COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

12. COMMITMENTS AND CONTINGENCIES

The Company has one near-term commitment:

● A $46,500 liability for a consulting contract for which services have not been received.

The Company is subject to Alaska state annual claims rental fees in order to maintain our non-patented claims. In addition to the annual claims rental fees of $125,945 due November 30 of each year, we are also required to meet annual labor requirements of approximately $61,100 due November 30 of each year. The Company is able to carry forward costs for annual labor that exceed the required yearly totals for four years. The Company has significant carryovers to 2022 to satisfy its annual labor requirements. This carryover expires in the years 2022 through 2026 if unneeded to satisfy requirements in those years.

Arbitration

In 2017, the Company, its subsidiary and the joint venture, as claimants, filed an arbitration statement of claim before a three-member Arbitration Panel (“the Panel”), against our JV partner and its affiliates; NyacAU, LLC (“NyacAU”), BEAR Leasing, LLC, and Dr. J. Michael James, as respondents. In 2018, the respondents filed a counter-claim against the Company, its subsidiaries and certain members of the Company’s current and former management, the counterclaim respondents. The arbitration claim alleged, amongst other things, claims concerning related-party transactions, accounting issues including capital vs. operating leases, interpretation of the joint venture operating agreement, allocation of tax losses between the joint venture partners, and unpaid amounts due Goldrich relating to the Chandalar Mine.

It is possible that there could be either adverse or favorable developments in the arbitration pending with the Company and its JV partner. The Company records provisions in the consolidated financial statements for pending arbitration results when it determines that an outcome is probable, and the amount of loss can be reasonably estimated. At the present time, except as stated otherwise, while it is reasonably possible that a favorable or unfavorable outcome in the arbitration may occur, after assessing the information available, management is unable to estimate the possible loss, or range of losses, for the pending arbitration; and accordingly, no estimated losses have been accrued in the consolidated financial statements for favorable or unfavorable outcomes. Legal defense costs are expensed as incurred. Favorable rulings would not result in the recognition of gains prior to offsetting against losses, due to the ruling being an estimate which must be constructively received prior to recognition.

During the year ended December 31, 2019, and through the date of this report, the Panel released various awards relating to the allegations of both parties. Some of which have been in favor of the Company’s positions some have been in favor of our JV partner and its affiliates. The arbitration is ongoing and the various parties to the claims and counterclaims continue to disagree on several matters.

On May 25, 2019, the Panel issued an Interim Award, which requested input from the parties on a small number of discrete issues, all input to be supported by references to the arbitration record.

On November 30, 2019, the Panel ordered the Partial Final Award and concurrently the Second Interim Award Regarding Dissolution/Liquidation of GNP and Related Issues (“the Second Interim Award”).

The Partial Final Award

The Partial Final Award addressed several matters including leases and the impact of their characterization on interim distributions. As a result, the Panel determined that the Company is entitled to an additional $214,797 in distributions for 2016 and an additional $198,644 for 2017, for a total of $413,441 from GNP. In like manner, the Panel determined that NyacAU is entitled to an additional $413,441 in distributions for these years. As the Company is uncertain as to the collectability of these distributions, no recognition of these awards are included in its Statement of Operations for the year ended December 31, 2021.

The Partial Final Award also addressed the Company’s claim for payment of interest earned by LOC 1. The Panel determined that NyacAU should pay the Company 50% of the interest earned on LOC 1 actually received by NyacAU, or $126,666. NyacAU challenged this award but the Panel issued an additional ruling stating the amount owed to be $120,883 to Goldrich plus 5% prejudgment interest on unpaid LOC1 interest as it fell due, see Supplemental Orders 5-8 below. As the Company is uncertain as to the collectability of this award, no recognition of this other income is included in its Statement of Operations for the year ended December 31, 2021.

The Panel ruled Goldrich was responsible to pay NyacAU for the 2012 reclamation work and NyacAU is also entitled to 5% interest on the award from the date the first invoice was sent to Goldrich in 2014. During the year ended December 31, 2019, Goldrich accrued a liability for this ruling on its consolidated balance sheet of $421,366 included in accounts payable and interest payable, however, Goldrich has contested the party to whom payment should be made and whether additional amounts not invoiced by GNP should be included in the award. This matter is discussed further in the Order on Respondents’ Motion to Confirm Judgment.

The Partial Final Award found the Company liable for an act of negligent misrepresentation regarding the concealment of certain technical information from NyacAU. The Company has vigorously disputed the concealment and the finding of negligence. Nevertheless, as a result of the Panel’s determination, the Panel awarded Dr. J. Michael James a reimbursement of 17% of his previous $350,000 stock investment in the Company or $59,500 plus prejudgment interest of 5% and legal fees. In addition, the Panel awarded Dr. James $9,858, plus interest at 5% and legal fees, for personal expenses incurred relating to GNP’s operations. This matter is discussed further in the Judgements Issued by Superior Court below.

The Second Interim Award

The Second Interim Award was necessitated by the fact that the dissolution/liquidation of the joint venture had not yet run its course. In the Second Interim Award the Panel ordered that:

a) No later than January 15, 2020, NyacAU and Goldrich shall attempt to establish, by agreement, a market value for the GNP permit in connection with a transfer of the Permit to Goldrich or a third party, taking into consideration the obligation of GNP, or any transferee of the permit, to complete reclamation in accordance with NyacAU’s government-approved reclamation plan.

b) Reasonably prior to May 31, 2020, NyacAU shall perform its obligation to “make provision … for reclamation by (1) adding all reclamation expenses actually incurred by NyacAU to LOC 1; (2) from GNP’s assets, to the extent possible after payment of GNP’s debts and liabilities and liquidation expenses”.

Neither order from the Second Interim Award was successfully executed by the parties on the dates specified by the Panel. The Second Interim Award confirmed the dissolution of GNP and noted that “no provision of the Claims Lease or the Operating Agreement speaks directly to the rights or obligations of GNP to transfer its mining permit, which is held in the name of the manager, NyacAU. Although GNP no longer has the right to mine, NyacAU, as holder of the permit and as ruled by the Panel, has the liability of reclamation.

Balance and payment of LOC1

The Panel calculated a tentative balance of LOC1 at $16,483,271 as of June 2019. This balance will be adjusted for any additional costs incurred by GNP in the liquidation or awards and/or adjustments made by the arbitration Panel. If there is no further placer production from these claims, Goldrich will not have a liability to pay 50% of LOC1.

The Panel ruled in the Final Post Award that LOC1 cannot be increased for costs incurred after mining operations have ceased, including costs for reclamation. “This deprives NyacAU of a security interest in 50% of future placer gold production at the site to repay reclamation expenses which it advances.” Further, the Panel ruled that the Operating Agreement does not impose an obligation on the Company to pay 50% of the reclamation fee, but that the reclamation obligation resides with the permit holder. See Final Post Award Orders below.

Right to Offset Damages or Distributions

The Panel granted the request that any damages awarded to one party can be an offset to distributions (or damages) due to the other party.

Judgements issued by Superior Court

On April 29, 2020, the Superior Court of the State of Alaska issued a judgement in favor of Dr. James, in the total amount of $13,713 (for the 2012 reclamation costs personally incurred, including interest) and $83,588 (for the adjustment to Dr. James’ stock purchase, including interest). On June 9, 2020, and June 20, 2020, the Court awarded additional costs and attorney’s fees. The Court ordered both Goldrich and NyacAU to submit a status report to the Court in September 2020 regarding the Panel’s clarification of the payable for the 2012 reclamation, including interest, and to clarify the party for the award, NyacAU or GNP. The status report has been filed by both parties, and these judgements remain unpaid and in force before the Superior Court. These amounts related to these judgements were accrued for at December 31, 2019. At December 31, 2020, a total amount of $101,669 is included for the judgement and post judgement interest in accounts payable and interest payable on the consolidated balance sheet. During the year-ended December 31, 2021, an additional $5,141 was accrued for interest. At December 31, 2021, a total of $106,810 is included in accounts payable and interest payable on the consolidated balance sheet for the judgements.

Final Post Award Orders

On September 4, 2020, the arbitration Panel issued Final Post Award Orders, wherein the Panel issued rulings on multiple issues, including but not limited to, those discussed below:

Reclamation

The Company had previously filed a motion to compel NyacAU to correct accruals for certain expenses including reclamation, demobilization, equipment rental and utilities. Most notably, the Company contended that an accrual for reclamation liability was short of a much larger estimate prepared by independent professionals as engaged by Goldrich. The Panel denied the Company’s motion and ruled that Goldrich does not have the authority to compel the establishment of any reserves on the GNP financial records.

The Company had previously filed a motion to compel NyacAU to reclaim the disturbed acres as required under the Operating Agreement and the mining permit issued to NyacAU in 2013, and to require NyacAU to fund the reclamation reserve from cash that had been distributed to NyacAU. The Panel denied the Company’s motion and ruled that while there was express provision in the Operating Agreement to establish reserves necessary for contingent or unforeseen liabilities or obligations, which could conceivably include reclamation reserves, the agreement does not impose an express obligation to reclaim the project site.

Mining Claims

All of the Company’s mining claims remain the property of the Company; however, NyacAU staked several claims contiguous to the claims owned by the Company. The Company had previously filed a motion to compel the transfer NyacAU’s claims from NyacAU to the Company. The motion was granted in part in that the claims held in NyacAU’s name were ruled to be owned by the Company but would not be transferred immediately. They would remain in the possession of NyacAU as manager of the liquidation until the property covered by the claims was not being used for liquidation activities and could be transferred without disruption to the liquidation activity.

Supplemental Orders 5-8

On December 4, 2020, the arbitration Panel issued Supplemental Orders 5-8, wherein the Panel issued rulings on multiple material issues:

2018 Profitability and 2018 Interim Distributions

Under the GNP Operating Agreement, Goldrich was entitled to receive certain interim distributions based on GNP’s profitability. Goldrich received such distributions for 2016 and 2017. Goldrich challenged the Panel’s understanding of facts related to GNP’s profitability for 2018 as presented in the arbitration proceedings and made a motion for GNP to distribute interim distributions for 2018 after applying the arbitration rulings made to date. Goldrich submitted a claim to the arbitration Panel for approximately $680,000 plus prejudgment interest thereon at 5%. The arbitration Panel denied Goldrich’s claim. Based on the Panel’s ruling, the paydown by NyacAU, as manager of GNP, of Line of Credit 1 (“LOC1”) with GNP funds, rather than the payment of a 2018 interim distribution to Goldrich, is not considered a misappropriation of funds. LOC1 is a related party loan between GNP and NyacAU.

The Panel ruled that GNP was dissolved at the end of the 2018 mining season (September 28, 2018) by failing to meet the Minimum Production Requirement of the GNP Operating Agreement rather than May 2019, when NyacAU published a formal notice of dissolution to the State of Alaska and to creditors. Based on this and other evidence, the Panel found that GNP was dissolved by no later than October 9, 2018, which precedes the date by which any interim distribution would otherwise have been due under the GNP Operating Agreement (October 31 - December 31, 2018). Accordingly, the Panel ruled that Goldrich is precluded from receiving any interim distributions for 2018 under the GNP Operating Agreement which provides that “[m]embers have a right to Distributions from the Company before the dissolution and winding up of the Company.”

Goldrich’s Portion of Interest Paid on LOC1

Under the GNP Operating Agreement, Goldrich is to receive 50% of any interest on LOC1 paid by GNP to NyacAU. Goldrich made a claim to the Panel that GNP had paid interest to NyacAU and that Goldrich was entitled to 50% of the amount paid. The Panel ruled that NyacAU is obligated to pay Goldrich 50% of $241,797 in interest “received” by NyacAU up to October 2018, when GNP was dissolved and commenced liquidation, in the total principal amount of $120,883. Goldrich is also entitled to recover 5% prejudgment interest on unpaid LOC1 interest as it fell due through October 1, 2018, after which date no interest would be shared with Goldrich. As we are uncertain as to the collectability of these distributions, no recognition of these revenues is included in our Statement of Operations for the year ended December 31, 2021.

Clarification of Award

In the Partial Final Award given in 2019, the arbitration Panel made an award to NyacAU of $377,253 in damages plus pre-award interest relating to 2012 reclamation expenses incurred on Goldrich’s behalf. Goldrich made an “Application for Modification and Correction of Arbitration Award, for Vacation of Award, or for Resubmission to Arbitration Panel for Clarification”, requesting an order from the Alaska court, under the Alaska Arbitration Act, that the damages awarded for unpaid 2012 reclamation expenses were to be paid to GNP, not NyacAU, and that the Panel clarify the appropriate amount of damages and interest to be paid. The Panel ruled that it will resolve these issues after the parties submit evidence and argument supporting their respective positions on the merits.

On April 7, 2021, the Panel issued two orders:

- Order on Respondents’ Motion to Preserve Confidentiality of Arbitration Proceedings, wherein the Panel ruled that the Company did not violate confidentiality when it filed the arbitration rulings as exhibits to its public reporting with the Securities and Exchange Commission, and

- Order on Respondents’ Motion to Confirm Judgement, to correct, clarify or modify an award made in the Partial Final Award. This order confirmed a GNP claim against the Company for $50,685 for additional reclamation costs, including interest of $2,589, and clarified that GNP, not NyacAU, was awarded the 2012 reclamation costs. This event constitutes a ‘Type 1’ event, which required adjustment and recognition in the financial statements for the year ended December 31, 2020. Together, the $421,366 accrued at December 31, 2019, the $16,503 accrued interest during the year ended December 31, 2020, and the aforementioned $50,685, at December 31, 2020, a total of $488,544 has been included in accounts and interest payable on the Consolidated Balance Sheet. Additional interest of $18,811 was accrued during the year ended December 31, 2021, bringing the total to $507,365 which is included in accounts and interest payable on the Consolidated Balance Sheet.

On August 30, 2021, the Panel issued the Second Partial Final Award and the Modified Second Interim Award re Dissolution/Liquidation of GNP and Related Issues. These Awards were administrative and clarifying in nature, and had no financial effects on the previous rulings.

Finally, if the Superior Court of Alaska determines that GNP or any other entity is the “prevailing party” of the Superior Court proceedings, the Company will likely also be liable for a percentage (most likely 20%) of some or all of the prevailing party’s attorney’s fees for those matters adjudicated before the Court. The likelihood of such a ruling, the amount thereof and the determination of a percentage of the fees cannot be presently estimated.