Quarterly Report (10-q)

Date : 08/07/2019 @ 10:01AM
Source : Edgar (US Regulatory)
Stock : Golden Minerals Co (AUMN)
Quote : 0.2096  0.0 (0.00%) @ 12:28PM

Quarterly Report (10-q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

(MARK ONE)

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019.

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE TRANSITION PERIOD FROM                 TO                 

 

COMMISSION FILE NUMBER 1-13627

 

GOLDEN MINERALS COMPANY


(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 

 

 

 

DELAWARE

 

26-4413382

 

 

 

(STATE OR OTHER JURISDICTION OF

 

(I.R.S. EMPLOYER

INCORPORATION OR ORGANIZATION)

 

IDENTIFICATION NO.)

 

 

 

 

350 INDIANA STREET,  SUITE 800

 

 

GOLDEN,  COLORADO

 

80401

 

 

 

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

 

(ZIP CODE)

 

(303)  839-5060


(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

 

 

 

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

Tile of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.01 par value

AUMN

NYSE American

 

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:    Yes ☒   No ☐

 

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).   Yes ☒   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act :

 

Large accelerated filer 

Accelerated filer 

Non-accelerated filer     

Smaller reporting company 

Emerging growth company   

 

 

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 Act).  Yes      No   

 

At August 7, 2019,  106,734,279 shares of common stock, $0.01 par value per share, were issued and outstanding.

 

 

GOLDEN MINERALS COMPANY

FORM 10-Q

QUARTER ENDED JUNE 30, 2019

 

INDEX

 

 

 

2

PART I. FINANCIAL INFORMATIO N

 

Item 1. Financial Statement s

 

GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in United States dollars)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

    

2019

    

2018

 

 

 

(in thousands, except share data)

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents (Note 6)

 

$

1,839

 

$

2,934

 

Short-term investments (Note 6)

 

 

172

 

 

330

 

Prepaid expenses and other assets (Note 7)

 

 

300

 

 

354

 

Assets held for sale (Note 3)

 

 

4,601

 

 

5,068

 

Total current assets

 

 

6,912

 

 

8,686

 

Property, plant and equipment, net (Note 8)

 

 

3,246

 

 

3,389

 

Other long term assets (9)

 

 

976

 

 

569

 

Total assets

 

$

11,134

 

$

12,644

 

 

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable and other accrued liabilities (Note 10)

 

$

779

 

$

943

 

Other current liabilities (Note 11)

 

 

1,687

 

 

12

 

Liabilities related to assets held for sale (Note 3)

 

 

3,870

 

 

4,019

 

Total current liabilities

 

 

6,336

 

 

4,974

 

Other long term liabilities  (Note 11)

 

 

418

 

 

33

 

Total liabilities

 

 

6,754

 

 

5,007

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 17)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity (Note 14)

 

 

 

 

 

 

 

Common stock, $.01 par value, 200,000,000 shares authorized; 98,080,433 and 95,620,796 shares issued and outstanding respectively

 

 

980

 

 

955

 

Additional paid in capital

 

 

519,333

 

 

517,806

 

Accumulated deficit

 

 

(515,933)

 

 

(511,124)

 

Shareholders' equity

 

 

4,380

 

 

7,637

 

Total liabilities and equity

 

$

11,134

 

$

12,644

 

 

The accompanying notes form an integral part of these condensed consolidated financial statements.

 

3

GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in United States dollars)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

  

2019

  

2018

  

2019

  

2018

 

 

(in thousands except per share data)

 

(in thousands, except per share data)

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Exploration expense

 

 

(1,094)

 

 

(883)

 

 

(1,787)

 

 

(1,639)

El Quevar project expense

 

 

(686)

 

 

(281)

 

 

(1,001)

 

 

(553)

Administrative expense

 

 

(999)

 

 

(852)

 

 

(2,103)

 

 

(1,943)

Stock based compensation

 

 

(51)

 

 

(206)

 

 

(600)

 

 

(209)

Other operating income, net

 

 

62

 

 

221

 

 

103

 

 

1,451

Depreciation and amortization

 

 

(75)

 

 

(94)

 

 

(152)

 

 

(186)

Total costs and expenses

 

 

(2,843)

 

 

(2,095)

 

 

(5,540)

 

 

(3,079)

Income (loss) from operations

 

 

(2,843)

 

 

(2,095)

 

 

(5,540)

 

 

(3,079)

Other income and (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income (expense), net (Note 15)

 

 

(40)

 

 

112

 

 

(137)

 

 

115

Loss on foreign currency

 

 

 3

 

 

(24)

 

 

(33)

 

 

(49)

Total other income (loss)

 

 

(37)

 

 

88

 

 

(170)

 

 

66

Loss from continuing operations before income taxes

 

 

(2,880)

 

 

(2,007)

 

 

(5,710)

 

 

(3,013)

Income taxes

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 Loss from continuing operations

 

 

(2,880)

 

 

(2,007)

 

 

(5,710)

 

 

(3,013)

Discontinued operations (Note 3)

 

 

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations

 

 

421

 

 

318

 

 

901

 

 

589

  Net loss

 

$

(2,459)

 

$

(1,689)

 

$

(4,809)

 

$

(2,424)

Net income (loss) per common share — basic

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(0.03)

 

$

(0.02)

 

$

(0.06)

 

$

(0.03)

Income from discontinued operations

 

$

0.00

 

$

0.00

 

$

0.01

 

$

0.01

Net income (loss) per common share — diluted

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations (1)

 

$

(0.03)

 

$

(0.02)

 

$

(0.06)

 

$

(0.03)

Income from discontinued operations

 

$

0.00

 

$

0.00

 

$

0.01

 

$

0.01

Weighted average Common Stock outstanding - basic

 

 

97,144,467

 

 

93,681,301

 

 

96,466,982

 

 

92,709,238

Weighted average Common Stock outstanding - diluted

 

 

102,370,195

 

 

97,197,310

 

 

101,310,308

 

 

95,895,759


(1) Potentially dilutive shares have not been included because to do so would be anti-dilutive.

 

The accompanying notes form an integral part of these condensed consolidated financial statements.

 

4

GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in United States dollars)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

    

2019

    

2018

 

 

 

(in thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net cash used in operating activities from continuing operations (Note 16)

 

$

(2,988)

 

$

(3,845)

 

Net cash provided by operating activities from discontinued operations (Note 3)

 

 

1,272

 

 

896

 

Net cash used in operating activities

 

 

(1,716)

 

 

(2,949)

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Proceeds from sale of assets

 

 

104

 

 

1,474

 

Acquisitions of property, plant and equipment

 

 

(26)

 

 

(30)

 

Acquisitions of property, plant and equipment related to discontinued operations (Note 3)

 

 

(1)

 

 

(28)

 

Net cash from investing activities

 

$

77

 

$

1,416

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

544

 

 

793

 

Net cash from financing activities

 

$

544

 

$

793

 

Net decrease in cash and cash equivalents

 

 

(1,095)

 

 

(740)

 

Cash and cash equivalents, beginning of period

 

 

2,934

 

 

3,050

 

Cash and cash equivalents, end of period

 

$

1,839

 

$

2,310

 

 

See Note 16 for supplemental cash flow information.

 

The accompanying notes form an integral part of these condensed consolidated financial statements.

 

5

GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in United States dollars)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

Other

 

 

 

 

 

 

Common Stock

 

Paid-in

 

Accumulated

 

Comprehensive

 

Total

 

 

 

Shares

 

Amount

 

Capital

 

Deficit

 

Income (loss)

 

Equity

 

 

 

(in thousands except share data)

 

Balance, December 31, 2017

 

91,929,709

 

$

919

 

$

516,284

 

$

(509,082)

 

$

(40)

 

$

8,081

 

Cumulative adjustment related to change in accounting principle (Note 5)

 

 —

 

 

 —

 

 

 —

 

 

(89)

 

 

40

 

 

(49)

 

Adjusted balance at January 1, 2018

 

91,929,709

 

$

919

 

$

516,284

 

$

(509,171)

 

$

 —

 

$

8,032

 

Stock compensation accrued and shares issued for vested stock awards

 

437,279

 

 

 3

 

 

133

 

 

 —

 

 

 —

 

 

136

 

Registered direct purchase agreement, net (Note 14)

 

3,153,808

 

 

32

 

 

1,210

 

 

 —

 

 

 —

 

 

1,242

 

Deemed dividend on warrants (Note 5)

 

 —

 

 

 —

 

 

 8

 

 

(8)

 

 

 —

 

 

 —

 

Net loss for Six months ended June 30, 2018

 

 —

 

 

 —

 

 

 —

 

 

(2,424)

 

 

 —

 

 

(2,424)

 

Balance, June 30, 2018

 

95,520,796

 

 

954

 

 

517,635

 

 

(511,603)

 

 

 —

 

 

6,986

 

Balance, December 31, 2018

 

95,620,796

 

$

955

 

$

517,806

 

$

(511,124)

 

$

 —

 

$

7,637

 

Stock compensation accrued and shares issued for vested stock awards (Note 14)

 

312,000

 

 

 3

 

 

426

 

 

 —

 

 

 —

 

 

429

 

Modification of previously awarded KELTIP Units (Note 14)

 

 —

 

 

 —

 

 

583

 

 

 —

 

 

 —

 

 

583

 

Shares issued under the at-the-market offering agreement, net (Note 14)

 

33,995

 

 

 1

 

 

11

 

 

 —

 

 

 —

 

 

12

 

Shares issued under the Lincoln Park commitment purchase agreement, net (Note 14)

 

2,113,642

 

 

21

 

 

507

 

 

 —

 

 

 —

 

 

528

 

Net loss for six months ended June 30, 2019

 

 —

 

 

 —

 

 

 —

 

 

(4,809)

 

 

 —

 

 

(4,809)

 

Balance, June 30, 2019

 

98,080,433

 

$

980

 

$

519,333

 

$

(515,933)

 

$

 —

 

$

4,380

 

 

The accompanying notes form an integral part of these condensed consolidated financial statements.

 

6

GOLDEN MINERALS COMPANY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

(Unaudited)

 

1.     Basis of Preparation of Financial Statements and Nature of Operations

 

Golden Minerals Company (the “Company”), a Delaware corporation, has prepared these unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). The interim condensed consolidated financial statements do not include all disclosures required by GAAP for annual financial statements, but in the opinion of management, include all adjustments necessary for a fair presentation.  Interim results are not necessarily indicative of results for a full year; accordingly, these interim financial statements should be read in conjunction with the annual financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and filed with the SEC on February 28, 2019.

 

The Company is a mining company holding a 100% interest in the El Quevar advanced exploration silver property in the province of Salta, Argentina, the Velardeña and Chicago precious metals mining properties and associated oxide and sulfide processing plants in the State of Durango, Mexico (the “Velardeña Properties”), and a diversified portfolio of precious metals and other mineral exploration properties located primarily in or near historical precious metals producing regions of Mexico,  Nevada and Argentina. The El Quevar advanced exploration property and the Velardeña Properties are the Company’s only material properties.

 

The Company remains focused on evaluation activities at its El Quevar exploration property in Argentina and on evaluating and searching for mining opportunities in North America with near term prospects of mining.  The Company is also focused on continuing its exploration efforts on selected properties in its portfolio of approximately 12 exploration properties located in Mexico, Nevada, and Argentina.

 

During November 2015 the Company suspended mining and sulfide processing activities at its Velardeña Properties in order to conserve the asset until the Company is able to develop mining and processing plans that at then current prices for silver and gold indicate a sustainable positive operating margin (defined as revenues less costs of sales) or the Company is able to locate, acquire and develop alternative mineral sources that could be economically mined and transported to the Velardeña Properties for processing.  The Company maintains a core group of employees at the Velardeña Properties, most of whom have been assigned to operate and provide administrative support for the oxide plant, which is leased to a subsidiary of Hecla Mining Company (“Hecla”). The employees at the Velardeña Properties also include an exploration group and an operations and administrative group to continue to advance the Company’s plans in Mexico, oversee corporate compliance activities, and to maintain and safeguard the longer-term value of the Velardeña Properties assets.

 

On June 26, 2019, the Company entered into a Purchase and Sale Agreement (the “Agreement”) along with its indirectly wholly-owned subsidiary, Minera de Cordilleras S. de R.L. de C.V., to sell certain assets to Compañía Minera Autlán S.A.B. de C.V. (“Autlán”) for US$22.0 million (the “Autlán Transaction”). Under the terms of the Agreement, Autlán will purchase three of the Company’s Mexican subsidiaries, which together hold the Velardeña Properties, including the Velardeña and Chicago mines (which are currently on care and maintenance as discussed above), two processing plants, mining equipment and other adjacent exploration properties. The sale includes the lease agreement pursuant to which the Company leases the Velardeña oxide plant to Hecla. The proposed transaction also includes the sale of the Rodeo and Santa Maria project concessions. 

 

The Agreement provides for a period of up to 75 days for Autlán to conduct due diligence related to the three subsidiary companies, the Rodeo concessions and the Santa Maria concessions. Closing of the transaction is subject to the satisfactory completion by Autlán of its due diligence review and other customary closing conditions. The transaction is also subject to approval by the Mexican antitrust authority (the Comisión Federal de Competencia Económica), which must be obtained without the imposition of any material conditions, restrictions or limitations on Autlán or the conduct of its business. This approval is expected to be obtained prior to closing. Following completion of its due diligence review, Autlán may elect to terminate the Agreement with no further obligation. The Agreement also contains customary representations, warranties, covenants and indemnification rights and obligations of the parties.  The Company will be entitled to retain proceeds from the lease of the Velardeña oxide plant that are received prior to closing. The Company anticipates that closing of the transaction will occur near the end of the third quarter 2019.

7

 

Upon execution of the Agreement, Autlán paid the Company a deposit of US$1.5 million (see Note 11) .  If the transaction is consummated, the deposit will be applied against the US$22.0 million purchase price at closing.  If the transaction does not close for any reason, the Company will have the option to repay the deposit amount within 90 days following termination or elect to convey the Rodeo concessions to Autlán in full settlement of the deposit. If the Rodeo concessions cannot be conveyed for any reason, the Company will be required to repay the deposit by making dedicated monthly payments equal to approximately 60 percent of the anticipated cash flow from the lease of the Velardeña oxide plant until the deposit amount is repaid with interest.

 

As the result of the agreement to sell the Velardeña Properties and other mineral concessions, the results of operations for the Velardeña Properties and related subsidiaries are presented as discontinued operations and assets held for sale for the periods presented in the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows (see Note 3).

 

The Company is considered an exploration stage company under SEC criteria since it has not yet demonstrated the existence of proven or probable mineral reserves, as defined by SEC Industry Guide 7, at any of its properties. Until such time, if ever, that the Company demonstrates the existence of proven or probable reserves pursuant to SEC Industry Guide 7, we expect to remain as an exploration stage company.

 

2.     Liquidity

 

At June 30, 2019, the Company’s aggregate cash and cash equivalents totaled $1.8 million, compared to the $2.9 million in similar assets held at December 31, 2018. The June 30, 2019 balance is due in part from the following expenditures and cash inflows for the six months ended June 30, 2019.  Expenditures totaled $6.2 million from the following:

 

·

$2.2 million in exploration expenditures, including work at the Yoquivo, Sand Canyon, Santa Maria and other properties;

 

·

$1.0 million in care and maintenance costs at the Velardeña Properties;

 

·

$1.0 million in exploration and evaluation activities, care and maintenance and property holding costs at the El Quevar project; and

 

·

$2.0 million in general and administrative expenses.

 

The foregoing expenditures were offset by cash inflows of $5.1 million from the following:

 

·

$2.7 million of net operating margin received pursuant to the oxide plant lease (defined as oxide plant lease revenue less oxide plant lease costs);

 

·

$1.5 million received as a deposit related to the proposed sale of the Velardeña Properties and other mineral concessions to Autlán (as described in Note 1);

 

·

$0.6 million, net of commitment fees and other offering related costs, from the LPC Program (as described in Note 14 below); and

 

·

$0.3 million decrease in working capital primarily related to increased accounts payables for general and administrative expenses.

 

In addition to the $1.8 million cash balance at June 30, 2019, the Company received approximately $2.0 million, net of costs, from the sale of approximately 8.6 million shares of the Company’s common stock to certain institutional investors in July 2019 (see Note 20).  The Company also expects to receive an additional approximately $1.3 million in net operating margin from the lease of the oxide plant prior to closing the Agreement with Autlán near the end of the third quarter 2019.  In addition, near the end of the third quarter 2019, the Company expects to receive the remaining $20.5 

8

million purchase price from closing the proposed Autlán Transaction (see Note 1).  The Company’s currently budgeted expenditures during the next twelve months ending June 30, 2020 are as follows:

 

·

Approximately $3.0 million on exploration activities and property holding costs related to the Company’s portfolio of exploration properties located in Mexico, Nevada and Argentina including project assessment and evaluation costs relating to Yoquivo, Sand Canyon and other properties;

 

·

Approximately $0.5 million at the Velardeña Properties for care and maintenance prior to the closing of the Autlán Transaction;

 

·

Approximately $1.0 million at the El Quevar project to fund ongoing exploration and evaluation activities, care and maintenance and property holding costs; and

 

·

Approximately $3.0 million on general and administrative costs.

 

If the Autlán Transaction closes, which we anticipate will occur near the end of the third quarter 2019, the Company’s cash resources will greatly exceed its currently budgeted expenditures during the next twelve months ended June 30, 2020.  Should the closing of the transaction not occur, the Company may be required to repay the US$1.5 million deposit and may need to take appropriate actions, which could include sales to parties other than Autlán of certain of the Company’s exploration assets, reductions to the Company’s currently budgeted level of spending, and/or raising additional equity capital through sales under the ATM Program and the LPC Program (as defined in Note 14 below) or otherwise.

 

The actual amount of cash that the Company receives or the expenditures that the Company incurs during the twelve-month period ending June 30, 2020 may vary significantly from the amounts specified above and will depend on a number of factors, including the successful closing of the Autlán Transaction, variations in anticipated revenues from the oxide plant lease, anticipated care and maintenance costs at the Velardeña Properties and costs for continued exploration, project assessment, and development at the Company’s other exploration properties, including El Quevar, which would require further actions on the Company’s part in order to maintain sufficient cash balances over the next twelve months.

 

The condensed consolidated financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the normal course of business.  However, the Company’s continuing long-term operations are dependent upon its ability to secure sufficient funding and to generate future profitable operations.  The underlying value and recoverability of the amounts shown as property, plant and equipment in the Company’s consolidated financial statements are dependent on its ability to generate positive cash flows from operations and to continue to fund exploration and development activities that would lead to profitable mining activities or to generate proceeds from the disposition of property, plant and equipment.

 

There can be no assurance that the Company will be successful in closing the Autlán Transaction or securing additional funding in the future on terms acceptable to the Company or at all.  Notwithstanding the foregoing, the Company believes the anticipated closing of the Autlán Transaction, continuing cash flow from the lease of the oxide plant (until closing of the Autlán Transaction occurs), use of the ATM Program and the LPC Program, and the potential for additional asset dispositions make it probable that the Company will have sufficient cash to meet its financial obligations and continue its business strategy beyond one year from the filing of the Company’s consolidated financial statements for the period ended June 30, 2019.

 

9

 

3. Discontinued Operations

 

As more fully described in Note 1, the Company entered into the Agreement on June 26, 2019 to sell the Velardeña Properties and other mineral concessions to Autlán.  The binding nature of the Agreement on the Company and other factors has resulted in the classification of the assets and liabilities related to the Agreement as held for sale on the Company’s Condensed Consolidated Balance Sheets.  The sale of the Velardeña Properties constitutes the sale of a separate major operating component and a strategic shift for the Company that will have a major effect on the Company’s ongoing operations and financial results.  The Company will not have significant continuing involvement with the Velardeña Properties following the closing of the proposed Autlán Transaction.  As a result, the Company is reporting the financial results relating to the Velardeña Properties as discontinued operations for all periods presented.

 

Following are the reconciliations of assets and liabilities held for sale and income from discontinued operations as presented in the Condensed Consolidated Balance Sheets, Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows.

 

 

 

 

 

 

 

 

Reconciliation of the Carrying Amounts of Major Classes of Assets and Liabilities

of the Discontinued Operation that are Disclosed in the Notes to Financial Statements

to Total Assets and Liabilities of the Disposal Group Classified as Held for Sale

that are Presented Separately in the Condensed Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

Unaudited

    

 

 

 

June 30,

 

December 31,

 

    

2019

    

2018

 

 

(in thousands, except share data)

Carrying amounts of major classes of assets included as part of discontinued operations

 

 

 

 

 

 

Cash and cash equivalents (1)

 

$

290

 

$

359

Lease receivables

 

 

511

 

 

481

Inventories, net (2)

 

 

231

 

 

229

Property, plant and equipment, net (3)

 

 

3,327

 

 

3,720

Other classes of assets that are not major

 

 

242

 

 

279

Total assets of the disposal group classified as held for sale in the condensed consolidated balance sheets

 

$

4,601

 

$

5,068

Carrying amounts of major classes of liabilities included as part of discontinued operations

 

 

 

 

 

 

Accounts payable and other accrued liabilities (4)

 

$

690

 

$

759

Asset retirement and reclamation liabilities (5)

 

 

2,711

 

 

2,660

Deferred revenue (6)

 

 

454

 

 

600

Other classes of liabilities that are not major

 

 

15

 

 

 —

Total liabilities of the disposal group classified as held for sale in the condensed consolidated balance sheets

 

$

3,870

 

$

4,019

 

(1)

Under the terms of the Agreement, the balance of accounts payable and accrued liabilities that Autlán will acquire is limited to $600,000 and the balance of cash will be no less than $200,000.  To the extent that the accounts payable and accrued liabilities balance exceeds $600,000, the balance of cash will be increased above $200,000, dollar for dollar, to compensate for the amount that the accounts payable and accrued liability balance exceeds $600,000.

 

(2)

Inventories at June 30, 2019 and December 31, 2018 consist entirely of material and supplies inventories.

 

(3)

Property, plant and equipment, net at June 30, 2019 consists of net mineral properties of $1.3 million and net plant and equipment of $2.0 million. Property plant and equipment, net at December 31, 2018 consists of net mineral properties of $1.3 million and net plant and equipment of $2.4 million.

 

(4)

Accounts payable and other accrued liabilities at June 30, 2019 consist of $0.1 million due to contractors and suppliers and $0.6 million of accrued employee compensation and benefits. Accounts payable and other accrued liabilities at December 31, 2018 consist of $0.2 million due to contractors and suppliers and $0.6 million of accrued employee compensation and benefits.

10

 

(5)

The asset retirement and reclamation liabilities (“ARO”) at both June 30, 2019 and December 31, 2018 are based on a detailed closure plan for the Velardeña Properties prepared by a third-party mining engineering firm. The Company continues to accrue additional estimated ARO amounts based on an asset retirement plan as activities requiring future reclamation and remediation occur.

 

(6)

On August 2, 2017, the Company granted Hecla an option to extend the oxide plant lease for an additional period of up to two years ending no later than December 31, 2020 in exchange for a $1.0 million upfront cash payment and other consideration. The Company recorded the $1.0 million as deferred revenue and will recognize the $1.0 million of income from granting the option over the expected life of the lease from August 2, 2017 through December 31, 2020 on a straight-line basis. The deferred revenue at June 30, 2019 and December 31, 2018 is the result of that transaction. Upon closing of the proposed Autlán Transaction the remaining deferred revenue will be recognized as income.

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of the Major Classes of Line Items Constituting Pretax Profit of Discontinued

Operations that are Disclosed in the Notes to Financial Statements to the After-Tax Profit

of Discontinued Operations that are Presented in the Condensed Consolidated Statements of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

  

2019

  

2018

  

2019

  

2018

 

 

(in thousands except per share data)

Major classes of line items constituting pretax profit of discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

Oxide plant lease (1)

 

$

1,976

 

$

1,730

 

$

3,908

 

$

3,367

Oxide plant lease costs (1)

 

 

(612)

 

 

(525)

 

 

(1,210)

 

 

(1,028)

Exploration expense

 

 

(189)

 

 

(23)

 

 

(307)

 

 

(212)

Velardeña shutdown and care and maintenance costs (2)

 

 

(467)

 

 

(605)

 

 

(999)

 

 

(1,011)

Stock based compensation

 

 

(55)

 

 

(29)

 

 

(53)

 

 

(40)

Reclamation expense

 

 

(38)

 

 

(52)

 

 

(114)

 

 

(103)

Other income and expense items that are not major

 

 

 1

 

 

(8)

 

 

68

 

 

(11)

Depreciation and amortization

 

 

(195)

 

 

(170)

 

 

(392)

 

 

(373)

Total profit on discontinued operations that is presented in the condensed consolidated statements of operations

 

$

421

 

$

318

 

$

901

 

$

589

 

(1)

The Company recognizes oxide plant lease fees and reimbursements for labor, utility and other costs as “ Revenue: Oxide plant lease ” following the guidance of ASC 606 regarding the income statement characterization of reimbursements received for certain expenses incurred by the Company in performing its obligations under the lease and reporting revenue gross as a principal versus net as an agent.  ASC 606 supports recording as gross revenue fees received for the reimbursement of expenses in situations where the recipient is the primary obligor and has certain discretion in the incurrence of the reimbursable expense. The actual costs incurred for reimbursed direct labor and utility costs are reported as “ Oxide plant lease costs ”. The Company recognizes lease fees during the period the fees are earned per the terms of the lease.

 

(2)

Velardeña shutdown and care and maintenance costs are related to care and maintenance activities at the Velardeña Properties after the suspension of mining and sulfide processing activities beginning in November 2015. The Company suspended operations in order to conserve the asset until the Company is able to develop mining and processing plans that at then current prices for silver and gold indicate a sustainable positive operating margin (defined as revenues less costs of sales) or the Company is able to locate, acquire and develop alternative mineral sources that could be economically mined and transported to the Velardeña Properties for processing. 

 

12

 

 

 

 

 

 

 

 

Reconciliation of the Major Classes of Line Items Constituting Cash Flows of Discontinued Operations

that are Disclosed in the Notes to Financial Statements as Cash Provided by Operating Activities

of Discontinued Operations that are Presented in the Condensed Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

    

2019

    

2018

 

 

(in thousands)

Cash flows from discontinued operations operating activities:

 

 

 

 

 

 

Net income from discontinued operations

 

$

901

 

$

589

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

392

 

 

373

Accretion of asset retirement obligation

 

 

111

 

 

103

Asset write off

 

 

 2

 

 

 8

Stock compensation

 

 

53

 

 

40

Changes in operating assets and liabilities from continuing operations:

 

 

 

 

 

 

Increase in lease receivable

 

 

(29)

 

 

(121)

Decrease in prepaid expenses and other assets

 

 

31

 

 

40

(Increase) decrease in inventories

 

 

(2)

 

 

 3

Decrease in value added tax recoverable, net

 

 

(3)

 

 

(4)

Decrease in deferred revenue

 

 

(146)

 

 

(146)

Decrease in reclamation liability

 

 

(63)

 

 

 —

Increase in accounts payable and accrued liabilities

 

 

25

 

 

11

Net cash provided by operating activities from discontinued operations

 

$

1,272

 

$

896

 

 

 

 

 

4.     New Accounting Pronouncements

 

During the first quarter 2019 the Company adopted ASU 2016-02, “Leases” (“ASU 2016-02”) and ASU No. 2018-11 “Leases (Topic 842)” (“ASU 2018-11”), which require lessees to recognize a right-of-use asset and a lease liability for all leases with terms greater than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. For a lessor, the accounting applied is largely unchanged from previous guidance. The Company currently leases administrative offices in the U.S. and in several foreign locations under lease agreements that typically exceed one year.  The Company has elected the modified retrospective method of adopting ASU 2016-02 (see Note 5).

 

During the first quarter 2018 the Company adopted ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”) which was issued by the Financial Accounting Standards Board (“FASB”) in May 2014.  The Company also adopted ASU No. 2017-05, “Other Income (Subtopic 310-20)” (“ASU 2017-05”), which was issued by the FASB in February 2017 clarifying the scope of Subtopic 610-20, which was originally issued as part of ASU 2014-09.  ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In addition, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing and uncertainty of revenue that is recognized and the related cash flows.  The Company has elected the modified retrospective method of adopting ASU 2014-09 (see Note 5).

 

During the first quarter 2018 the Company adopted ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”), which amended its accounting treatment for the recognition, measurement, presentation and disclosure of certain financial assets. ASU 2016-01 requires equity investments that have a readily determinable fair value to be measured at fair value through net income. Previously, entities would recognize changes in fair value of available-for-sale equity securities in other comprehensive income, and would recognize in net income impairment losses that were other-than-temporary.  There will no longer be an available-for-sale classification (with changes in fair value reported in other comprehensive income) for equity securities with readily determinable fair values.  The Company recognized retrospectively the cumulative effect of initially adopting ASU 2016-01 (see Note 5).  

 

13

5.     Change in Accounting Principle

 

Leases

 

Effective January 1, 2019 the Company adopted ASU 2016-02 and ASU No. 2018-11, which requires lessees to recognize a right-of-use asset and a lease liability for all leases with terms greater than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. For a lessor, the accounting applied is largely unchanged from previous guidance. The Company currently leases administrative offices in the U.S. and in several foreign locations under lease agreements that typically exceed one year.  The Company has elected the modified retrospective method of adopting ASU 2016-02 per Topic 842.  The adoption of ASU 2016-02 and ASU No. 2018-11 at January 1, 2019 resulted in only a negligible difference to amounts already recorded by the Company in its Consolidated Balance Sheets as of December 31, 2018, and as result the Company did not record an adjustment to the beginning balance of retained earnings at January 1, 2019, as required under the modified retrospective method.

 

The Company took possession of new office space and began a new long-term lease for its principal headquarters office with an effective commencement date of June 1, 2019. The new office lease will expire five years and eight full calendar months following the commencement date.  There are no options to extend the lease beyond the stated term. The Company recorded a right of use asset of approximately $465,000 (see Note 9) and a lease liability of approximately $450,000 (see Note 11) in the second quarter of 2019 based on the net present value of the future lease payments discounted at 9.5%, which represents the Company’s incremental borrowing rate for purposes of applying the guidance of Topic 842. As required, the Company will recognize a single lease cost on a straight-line basis.

 

The Company also has long-term office leases in Mexico and Argentina that will expire in 2019 and has recorded a combined lease liability of approximately $18,000 and combined right of use asset of approximately $18,000 relating to both of those leases. 

 

Other Income Related to the Sale of Exploration Properties

 

During the first quarter 2018 the Company adopted ASU No. 2014-09, which was issued by the FASB in May 2014. ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In addition, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing and uncertainty of revenue that is recognized and the related cash flows.  The Company has elected the modified retrospective method of initially adopting ASU 2014-09. 

 

ASU 2014-09 requires, in certain instances, that transactions covered by ASC Topic 610, “Other Income” (“Topic 610”) follow the recognition, measurement and disclosure guidelines established by ASU 2014-09.  The Company generally follows the guidance of Topic 610 with respect to the recognition of income from the farm-out or sale of exploration properties.  As of the beginning of 2018, the Company had one open contract impacted by the adoption of ASU 2014-09, involving an option agreement under which Santacruz Silver Mining Ltd. (“Santacruz”) could acquire the Company’s interest in certain nonstrategic mineral claims located in the Zacatecas Mining District, Zacatecas, Mexico (the “Zacatecas Properties”) for a series of payments totaling $1.5 million (Note 8).  In applying ASU 2014-09, approximately $49,000 of the income recognized from the Santacruz transaction in the fourth quarter of 2017 would have been recognized in the first quarter of 2018.  Accordingly, the Company has recognized retrospectively the cumulative effect of initially adopting ASU 2014-09 by recording a negative adjustment to retained earnings of $49,000  at the beginning of 2018, included in the Company’s Condensed Consolidated Statement of Changes in Equity, and recording $49,000 in “ Other operating income, net ” in the accompanying Condensed Consolidated Statements of Operations for the period ended June 30, 2018.  See Note 8 for a further description of the contract with Santacruz and the identification of performance obligations and other significant judgments used in applying the guidance of Topic 606 to the contract.

 

Available for Sale Securities

 

During the first quarter 2018 the Company adopted ASU No. 2016-01, which amended its accounting treatment for the recognition, measurement, presentation and disclosure of certain financial assets. ASU 2016-01 requires equity investments that have readily determinable fair values to be measured at fair value through net income. Previously, entities would recognize changes in fair value of available-for-sale equity securities in other comprehensive income, and would

14

recognize in net income impairment losses that were other-than-temporary.  There will no longer be an available-for-sale classification (with changes in fair value reported in other comprehensive income) for equity securities with readily determinable fair values (see Note 6).  At December 31, 2017, the Company had equity securities classified as available-for-sale and reported at fair value of $238,000, with cumulative unrealized losses of $40,000 recorded in “Accumulated other comprehensive loss”  on its Condensed Consolidated Balance Sheets.  The Company has recognized the cumulative effect of initially adopting ASU 2016-01 by recording a negative adjustment to retained earnings and other comprehensive income of $40,000 at the beginning of 2018, included in the Company’s Condensed Consolidated Statement of Changes in Equity. Subsequent to adopting ASU 2016-01 The Company recorded a mark-to-market loss of approximately $158,000 for the period ended June 30, 2019 and a mark-to-market gain of approximately $67,000 for the period ended June 30, 2018, with both amounts being recorded to ” Interest and other income, net” in the accompanying Condensed Consolidated Statements of Operations .

 

6.     Cash and Cash Equivalents and Short-term Investments

 

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Short-term investments include investments with maturities greater than three months, but not exceeding 12 months, or highly liquid investments with maturities greater than 12 months that the Company intends to liquidate during the next 12 months for working capital needs.

 

The following tables summarize the Company’s short-term investments at June 30, 2019 and December 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Estimated

    

Carrying

 

June 30, 2019

 

Cost

 

Fair Value

 

Value

 

 

 

 

(in   thousands)

 

Investments:

 

 

 

 

 

 

 

 

 

 

Short-term:

 

 

 

 

 

 

 

 

 

 

Trading securities

 

$

275

 

$

172

 

$

172

 

Total trading securities

 

 

275

 

 

172

 

 

172

 

Total short term

 

$

275

 

$

172

 

$

172

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

Short-term:

 

 

 

 

 

 

 

 

 

 

Trading securities

 

$

275

 

$

330

 

$

330

 

Total trading securities

 

 

275

 

 

330

 

 

330

 

Total short term

 

$

275

 

$

330

 

$

330

 

 

The short-term investments at June 30, 2019 and December 31, 2018 consist of 7,500,000 common shares, approximately 10% of the outstanding common shares, of Golden Tag Resources, Ltd. (“Golden Tag”), a junior mining company that was a joint venture partner in the Company’s previously owned San Diego exploration property in Mexico.  The Company acquired the shares during 2015 and 2016 in transactions involving the sale of its remaining 50% interest in the San Diego property to Golden Tag.

 

Credit Risk

 

The Company invests substantially all of its excess cash with high credit-quality financial institutions or in U.S. government or debt securities.  Credit risk is the risk that a third party might fail to fulfill its performance obligations under the terms of a financial instrument. For cash and equivalents and investments, credit risk represents the carrying amount on the balance sheet. The Company mitigates credit risk for cash and equivalents and investments by placing its funds and investments with high credit-quality financial institutions, limiting the amount of exposure to each of the financial institutions, monitoring the financial condition of the financial institutions and investing only in government and corporate securities rated “investment grade” or better.  The Company invests with financial institutions that maintain a net worth of not less than $1 billion and are members in good standing of the Securities Investor Protection Corporation.

 

15

7.     Prepaid Expenses and Other Assets

 

Prepaid expenses and other current assets at June 30, 2019 and December 31, 2018 consist of the following:

 

 

 

 

 

 

 

 

 

 

    

June 30,

    

December 31,

 

 

 

2019

    

2018

 

 

 

(in thousands)

 

Prepaid insurance

 

$

227

 

$

275

 

Recoupable deposits and other

 

 

73

 

 

79

 

 

 

$

300

 

$

354

 

 

 

 

 

8.     Property, Plant and Equipment, Net

 

The components of property, plant and equipment are as follows:

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

    

2019

    

2018

 

 

 

(in thousands)

 

Exploration properties

 

$

2,518

 

$

2,518

 

Royalty properties

 

 

200

 

 

200

 

Buildings

 

 

2,603

 

 

3,127

 

Mining equipment and machinery

 

 

2,392

 

 

2,377

 

Other furniture and equipment

 

 

880

 

 

880

 

 

 

 

8,593

 

 

9,102

 

Less: Accumulated depreciation and amortization

 

 

(5,347)

 

 

(5,713)

 

 

 

$

3,246

 

$

3,389

 

 

Celaya Farm-out

 

In August 2016, the Company, through its wholly owned Mexican subsidiary, entered into an earn-in agreement with a 100% owned Mexican subsidiary of Electrum Group, LLC, a privately owned company (together “Electrum”), related to the Company’s Celaya exploration property in Mexico. The Company received an upfront payment of $0.2 million and Electrum agreed to incur exploration expenditures totaling at least $0.5 million in the first year of the agreement, reduced by certain costs Electrum previously incurred on the property since December 2015 in its ongoing surface exploration program.  Electrum initially earned the right to acquire an undivided 60% interest in a joint venture company to be formed to hold the Celaya project by incurring exploration expenditures totaling at least $2.5 million during the initial first three years of the agreement. Electrum would serve as manager of the joint venture. Prior to subsequent amendments to the agreement, the Company would have been allowed to maintain a 40% interest in the Celaya project, following the initial earn-in period, by contributing its pro-rata share of an additional $2.5 million in exploration or development expenditures incurred over a second three-year period. 

 

In February 2018, the Company and Electrum amended the Celaya earn-in agreement to permit Electrum to earn, at its option, an incremental 20% interest in the Celaya project in exchange for a payment of $1.0 million.  Following the amendment, Electrum could have increased its total interest in the project to 80% by contributing 100% of the $2.5 million of additional expenditures required in the second three-year earn-in period.  Following the second earn-in period, and prior to the Company entering into a second and final amendment of the agreement, the Company could have maintained its 20% participating interest or its interest could ultimately have been converted into a carried 10% net profits interest if the Company elected not to participate as a joint venture owner. 

 

In September 2018, the Company and Electrum entered into a second and final amendment of the Celaya earn-in agreement pursuant to which Electrum acquired 100% of the Company’s remaining interest in the Celaya project in exchange for a payment of $3.0 million.  The transaction was set out in a definitive Assignment of Rights Agreement (the “Assignment Agreement”) containing customary terms and conditions. The earn-in agreement was terminated upon entry into the Assignment Agreement.

 

The Company had previously expensed all of its costs associated with the Celaya property and accordingly recognized a gain of $1.0 million from the execution of the first amendment to the agreement in the period ended June 30, 2018,

16

included in “ Other operating income, net ” in the accompanying Condensed Consolidated Statements of Operations.  The Company recognized a gain of $3.0 million from the execution of the second amendment to the agreement in the three month period ended September 30, 2018.

 

Zacatecas Farm-out

 

In April 2016, the Company entered into an option agreement, which was later amended in February 2018, under which Santacruz acquired the Company’s interest in the Zacatecas Properties for a series of payments totaling approximately $1.5 million through October 2018, including $249,000,  $225,000 and $212,000 paid to the Company during the first, second and third quarters of 2018, respectively.  The final payment due the Company of $13,000 was received in October 2018.  Upon receipt of each cash payment, the agreement imposed a performance obligation on the Company to provide Santacruz an exclusive right to the Zacatecas Properties to conduct exploration activities during the period from receipt of the payment until the next payment due date, with a final obligation, following receipt of the final payment, to formally acknowledge completion of the sale enabling Santacruz to register title to the properties in its name.  At December 31, 2018 there were no further performance obligations and the Company had taken all steps necessary for Santacruz to take title to the properties.

 

The Company previously expensed all of its costs associated with the Zacatecas Properties.  Because Santacruz was able to terminate the option agreement at any time, and the associated uncertainty relating to timely payments, the Company only recognized income, equal to the cash payments made, evenly over the period covered by each payment.  The Company recognized approximately $336,000 of income under the agreement for the six months ended June 30, 2018, included in “ Other operating income, net ” in the accompanying Condensed Consolidated Statements of Operations. The Company also recorded a liability of approximately $187,000 at June 30, 2018 representing its unearned performance obligation related to the agreement, included in “Other current liabilities”  as reported in its Condensed Consolidated Balance Sheets.    

 

9. Other Long-Term Assets

 

Other long-term assets at June 30, 2019 and December 31, 2018 consist of the following:

 

 

 

 

 

 

 

 

 

 

    

June 30,

    

December 31,

 

 

2019

 

2018

 

 

 

(in thousands)

 

Deferred offering costs

 

$

511

 

$

569

 

Right of use assets

 

 

465

 

 

 —

 

 

 

$

976

 

$

569

 

 

The deferred offering costs are associated with the LPC Program and ATM Agreement (see Note 14). The right of use assets are related to certain office leases (see Note 4).

 

10.     Accounts Payable and Other Accrued Liabilities

 

The Company’s accounts payable and other accrued liabilities consist of the following:

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

    

2019

    

2018

 

 

 

(in thousands)

 

Accounts payable and accruals

 

$

342

 

$

151

 

Accrued employee compensation and benefits

 

 

437

 

 

792

 

 

 

$

779

 

$

943

 

 

June 30, 2019

 

Accounts payable and accruals at June 30, 2019 are primarily amounts due to contractors and suppliers related to corporate administrative and exploration activities. 

 

Accrued employee compensation and benefits at June 30, 2019 consist of $0.2 million of accrued vacation payable and $0.2 million related to withholding taxes and benefits payable.

17

 

December 31, 2018

 

Accounts payable and accruals at December 31, 2018 are primarily amounts due to contractors and suppliers related to corporate administrative and exploration activities. 

 

Accrued employee compensation and benefits at December 31, 2018 consist of $0.2 million of accrued vacation payable and $0.6 million related to withholding taxes and benefits payable. Included in the $0.6 million of accrued employee compensation and benefits is $0.4 million related to the KELTIP Units (see Note 14).

 

11 .     Other Liabilities

 

Other Current Liabilities

 

Included in other current liabilities for the period ended June 30, 2019 is a  $1.5 million liability related to the deposit received for the sale of our Velardeña Properties and other mineral concessions to Autlán (see Note 1). Also included is approximately $0.1 million related to a lease liability for office space at the Company’s principal headquarters in Golden and in Mexico and Argentina (see Note 4) and approximately $0.1 million related to an insurance premium payable.

 

Other Long-Term Liabilities

 

Other long-term liabilities of $0.4 million for the period ended June 30, 2019 is primarily related to a lease liability for office space at the Company’s principal headquarters in Golden (see Note 5).

 

 

12.     Fair Value Measurements

 

Financial assets and liabilities and nonfinancial assets and liabilities are measured at fair value under a framework of a fair value hierarchy which prioritizes the inputs into valuation techniques used to measure fair value into three broad levels.  This hierarchy gives the highest priority to quoted prices (unadjusted) in active markets and the lowest priority to unobservable inputs.  Further, financial assets and liabilities should be classified by level in their entirety based upon the lowest level of input that was significant to the fair value measurement. The three levels of the fair value hierarchy per ASC 820 are as follows:

 

Level 1 :  Unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date.

 

Level 2 :  Quoted prices in inactive markets for identical assets or liabilities, quoted prices for similar assets or liabilities in active markets, or other observable inputs either directly related to the asset or liability or derived principally from corroborated observable market data.

 

Level 3 :  Unobservable inputs due to the fact that there is little or no market activity. This entails using assumptions in models which estimate what market participants would use in pricing the asset or liability.

 

18

The following table summarizes the Company’s financial assets and liabilities at fair value on a recurring basis at June 30, 2019 and December 31, 2018, by respective level of the fair value hierarchy:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Level 1

    

Level 2

    

Level 3

    

Total

 

 

 

(in thousands)

 

At June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,839

 

$

 —

 

$

 —

 

$

1,839

 

Short-term investments

 

 

172

 

 

 —

 

 

 —

 

 

172

 

 

 

$

2,011

 

$

 —

 

$

 —

 

$

2,011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,934

 

$

 —

 

$

 —

 

$

2,934

 

Short-term investments

 

 

330

 

 

 —

 

 

 —

 

 

330

 

 

 

$

3,264

 

$

 —

 

$

 —

 

$

3,264

 

 

The Company’s cash equivalents, comprised principally of U.S. treasury securities, are classified within Level 1 of the fair value hierarchy.

 

The Company’s short-term investments consist of the common stock in Golden Tag and are classified within Level 1 of the fair value hierarchy (see Note 6).

 

Non-recurring Fair Value Measurements

 

There were no non-recurring fair value measurements at June 30, 2019 or December 31, 2018.

 

13.     Income Taxes

 

The Company accounts for income taxes in accordance with the provisions of ASC 740, “Income Taxes” (“ASC 740”), on a tax jurisdictional basis.  For the six months ended June 30, 2019 and June 30, 2018 the Company did not rec