Paramount Gold Nevada Corp 10-Q for FY2023 Q1
Paramount Gold Nevada Corp. (PZG)
About this 10-Q
Paramount Gold Nevada Corp filed this 10-Q on November 10, 2022, covering the quarter ended September 30, 2022 (FY2023 Q1).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $1.84M
- compared with a net loss of $1.91M a year earlier
- Diluted EPS
- -$0.04
- compared with -$0.05 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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Registrant’s telephone number, including area code: (
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 7, 2022 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, 2022 and June 30, 2022(Unaudited) |
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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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18 |
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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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22 |
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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 bond |
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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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— |
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Convertible debt, related parties |
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— |
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Total Current Liabilities |
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Non-Current Liabilities |
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Convertible debt |
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— |
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Convertible debt, related parties |
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— |
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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 11) |
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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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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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2022 |
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2021 |
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Expenses |
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Exploration |
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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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Insurance |
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Depreciation |
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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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$ |
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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, 2022 |
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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 payment of interest |
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Net loss |
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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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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, 2021 |
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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 financing |
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Capital issued for payment of interest |
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Net loss |
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— |
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Balance at September 30, 2021 |
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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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2022 |
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2021 |
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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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— |
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Change in reclamation bonds accounts |
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— |
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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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Purchase of equipment |
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— |
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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, 2022 and 2021
(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 Company faces various risks related to the COVID-19 global pandemic. The Company’s primary goal during the COVID-19 pandemic is to safeguard the health of our employees, suppliers and the communities where we operate while minimizing business interruption. To date, COVID-19 pandemic has not had a material impact on our business however because of the highly uncertain and dynamic nature of events relating to the COVID-19 pandemic, it is not currently possible to predict any future impact of the COVID-19 pandemic, but these impacts could have a material adverse effect on the business, financial position, results of operations and/or cash flows. We will continue to monitor the COVID-19 situation closely.
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, 2022.
Significant Accounting Policies
Please see Note 1- Description of Business and Summary of Significant Accounting Policies contained in the 2022 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 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 with one year after the date of 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.
6
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 10, 2022, the Company expects to fund operations as follows:
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 the convertible notes which become due in September 2023. 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.
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 and convertible debt. Due to their short maturity of our cash, accounts payable and accrued liabilities, we believe that their carrying amounts approximate fair value as of September 30, 2022 and 2021. 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, 2022, the Company issued
Note 5. Capital Stock
Authorized Capital
Authorized capital stock consists of
For the three months ended September 30, 2022, the Company issued
7
For the three months ended September 30, 2021, the Company issued
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, 2022 and 2021 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, 2022, the Company granted
The fair value for these options was 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, 2022 |
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Three Months Ended September 30, 2021 |
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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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Expected dividends |
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Weighted average expected term (years) |
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Weighted average fair value |
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$ |
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For the three months ended September 30, 2022, 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, 2022 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, 2021 |
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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 June 30, 2022 |
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$ |
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$ |
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Granted |
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$ |
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Exercised |
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Forfeited or expired |
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Outstanding at September 30, 2022 |
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$ |
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$ |
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Exercisable at September 30, 2022 |
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$ |
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$ |
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8
A summary of the status of Paramount’s non-vested options as at September 30, 2022 is presented below:
Non-vested Options |
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Options |
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Weighted- |
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Non-vested at June 30, 2021 |
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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 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 September 30, 2022 |
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$ |
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As of September 30, 2022, 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, 2022, there were
For the three months ended September 30, 2022, share-based compensation expenses related to service condition RSUs and performance condition RSUs was $
A summary of RSUs activity is summarized as follows:
Restricted Share Unit Activity |
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Outstanding RSUs |
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Weighted average grant date fair value |
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Outstanding at June 30, 2021 |
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$ |
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Granted |
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Vested |
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— |
|
Forfeited |
|
|
— |
|
|
|
— |
|
Outstanding at June 30, 2022 |
|
|
|
|
$ |
|
||
Granted |
|
|
— |
|
|
$ |
— |
|
Vested |
|
|
— |
|
|
|
— |
|
Forfeited |
|
|
— |
|
|
|
— |
|
Outstanding at September 30, 2022 |
|
|
|
|
$ |
|
||
As of September 30, 2022, there was approximately $
Note 6. Convertible Debt
|
|
Debt |
|
|||||||||||||
|
|
September 30, 2022 |
|
|
June 30, 2022 |
|
||||||||||
|
|
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
will be convertible at a price of $
During the three months ended September 30, 2022, there were
As of September 30, 2022, there were
Note 7. Mineral Properties
The Company has capitalized acquisition costs on mineral properties as follows:
|
|
September 30, 2022 |
|
|
June 30, 2022 |
|
||
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, 2022 and September 30, 2021, 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 8. 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.
The Company has posted several cash bonds as financial security to satisfy reclamation requirements. The balance of posted cash reclamation bonds at September 30, 2022 is $
Paramount is responsible for managing the reclamation activities from the previous mine operations at the Sleeper Gold Mine as directed by the Bureau of Land Management ("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 $
10
The following variables were used in the calculation for the periods ending September 30, 2022 and June 30, 2022:
|
|
Three Months Ended |
|
|
Year Ended June 30, 2022 |
|
||
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, 2022 and the year ended June 30, 2022 are as follows:
|
|
Three Months Ended |
|
|
Year Ended June 30, 2022 |
|
||
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 $
Note 9. Other Income
The Company’s other income details for the three months ended September 30, 2022 and 2021 were as follows:
|
|
Three Months Ended September 30, 2022 |
|
|
Three Months Ended |
|
||
Re-imbursement of reclamation costs |
|
$ |
— |
|
|
$ |
|
|
Leasing of water rights to third party |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Note 10. Segmented Information
Segmented information has been compiled based on the material mineral properties in which the Company performs exploration activities.
Expenses and mineral property carrying values by material project for the three months ended September 30, 2022:
|
|
Exploration |
Land Holding |
|
|
|
|
|||||
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
Mineral Properties at September 30, 2022 |
|
|||
Sleeper Gold Project and other Nevada based Projects |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Grassy Mountain Project and other Oregon based Projects |
|
|
|
|
|
|
|
|
|
|||
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
11
Expenses for the three months ended September 30, 2021 and mineral property carrying values at June 30, 2022 by material project:
|
|
Exploration |
Land Holding |
|
|
|
|
|||||
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
Mineral Properties As at June 30, 2022 |
|
|||
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 exception of accretion expense which is discussed in Note 8.
Note 11. Commitments and Contingencies
Other Commitments
Paramount has an agreement to acquire
Paramount has an agreement with Nevada Select Royalty (“Nevada Select”) to purchase
The Company has an agreement with Nevada Select to purchase the Bald Peak mining claims in the State of Nevada and California for a total consideration of $
12
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 October 13, 2022. 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 U.S. Securities and Exchange Commission (“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, 2022 and compares these results to the results of the prior year three months ended September 30, 2021.
Operating Highlights:
For the three months ended September 30, 2022, the Company continued with its permitting at its Grassy Mountain Project. Highlights include:
13
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 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.
Having accomplished many of the activities we outlined in our Annual Report on Form 10-K for the year ended June 30, 2022, the Company now expects to undertake the following activities in the next several months:
Grassy Mountain Project:
Paramount expects to continue with both state and federal permitting activities for its proposed underground gold mine. With 22 baseline studies approved and accepted by the State of Oregon and the submitted modified CPA, the Company will continue working with the appropriate permitting agencies to ensure a complete permit application. Once the State of Oregon determines that the CPA is complete it will proceed to the drafting permits process which includes issuing an environmental evaluation and socio-economic impact analysis and the drafting of all relevant permits for the project. Under Oregon law the drafting permits process, which includes public notice and public hearing period, must be completed within 225 days. Subsequent to the drafting permit process if draft permits are issued, up to an additional 120 days is provided for further public consultation and the development and distribution of final permits. The costs incurred by the State of Oregon for the drafting permit and final permit processes will be reimbursed by the Company directly through cost recovery invoices received from the Oregon Department of Geology and Mineral Industries or by permit fees established by individual permitting agencies. In addition to the state incurred costs, the Company will engage with its permitting and technical advisors and consultants to respond to any further information requests from the State's permitting agencies.
With respect to federal permitting, once the Notice is registered and the Environmental Impact Statement has commenced, Paramount will also engage with its permitting and technical advisors to assist in the process.
Sleeper Gold Project:
In completing the Sleeper TRS, the Company undertook a comprehensive review of the project’s database which included over 4,000 drill holes dating back to the early 1980s from the time of the first discovery of mineralization to when the mine was closed in 1996. Given the lack of digitization of the original drill hole database, the Company has, under the direction of QP RESPEC Company LLC, engaged in digitizing and re-verifying the entire Sleeper database.
Once the data verification is complete and a higher confidence level can be applied to the resources and allowing for additional 3D modeling, Paramount will continue to advance the evaluation of Sleeper to update the Initial Assessment in 2023.
COVID-19 Update
Paramount continues to monitor the evolution of the COVID-19 pandemic and continues to evaluate its business activities and plans. Our priority is to ensure the health and safety of our employee and consultants. We continue to perform the majority of our activities remotely with a limited amount of on-site or in-office attendance only when required.
Comparison of Operating Results for the three months ended September 30, 2022 and 2021
Results of Operations
We did not earn any revenue from mining operations for the three months ended September 30, 2022 and 2021.
Net Loss
Our net loss for the three-months ended September 30, 2022 was $1,840,216 compared to a net loss of $1,913,746 in the previous three-month period ended September 30, 2021. The drivers of the decrease in net loss of 4% 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, 2022 and 2021, exploration expenses were $839,594 and $1,256,805, respectively. This represents a decrease of 33% or $417,211. Expenses as they relate 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
14
permitting activities with state and federal permitting agencies and completed a TRS on the property. These expenses totaled $398,250. At Sleeper, the Company re-assayed historical drill holes, digitized and re-verified its geological database and completed a TRS on the property for total expenses of $441,344. In the prior year comparable period the Company focused its efforts on preparing its modified permit applications for the Grassy Mountain Project, completed a drill program at its Frost property and incurred expenses related to reclamation activities its Sleeper Gold Project.
For the three months ended September 30, 2022 and 2021, land holding costs were $161,055 and $141,193, respectively. The increase of land holding costs was primarily due to the acquisition of Bald Peak Project in Nevada.
Salaries and Benefits
For the three-month period ended September 30, 2022, salary and benefits increased by 33% or by $76,625 to $307,374 from the prior year’s three-month period ended September 30, 2021. Salary and benefits are comprised of cash and stock-based compensation of the Company’s executive and corporate administration teams. The increase primarily reflects higher stock-based compensation that was recorded during the three-month period ended September 30, 2022 compared to the three-month period ended September 30, 2021. Included in the salary and benefits expense amount for the three months ended September 30, 2022 and 2021 was a non-cash stock-based compensation of $105,171 and $42,671, respectively.
Directors’ Compensation
For the three-month period ended September 30, 2022, directors’ compensation increased by 155% or by $21,504 to $35,341 from the three-month period ended September 30, 2021. Directors’ compensation consists of cash and stock-based compensation of the Company’s board of directors. The increase reflects higher stock-based compensation recorded in the current quarter compared to the prior year’s comparable period and the addition of one new board member.
Professional Fees and General and Administration
For the three months ended September 30, 2022 and 2021, professional fees were $133,328 and $44,963, respectively. This represents an increase of 197% or $88,365. The increase was mainly due to recording the audit fees for the fiscal year ended June 30, 2022 after engaging the Company's new auditor in the current period. Professional fees included legal, 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, 2022, general and administration expenses decreased by 14% to $103,309 from $119,863 from the three-month period ended September 30, 2021. The decrease in general and administration expenses from the previous year’s comparable period was mainly due to reduced office related expenses.
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, 2022, we had cash and cash equivalents of $1,271,450 compared to $2,484,156 as at June 30, 2022. 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, 2022, the Company did not issue any shares under the program.
The main uses of cash for the three months ended September 30, 2022 was:
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 many be unable to meet its obligations as they become due with one year after the date of 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 $4.3 million in capital to repay the 2019 convertible notes which become due in September 2023.
We anticipate our twelve-month cash expenditures to be as follows:
15
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 10, 2022, the Company expects to fund operations as follows:
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 the convertible notes which become due in September 2023. 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, stock-based compensation, asset retirement obligations and foreign currency translation.
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 a 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 expenses as incurred.
Stock Based Compensation
For stock option grants with market conditions that affect vesting, the Company uses a lattice approach incorporating a Monte Carlo simulation to value stock options granted.
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 5 years. To better align the interests of its key executives, employee and directors with those of its shareholders a significant portion of those share option awards will vest contingent upon meeting certain stock price appreciation performance goals and other performance conditions. Option and share awards provide for accelerated vesting if there is a change in control (as defined in the employee share option plan). For stock option grants made in the fiscal years ended June 30, 2021, the Company used the Black-Scholes option valuation model to value stock options granted. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The
16
model requires management to make estimates which are subjective and may not be representative of actual results. Changes in assumptions can materially affect estimates of fair values.
Use of 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 to long-lived assets and asset retirement obligations. 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.
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, 2022.
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 March 31, 2022, 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 10, 2022 |
|
By: |
/s/ Rachel Goldman |
|
|
|
Rachel Goldman |
|
|
|
Chief Executive Officer |
|
|
|
|
Date: November 10, 2022 |
|
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 10, 2022 |
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 10, 2022 |
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, 2022 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 10, 2022 |
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, 2022 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 10, 2022 |
By: |
|
/s/ Carlo Buffone |
|
|
|
Carlo Buffone |
|
|
|
Chief Financial Officer |