NOTE

9–

OPTIONS AND WARRANTS TO PURCHASE COMMON STOCK

Outstanding Stock Warrants

A summary of the status and changes of the warrants issued for the

three

months ended

2018:

	Shares Issuable upon exercise of
	upon Exercise of			Weighted Average
	Outstanding Warrants			Exercise Price

Outstanding at January 1, 2018		18,813,373		$	0.14
Issued		---			--
Exercised		(500,000	)	$	0.04
Forfeited		--			--
Outstanding at March 31, 2018		18,313,373		$	0.14

A summary of the status of the warrants outstanding and exercisable at

March 31, 2018

is presented below:

		Warrants Outstanding and Exercisable
		Shares Issuable		Weighted Average
		upon Exercise of		Remaining		Weighted Average
Exercise Price		Outstanding Warrants		Contractual Life (years)		Exercise Price
$	1.15		461,340		3.1	$	1.15
$	0.25		3,283,283		3.2	$	0.25
$	0.04		3,568,750		4.5	$	0.04
$	0.10		11,000,000		4.7	$	0.10
			18,313,373		4.4	$	0.14

Outstanding Stock Options

November 20, 2012,

the shareholders of the Company approved the adoption of the Applied Minerals, Inc.

2012

Long-Term Incentive Plan (“LTIP”) and the Short-Term Incentive Plan (“STIP”) and the performance criteria used in setting performance goals for awards intended to be performance-based. Under the LTIP,

8,900,000

shares are authorized for issuance. The STIP does

not

refer to a particular number of shares under the LTIP, but would use the shares authorized in the LTIP for issuance under the STIP. The CEO, the CFO, and named executive officers, and directors, among others are eligible to participate in the LTIP and STIP. Prior to the adoption of the LTIP and STIP, stock options were granted under individual arrangements between the Company and the grantees, and approved by the Board of Directors.

May, 2016,

the Company adopted the

2016

Long-Term Incentive Plan (

“2016

LTIP”). The number of shares of common stock for issuance or for reference purposes subject to the

2016

LTIP was

2,000,000.

December 7, 2016,

the stockholders of the Company approved the

2016

Incentive Plan. The purpose of the

2016

Incentive Plan is to enhance the profitability and value of the Company for the benefit of its stockholders by enabling the Company to offer eligible employees, consultants, and non-employee directors incentive awards in order to attract, retain and reward such individuals and strengthen the mutuality of interests between such individuals and the Company’s stockholders. The aggregate number of shares of Common Stock that

may

be issued or used for reference purposes under the

2016

Incentive Plan or with respect to which awards

may

be granted

may

not

exceed

15,000,000

shares, which

may

be either (i) authorized and unissued Common Stock or (ii) Common Stock held in or acquired for the treasury of the Company.

The Compensation Committee of the Company Board of Directors has full authority to administer and interpret the

2016

Incentive Plan, to grant awards under the

2016

Incentive Plan, to determine the persons to whom awards will be granted, to determine the types of awards to be granted, to determine the terms and conditions of each award, to determine the number of shares of Common Stock to be covered by each award and to make all other determinations in connection with the

2016

Incentive Plan and the awards thereunder as the Committee, in its sole discretion, deems necessary or desirable.

December 14, 2017,

the Board of Directors approved the

2017

Incentive Plan (

“2017

IP”). Forty million (

40,000,000

) shares of Common Stock are subject to the

2017

IP.

The fair value of each of the Company's stock option awards is estimated on the date of grant using the Black-Scholes option-pricing model that uses the assumptions noted in the table below. Expected volatility is based on an average of historical volatility of the Company's common stock. The risk-free interest rate for periods within the contractual life of the stock option award is based on the yield curve of a

zero

-coupon U.S. Treasury Bond on the date the award is granted with a maturity equal to the expected term of the award.

The significant assumptions relating to the valuation of the Company's options issued during the

three

months ended

March 31, 2018

were as follows on a weighted average basis:

Dividend Yield		0%
Expected Life (in years)	2.90	–	2.92
Expected Volatility	163.19%	–	163.46%
Risk Free Interest Rate		2.38%

A summary of the status and changes of the options granted under stock option plans and other agreements during the

three

months ended

March 31, 2018:

	Shares Issued			Weighted
	Upon Exercise of			Average
	Options			Exercise Price

Outstanding at December 31, 2017		57,057,768		$	0.36
Granted		3,000,000		$	0.12
Exercised		--			--
Forfeited		(232,645	)		1.36
Outstanding at March 31, 2018		59,825,123		$	0.35

During the

three

months ended

March 31, 2018,

the Company granted

3,000,000

options to purchase the Company’s common stock with a weighted average exercise price of

$0.12.

The options vest monthly through

January, 2019.

A summary of the status of the options outstanding at

March 31, 2018

is presented below:

Options Outstanding					Options Exercisable
Number Outstanding	Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price

34,475,000		9.70	$	0.06		22,808,336	$	0.06
545,289		9.73	$	0.075		211,955	$	0.075
3,000,000		4.86	$	0.12		249,999	$	0.12
500,000		3.38	$	0.16		500,000	$	0.16
81,395		5.89	$	0.21		81,395	$	0.21
100,000		2.47	$	0.22		100,000	$	0.22
1,066,155		3.12	$	0.24		1,066,155	$	0.24
2,087,500		4.54	$	0.25		2,087,500	$	0.25
35,595		5.04	$	0.27		35,595	$	0.27
474,815		6.11	$	0.28		474,815	$	0.28
234,506		4.89	$	0.285		234,506	$	0.285
81,522		2.81	$	0.30		81,522	$	0.30
200,000		6.88	$	0.66		200,000	$	0.66
150,000		6.86	$	0.68		150,000	$	0.68
7,233,277		0.75	$	0.70		7,233,277	$	0.70
488,356		7.13	$	0.73		371,666	$	0.73
3,104,653		3.90	$	0.83		3,104,653	$	0.83
975,000		6.20	$	0.84		975,000	$	0.84
300,000		5.39	$	1.10		300,000	$	1.10
300,000		5.24	$	1.15		300,000	$	1.15
115,000		2.99	$	1.35		115,000	$	1.35
300,000		4.15	$	1.55		300,000	$	1.55
3,077,060		4.64	$	1.66		3,077,060	$	1.66
900,000		3.39	$	1.90		900,000	$	1.90
59,825,123		7.11	$	0.35		44,958,434	$	0.44

December 14, 2017,

the Company’s management was granted performance-based options to purchase

27.5

million shares of the Company’s common stock at

$0.06

per share. The options expire on

December 13, 2027.

December 31, 2017,

the

first

fifty

percent (

50%

) of the performance-based options vested as management was able to (i) close the sale of an aggregate of

$600,000

of units (consisting of a share of common stock of the Company and a warrant to buy

0.25

of a share of common stock of the Company) at

$0.04

per unit and (ii) establish toll processing arrangements with

two

toll processors of halloysite that, in management’s good faith belief, can process halloysite to the Company’s specifications. An additional

twenty-five

percent (

25%

) of the performance-based options vested on

February 1, 2018

when management generated

$900,000

of additional cash proceeds through (i) the sale of common stock and (ii) the licensing of a right to explore the Dragon Mine property for certain precious metals. The vesting of the remaining

8.3%,

8.3%

and

8.4%

of the performance-based options occurs when (i) EBITDA is positive over a

twelve

-month period, (ii) EBITDA is at or greater than

million over a

twelve

-month period and (iii) EBITDA is at or greater than

million over a

twelve

-month period, respectively. At

March 31, 2018,

the achievement of the performance targets was

not

deemed probable.

Compensation expense of

$583,000

has been recognized for the vested options for the

three

months ended

March 31, 2018.

The aggregate intrinsic value of the outstanding options at

March 31, 2018

was

$5,154,661.

March 31, 2018, (

$600,173

of unamortized compensation expense for time-based unvested options will be recognized over the next

0.78

years on a weighted average basis; and (ii)

$354,750

of unamortized compensation expense for performance-based unvested options will be recognized as the achievement of the performance targets becomes probable.