted Ashford, III is the owner of 13,187,500 of these options pursuant to an agreement between the parties, with such transfer authorized by the Company.

The Company entered into a Strategic Advisory Services Agreement with a consultant dated effective October 15, 2013. As consideration for the consultant’s assistance in expanding the Company’s operations and securing new business arrangements, the Company granted the consultant an aggregate of 3,500,000 options to purchase common stock of the Company, with 1,500,000 shares available for purchase at an exercise price of $0.65 per share and 2,000,000 shares available for purchase at an exercise price of $1.25 per share, with a grant term of seven years and subject to a vesting schedule. With respect to the options to purchase up to 1,500,000 shares at $0.65 per share, 500,000 options vest upon each of the following: (i) October 15, 2013 (the “Consultant Grant Date”); (ii) 90 days after the Consultant Grant Date; and (iii) 180 days after the Consultant Grant Date. With respect to the options to purchase up to 2,000,000 shares at an exercise price of $1.25 per share, 500,000 options vest upon each of the following: April 1, 2014, July 1, 2014, October 1, 2014 and January 1, 2015. 

On December 26, 2013, the Company entered into a Consulting Services Agreement with LR Advisors, LLC (“LRA”). Pursuant to the terms of the agreement, LRA agreed to provide the Company advisory services in connection with the Company’s investor relations. As compensation for such services, LRA was granted a total of 1,500,000 options to purchase common stock of the Company at an exercise price of $1.25 per share, with a grant term of seven years. The options vested in full upon execution of the agreement.

The Company entered into a Consulting Agreement with EAS Advisors, LLC (“EAS”) on January 1, 2014, whereby EAS agreed to provide the Company general corporate advice, guidance and strategic services relating to the Company’s milling assets and the development of mining clients and contacts. As consideration for such services, the Company granted EAS an aggregate of 2,000,000 options to purchase common stock of the Company, with 1,000,000 shares available for purchase at an exercise price of $1.25 per share and 1,000,000 shares available for purchase at an exercise price of $2.25 per share, with a grant term of seven years and subject to a vesting schedule. With respect to the options to purchase up to 1,000,000 shares at $1.25 per share, 250,000 options vest upon each of the following: (i) January 1, 2014 (the “EAS Grant Date”); (ii) 90 days after the EAS Grant Date; (iii) 180 days after the EAS Grant Date; and (iv) 270 days after the EAS Grant Date. With respect to the options to purchase up to 1,000,000 shares at an exercise price of $2.25 per share, 250,000 options vest upon each of the following: July 1, 2014, October 1, 2014, November 1, 2014 and December 1, 2014. The Company estimated the fair value of these options of $1,398,584 using the above Black-Scholes pricing model and will amortize over the vesting term.

14 

 On June 18, 2014, the Company granted 250,000 options to purchase common stock of the Company at an exercise price of $1.67 per share with a term of seven years to a legal advisor. The options vested in full on grant.

On June 18, 2014, the Company granted 750,000 options to purchase common stock of the Company at an exercise price of $1.67 per share with a term of seven years to the President of our Tonopah Custom Processing, Inc. subsidiary. The options vested in full on grant.

On June 18, 2014, the Company granted 1,000,000 options to purchase common stock of the Company at an exercise price of $1.67 per share with a term of seven years to an officer of the Company. The options vested in full on grant.

On January 16, 2015 the Company’s Chief Operating Officer was granted 2,250,000 options under the 2014 Plan with an exercise price of $1.15 per share for a term of seven years. The options shall vest and become exercisable as follows: (i) 750,000 shall vest on the Date of Grant; (ii) 187,500 shall vest on each of the following dates: April 1, 2015, July 1, 2015, October 1, 2015, January 1, 2016, April 1, 2016, July 1, 2016, October 1, 2016 and January 1, 2017. On March 27, 2015 the Company executed an addendum to the Chief Operating Officer’s employment agreement wherein he agreed to take on additional responsibilities. As consideration, the Company issued an additional 7,000,000 options under the 2014 Plan with an exercise price of $1.00 for a term of seven years. The 7,000,000 options vested in full on grant.

On April 24, 2015 the Company entered into an employment agreement with Mr. John Ryan to serve as the Company’s president. Pursuant to the employment agreement, the Company granted Mr. Ryan 2,500,000 options under the 2014 Plan with an exercise price of $0.92 per share for a term of three years to Mr. John Ryan its new President. The options shall vest and become exercisable as follows: (i) 100,000 vested on the Date of Grant; (ii) 150,000 vested on July 24, 2015, (iii) 250,000 shall vest on each of the following dates: October 24, 2015, January 24, 2016 and April 24, 2016, (iv) 750,000 shall vest on achievement of certain performance objectives of tonnage and gold ore concentrate (v) 750,000 shall vest on achievement of certain performance objectives based on earnings before interest, taxes, depreciation and amortization. See the Form 8-K filed with the Commission on April 28, 2015. The Company and Mr. Ryan came to a mutual agreement to terminate this agreement on October 22, 2015. All unvested options are cancelled.

On June 4, 2015 the Company entered into an employment agreement with Mr. Thomas Loucks to serve as the Company’s Vice President of Corporate Development. Pursuant to the employment agreement, the Company granted Mr. Loucks 2,500,000 options under the 2014 Plan with an exercise price of $0.90 per share for a term of three years. The options shall vest and become exercisable as follows: (i) 500,000 shall vest on the Date of Grant; (ii) 500,000 shall vest on each of the following dates: December 4, 2015, June 4, 2016, December 4, 2016 and June 4, 2017. The Company and Mr. Loucks came to a mutual agreement to terminate this agreement on October 22, 2015. All unvested options are cancelled.

On June 11, 2015 the Company entered into an employment agreement with Mr. Bobby Cooper to serve as the Company’s Managing Director. Pursuant to the employment agreement, the Company granted Mr. Cooper 2,500,000 options under the 2014 Plan with an exercise price of $0.80 per share for a term of three years. The options shall vest and become exercisable as follows: (i) 500,000 shall vest on the Date of Grant; (ii) 500,000 shall vest on each of the following dates: December 11, 2015, June 11, 2016, December 11, 2016 and June 11, 2017. The Company and Mr. Cooper came to a mutual agreement to terminate this agreement on October 22, 2015. All unvested options are cancelled.

On July 21, 2015 the Company agreed to reprice 750,000 options of an officer and director June 18, 2014 with an original exercise price of $1.67 to $0.75 exercise price. The accounting effect of this resolution is to cancel the previous options and reissue new options with the new exercise price of $0.75 with vested immediately as all other option terms remained the same and reduced option compensation by $318,270.

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

In determining the compensation cost of the stock awards granted during the nine month period ended September 30, 2016 and the year ended December 31, 2015, the fair value of each grant had been estimated on the date of grant using the Black-Scholes pricing model and the weighted average assumptions used in these calculations are summarized below: 

	2016	2015
Risk-free interest rate	—	0.084% - 2.08%
Expected volatility factor	—	185% - 305%
Expected dividend	—	—
Expected option term (years)	—	3 - 7

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

15 

The Company recorded $0 and $11,923,865 related to compensation expense for the nine months ended September 30, 2016 and 2015, respectively. All compensation expense is included in general and administrative expense. There was no tax benefit from recording this non-cash expense due to our income tax valuation allowance and due to a portion of the options being incentive stock options. As of September 30, 2016, there was $0 in unrecognized compensation expense.

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

	Number of Options			Weighted Average Exercise Price
Options outstanding - December 31, 2014		34,131,842		$	0.99
Granted		17,500,000			.90
Canceled or expired		(16,555,619	)		.92
Exercised		-			-
Options outstanding - December 31, 2015		35,076,223		$	0.99
Granted		-			-
Canceled or expired		(2,500,000	)		0.88
Exercised		-			-
Options outstanding –September 30, 2016		32,576,223		$	0.98
Weighted average fair value of options granted during the period ended September 30, 2016				$	-
Weighted average fair value of options granted during the year ended December 31, 2015				$	0.90

A summary of the Company’s non-vested options at September 30, 2016, and changes during the nine months ended September 30, 2016, is presented below:

	Options		Weighted Average Grant Date  Fair Value
Non-vested, beginning of period		1,149,850	$	0.90
Granted		-	$	-
Vested		-	$	-
Forfeited		1,149,850	$	0.88
Non-vested, end of period		-	$	-

The following tables summarize information about stock options outstanding and exercisable at September 30, 2016: 

	Options Outstanding at September 30, 2016
Range of  Exercise Prices	Number  Outstanding		Weighted  Remaining  Contractual  Life	Weighted  Average  Exercise  Price		Aggregate  Intrinsic Value(1)
$0.40 to $0.60		5,276,223	4.1 years	$	0.46	$	-
$0.61 to $1.00		9,800,000	4.0 years	$	0.67	$	-
$1.01 to $1.50		14,500,000	4.1 years	$	1.25	$	-
$1.51 to $2.25		3,000,000	4.6 years	$	1.63	$	-
$0.40 to $2.25		32,576,223	4.1 years	$	0.98	$	-

	Options Exercisable at September 30, 2016
Range of Exercise Prices	Number  Exercisable		Weighted  Remaining  Contractual  Life	Weighted  Average  Exercise  Price		Aggregate  Intrinsic Value(1)
$0.40 to $0.60		5,276,223	4.1 years	$	0.46	$	-
$0.61 to $1.00		9,800,000	4.0 years	$	0.67	$	-
$1.01 to $1.50		14,500,000	4.1 years	$	1.25	$	-
$1.51 to $2.25		3,000,000	4.6 years	$	1.63	$	-
$0.40 to $2.25		32,576,223	4.1 years	$	0.98	$	-

(1) The aggregate intrinsic value in the table represents the difference between the closing stock price on September 30, 2016 and the exercise price, multiplied by the number of in-the-money options that would have been received by the option holders had all option holders exercised their options on September 30, 2016.

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Common Stock Purchase Warrants

For warrants granted to non-employees in exchange for services, we recorded the fair value of the equity instrument using the Black-Scholes pricing model unless the value of the services is more reliably measurable.

On March 2, 2015, 100,000 warrants to purchase common stock were exercised at a per share price of $0.89 for a total of $89,000.

On April 23, 2015, 40,000 warrants to purchase common stock were exercised at a per share price of $0.89 for a total of $35,600. 

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

The following table summarizes information about the Company’s stock purchase warrants outstanding at September 30, 2016 and December 31, 2015:

	Number			Weighted  Average  Exercise  Price		Range  of  Exercise  Price		Weighted  Remaining  Contractual  Life
Outstanding at December 31, 2014		5,483,980		$	0.79	$	0.20 – 2.00		4.8 years
Granted		400,000		$	1.24	$	1.23 – 1.25
Cancelled or expired		(728,340	)		0.50		0.50
Exercised		(140,000	)	$	0.89	$	0.25 – 0.89
Outstanding at December 31, 2015		5,015,640		$	0.88	$	0.20 – 2.00		4.4 years
Granted		1,260,000		$	2.00	$	0.30 – 1.25
Cancelled or expired		-			-		-
Exercised		-		$	-	$	-
Outstanding at September 30, 2016		6,275,640		$	0.86	$	0.20 – 2.00		4.9 years
Warrants exercisable at September 30, 2016							6,275,640

The aggregate intrinsic value of the 6,425,640 outstanding and exercisable warrants at September 30, 2016 was $0. The intrinsic value is the difference between the closing stock price on September 30, 2016 and the exercise price, multiplied by the number of in-the-money warrants had all warrant holders exercised their warrants on September 30, 2016.

NOTE 9 – COMMITMENTS AND CONTINGENCIES  

Legal Matters

Stephen E. Flechner v. Standard Metals Processing, Inc.

On April 29, 2014, Stephen E. Flechner filed suit in the United States District Court for the District of Colorado against Standard Metals Processing, Inc. alleging that Standard Metals had refused to allow him to exercise stock options granted to him pursuant to a Stock Option Agreement, dated April 1, 2010, and a second Stock Option Agreement, dated January 21, 2011. On June 12, 2014, Standard Metals filed an Answer and a Motion to Dismiss or, Alternatively, to Stay or Transfer the action to the United States District Court for the Northern District of Alabama, Middle Division . On January 16, 2015, Standard Metals filed a Motion for Summary Judgment. On January 23, 2015, the Court issued an Order granting in part and denying in part Standard Metals’ Motion to Dismiss or, Alternatively, to Stay or Transfer the action to the United States District Court for the Northern District of Alabama, Middle Division. The Court in its Order stayed further proceedings in Colorado pending the issuance of orders by the Alabama court. Thereafter, on January 26, 2015, the Court issued an Order vacating the February 20, 2015 Trial Preparation Conference and the March 9, 2015 Bench Trial. On March 23, 2015, the Court issued an Order denying Standard Metals’ Motion for Summary Judgment. On March 30, 2015, Flechner filed a Motion to Lift the Stay. On March 31, 2015, the Court issued an Order granting Flechner’s Motion to Lift the Stay. On April 6, 2015, the Court issued an Order scheduling a Bench Trial for July 29, 2015. On April 9, 2015, Flechner filed a Motion for Reconsideration of the Court’s March 23, 2015 Order Denying Flechner’s Motion to Enforce the Confidential Settlement Agreement to Settle Certain Issues. On May 1, 2015, the Court issued an Order Granting Flechner’s Motion to Enforce the Confidential Settlement Agreement to Settle Certain Issues. On August 12, 2015 the United Stated District Court for the District of Colorado issued a judgment in favor of Stephen E. Flechner for $2,157,000. An amended final judgment was ordered in adjudication of the Complaint by the U.S. District Court for the District of Colorado (the “Court”) on August 28, 2015 in favor of Flechner in the amount of $2,157,000, plus interest through the date of judgment of $235,246, plus interest of $472.76/day from August 28, 2015 until paid in full. The Company, in good faith anticipation of a settlement did not appeal the judgment and therefore, the Company’s notice of appeal was dismissed on November 17, 2015. This judgment is now non-appealable. The Company and Flechner entered into a Settlement Agreement on November 24, 2015, wherein Flechner will receive $450,000 in cash payment and $250,000 in installment payments. As of the date of this filing, the Company has not yet made a payment and has recorded an accrual in the amount of judgment.

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NOTE 10 – RELATED PARTY TRANSACTIONS

Tina Gregerson/Tina Gregerson Family Properties, LLC

On February 11, 2015, the Company issued an unsecured promissory note (the “Note”) to Tina Gregerson Family Properties, LLC, an entity controlled by a director of the Company. The Note for up to $750,000 will be provided in tranches. Maturity of each tranche is one year from the date of receipt. Interest will accrue at 8% per annum on each tranche. As consideration, the Company agreed to issue common stock purchase warrants for the purchase of up to 250,000 shares of common stock exercisable for seven years at $1.23 per share. Under the terms of the Note, the Company received $200,000 on February 11, 2015, $48,000 on February 13, 2015, $50,000 on April 13, 2015, $150,000 on July 31, 2015, $2,500 on October 20, 2015, $12,000 on October 29, 2015 and $15,000 on November 4, 2015.

Pure Path Management Company, LLC

Pure Path Management Company, LLC (“Pure Path”) is currently the beneficial owner of 19.8% of the outstanding common stock of the Company. On October 10, 2013, the Company issued 27,000,000 shares of common stock to Pure Path Management Company, LLC to settle $1,500,000 of the note payable and accrued interest by the Company.

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

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

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

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

NOTE 11 – EARNINGS (LOSS) PER SHARE

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

At September 30, 2016, the weighted average shares from stock options of 32,576,223, warrants of 6,275,640 and Convertible Promissory note shares of 1,000,000 were excluded from the diluted weighted average common share calculation due to the antidilutive effect such shares would have on net loss per common share. The 5,000,000 shares in escrow pending the exchange for the Series A Preferred Stock are considered issued but not outstanding.

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NOTE 12 – SUBSEQUENT EVENTS

Effective November 21, 2016, Tina Gregerson resigned as CEO. Effective December 13, 2016, J. Bryan Read was appointed to the existing vacancy seat on the Board of Directors to serve until approved at the next shareholder meeting and as Interim CEO.

J. Bryan Read, Lt. Col, US Army (R)

Mr. Read honorably served as an officer and a commander in the United States Army. He has over twenty years professional military experience in leadership management, military logistics, training operations, missile defense, property management, diplomacy, and supply systems. He has commanded military organizations from platoon up through battalion level. As a military attaché assigned to the State Department and an overseas United States Embassy in the Former Soviet Union, he regularly planned and conducted meetings with high level foreign government officials and ministries on behalf of the United States involving important defense and commerce related matters. He has served as the Russian language Interpreter and team leader for the U.S. Humanitarian Special Operations Mission to Semipalatinsk, Kazakhstan. Additionally, he was a professor at the United States Military Academy at West Point.

Bryan has served as a business development executive officer and independent business development consultant for variety of companies and industries. He has introduced businesses to private and government sector opportunities by utilizing operations research, analytics, and networking. The goal was to present revenue generating opportunities as well as merger and acquisition opportunities. His duties included negotiating terms of agreement for client projects, analyzing business models, developing marketing strategies, and reviewing P&L. His clients’ products and services have included the following industries: renewable energy, mining, precious metals processing, B2B connectivity/management services, e-mail encryption technology software, EVM software, steel manufacturing technology, construction, antennas, smart grid technologies, computer simulations, and sports recovery nutritional products. He has also served as a business development liaison between Bio-Pharmaceutical companies in order to coordinate clinical research for FDA approval. He has regularly organized and facilitated meetings for clients with fortune 500 senior management, government agencies, and congressional staffs. His efforts have a proven track record of producing contracts, teaming arrangements, alliances, and reseller agreements.

As a member of the American Council of Renewable Energy (ACORE), Mr. Read has served on the Power and Infrastructure Committee and the Defense Initiatives Energy Committee. These committee positions allowed him to regularly provide input to elected officials on future energy policy. He regularly attends national energy conferences to connect and share ideas with public and private leaders in the energy community. Bryan is also the President and Founder of Keystone General Contracting and Technologies LLC: a Veteran Owned Small Business.

Mr. Read has a master’s degree from Cornell University and is a graduate of the United States Army Command and General Staff College. He was a Senior Fellow at the George C. Marshall European Center for Security Studies in Garmisch, Germany. He earned his bachelor’s degree from the University of Alabama.

Midwest Settlement

The parties to the Midwest lawsuit executed an addendum to the Settlement Agreement. The Addendum modified the terms of the Settlement by providing a payment schedule with $25,000 due on December 15, 2016 and $10,000 due every 60 days thereafter with a balloon payment of $60,000 due on December 15, 2017. If a payment is more than seven days late, the Company will pay an additional $100,000 penalty. The shares subject to the lock up agreement will be released and Midwest will file a Release of Judgment for all claims against the Company and any affiliated parties.

Promissory Note

On December 13, 2016, the Company issued a promissory note for $65,000 to an unrelated third party. The note was funded on November 28, 2016, is convertible at $0.02 per share based on a discount to the lowest trading price in the previous five trading days and accrues interest at 6%. The note matures one year from the date of issuance.

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

The following management discussion and analysis of financial condition and results of operations should be read in connection with the accompanying unaudited condensed financial statements and related notes thereto included elsewhere in this Report and the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2015.

Cautionary Notice Regarding Forward Looking Statements

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

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

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

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

History

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

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

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

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

Overview of the Company

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

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

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WATER POLLUTION CONTROL PERMIT WITH THE NEVADA DEPARTMENT OF ENVIRONMENTAL PROTECTION

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

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

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

Survey

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

Site Preparation

The Company received leased heavy equipment on August 1, 2013, which was used to begin cleanup of the site to prepare it for the new construction. We ordered a pre-fabricated building on November 4, 2013 and took delivery of the building on March 21, 2014.

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

PRODUCTS AND SERVICES

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

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

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

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

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

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TOLL MILLING

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

Procedure

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

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

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

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

Concentrate/Leach Circuit

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

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

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

RESULTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015.  

Revenues

We had no revenues from any operations for the three and nine months ended September 30, 2016 and 2015. Furthermore, we do not anticipate any significant future revenue until we have sufficiently funded construction and begin operations. 

General and administrative expenses were $276,161 for the nine months ended September 30, 2016 as compared to $13,649,311 for the same period in 2015. For the nine months ended September 30, 2015, the majority of general and administrative expense was compensation expense related to options and warrants totaling $12,242,135; compensation expenses related to options and warrants in the same period in 2016 were $0. In the nine months ended September 30, 2016, compensation expenses as well as operating expenses stayed relatively the same. We anticipate that future compensation expenses will increase and that certain operating expenses will increase for fiscal 2016 as we continue to build the infrastructure to proceed with permitted custom processing toll milling services.

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General and administrative expenses were $59,502 for the three months ended September 30, 2016 as compared to $895,510 for the same period in 2015. For the three months ended September 30, 2015, the majority of general and administrative expense was compensation expense related to options and warrants totaling $477,587; compensation expenses related to options and warrants in the same period in 2016 were $0. In the three months ended September 30, 2016, compensation expenses as well as operating expenses stayed relatively the same. We anticipate that future compensation expenses will increase and that certain operating expenses will increase for fiscal 2016 as we continue to build the infrastructure to proceed with permitted custom processing toll milling services.

Other Income and Expenses  

Other Income  

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

On February 23, 2016 an auction was held in which $222,597 of equipment was sold for $56,500. The net proceeds from this sale were paid to a former employee for past compensation.

Interest Expense  

Interest expense for the nine months ended September 30, 2016 was $210,471 compared to $196,253 for the respective period in 2015. The 2016 and 2015 amounts relate primarily to the interest due on our notes payable: (i) the $2,500,000 secured, convertible promissory note issued to Pure Path on October 10, 2013 in accordance with the settlement agreement of same date. All prior debt was subsumed under this note, the outstanding of which was $2,229,187 plus accrued interest at 8% per annum on September 30, 2016; (ii) the short-term note payable; (iii) the convertible notes issued in 2011 and 2012 and the notes with Tina Gregerson Family Properties, LLC, an entity controlled by the CEO of the Company; (iv) convertible debt of $220,000; and (v) accounts payable.

Interest expense for the three months ended September 30, 2016 was $62,267, compared to $78,096 for the respective period in 2015. The 2016 and 2015 amounts relate primarily to the interest due on our notes payable: (i) the $2,500,000 secured, convertible promissory note issued to Pure Path on October 10, 2013 in accordance with the settlement agreement of same date. All prior debt was subsumed under this note, the outstanding of which was $2,229,187 plus accrued interest at 8% per annum on September 30, 2016; (ii) the short-term note payable; (iii) the convertible notes issued in 2011 and 2012 and the notes with Tina Gregerson Family Properties, LLC, an entity controlled by the CEO of the Company; (iv) convertible debt of $220,000; and (v) accounts payable.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is a measure of an entity’s ability to secure enough cash to meet its contractual and operating needs as they arise. We have funded our operations and satisfied our capital requirements through the issuance of short-term debt, convertible debt and through equity capital we have received via certain shareholders exercising their warrants and loans from related parties during the three months periods ended September 30, 2016 and 2015. We do not anticipate generating sufficient net positive cash flows from our operations to fund the next twelve months. We had a working capital deficit of $9,123,197 at September 30, 2016. Cash and cash equivalents were $1,035 at September 30, 2016, representing an decrease of $5,621 from the cash and cash equivalents of $6,656 at September 30, 2015. 

Our cash reserves will not be sufficient to meet our operational needs and thus, we need to raise additional capital to pay for our operational expenses and provide for capital expenditures. Our basic operational expenses are currently estimated at approximately $70,000 per month. Above the basic operational expenses, we estimate that we need approximately $17,500,000 to begin limited toll milling operations. If we are not able to raise additional working capital, we may have to cease operations altogether.

For the nine months ended September 30, 2016, we had net cash used in operating activities of $297,212, as compared to $613,101 for the nine months ended September 30, 2015. 

For the nine months ended September 30, 2016 and 2015 we had net cash provided by investing activities of $56,500 and net cash used in investing activities of $43,528 respectively. The amount in 2016 was from the sale of equipment and 2015 was due to the funds required to conduct site preparation on our Tonopah, Nevada property and purchase of machinery and equipment. 

For the nine months ended September 30, 2016 and 2015, we had net cash provided by financing activities of $240,000 and $627,190, respectively. 

Summary

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

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Off-Balance Sheet Arrangements

During the nine months ended September 30, 2016, we did not engage in any off balance sheet arrangements as defined in item 303(a)(4) of the SEC’s Regulation S-K. 

Item 3. Quantitative and Qualitative

Not Applicable.

Item 4. Controls and Procedures

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

Based on this evaluation and taking into account that certain material weaknesses existed as of December 31, 2015, our Chief Executive Officer and Chief Financial Officer have each concluded that our disclosure controls and procedures were not effective. As a result of this conclusion, the financial statements for the period covered by this Quarterly Report on Form 10-Q were prepared with particular attention to the material weaknesses previously disclosed. Notwithstanding the material weaknesses in internal controls that continue to exist as of September 30, 2016, we have concluded that the financial statements included in this Quarterly Report on Form 10-Q present fairly, the financial position, results of operations and cash flows of the Company as required for interim financial statements.

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

PART II. OTHER

INFORMATION

Item 1.  Legal Proceedings   

Stephen E. Flechner v. Standard Metals Processing, Inc.

On April 29, 2014, Stephen E. Flechner filed suit in the United States District Court for the District of Colorado against Standard Metals Processing, Inc. alleging that Standard Metals had refused to allow him to exercise stock options granted to him pursuant to a Stock Option Agreement, dated April 1, 2010, and a second Stock Option Agreement, dated January 21, 2011. On June 12, 2014, Standard Metals filed an Answer and a Motion to Dismiss or, Alternatively, to Stay or Transfer the action to the United States District Court for the Northern District of Alabama, Middle Division . On January 16, 2015, Standard Metals filed a Motion for Summary Judgment. On January 23, 2015, the Court issued an Order granting in part and denying in part Standard Metals’ Motion to Dismiss or, Alternatively, to Stay or Transfer the action to the United States District Court for the Northern District of Alabama, Middle Division . The Court in its Order stayed further proceedings in Colorado pending the issuance of orders by the Alabama court. Thereafter, on January 26, 2015, the Court issued an Order vacating the February 20, 2015 Trial Preparation Conference and the March 9, 2015 Bench Trial. On March 23, 2015, the Court issued an Order denying Standard Metals’ Motion for Summary Judgment. On March 30, 2015, Flechner filed a Motion to Lift the Stay. On March 31, 2015, the Court issued an Order granting Flechner’s Motion to Lift the Stay. On April 6, 2015, the Court issued an Order scheduling a Bench Trial for July 29, 2015. On April 9, 2015, Flechner filed a Motion for Reconsideration of the Court’s March 23, 2015 Order Denying Flechner’s Motion to Enforce the Confidential Settlement Agreement to Settle Certain Issues. On May 1, 2015, the Court issued an Order Granting Flechner’s Motion to Enforce the Confidential Settlement Agreement to Settle Certain Issues. On August 12, 2015 the United Stated District Court for the District of Colorado issued a judgment in favor of Stephen E. Flechner for $2,157,000. An amended final judgment was ordered in adjudication of the Complaint by the U.S. District Court for the District of Colorado (the “Court”) on August 28, 2015 in favor of Flechner in the amount of $2,157,000, plus interest through the date of judgment of $235,246, plus interest of $472.76/day from August 28, 2015 until paid in full. The Company, in good faith anticipation of a settlement did not appeal the judgment and therefore, the Company’s notice of appeal was dismissed on November 17, 2015. This judgment is now non-appealable. The Company and Flechner entered into a Settlement Agreement on November 24, 2015, wherein Flechner will receive $450,000 in cash payment and $250,000 in installment payments. As of the date of this filing, the Company has not yet made a payment and has recorded an Accrual in the amount of judgment.

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Item 1A. Risk Factors

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

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

The Company accepted an investment from an unrelated third party of $20,000 for the purchase of 275,028 shares of restricted common stock. The investment was funded on August 17, 2016 and the shares were issued on December 13, 2016.

Preferred Stock

On April 11, 2016 the Company and Pure Path Capital Management LLC, a related party, Path executed an addendum removing Pure Path’s ability to convert its note into shares of Series B Preferred Stock. Subsequently, the Company retired and cancelled the entire class of Series B Preferred Stock, which was never issued or outstanding and such class is no longer available for issuance.

Promissory Notes

The Company issued 5,000,000 shares of restricted common stock on April 1, 2016 that are being held in escrow pending a Triggering Event under the agreement with the holder of the Series A Preferred Stock. See Note 8 – Shareholders Equity.

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

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

None.

Item 5.  Other Information

None.

Item 6.  Exhibits

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

* filed herewith electronically

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SIGNATURES

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

	Standard Metals Processing, Inc.
Date:    December 16, 2016
	By:	/s/ J. Bryan Read
		J. Bryan Read
		Interim Chief Executive Officer
	By:	/s/ Sharon Ullman
		Sharon Ullman
		Chief Financial Officer

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