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, 2021, as filed with the SEC on April 14, 2022.

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 this 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.

As used in this Quarterly Report on Form 10-Q and unless otherwise indicated, the terms "Company," "we," "us," and "our" refer to American Clean Resources Group, Inc., and its wholly owned subsidiary, Aurielle Enterprises Inc. ("AE"), and AE's wholly owned subsidiaries Tonopah Custom Processing, Inc. ("TCP") and Tonopah Resources, Inc. ("TR"). Unless otherwise specified, all dollar amounts are expressed in United States dollars.





Corporate History

We were incorporated in the State of Colorado on July 10, 1985, and re-domiciled in Nevada in March 2013. In 2011, we closed a series of transactions, whereby we acquired certain assets of Shea Mining & Milling, LLC, 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 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. Effective June 17, 2022, the Company's name was changed from Standard Metals Processing, Inc. to American Clean Resources Group, Inc., the number of authorized shares of Common Stock of the Company was increased to one billion shares (1,000,000,000) and the number of authorized shares of Preferred Stock of the Company was increased to one hundred ten million (110,000,000) of which ninety million (90,000,000) will be classified as "blank check preferred" (the "Authorized Increase"). For additional information see the Form DEF 14C filed with the Securities and Exchange Commission on May 20, 2022.





Overview of the Company

We have an office in Gadsden, Alabama and, through a subsidiary, a property in Tonopah, Nevada. Our business plan is to purchase equipment and build a facility on the Tonopah property to serve as a permitted custom processing toll milling facility which includes an analytical lab, pyrometallurgical 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 Nevada Department of Environmental Protection

Through the Company's wholly owned subsidiary, 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.

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.

Advanced Surveying & Professional Services, a 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 1,186 acres. The scope of work the 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 Auto Cad software.





Site Preparation

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 preparation of our planned 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. We have also refurbished a trailer that will act as our construction office.





Business Plan

The Company is reexamining its next steps for developing a processing facility. In an effort to move the Company's business plan forward, the Company may evaluate opportunities to acquire, license, or joint venture with other parties involved in toll milling, processing, or mining related activities, which may include GPR and its affiliated entities including, but not limited to, Sustainable Metal Solutions, LLC ("SMS"), Remedy Environmental LLC, and Black Bear Natural Resources, LTD.





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The Company owns certain tailings located on the Tonopah property and the rights to some tailings located in Manhattan, Nevada. The Company has not disturbed or processed any of this material, but recently authorized GPR to examine the economic feasibility of processing the tailings to reclaim their residual content of valuable metals in exchange for the exclusive right to process the tailings should their economic assessment prove positive. The terms of such processing to be mutually agreed upon between GPR and the Company in the future based on the results of the assessment. In addition, the Company and Sustainable Metal Solutions, LLC ("SMS"), an affiliate of GPR, agreed to form a joint venture into which the Company will contribute the solar energy rights attributable to its 1,086 acres in exchange for SMS's agreement to develop, manage and underwrite the venture.





Products and Services

We plan to establish ourselves as a custom processing and 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 obtain a permit for 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 sorely needing 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, we will be in a unique position among processing facilities because we plan to be 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 dearly needed milling and processing services. Some of our mining customers will be able to take their tailings (the material left over after the initial processing extracts most minerals) from the material they deposited with the Company for secondary recovery and return those tailings to the same mines the tailings originally came from. Thereby eliminating the need for the Company to store or dispose of their voluminous remains.





Results of Operation

Comparison of Nine Months Ended September 30, 2022, to the Nine Months Ended September 30, 2021





Revenues

We had no revenues from any operations for the nine months ended September 30, 2022, and 2021. Furthermore, we do not anticipate any significant future revenue until we have sufficiently funded construction and begin operations.

General and Administrative Expenses

General and administrative expenses were $462,061 for the nine months ended September 30, 2022, as compared to $595,415 for the same period in 2021. During 2021, the $595,415 represented the Company's completion of substantially all the engineering, test drilling, and independent lab analysis to characterize mineral content on the Company's tailings which cover approximately 30% of its 1,184 acres. The $462,061 during the nine months ended September 30, 2022, was principally a result of a reduction in engineering and development expenses necessary in evaluating the future uses of the Company's property as much of that evaluation was completed in the prior year.





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Other Income and Expenses

We receive monthly lease payments of from American Tower Corporation for a cellular tower located on our Tonopah land. As such Other Income for the nine months ended September 30, 2022, was $6,296 compared to $6,296 for the respective period in 2021. Additionally, gain on derecognition of debt for the nine months ended September 30, 2022, was $15,138 compared to $29,353 for the respective period in 2021.

Interest expense for the nine ended September 30, 2022, was $558,004 compared to $509,449 for the same period in 2021. The increase of $48,555 in the current period was consistent with the balances of debt between periods.

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 increases in convertible debt pursuant to our LOC during the nine months ended September 30, 2022, and 2021. 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 $12,296,039 at September 30, 2022. Cash was $849 at September 30, 2022, as compared to cash of $2,363 at December 31, 2021.

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 $50,000 per month. Above the basic operational expenses, we estimate that we need approximately $15,000,000 to begin limited toll milling operations. If we are not able to raise additional working capital, we may have to cease operations altogether.





Recent Financings

On March 16, 2020, the Company executed a Line of Credit ("LOC") with GPR, a related party, evidenced by a convertible promissory note. The LOC is for up to $2,500,000, matures over three years, bears interest at 10% per annum, is convertible into shares of the Company's common stock at a per share price of $1.65, and is secured by the real and personal property of the Company and its subsidiaries, and the pledged securities GPR already has under lien. The LOC is for funding operating expenses critical to the Company's basic operations and redirection, and all requests for funds may be approved or disapproved in GPR's sole discretion.

During the nine months ended September 30, 2022, GPR advanced $395,496 to pay directly on the Company's behalf, certain administrative costs as well as engineering and development expenses to assess the future uses of the Company's real property. During the nine months ended September 30, 2021. GPR advanced $580,828 which it used to pay directly certain of the Company's providers of administrative expenses. The advances were made by GPR, a related party, pursuant to the terms of our LOC.





Going Concern

The condensed consolidated financial statements contained in this quarterly report on Form 10-Q have been prepared assuming that the Company will continue as a going concern. The Company has accumulated losses from inception through the period ended September 30, 2022, of $106,476,487 and a working capital deficit of $12,296,039, as well as negative cash flows from operating activities. Presently, the Company does not have sufficient cash resources to meet its debt obligations in the twelve months following the date of this filing. In addition, virtually all of the Company's assets are encumbered or pledged under senior secured debts that are in default. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management is in the process of evaluating various financing alternatives to fund its capital requirements, as well as for general and administrative expenses. These alternatives include raising funds through public or private equity markets and either through institutional or retail investors. Although there is no assurance that the Company will be successful with its fund-raising initiatives, management believes that the Company will be able to secure the necessary financing providing it is successful in resolving its liabilities and other claims with its unsecured creditors and GPR's assistance.





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The consolidated financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependent on its ability to obtain additional financing as may be required and ultimately to attain profitability. If the Company raises additional funds through the issuance of equity, the percentage ownership of current shareholders would likely be reduced, and such securities might have rights, preferences or privileges senior to the rights, preferences, and privileges of the Company's 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 would significantly and materially restrict its future. If the Company is unable to resolve the claims of its unsecured creditors, the Company may have to cease operations.





                             September 30,      December 31,
Working Capital Deficiency        2022              2021
Current assets               $          849     $       2,363
Current liabilities              12,296,888        11,299,771

Working capital deficiency $ (12,296,039 ) $ (11,297,408 )

The balance and components of current assets are consistent between periods. The increase in current liabilities is primarily due to accrual of interest on settlement of lawsuits, creditor claims, and notes due related parties.





Cash Flows



                                                        Nine Months Ended
                                                          September 30,
                                                         2022          2021

Net provided by cash (used in) operating activities $ (1,514 ) $ 921 Net cash provided by financing activities

                     ---        ---
Increase (Decrease) in cash                           $    (1,514 )    $ 921




Operating Activities

Net cash (used in) provided by operating activities was $(1,514) and $921 for the nine months ended September 30, 2022, and 2021, respectively. The level of cash during both periods was primarily related to payments advanced under the LOC for operating expenses.





Financing Activities

For the nine months ended September 30, 2022, net cash provided by financing activities was $0. For the nine months ended September 30, 2021, net cash provided by financing activities was also $0.

Off-Balance Sheet Arrangements

During the nine months ended September 30, 2022, we did not engage in any off-balance sheet arrangements as defined in item 303(a)(4) of the SEC's Regulation S-K.





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Effects of Inflation

We do not believe that inflation has had a material impact on our business, revenues or operating results during the periods presented.

Critical Accounting Policies and Estimates

Our significant accounting policies are more fully described in the notes to our consolidated condensed financial statements included herein for the nine months ended September 30, 2022, and in the notes to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed April 14, 2022. We believe that the accounting policies below are critical for one to fully understand and evaluate our financial condition and results of operations.

Impairment of Long-lived Assets

We review our property and its mining, mineral, and water rights subject to amortization and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset class may not be recoverable. Indicators of potential impairment include: an adverse change in legal factors or in the business climate that could affect the value of the asset; an adverse change in the extent or manner in which the asset is used or is expected to be used, or in its physical condition; and current or forecasted operating or cash flow losses that demonstrate continuing losses associated with the use of the asset. If indicators of impairment are present, the asset is tested for recoverability by comparing the carrying value of the asset to the related estimated undiscounted future cash flows expected to be derived from the asset. If the expected cash flows are less than the carrying value of the asset, the asset is considered to be impaired and its carrying value is written down to fair value, based on the related estimated discounted cash flows. During the year ended December 31, 2018, we combined the carrying value of our real property, mining, mineral and water rights as they are inseparable and depend upon each other in value creation. See Note 3. There were no impairment charges in the nine months ended September 30, 2022.





Recent Accounting Standards

During the nine months ended September 30, 2022, and through the date of this filing, 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.

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