Paramount Gold Nevada Corp 10-Q for FY2024 Q1
Paramount Gold Nevada Corp. (PZG)
About this 10-Q
Paramount Gold Nevada Corp filed this 10-Q on November 9, 2023, covering the quarter ended September 30, 2023 (FY2024 Q1).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $2.07M
- compared with a net loss of $1.84M a year earlier
- Diluted EPS
- -$0.04
- compared with -$0.04 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
FOR THE TRANSITION PERIOD FROM TO
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(Exact name of registrant as specified in its charter)
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Indicate by check mark whether the registrant: (1) has 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares of registrant’s Common Stock outstanding, $0.01 par value per share, as of November 6, 2023 was
Securities registered pursuant to Section 12(b) of the Act:
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Table of Contents
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PART I |
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Item 1. |
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2 |
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Condensed Consolidated Interim Balance Sheets as of September 30, 2023 (Unaudited) and June 30, 2023 |
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3 |
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4 |
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5 |
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Notes to Condensed Consolidated Interim Financial Statements (Unaudited) |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II |
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Item 1A. |
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Item 4. |
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Item 6. |
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Signatures |
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i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
PARAMOUNT GOLD NEVADA CORP.
Condensed Consolidated Interim Balance Sheets
(Unaudited)
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September 30, |
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June 30, |
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Assets |
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Current Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Prepaid expenses and deposits |
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Total Current Assets |
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Non-Current Assets |
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Mineral properties |
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Reclamation bonds |
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Property and equipment |
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Total Non-Current Assets |
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Total Assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Liabilities |
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Current Liabilities |
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Accounts payable and accrued liabilities |
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$ |
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$ |
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Reclamation and environmental obligation, current portion |
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Convertible debt |
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Notes payable, related party |
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Total Current Liabilities |
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Non-Current Liabilities |
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Deferred tax liability |
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Reclamation and environmental obligation, non-current portion |
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Total Non-Current Liabilities |
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Total Liabilities |
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(Note 12) |
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Stockholders' Equity |
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Common stock, par value $ |
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Additional paid in capital |
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Accumulated deficit |
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Total Stockholders' Equity |
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Total Liabilities and Stockholders' Equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated interim financial statements.
2
PARAMOUNT GOLD NEVADA CORP.
Condensed Consolidated Interim Statements of Operations
(Unaudited)
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Three Months Ended September 30, |
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2023 |
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2022 |
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Expenses |
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Exploration |
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$ |
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$ |
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Land holding costs |
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Professional fees |
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Salaries and benefits |
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Directors' compensation |
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General and administrative |
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Accretion |
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Total Expenses |
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Net Loss Before Other Expense |
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Other Expense (Income) |
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Other income |
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Interest and service charges |
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Net Loss |
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$ |
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$ |
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Loss per Common Share |
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Basic and diluted |
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$ |
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Weighted Average Number of Common |
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Shares Used in Per Share Calculations |
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Basic and diluted |
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The accompanying notes are an integral part of these condensed consolidated interim financial statements.
3
PARAMOUNT GOLD NEVADA CORP.
Condensed Consolidated Interim Statements of Stockholders’ Equity
(Unaudited)
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Shares (#) |
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Common Stock |
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Additional |
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Deficit |
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Total Stockholders' |
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Balance at June 30, 2023 |
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$ |
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$ |
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$ |
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$ |
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Stock based compensation |
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— |
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— |
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— |
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Capital issued for financing |
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— |
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Capital issued for payment of interest |
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Net loss |
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— |
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— |
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Balance at September 30, 2023 |
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$ |
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$ |
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$ |
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Shares (#) |
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Common Stock |
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Additional |
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Deficit |
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Total Stockholders' |
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Balance at June 30, 2022 |
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$ |
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$ |
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$ |
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Stock based compensation |
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— |
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— |
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Capital issued for payment of interest |
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Net loss |
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— |
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— |
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Balance at September 30, 2022 |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated interim financial statements.
4
PARAMOUNT GOLD NEVADA CORP.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited)
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Three Months Ended September 30, |
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2023 |
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2022 |
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Net Loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash used in operations: |
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Depreciation |
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Stock based compensation |
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Amortization of debt issuance costs |
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Interest expense |
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Accretion expense |
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Settlement of asset retirement obligations |
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Effect of changes in operating working capital items: |
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(Increase)/Decrease in prepaid expenses |
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Increase/(Decrease) in accounts payable |
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Cash used in operating activities |
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Cash flows from investing activities: |
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Cash used in investing activities |
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— |
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Cash flows from financing activities |
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Capital issued for financing, net of share issuance costs |
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— |
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Cash provided by financing activities |
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— |
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Change in cash during period |
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Cash at beginning of period |
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Cash at end of period |
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$ |
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$ |
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See Note 4 for supplemental cash flow information
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
5
PARAMOUNT GOLD NEVADA CORP.
Notes to Condensed Consolidated Interim Financial Statements
For the Three Months Period Ended September 30, 2023 and 2022
(Unaudited)
Note 1. Description of Business and Summary of Significant Accounting Policies
Paramount Gold Nevada Corp. (the “Company” or “Paramount”), incorporated under Chapter 78 of Nevada Revised Statutes, and its wholly-owned subsidiaries are engaged in the acquisition, exploration and development of precious metal properties. The Company’s wholly owned subsidiaries include New Sleeper Gold LLC, Sleeper Mining Company, LLC, and Calico Resources USA Corp (“Calico”). The Company is in the process of exploring its mineral properties in Nevada and Oregon, United States. The Company’s activities are subject to significant risks and uncertainties, including the risk of failing to secure additional funding to advance its projects and the risks of determining whether these properties contain reserves that are economically recoverable. The Company’s shares of common stock trade on the NYSE American LLC under the symbol “PZG”.
Basis of Presentation and Preparation
The unaudited condensed consolidated interim financial statements are prepared by management in accordance with accounting principles for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, all the normal and recurring adjustments necessary to fairly present the interim financial information set forth herein have been included.
The condensed consolidated interim financial statements have been prepared on an accrual basis of accounting, in conformity with U.S. GAAP, are presented in US dollars and follow the same accounting policies and methods of their application as the most recent annual financial statements. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. The condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and related footnotes for the year ended June 30, 2023.
Significant Accounting Policies
Please see Note 1- Description of Business and Summary of Significant Accounting Policies contained in the 2023 10-K.
Note 2. Going Concern
The Company has not generated any revenues or cash flows from operations to date. As such the Company is subject to all the risks associated with development stage companies. Since inception, the Company has incurred losses and negative cash flows from operating activities which have been funded from the issuance of common stock, convertible notes, note payable and the sale of royalties on its mineral properties. The Company does not expect to generate positive cash flows from operating activities in the near future, if at all, until such time it successfully initiates production at its Grassy Mountain Project, including obtaining construction financing, completing the construction of the proposed mine and anticipates incurring operating losses for the foreseeable future.
The Consolidated Financial Statements of the Company have been prepared on a “going concern” basis, which means that the continuation of the Company is presumed even though events and conditions exist that, when considered in aggregate, raise substantial doubt about the Company’s ability to continue as a going concern because it is possible that the Company will be required to adversely change its current business plan or may be unable to meet its obligations as they become due within one year after the date that these financial statements were issued.
Paramount expects to continue to incur losses as a result of costs and expenses related to maintaining its properties and general and administrative expenses. Since 2015, the Company has relied on equity financings, debt financings and sale of royalties to fund its operations and the Company expects to rely on these forms of financing to fund operations into the near future. The Company will also continue to identify ways to reduce its cash expenditures.
Paramount’s current business plan requires working capital to fund non-discretionary expenditures for its exploration and development activities on its mineral properties, mineral property holding costs and general and administrative expenses. It also requires approximately $
Subsequent to November 9, 2023, the Company expects to fund operations as follows:
6
Historically, we have been successful in accessing capital through equity and debt financing arrangements or by the sale of royalties on its mineral properties, no assurance can be given that additional financing will be available to it in amounts sufficient to meet its needs, or on terms acceptable to the Company. In the event that we are unable to obtain additional capital or financing, our operations, exploration and development activities will be significantly adversely affected. The continuation of the Company as a going concern is dependent on having sufficient capital to maintain our operations and to repay debt which become due in November 2023 and September 2024. In considering our financing plans and our current working capital position the Company believes there is substantial doubt about its ability to continue as a going concern twelve months after the date that our financial statements are issued.
Note 3. Fair Value Measurements
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization with the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The three levels of the fair value hierarchy are described below:
Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 Inputs that are both significant to the fair value measurement and unobservable.
Financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
Our financial instruments include cash, accounts payable, accrued liabilities, notes payable and convertible debt. Due to their short maturity of our cash, accounts payable, notes payable and accrued liabilities, we believe that their carrying amounts approximate fair value as of September 30, 2023 and 2022. The carrying amount of convertible debt approximates fair value as the interest rate charged represents a market rate of interest.
Note 4. Non-Cash Transactions
For the three months ended September 30, 2023, the Company issued
For the three months ended September 30, 2022, the Company issued
Note 5. Capital Stock
Authorized Capital
Authorized capital stock consists of
For the three months ended September 30, 2023, the Company issued
For the three months ended September 30, 2022, the Company issued
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Stock Options, Restricted Stock Units and Stock Based Compensation
Paramount’s 2015 and 2016 Stock Incentive and Compensation Plans, which are stockholder-approved, permits the grant of stock options, restricted stock units and stock to its employees and directors for up to
Total stock-based compensation for the three months ended September 30, 2023 and 2022 were $
Stock Options
Stock option awards are generally granted with an exercise price equal to the market price of Paramount’s stock at the date of grant and have contractual lives of
For the three months ended September 30, 2023, the Company did
The fair value for these options were calculated using the Black-Scholes option valuations method. The weighted average assumptions used were as follows:
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Three Months Ended September 30, 2023 |
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Three Months Ended September 30, 2022 |
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Weighted average risk-free interest rate |
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N/A |
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Weighted-average volatility |
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N/A |
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Expected dividends |
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Weighted average expected term (years) |
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N/A |
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Weighted average fair value |
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N/A |
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$ |
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For the three months ended September 30, 2023, share-based compensation expense relating to service condition options and performance condition options was $
A summary of stock option activity under the Stock Incentive and Compensation Plans as of September 30, 2023 is presented below:
Options |
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Options |
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Weighted |
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Weighted- |
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Aggregate |
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Outstanding at June 30, 2022 |
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$ |
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Granted |
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Exercised |
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Forfeited or expired |
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Outstanding at June 30, 2023 |
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$ |
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$ |
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Granted |
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Exercised |
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— |
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Forfeited or expired |
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Outstanding at September 30, 2023 |
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$ |
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$ |
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Exercisable at September 30, 2023 |
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$ |
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$ |
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8
A summary of the status of Paramount’s non-vested options at September 30, 2023 is presented below:
Non-vested Options |
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Weighted- |
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Non-vested at June 30, 2022 |
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$ |
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Granted |
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Vested |
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Forfeited or expired |
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Non-vested at June 30, 2023 |
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$ |
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Granted |
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— |
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— |
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Vested |
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Forfeited or expired |
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Non-vested at September 30, 2023 |
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$ |
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As of September 30, 2023, there was approximately $
Restricted Stock Units ("RSUs")
RSUs are awards for service and performance which upon vesting and settlement entitle the recipient to receive one common share of the Company's Common Stock for no additional consideration, for each RSU held.
For the three months ended September 30, 2023 and 2022, there were no RSUs granted by the Company.
For the three months ended September 30, 2023, share-based compensation expenses related to service condition RSUs and performance condition RSUs was $
A summary of RSUs activity is summarized as follows:
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Outstanding RSUs |
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Weighted average grant date fair value |
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Outstanding at June 30, 2022 |
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$ |
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Granted |
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Vested |
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Forfeited |
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— |
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Outstanding at June 30, 2023 |
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$ |
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Granted |
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Vested |
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— |
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Forfeited |
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Outstanding at September 30, 2023 |
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$ |
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As of September 30, 2023, there was approximately $
Note 6. Convertible Debt
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Debt |
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September 30, 2023 |
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June 30, 2023 |
|
||||||||||
|
|
Current |
|
|
Non-Current |
|
|
Current |
|
|
Non-Current |
|
||||
2019 Secured Convertible Notes |
|
$ |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
|
||
Less: unamortized discount and issuance costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
In September 2019, the Company completed a private offering of
9
During the three months ended September 30, 2023, there were
As of September 30, 2023, there were
Note 7. Notes Payable, Related Party
On December 9, 2022, the Company issued a Bridge Promissory Note (the "Note") to Seabridge, an entity affiliated with the Chairman of our Board of Directors, Rudi Fronk, and an owner of approximately
At September 30, 2023, the balance of the loan including accrued interest was $
During the period ended September 30, 2023, an agreement between the Company and Seabridge was reached to extend the maturity of the Note to the earlier of
Note 8. Mineral Properties
The Company has capitalized acquisition costs on mineral properties as follows:
|
|
September 30, 2023 |
|
|
June 30, 2023 |
|
||
Sleeper and other Nevada based Projects |
|
$ |
|
|
$ |
|
||
Grassy Mountain and other Oregon based Projects |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Sleeper:
Sleeper is located in Humboldt County, Nevada, approximately 26 miles northwest of the town of Winnemucca.
Grassy Mountain:
The Grassy Mountain Project is located in Malheur County, Oregon, approximately 22 miles south of Vale, Oregon, and roughly 70 miles west of Boise, Idaho.
Impairment of Mineral Properties
The Company reviews and evaluates its long-lived assets for impairment on an annual basis or more frequently when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. For the three months ended September 30, 2023 and 2022, no events or changes in circumstance are believed to have impacted recoverability of the Company’s long-lived assets. Accordingly, it was determined that no interim impairment was necessary.
Note 9. Reclamation and Environmental
Reclamation and environmental costs are based principally on legal requirements. Management estimates costs associated with reclamation of mineral properties and properties under mine closure. On an ongoing basis the Company evaluates its estimates and assumptions; however, actual amounts could differ from those based on estimates and assumptions.
10
The Company has posted several cash bonds as financial security to satisfy reclamation requirements. The balance of posted cash reclamation bonds at September 30, 2023 is $
Paramount is responsible for managing the reclamation activities from the previous mine operations at the Sleeper Gold Mine as directed by the BLM and the Nevada State Department of Environmental Protection (“NDEP”). Paramount has estimated the undiscounted reclamation costs for existing disturbances at the Sleeper Gold Project required by the BLM to be $
The following variables were used in the calculation for the periods ending September 30, 2023 and June 30, 2023:
|
|
Three Months Ended |
|
|
Year Ended June 30, 2023 |
|
||
Weighted-average credit adjusted risk free rate |
|
|
% |
|
|
% |
||
Weighted-average inflation rate |
|
|
% |
|
|
% |
||
Changes to the Company’s reclamation and environmental costs for the Sleeper Gold Mine for the three month period ended September 30, 2023 and the year ended June 30, 2023 are as follows:
|
|
Three Months Ended |
|
|
Year Ended June 30, 2023 |
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
|
||
Accretion expense |
|
|
|
|
|
|
||
Additions and change in estimates |
|
|
— |
|
|
|
( |
) |
Settlements |
|
|
( |
) |
|
|
( |
) |
Balance at end of period |
|
$ |
|
|
$ |
|
||
The balance of the reclamation and environmental obligation of $
The Company recorded an accretion expense for the three month period ended September 30, 2023 of $
Note 10. Other Income
The Company’s other income details for the three months ended September 30, 2023 and 2022 were as follows:
|
|
Three Months Ended |
|
|
Three Months Ended |
|
||
Re-imbursement of reclamation costs |
|
$ |
|
|
$ |
- |
|
|
Leasing of water rights to third party |
|
|
|
|
|
|
||
Restitution payment |
|
|
|
|
|
— |
|
|
Total |
|
$ |
|
|
$ |
|
||
11
Note 11. Segmented Information
Segmented information has been compiled based on the material mineral properties in which the Company performs exploration activities.
Expenses by material project for the three months ended September 30, 2023:
|
|
|
|
|
|
|||
|
|
Exploration and Development Expenses |
|
|
Land Holding Costs |
|
||
Sleeper Gold Project and other Nevada based Projects |
|
$ |
|
|
$ |
|
||
Grassy Mountain Project and other Oregon based Projects |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|||
|
|
Exploration and Development Expenses |
|
|
Land Holding Costs |
|
||
Sleeper Gold Project and other Nevada based Projects |
|
$ |
|
|
$ |
|
||
Grassy Mountain Project and other Oregon based Projects |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Carrying values of mineral properties by material projects:
|
|
As of September 30, 2023 |
|
|
As of June 30, 2023 |
|
||
Sleeper Gold Project and other Nevada based Projects |
|
$ |
|
|
$ |
|
||
Grassy Mountain Project and other Oregon based Projects |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Additional operating expenses incurred by the Company are treated as corporate overhead with the exception of accretion expense which is discussed in Note 9.
Note 12. Commitments and Contingencies
Other Commitments
Paramount has an agreement to acquire
Paramount has an agreement with Nevada Select Royalty to purchase
The Company has an agreement with Nevada Select to purchase the Bald Peak mining claims in the States of Nevada and California for a total consideration of $
Seabridge Gold Inc. ("Seabridge") holds a Net Profit Interest ("NPI") put option in which during the 30-day period immediately following the day that the Company has delivered notice to Seabridge that a positive production decision has been made and construction financing has been secured with respect to the Grassy Mountain Project, Seabridge may cause the Company to purchase the NPI for CDN$
12
Note 13. Subsequent Events
Subsequent to the period end, the Company sold
13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Certain statements in this Quarterly Report on Form 10-Q (“Form 10-Q”) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give the Company's current expectations and forecasts of future events. All statements other than statements of current or historical fact contained in this quarterly report, including statements regarding the Company's future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” and similar expressions, as they relate to the Company, are intended to identify forward-looking statements. These statements are based on the Company's current plans, and the Company's actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Any or all of the forward-looking statements in this quarterly report may turn out to be inaccurate. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and assumptions. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-Q, and in the risk factors on Form 10-K that was filed with the U.S. Securities and Exchange Commission ("SEC") on September 26, 2023. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.
Cautionary Note to U.S. Investors
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and applicable Canadian securities laws, and as a result we report our mineral reserves and mineral resources according to two different standards. U.S. reporting requirements, for disclosure of mineral properties, are governed by Item 1300 of Regulation S-K (“S-K 1300”), as issued by the SEC. Canadian reporting requirements for disclosure of mineral properties are governed by National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”), as adopted from the definitions provided by the Canadian Institute of Mining, Metallurgy and Petroleum. Both sets of reporting standards have similar goals in terms of conveying an appropriate level of confidence in the disclosures being reported, but the standards embody slightly different approaches and definitions.
In our public filings in the U.S. and Canada and in certain other announcements not filed with the SEC, we disclose proven and probable reserves and measured, indicated and inferred resources, each as defined in S-K 1300. The estimation of measured resources and indicated resources involves greater uncertainty as to their existence and economic feasibility than the estimation of proven and probable reserves, and therefore investors are cautioned not to assume that all or any part of measured or indicated resources will ever be converted into S-K 1300-compliant reserves. The estimation of inferred resources involves far greater uncertainty as to their existence and economic viability than the estimation of other categories of resources, and therefore it cannot be assumed that all or any part of inferred resources will ever be upgraded to a higher category. Therefore, investors are cautioned not to assume that all or any part of inferred resources exist, or that they can be mined legally or economically.
Overview
We are a company engaged in the business of acquiring, exploring and developing precious metal projects in the United States of America. Paramount owns advanced stage exploration projects in the states of Nevada and Oregon. We enhance the value of our projects by implementing exploration and engineering programs that have the goal to expand and upgrade known mineralized material to reserves. The following discussion updates our outlook and plan of operations for the foreseeable future. It also analyzes our financial condition and summarizes the results of our operations for the three months ended September 30, 2023 and compares these results to the results of the prior year three months ended September 30, 2022.
Operating Highlights:
For the three months ended September 30, 2023, the Company highlights include:
Outlook and Plan of Operation:
We believe that investors will gain a better understanding of the Company if they understand how we measure and disclose our results. As a development stage company, we do not generate cash flow from our operations. We recognize the importance of managing our liquidity and capital resources. We pay close attention to all cash expenses and look for ways to minimize them when
14
possible. We ensure we have sufficient cash on hand to meet our annual land holding costs as the maintenance of mining claims and leases are essential to preserve the value of our mineral property assets.
Comparison of Operating Results for the three months ended September 30, 2023 and 2022
We did not earn any revenue from mining operations for the three months ended September 30, 2023 and 2022.
Net Loss
Our net loss for three months ended September 30, 2023, was $2,074,160 compared to a net loss of $1,840,216 in the previous three month period ended September 30, 2022. The drivers of the increase in net loss of 11% are fully described below.
The Company expects to incur losses for the foreseeable future as we continue with our planned exploration and development programs.
Expenses
Exploration and Land Holding Costs
For the three months ended September 30, 2023 and 2022, exploration expenses were $1,259,793 and $839,594, respectively. This represents an increase of 50% or $420,199. Expenses related to our exploration or development activities are generally not comparable from period to period as activities will vary based on several factors. At Grassy Mountain the Company continued with permitting activities with state and federal permitting agencies. These expenses totaled $322,226. At Sleeper, the Company completed an updated TRS and commenced converting several collection ponds from the previous mining operations to evaporation cells totaling $937,567 In the prior year comparable period, the Company focused its efforts on completing permit applications for the Grassy Mountain Project and incurred expenses related to reclamation activities its Sleeper Gold Project.
For the three months ended September 30, 2023 and 2022, land holding costs were $157,143 and $161,055, respectively. The decrease in land holding costs was primarily due to 2022 costs associated with staking additional mining claims with respect to the Bald Peak Project in Nevada.
Salaries and Benefits
For the three month period ended September 30, 2023 and 2022, salary and benefits were $279,596 and $307,374, respectively. This represents a decrease of 9%. Salary and benefits are comprised of cash and equity based compensation of the Company’s executive and corporate administration teams. The decrease primarily reflects lower equity based compensation that was recorded during the three month period ended September 30, 2023 compared to the three month period ended September 30, 2022. Included in the salary and benefits expense amount for the three months ended September 30, 2023 and 2022 was non-cash equity based compensation of $63,537 and $105,171, respectively.
Directors’ Compensation
For the three month period ended September 30, 2023 and 2022, directors’ compensation expenses were $29,033 and $35,341, respectively. This represents an decrease of 18%. Directors’ compensation consists of cash and stock-based compensation of the Company’s board of directors. The decrease reflects lower equity based compensation recorded in the current quarter compared to the prior year’s comparable period.
Professional Fees and General and Administration
For the three months ended September 30, 2023 and 2022, professional fees were $55,252 and $133,328, respectively. This represents a decrease of $78,076. The decrease was mainly due to less one-time consulting fees and legal fees incurred in the period and the recording of audit fees for our June 30, 2022 year end during the three months ended September 30, 2022. Professional fees include legal, audit, advisory and consultant expenses incurred on corporate and operational activities being performed by the Company on a period-by-period basis.
For the three month period ended September 30, 2023, general and administration expenses decreased by 16% to $133,632 from $159,174 from the three month period ended September 30, 2022. The decrease in general and administration expenses from the previous year’s comparable period was mainly due to lower insurance and travel costs.
Liquidity and Capital Resources
As an exploration and development company, Paramount funds its operations, reclamation activities and discretionary exploration programs with its cash on hand. At September 30, 2023, we had cash and cash equivalents of $1,014,128 compared to $824,920 as at June 30, 2023. We had negative working capital of approximately $7.7 million which is primarily attributed to our accounts payable and the current 2019 convertible notes, notes payable to Seabridge and our current reclamation and environmental obligation at
15
Sleeper. Our plans to address the negative working capital and improve our liquidity position are described below under Going Concern and Capital Resources.
In May 2020, the Company established an $8.0 million “at the market” equity offering program with Cantor Fitzgerald & Co. and Canaccord Genuity LLC to proactively increase its financial flexibility. During the three months ended September 30, 2023, the Company issued 3,515,257 shares under the program for net proceeds of $1,088,528. Subsequent to the period ended September 30, 2023, the Company sold 119,348 shares under the program for gross proceeds of $36,679.
During the period ended September 30, 2023, the Company entered into an amendment to its 2019 Convertible Notes with a majority of the note holders, to extend the maturity date of the 2019 Convertible Notes to be the earlier of (i) September 30, 2024 or (ii) the date of funding of the transaction contemplated by that a non-binding term sheet by an between the Company and Sprott Resource and Streaming Royalty Corp.
In December 2022, the Company issued the Note to Seabridge, an entity affiliated with the Chairman of our Board of Directors, Rudi Fronk, and an owner of approximately 4.6% of our outstanding common stock, pursuant to which the Company may borrow, in one or more advances, the principal amount of up to $1,500,000. The Loan bears interest at a per annum rate of 12%, payable upon maturity or prepayment, and originally matured on September 30 2023. The Company has the right to prepay the Loan, in whole or in part, at any time without penalty. As of September 30, 2023, the Company had borrowed $1,500,000 from Seabridge. During the three months ended September 30, 2023, the Company and Seabridge entered into an agreement to extend the maturity date of the Note to Seabridge to November 30, 2023 and increase the applicable annual interest rate to 13%.
The main uses of cash for the three months ended September 30, 2023 were:
In addition to cash used in operating activities, the Company received cash as follows:
Going Concern and Capital Resources
The Consolidated Financial Statements of the Company have been prepared on a “going concern” basis, which means that the continuation of the Company is presumed even though events and conditions exist that, when considered in aggregate, raise substantial doubt about the Company’s ability to continue as a going concern because it is possible that the Company will be required to adversely change its current business plan or may be unable to meet its obligations as they become due within one year after the date that these financial statements were issued.
Paramount expects to continue to incur losses as a result of costs and expenses related to maintaining its properties and general and administrative expenses. Since 2015, the Company has relied on equity financings, debt financings and sale of royalties to fund its operations and the Company expects to rely on these forms of financing to fund operations into the near future. The Company will also continue to identify ways to reduce its cash expenditures.
Paramount’s current business plan requires working capital to fund non-discretionary expenditures for its exploration and development activities on its mineral properties, mineral property holding costs and general and administrative expenses. It also requires approximately $6.0 million in capital to repay the 2019 convertible notes and the note payable to Seabridge which become due in September 2024 and November 2023 respectively.
We anticipate our twelve-month cash expenditures to be as follows:
We anticipate our twelve-month cash discretionary exploration and development, subject to available cash on hand as follows:
For the planned reclamation activities required by state and federal regulators at Sleeper, the Company expects that these expenditures will be reimbursed by insurance proceeds. For any interest that accrues and is owing on the outstanding convertible debt, the Company expects to elect to pay the semi-annual interest payment in shares of its Common Stock.
Subsequent to November 9, 2023, the Company expects to fund operations as follows:
16
Historically, we have been successful in accessing capital through equity and debt financing arrangements or by the sale of royalties on its mineral properties, no assurance can be given that additional financing will be available to it in amounts sufficient to meet its needs, or on terms acceptable to the Company. In the event that we are unable to obtain additional capital or financing, our operations, exploration and development activities will be significantly adversely affected. The continuation of the Company as a going concern is dependent on having sufficient capital to maintain our operations and to repay debt which become due in November 2023 and September 2024. In considering our financing plans, our current working capital position and our ability to reduce operating expenses the Company believes there is substantial doubt about its ability to continue as a going concern twelve months after the date that our financial statements are issued.
Critical Accounting Policies and Estimates
Management considers the following policies to be most critical in understanding the judgments that are involved in preparing the Company’s consolidated financial statements and the uncertainties that could impact the results of operations, financial condition and cash flows. Our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. Management believes the Company’s critical accounting policies are those related to mineral property acquisition costs, exploration and development cost, derivative accounting and foreign currency translation.
Estimates
The Company prepares its consolidated financial statements and notes in conformity to United States Generally Accepted Accounting Principles (“U.S. GAAP”) and requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, management evaluates these estimates, including those related the adequacy of the Company’s reclamation and environmental obligation, and assessment of impairment of mineral properties. Management bases these estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Mineral property acquisition costs
The Company capitalizes the cost of acquiring mineral properties and will amortize these costs over the useful life of a property following the commencement of production or expense these costs if it is determined that the mineral property has no future economic value or the properties are sold or abandoned. Costs include cash consideration and the fair market value of shares issued on the acquisition of mineral properties. Properties acquired under option agreements, whereby payments are made at the sole discretion of the Company, are recorded in the accounts of the specific mineral property at the time the payments are made.
The amounts recorded as mineral properties reflect actual costs incurred to acquire the properties and do not indicate any present or future value of economically recoverable reserves.
Exploration expenses
We record exploration expenses as incurred. When we determine that precious metal resource deposit can be economically and legally extracted or produced based on established proven and probable reserves, further exploration expenses related to such reserves incurred after such a determination will be capitalized. To date, we have not established any proven or probable reserves and will continue to expense exploration costs as incurred.
Asset Retirement Obligation
The fair value of the Company’s asset retirement obligation (“ARO”) is measured by discounting the expected cash flows using a discount factor that reflects the credit-adjusted risk free rate of interest, while taking into account the inflation rate. The Company prepares estimates of the timing and amounts of expected cash flows and ongoing reclamation expenditures are charged against the ARO as incurred to the extent they relate to the ARO. Significant judgments and estimates are made when estimating the fair value of ARO.
Off-Balance Sheet Arrangements
We are not currently a party to, or otherwise involved with, any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, or capital resources.
17
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable as a smaller reporting company.
18
Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) and determined that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q. The evaluation considered the procedures designed to ensure that the information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and communicated to our management as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control over Financial Reporting
During the period covered by this Quarterly Report on Form 10-Q, there was no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(d) and 13d-15(d) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
(c) Inherent Limitations of Disclosure Controls and Internal Controls over Financial Reporting
Because of its inherent limitations, disclosure controls and internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation or effectiveness to future periods are subject to risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
19
PART II – OTHER INFORMATION
Item 1A. Risk Factors.
There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended June 30, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
20
PART IV
Item 6. Exhibits.
Exhibit Number |
|
Description |
31.1* |
|
|
31.2* |
|
|
32.1* |
|
|
32.2* |
|
|
101.INS* |
|
Inline XBRL Instance Document -the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, has been formatted in Inline XBRL. |
* Filed herewith.
21
SIGNATURES
Pursuant to 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.
|
|
Paramount Gold Nevada Corp. |
|
|
|
|
|
Date: November 9 , 2023 |
|
By: |
/s/ Rachel Goldman |
|
|
|
Rachel Goldman |
|
|
|
Chief Executive Officer |
|
|
|
|
Date: November 9, 2023 |
|
By: |
/s/ Carlo Buffone |
|
|
|
Carlo Buffone |
|
|
|
Chief Financial Officer |
22
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Rachel Goldman, certify that:
Date: November 9, 2023 |
By: |
|
/s/ Rachel Goldman |
|
|
|
Rachel Goldman |
|
|
|
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Carlo Buffone, certify that:
Date: November 9, 2023 |
By: |
|
/s/ Carlo Buffone |
|
|
|
Carlo Buffone |
|
|
|
Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Paramount Gold Nevada Corp. (the “Company”) on Form 10-Q for the period ending September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: November 9, 2023 |
By: |
|
/s/ Rachel Goldman |
|
|
|
Rachel Goldman |
|
|
|
Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Paramount Gold Nevada Corp. (the “Company”) on Form 10-Q for the period ending September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: November 9, 2023 |
By: |
|
/s/ Carlo Buffone |
|
|
|
Carlo Buffone |
|
|
|
Chief Financial Officer |