Item 1. Financial Statements.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Notes to Condensed Consolidated Interim Financial Statements
For the Three-Month Period Ended September 30, 2021 and 2020
(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 results of operations for the interim period ended September 30, 2021 is not necessarily indicative of the operating results expected for any future period.
The condensed consolidated interim financial statements have been prepared on an accrual basis of accounting, in conformity with accounting principles generally accepted in the United States of America (“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, 2021.
Significant Accounting Policies
Please see Note 1- Description of Business and Summary of Significant Accounting Policies contained in the 2021 10-K.
Note 2. Recent Accounting Guidance
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which addresses the complexity of its guidance for certain financial instruments with characteristics of liabilities and equity. ASU 2020-06 removes the accounting models that require beneficial conversion features or cash conversion features associated with convertible instruments to be recognized as a separate component of equity, adds certain disclosure requirements for convertible instruments, amends the guidance for the derivatives scope exception for contracts in an entity’s own equity and simplifies the diluted earnings per share calculation for certain situations. This ASU is effective for the Company beginning on January 1, 2024. The Company is currently evaluating the impact of implementing these changes on the Company’s consolidated financial position, operating results and cash-flows.
6
Note 3. Fair Value Measurements
Fair value accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. 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
|
Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
|
Level 3
|
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
|
Financial assets carried at fair value on a recurring basis by level within the fair value hierarchy in the Condensed Consolidated Interim Balance Sheets at September 30, 2021 and June 30, 2021 are presented in the following table:
|
|
|
|
|
|
Fair Value at September 30, 2021
|
|
|
June 30, 2021
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Cash and cash equivalents
|
|
$
|
3,659,067
|
|
|
|
3,659,067
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
3,113,064
|
|
The carrying values of accounts payable and accrued liabilities and convertible debt (Note 6) approximate fair value as of September 30, 2021 and June 30, 2021.
Note 4. Non-Cash Transactions
During the three-month period ended September 30, 2021, the Company issued 168,690 shares of Common Stock for payment of interest accrued and owing on its outstanding 2019 Convertible Notes.
During the three-month period ended September 30, 2020, the Company issued 183,395 shares of Common Stock for payment of interest accrued and owing on its outstanding 2019 Convertible Notes. Additionally, 200,000 shares of Common Stock were issued upon the conversion of 200 of its outstanding 2019 Convertible Notes.
Note 5. Capital Stock
Authorized Capital
Authorized capital stock consists of 200,000,000 common shares with par value of $0.01 per common share (June 30, 2021 – 200,000,000 common shares with par value $0.01 per common share).
During the three-month period ended September 30, 2021, the Company issued 2,202,352 shares at an approximate average price of $0.856 for gross proceeds of $1,886,135 through its at-the-market offering. Share issuance costs related to this were $56,584. The Company also issued 168,690 shares for payment of interest accrued and owing (Note 6) with a fair value of $163,642.
During the three month period ended September 30, 2020, the Company issued 595,281 shares at an approximate average price of $1.3344 for gross proceeds of $794,345. Share issuance costs including commissions were $23,830 for net proceeds of $770,514. The Company also issued 183,395 shares for payment of interest accrued and owing at June 30, 2020 (Note 6). The Company also issued 200,000 shares upon the conversion of 200 of the 2019 Senior Secured Convertible Notes (Note 6).
At September 30, 2021 there were 40,525,151 common shares issued and outstanding (June 30, 2021 – 38,154,109 common shares).
Stock Options and Stock Based Compensation
Paramount’s 2015 and 2016 Stock Incentive and Compensation Plans, which are stockholder-approved, permits the grant of stock options and stock to its employees and directors for up to 2.169 million shares of common 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 5 years. To better align the interests of its key executives, employees and directors with those of its shareholders a significant portion of those
7
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).
During the three-month period ended September 30, 2021, the Company did not grant any stock options (2020 – 55,000).
During the three-month period ended September 30, 2021, share-based compensation expense relating to service condition options and performance condition was $45,021 and $35,843, respectively (2020- $23,029 and $44,477).
The fair value for these options was calculated using the Black-Scholes option valuations method. The weighted average assumptions used for the three-month period ended September, 2021 and three-month period ended September 30, 2020 were as follows:
|
|
Three-Months Ended September 30, 2021
|
|
Three-Months Ended September 30, 2020
|
|
Weighted average risk-free interest rate
|
|
N/A
|
|
|
0.22
|
%
|
Weighted-average volatility
|
|
N/A
|
|
|
63
|
%
|
Expected dividends
|
|
N/A
|
|
$
|
0.00
|
|
Weighted average expected term (years)
|
|
N/A
|
|
|
5.00
|
|
Weighted average fair value
|
|
N/A
|
|
$
|
0.64
|
|
A summary of option activity under the Stock Incentive and Compensation Plans as of September 30, 2021 is presented below:
Options
|
|
Options
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted-
Average Remaining
Contractual Term (Years)
|
|
|
Aggregate
Intrinsic Value
|
|
Outstanding at June 30, 2020
|
|
|
1,243,995
|
|
|
$
|
1.20
|
|
|
|
3.63
|
|
|
$
|
165,600
|
|
Granted
|
|
|
755,000
|
|
|
|
1.13
|
|
|
|
4.44
|
|
|
|
—
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Forfeited or expired
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Outstanding at June 30, 2021
|
|
|
1,998,995
|
|
|
$
|
1.17
|
|
|
|
3.31
|
|
|
$
|
—
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Forfeited or expired
|
|
|
(190,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Outstanding at September 30, 2021
|
|
|
1,808,995
|
|
|
$
|
1.14
|
|
|
|
3.17
|
|
|
$
|
—
|
|
Exercisable at September 30, 2021
|
|
|
863,330
|
|
|
$
|
1.16
|
|
|
|
2.94
|
|
|
$
|
—
|
|
A summary of the status of Paramount’s non-vested options as at September 30, 2021 is presented below:
Non-vested Options
|
|
Options
|
|
|
Weighted-
Average Grant-
Date Fair Value
|
|
Non-vested at June 30, 2020
|
|
|
943,992
|
|
|
$
|
0.51
|
|
Granted
|
|
|
755,000
|
|
|
|
0.56
|
|
Vested
|
|
|
(664,994
|
)
|
|
|
0.50
|
|
Forfeited or expired
|
|
|
—
|
|
|
|
—
|
|
Non-vested at June 30, 2021
|
|
|
1,033,998
|
|
|
$
|
0.55
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
Vested
|
|
|
—
|
|
|
|
—
|
|
Forfeited or expired
|
|
|
(88,333
|
)
|
|
|
0.73
|
|
Non-vested at September 30, 2021
|
|
|
945,665
|
|
|
$
|
0.54
|
|
As of September 30, 2021, there was $77,970 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the employee share option plans. That cost is expected to be recognized over a weighted-
8
average period of 1.15 years. The total fair value of stock based compensation arrangements vested during the three-month period ended September 30, 2021 and 2020, was $nil and $nil, respectively.
Note 6. Convertible Debt
|
|
Debt
|
|
|
|
September 30, 2021
|
|
|
|
June 30, 2021
|
|
|
|
Current
|
|
|
|
Non-Current
|
|
|
|
Current
|
|
|
|
Non-Current
|
|
2019 Secured Convertible Notes
|
|
$
|
|
—
|
|
|
$
|
|
4,277,690
|
|
|
|
$
|
|
—
|
|
|
|
$
|
|
4,277,690
|
|
Less: unamortized discount and issuance costs
|
|
|
|
—
|
|
|
|
|
(100,987
|
)
|
|
|
|
|
—
|
|
|
|
|
|
(116,188
|
)
|
|
|
$
|
|
—
|
|
|
$
|
|
4,176,703
|
|
|
|
$
|
|
—
|
|
|
|
$
|
|
4,161,502
|
|
In September 2019, the Company completed a private offering of 5,478 Senior Secured Convertible Notes (“2019 Convertible Notes”) at $975 per $1,000 face amount due in 2023. Each 2019 Convertible Note will bear an interest rate of 7.5% per annum, payable semi-annually. The effective interest rate of the 2019 Convertible Notes in 9.23%. The principal amount of the 2019 Convertible Notes will be convertible at a price of $1.00 per share of Paramount common stock. Unamortized discount and issuance costs of $275,883 will be amortized as an additional interest expense over the four year term of the 2019 Convertible Notes. During the three-month period ended September 30, 2021, the Company amortized $15,201 (2020- $25,318) of discount and issuance costs. At any point after the second anniversary of the issuance of the convertible notes, Paramount may force conversion if the share price of its common stock remains above $1.75 for 20 consecutive trading days. The convertible notes are secured by a lien on all assets of the Company and the Company is required to maintain a working capital balance of $250,000. At September 30, 2021, the working capital covenant was met by the Company.
During the three-month period ended September 30, 2021, there were no conversions of 2019 Convertible Notes to common stock of the Company.
During the three-month period ended September 30, 2020, 200 of the 2019 Convertible Notes outstanding were converted into 200,000 shares of common stock of the Company (Note 5) and $7,934 of unamortized discount and issuance costs were debited to additional paid in capital to reflect the issued common stock.
Note 7. Mineral Properties
The Company has capitalized acquisition costs on mineral properties as follows:
|
|
September 30,
2021
|
|
|
June 30,
2021
|
|
Sleeper and other Nevada based Projects
|
|
$
|
26,031,976
|
|
|
$
|
26,011,976
|
|
Grassy Mountain and other Oregon based Projects
|
|
|
23,210,728
|
|
|
|
23,185,728
|
|
|
|
$
|
49,242,704
|
|
|
$
|
49,197,704
|
|
Sleeper:
Sleeper is located in Humboldt County, Nevada, approximately 26 miles northwest of the town of Winnemucca. The Sleeper Gold Mine consists of 2,322 unpatented mining claims totaling approximately 38,300 acres.
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. It consists of 442 unpatented lode claims, 3 patented lode claims, and various leased fee land surface and surface/mineral rights, covering approximately 8,300 acres.
Note 8. Reclamation and Environmental
9
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, 2021 is $500,738 (June 30, 2021 - $533,703).
Paramount is responsible for managing the reclamation activities from the previous mine operations at the Sleeper Gold Mine as directed by the BLM and the Nevada State Department of Environmental Protection (“NDEP”). Paramount has estimated the undiscounted reclamation costs for existing disturbances at the Sleeper Gold Project required by the BLM to be $3,557,944. These costs are expected to be incurred between the calendar years 2021 and 2060. Paramount has also estimated undiscounted reclamation cost as required by the NDEP to be $1,470,000. These costs include on-going monitoring and new requests from the NDEP to convert three processing ponds from the historical operations to evaporation cell ponds by 2023. On-going monitoring costs are expected to be incurred between 2021 and 2039. The sum of expected costs by year are discounted using the Company’s credit adjusted risk free interest rate from the time it expects to pay the retirement to the time it incurs the obligation. The asset retirement obligation for the Sleeper Gold Project recorded on the balance sheet is equal to the present value of the estimated reclamation costs as required by both the BLM and NDEP.
The following variables were used in the calculation for the periods ending September 30, 2021 and June 30, 2021:
|
|
Three-Months Ended September 30, 2021
|
|
|
Year Ended June 30, 2021
|
|
Weighted-average credit adjusted risk free rate
|
|
|
9.89
|
%
|
|
|
9.89
|
%
|
Weighted-average inflation rate
|
|
|
2.31
|
%
|
|
|
2.31
|
%
|
Changes to the Company’s asset retirement obligations for the Sleeper Gold Mine for the three-month period ended September 30, 2021 and the year ended June 30, 2021 are as follows:
|
|
Three-Month
Period Ended
September 30,
2021
|
|
|
Year Ended
June 30, 2021
|
|
Balance at beginning of period
|
|
$
|
1,849,644
|
|
|
$
|
615,170
|
|
Accretion expense
|
|
|
45,969
|
|
|
|
60,040
|
|
Additions and change in estimates
|
|
|
—
|
|
|
|
1,498,950
|
|
Settlements
|
|
|
—
|
|
|
|
(324,516
|
)
|
Balance at end of period
|
|
$
|
1,895,613
|
|
|
$
|
1,849,644
|
|
The balance of the asset retirement obligation of $1,895,613 at September 30, 2021 (June 30, 2021 -$1,849,644 ) is comprised of a current portion of 316,022 (June 30, 2020 -$310,022 ) and a non-current portion of 1,579,591 (June 30, 2020 -$1,539,622). The Company recorded an accretion expense for the three-month period ended September 30, 2021 of $45,969 (September 30, 2020 - $15,010).
Note 9. Other Income
The Company’s other income details for the three month period ended September 30, 2021 and 2020 were as follows:
|
|
Three-Month
Period
|
|
|
Three-Month
Period
|
|
|
|
Ended
September 30,
2021
|
|
|
Ended
September 30,
2020
|
|
Re-imbursement of reclamation costs
|
|
$
|
110,441
|
|
|
$
|
63,205
|
|
Leasing of water rights to third party
|
|
|
5,858
|
|
|
|
5,743
|
|
Total
|
|
$
|
116,299
|
|
|
$
|
68,948
|
|
10
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-month period ended September 30, 2021:
|
|
Exploration
Expenses
|
Land Holding
Costs
|
|
|
|
|
|
Three-Month
Period Ended
September 30, 2021
|
|
|
Three-Month
Period Ended
September 30, 2021
|
|
|
Mineral Properties
As at September 30,
2021
|
|
Sleeper Gold Project and other Nevada based Projects
|
|
$
|
335,242
|
|
|
$
|
112,815
|
|
|
$
|
26,031,976
|
|
Grassy Mountain Project and other Oregon based Projects
|
|
|
921,563
|
|
|
|
28,378
|
|
|
|
23,210,728
|
|
|
|
$
|
1,256,805
|
|
|
$
|
141,193
|
|
|
$
|
49,242,704
|
|
Expenses for the three-month period ended September 30, 2020 and mineral property carrying values as at June 30, 2021 by material project:
|
|
Exploration
Expenses
|
Land Holding
Costs
|
|
|
|
|
|
Three-Month
Period Ended
September 30, 2020
|
|
|
Three-Month
Period Ended
September 30, 2020
|
|
|
Mineral Properties
As at June 30,
2021
|
|
Sleeper Gold Project and other Nevada based Projects
|
|
$
|
283,263
|
|
|
$
|
106,904
|
|
|
$
|
26,011,976
|
|
Grassy Mountain Project and other Oregon based Projects
|
|
|
352,764
|
|
|
|
24,279
|
|
|
|
23,185,728
|
|
|
|
$
|
636,027
|
|
|
$
|
131,183
|
|
|
$
|
49,197,704
|
|
Note 11. Commitments and Contingencies:
Other Commitments
Paramount has an agreement to acquire 44 mining claims (“Cryla Claims”) covering 589 acres located immediately to the west of the proposed Grassy Mountain site from Cryla LLC. Paramount is obligated to make annual lease payments of $40,000 per year for the first two years of the lease term commencing in 2018 and $60,000 per year thereafter with an option to purchase the Cryla Claims for $560,000 at any time. The term of the agreement is 25 years. In the event Paramount exercises its option to acquire the Cryla Claims, all annual payments shall be credited against a production royalty that will be based on a prevailing price of the metals produced from the Cryla Claims. The royalty rate ranges between 2% and 4% based on the daily price of gold. The agreement with Cryla can be terminated by Paramount at any time. All lease payments under the agreement are up-to-date and no other payments were made during the three-month period ended September 30, 2021. The Cryla Claims are without known mineral reserves and there is no current exploratory work being performed.
Paramount has an agreement with Nevada Select Royalty (“Nevada Select”) to purchase 100% of the Frost Project, which consists of 40 mining claims located approximately 12 miles west of its Grassy Mountain Project. A total consideration of $250,000 payable to Nevada Select will be based on certain events over time. Nevada Select will retain a 2% NSR on the Frost Claims and Paramount has the right to reduce the NSR to 1% for a payment of $1 million. During the nine-month period ended March 31, 2021, the Company made a payment to Nevada Select for $15,000 upon receipt of its drilling permit from state and federal regulators and all required payments under the agreement are up-to-date as of September 30, 2021. The Frost Claims are without known mineral reserves.
During the three-month period ended September 30, 2021, the Company entered into an option agreement with Nevada Select to purchase the Bald Peak mining claims in the State of Nevada and California for a total consideration of $300,000. Payments under the agreement will be based on achieving certain events over time. Upon signing the agreement Paramount made a payment to Nevada Select of $20,000. The Bald Peak Claims are without known mineral reserves.
11