XPL Solitario Resources Corp

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the information contained in the consolidated financial statements of Solitario for the years ended December 31, 2020 and 2019, and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Solitario’s Annual Report on Form 10-K for the year ended December 31, 2020. Solitario’s financial condition and results of operations are not necessarily indicative of what may be expected in future periods. Unless otherwise indicated, all references to dollars are to U.S. dollars.

(a) Business Overview and Summary

We are an exploration stage company as defined by rules issued by the SEC, with a focus on the acquisition of precious and base metal properties with exploration potential and the development or purchase of royalty interests. Currently our primary focus is the acquisition and exploration of zinc-related and precious metals exploration mineral properties. However, we continue to evaluate other mineral properties for acquisition, and we hold a portfolio of mineral exploration properties and assets for future sale, joint venture or on which to create a royalty prior to the establishment of proven and probable reserves. Although our mineral properties may be developed in the future by us, through a joint venture or by a third party, we have never developed a mineral property. In addition to focusing on our current mineral exploration properties, we also from time to time evaluate potential strategic transactions for the acquisition of new precious and base metal properties and assets with exploration potential.

Our current geographic focus for the evaluation of potential mineral property assets is in North and South America; however, we have conducted property evaluations for potential acquisition in other parts of the world. At September 30, 2021, we consider our carried interest in the Florida Canyon project in Peru, our interest in the Lik project in Alaska, and our Golden Crest project in South Dakota to be our core mineral property assets. We are conducting exploration activities in Peru and the United States both on our own and through joint ventures operated by our partners in Peru and the United States. We also conduct potential acquisition evaluations in other countries located in South and North America.

We have recorded revenue in the past from the sale of mineral properties, including from the Royalty Sale in January 2019 and the sale in June 2018 of our interest in the royalty on the Yanacocha property. Revenues and / or proceeds from the sale or joint venture of properties or assets, although generally significant when they have occurred in the past, have not been a consistent source of revenue and would only occur in the future, if at all, on an infrequent basis. We have reduced our exposure to the costs of our exploration activities in the past through the use of joint ventures. Although we anticipate that the use of joint venture funding for some of our exploration activities will continue for the foreseeable future, we can provide no assurance that these or other sources of capital will be available in sufficient amounts to meet our needs, if at all.

As of September 30, 2021, we have balances of cash and short-term investments that we anticipate using, in part, to (i) fund costs and activities intended to further the exploration of our Lik project, (ii) fund costs and activities intended to further the exploration at our Florida Canyon project, (iii) fund costs and activities intended to further our Golden Crest project; (iv) conduct reconnaissance exploration and (v) potentially acquire additional mineral property assets. The fluctuations in precious metal and other commodity prices contribute to a challenging environment for mineral exploration and development, which has created opportunities as well as challenges for the potential acquisition of advanced mineral exploration projects or other related assets at potentially attractive terms.

As of September 30, 2021, we do not expect the effects of the COVID-19 pandemic to have a material effect on Solitario’s planned activities related to the exploration of its Lik, Florida Canyon or Golden Crest projects. However, we continue to monitor planned activities for the remainder of 2021 at our Florida Canyon, Lik and Golden Crest projects. The extent to which the COVID-19 pandemic impacts our business, including our exploration and other activities and the market for our securities, will depend on future developments, which are highly uncertain and cannot be predicted at this time. Please see Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2020.

(b) Results of Operations

Comparison of the three months ended September 30, 2021 to the three months ended September 30, 2020

We had a net loss of $701,000 or $0.01 per basic and diluted share for the three months ended September 30, 2021 compared to a net loss of $53,000 or $0.00 per basic and diluted share for the three months ended September 30, 2020. As explained in more detail below, the primary reasons for the increase in our net loss for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were (i) an increase in exploration expense to $442,000 in the three months ended September 30, 2021 compared to exploration expense of $112,000 during the three months ended September 30, 2020; (ii); the recording of a $17,000 property abandonment and impairment of our Gold Coin project in Arizona during the three months ended September 30, 2021, with no similar item during the three months ended September 30, 2020; (iii) a decrease in the unrealized gain on marketable equity securities to $50,000 during the three months ended September 30, 2021 compared to an unrealized gain on marketable equity securities of $333,000 during the three months ended September 30, 2020; (iv) the recording of a loss on the sale of marketable equity securities of $89,000 during the three months ended September 30, 2021, compared to a gain on the sale of marketable equity securities of $25,000 during the three months ended September 30, 2020. Partially offsetting the above items were (i) a decrease in general and administrative expense to $207,000 in the three months ended September 30, 2021 compared to general and administrative expense of $226,000 during the three months ended September 30, 2020; (ii) an increase in interest income to $13,000 during the three months ended September 30, 2021 compared to interest income of $3,000 during the three months ended September 30, 2020; and (iii) a reduction in the loss on derivative instruments to $1,000 during the three months ended September 30, 2021 compared to a loss on derivative instruments of $70,000 during the three months ended September 30, 2020. Each of the major components of these items is discussed in more detail below.

Our net exploration expense increased to $442,000 during the three months ended September 30, 2021 compared to exploration expense of $112,000 during the three months ended September 30, 2020 as a result of (i) our exploration efforts at the Golden Crest project which resulted in $94,000 of direct exploration expenditures during the three months ended September 30, 2021 with no similar expense in the three months ended September 30, 2020; (ii) exploration costs of $207,000 at our Lik project in Alaska during the three months ended September 30, 2021 incurred by our joint venture partner Teck compared to exploration expenditures of $27,000 during the three months ended September 30, 2020; and (iii) an increase in our reconnaissance exploration activities primarily related to the evaluation of mineral properties and / or entities for potential acquisition or other strategic transactions to $126,000 during the three months ended September 30, 2021 compared to $81,000 during the three months ended September 30, 2020. These increases in exploration expenditures were partially offset by expenditures of $4,000 at our Florida Canyon project during the three months ended September 30, 2020, with no similar expenditure during the three months ended September 30, 2021. During the three months ended September 30, 2021 we had three contract geologists working at our Golden Crest project, and our Denver personnel spent a portion of their time on reconnaissance exploration activities described above and related matters. We have budgeted approximately $1,642,000 for the full-year exploration expenditure for 2021, which includes approximately $622,000 for Solitario’s share of a joint exploration/drilling program with Teck at the Lik project, with the bulk of those expenditures planned for the third and fourth quarters of 2021. However, due to personnel, weather and permitting delays, we have agreed to postpone the drilling program portion of the 2021 Lik budget, and as a result expect our full-year expenditures for the Lik project to be less than the full project budget amount of $1.2 million. Based upon favorable results from our early exploration activities at Golden Crest, we anticipate we will spend additional funds at the Golden Crest project during the remainder of 2021, compared to the original budget. We expect our full-year exploration expenditures for 2021 to be above the exploration expenditures for full-year 2020.

Exploration expense (in thousands) by project consisted of the following:

General and administrative costs, excluding stock option compensation costs, discussed below, were $175,000 during the three months ended September 30, 2021 compared to $153,000 during the three months ended September 30, 2020. The major components of our general and administrative costs were (i) salaries and benefit expense of $67,000 during the three months ended September 30, 2021 compared to salary and benefit costs of $74,000 during the three months ended September 30, 2020; (ii) legal and accounting expenditures of $49,000 in the three months ended September 30, 2021 compared to $26,000 in the three months ended September 30, 2020; (iii) office rent and expenses of $30,000 during the three months ended September 30, 2021, compared to $27,000 during the three months ended September 30, 2020; and (iv) travel and shareholder relation costs of $29,000 during the three months ended September 30, 2021 compared to $26,000 during the three months ended September 30, 2020. We anticipate the full-year general and administrative costs will be higher for 2021 compared to 2020.

We recorded $32,000 of stock option compensation expense for the amortization of unvested grant date fair value with a credit to additional paid-in-capital during the three months ended September 30, 2021 compared to $72,000 of stock option compensation expense during the three months ended September 30, 2020. These non-cash charges related to the expense for vesting on stock options outstanding during the three months ended September 30, 2021 and 2020. The primary reason for the decrease in 2021 was the full vesting certain options during 2020, which reduced the amortization of grant date fair value expense during the three months ended September 30, 2021 compared to the same period of 2020. See Note 11, “Employee Stock Compensation Plans,” above, for additional information on our stock option expense.

We recorded a non-cash unrealized gain on marketable equity securities of $50,000 during the three months ended September 30, 2021 compared to an unrealized gain on marketable equity securities of $333,000 during the three months ended September 30, 2020. The non-cash unrealized gain during the three months ended September 30, 2021 was smaller than the gain in the three months ended September 30, 2020 primarily due to (i) a decrease in the value of our holdings of 100,000 shares of Kinross common stock, which decreased to a fair value of $536,000 at September 30, 2021 from a fair value of $635,000 at June 30, 2021 or an unrealized loss of $99,000 based on quoted market prices; and (ii) a decrease in the value of 10,040,000 shares of Vendetta common stock, which decreased to a fair value of $357,000 at September 30, 2021 from a fair value of $365,000 at June 30, 2021 or an unrealized loss of $7,000, based on quoted market prices; both of which offset (iii) an increase in the fair value of 134,055 shares of Vox Royalty stock to $333,000 at September 30, 2021 from a fair value of $263,000 at June 30, 2021, or an unrealized gain of $70,000; and the recognition of $88,000 of unrealized gain on previously recorded unrealized loss on marketable equity securities from 500,000 shares of Vendetta sold during the three months ended September 30, 2021. The gain during the three months ended September 30, 2020 was primarily related to (i) an increase in the value of our holdings of 100,000 shares of Kinross common stock, which increased to a fair value of $882,000 at September 30, 2020 from a fair value of $722,000 at June 30, 2020 or an increase of $160,000 based on quoted market prices; (ii) an increase in the value of our 11,550,000 shares of Vendetta common stock of $224,000, based on quoted market prices, which increased from a fair value of $424,000 at June 30, 2020 to a fair value of $648,000 at September 30, 2020, (iii) a decrease in the value of our holdings of Vox Royalty common shares of $40,000 to $303,000 at September 30, 2020 from a fair value of $343,000 at June 30, 2020 based on quoted market prices and, (iv) we held other marketable equity securities with a fair value of $11,000 at September 30, 2020. In addition, we recorded an $11,000 unrealized loss on the Vendetta shares we sold during the three months ended September 30, 2020

During the three months ended September 30, 2021, we sold 500,000 shares of our holdings of Vendetta common stock for proceeds of $17,000 and recorded a loss on sale of marketable equity securities of $89,000 compared to the sale of 900,000 shares of Vendetta common stock during the three months ended September 30, 2020 for proceeds of $47,000 and recorded a gain on sale of $25,000. See Note 3 “Marketable Equity Securities” to the condensed consolidated financial statements for a discussion of the sale of marketable equity securities.

During the three months ended September 30, 2021, we recorded a non-cash loss on derivative instruments of $1,000, related to a $2,000 reduction in the value of our holdings of Vendetta Warrants which were recorded at a fair value of $7,000 at September 30, 2021, based upon a Black-Scholes model, compared to a fair value of $9,000 at June 30, 2021, which was partially offset by a gain on derivative instruments of $1,000 during the three months ended September 30, 2021 related to certain Kinross covered calls. During the three months ended September 30, 2020, we recorded a non-cash loss on derivative instruments of $70,000 primarily related to a $106,000 loss on certain Kinross covered calls, partially offset by a gain of $36,000 in the value of our holdings of Vendetta Warrants. See Note 6, “Derivative instruments” to the condensed consolidated financial statements for a discussion of changes to the value of our derivative instruments.

We recorded interest and dividend income of $13,000 during the three months ended September 30, 2021 compared to interest income of $3,000 during the three months ended September 30, 2020. The increase was primarily from the receipt of $9,000 in dividends on our investment in Kinross during the three months ended September 30, 2021, with no similar amount during the three months ended September 30, 2020. In addition we had a decrease in the interest earned on our short-term investments in USTS as a result of a decrease in the total amount of outstanding short-term investments during the three months ended September 30, 2021 compared to the three months ended September 30, 2020, which was partially offset by slightly higher average interest rates on our existing short-term investments during the three months ended September 30, 2021 compared to the average interest rates received during the three months ended September 30, 2020.

We regularly perform evaluations of our mineral property assets to assess the recoverability of our investments in these assets. All long-lived assets are reviewed for impairment whenever events or circumstances change which indicate the carrying amount of an asset may not be recoverable utilizing guidelines based upon future net cash flows from the asset as well as our estimates of the geological potential of an early-stage mineral property and its related value for future sale, joint venture or development by us or others. During the three months ended September 30, 2021 we recorded a mineral property abandonment of our Gold Coin project in Arizona of $17,000 with no similar abandonment or impairment during the three months ended September 30, 2020.

We recorded no income tax expense or benefit during the three months ended September 30, 2021 or 2020 as we provide a valuation allowance for the tax benefit arising out of our net operating losses for all periods presented. As a result of our administrative expenses and exploration activities, we anticipate we will not have currently payable income taxes during 2021. In addition to the valuation allowance discussed above, we provide a valuation allowance for our foreign net operating losses, which are primarily related to our exploration activities in Peru. We anticipate we will continue to provide a valuation allowance for these net operating losses until we are in a net tax liability position with regards to those countries where we operate or until it is more likely than not that we will be able to realize those net operating losses in the future.

Comparison of the nine months ended September 30, 2021 to the nine months ended September 30, 2020

We had a net loss of $1,897,000 or $0.03 per basic and diluted share for the nine months ended September 30, 2021 compared to a net loss of $405,000 or $0.01 per basic and diluted share for the nine months ended September 30, 2020. As explained in more detail below, the primary reasons for the increase in our net loss were (i) an increase in exploration expense to $826,000 during the nine months ended September 30, 2021 compared to exploration expense of $269,000 during the nine months ended September 30, 2020; (ii) an unrealized loss on marketable equity securities of $220,000 during the nine months ended September 30, 2021 compared to an unrealized gain on marketable equity securities of $584,000 during the nine months ended September 30, 2020; (iii) a decrease in other income to $10,000 from the forgiveness of our PPP loan during the nine months ended September 30, 2021 compared to other income of $44,000 from the conversion of the SilverStream Note, discussed above, during the nine months ended September 30, 2020; (iv) a decrease in interest income to $23,000 during the nine months ended September 30, 2021 compared to interest income of $111,000 during the nine months ended September 30, 2020; (v) the recognition of a realized loss of $70,000 from the sale of marketable equity securities during the nine months ended September 30, 2021 compared with a realized gain of $50,000 during the nine months ended September 30, 2020; and (vi) a property abandonment charge of $17,000 during the nine months ended September 30, 2021 with no similar item during the nine months ended September 30, 2020. These causes of the increase in our net loss during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 were partially offset by (i) a reduction in general and administrative costs to $743,000 during the nine months ended September 30, 2021 compared to general and administrative costs of $816,000 during the nine months ended September 30, 2020 and (ii) a reduction in the loss on derivative instruments to $34,000 during the nine months ended September 30, 2021 compared to a loss on derivative instruments of $90,000 during the nine months ended September 30, 2020. The significant changes for these items are discussed in more detail below.

Our net exploration expense increased to $826,000 during the nine months ended September 30, 2021 compared to $269,000 during the nine months ended September 30, 2020. The primary reasons for the increase were(i) the exploration activity at our Golden Crest project of $207,000 and our Gold Coin project in Arizona of $24,000 during the nine months ended September 30, 2021 with no similar expenditures during the nine months ended September 30, 2020; (ii) exploration expenditures at our Lik project in Alaska of $290,000 during the nine months ended September 30, 2021, where our joint venture partner, Teck, began work on a planned $1.24 million exploration program for 2021, compared to a net credit of $11,000 at Lik from an over billing by Teck during 2019, that was corrected during the nine months ended September 30, 2020; and (iii) exploration expenditures of $64,000 at our Florida Canyon project during the nine months ended September 30, 2021, related to an analysis of the Florida Canyon deposit for future drilling or expansion, compared to expenditures of $10,000 during the nine months ended September 30, 2020. These increases in exploration expense were partially offset by a reduction in our reconnaissance exploration activity to $241,000 during the nine months ended September 30, 2021 compared to $270,000 during the nine months ended September 30, 2020 as a result of shifting our exploration focus to the Golden Crest project from reconnaissance exploration.

General and administrative costs, excluding stock option compensation costs discussed below, were $639,000 during the nine months ended September 30, 2021 compared to $529,000 during the nine months ended September 30, 2020. The major components of the costs were (i) salary and benefit expense during the nine months ended September 30, 2021 of $203,000 compared to salary and benefit expense of $218,000 during the nine months ended September 30, 2020, with these decreases as a result of personnel and salary reductions; (ii) legal and accounting expenditures of $151,000 during the nine months ended September 30, 2021, compared to $50,000 during the nine months ended September 30, 2020; (iii) office and other costs of $76,000 during the nine months ended September 30, 2021 compared to $87,000 during the nine months ended September 30, 2020; and (iv) travel and shareholder relation costs of $209,000 during the nine months ended September 30, 2021 compared to $174,000 during the nine months ended September 30, 2020.

During the nine months ended September 30, 2021 and 2020, Solitario recorded $104,000 and $287,000, respectively, of stock option expense for the amortization of unvested grant date fair value with a credit to additional paid-in capital. The decrease during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was primarily related to the grant date stock option expense for 1,325,000 options granted on April 2, 2020, compared to the grant date stock option expense for 140,000 options granted during the nine months ended September 30, 2021. In addition, certain previously granted options became fully vested during 2020 which reduced the stock option amortization expense during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

We recorded an unrealized loss on marketable equity securities of $220,000 during the nine months ended September 30, 2021 compared to an unrealized gain on marketable equity securities of $584,000 during the nine months ended September 30, 2020. The non-cash unrealized loss during the nine months ended September 30, 2021 was primarily related to (i) a decrease in the value of our holdings of 10,040,000 shares of Vendetta common stock which decreased in fair value to $357,000 at September 30, 2021 compared to a fair value of $479,000 at December 31, 2020, based on quoted market prices; and (ii) a decrease in the fair value of our holdings of 100,000 shares of Kinross common stock to a fair value of $536,000 compared to a fair value of $734,000 at December 31, 2020, based on quoted market prices. The non-cash unrealized gain during the nine months ended September 30, 2020 was primarily related to (i) an increase in the fair value of our holdings of 100,000 shares of Kinross common stock which increased to a fair value of $882,000 at September 30, 2020 compared to a fair value of $474,000 at December 31, 2019 based on quoted market prices; and (ii) an increase in the fair value of our holdings of 11,550,000 shares of Vendetta common stock, which increased from a fair value of $446,000 at December 31, 2019 to a fair value of $648,000 at September 30, 2020, based on quoted market prices. We may reduce our holdings of marketable equity securities depending on cash needs and market conditions, which may reduce the volatility of the changes in unrealized gains and losses in marketable equity securities during the remainder of 2021.

During the nine months ended September 30, 2021, we sold (i) 1,510,000 shares of Vendetta common stock for proceeds of $69,000 and recorded a loss on sale of $91,000; (ii) 430,000 shares of TNR Gold Corp. common stock for proceeds of $26,000 and recorded a gain on sale of $19,000; and (iii) 3,200 shares of Vox common stock for proceeds of $9,000 and recorded a gain on sale of $2,000. During the nine months ended September 30, 2020, we sold 2,900,000 shares of our holdings of Vendetta common stock for proceeds of $123,000 and recorded a gain on sale of marketable equity securities of $50,000. After the completion of the sale of the Vendetta shares during the nine months ended September 30, 2021, we hold 10,040,000 shares of Vendetta common stock at September 30, 2021. See Note 3 “Marketable Equity Securities” to the condensed consolidated financial statements for a discussion of the sale of Vendetta common stock.

Our interest income on short-term investments decreased to $23,000 during the nine months ended September 30, 2021 compared to interest income of $111,000 during the nine months ended September 30, 2020 primarily as a result of (i) the effects of reduced interest rates, which increased the quoted market price of our outstanding USTS holdings during the nine months ended September 30, 2020, with the increase in value recorded as interest income, with the opposite effect in 2021, as slightly rising interest rates reduced the quoted price of our USTS during the nine months ended September 30 2021; and (ii) our lower balance of holdings of short-term investments reducing the interest earned during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020; We anticipate as we utilize our short-term investments to provide funds for exploration and general and administrative expenses that our interest income will be reduced during the remainder of 2021 compared to 2020.

(c) Liquidity and Capital Resources

Cash and Short-term Investments

As of September 30, 2021, we have $4,438,000 in cash and short-term investments. As of September 30, 2021, we have $3,283,000 of our current assets in USTS with maturities of 2 to 12 months. In addition, we have $601,000 of current assets in three CDs with face values between $100,000 and $250,000 and maturities between 15 days to seven months. The USTS and CDs are recorded at their fair value based upon quoted market prices. We anticipate we will roll over that portion of our short-term investments not used for exploration expenditures, operating costs or mineral property acquisitions as they become due during the remainder of 2021. We intend to utilize a portion of our cash and short-term investments in our exploration activities and the potential acquisition of mineral assets over the next several years.

Investment in Marketable Equity Securities

Our marketable equity securities are carried at fair value, which is based upon market quotes of the underlying securities. At September 30, 2021 we own 10,040,000 shares of Vendetta common stock, 100,000 shares of Kinross common stock and 134,055 shares of Vox common stock. At September 30, 2021, the Vendetta shares are recorded at their fair market value of $357,000, the Kinross shares are recorded at their fair value of $536,000; and the Vox shares are recorded at their fair value of $333,000. During the nine months ended September 30, 2021 we sold 1,510,000 shares of Vendetta common stock, 430,000 shares of TNR Gold Corp. common stock and 3,200 shares of Vox common stock, as discussed above. See Note 3 “Marketable Equity Securities” in the condensed consolidated financial statements. We anticipate we may sell some additional holdings of our marketable equity securities during the remainder of 2021 depending on cash needs and market conditions.

Working Capital

We had working capital of $5,797,000 at September 30, 2021 compared to working capital of $7,875,000 as of December 31, 2020. Our working capital at September 30, 2021 consists primarily of our cash and cash equivalents, our investment in USTS and CDs, discussed above, our investment in marketable equity securities of $1,226,000, and other current assets of $384,000, less our accounts payable of $215,000 and other current liabilities of $36,000. As of September 30, 2021, our cash balances along with proceeds we may receive from sales of our common stock under our ATM Program and our short-term investments and marketable equity securities are adequate to fund our expected expenditures over the next year.

The nature of the mineral exploration business requires significant sources of capital to fund exploration, development and operation of mining projects. We will need additional capital if we decide to develop or operate any of our current exploration projects or any projects or assets we may acquire. We anticipate we would finance any such development through the use of our cash reserves, short-term investments, joint ventures, issuance of debt or equity, or the sale of our interests in other exploration projects or assets.

Stock-Based Compensation Plans

As of September 30, 2021, and December 31, 2020 there were options outstanding to acquire 5,513,000 and 5,558,000 shares, respectively, of Solitario common stock. The outstanding options have exercise prices between $0.77 per share and $0.20 per share. During the nine months ended September 30, 2021, options for 185,000 shares were exercised with an average exercise price of $0.45 per share for proceeds of $83,000. There were no exercises of options during the nine months ended September 30, 2020. We do not anticipate the exercise of options to be a significant source of cash flow during the remainder of 2021.

At the Market Offering Agreement

On February 2, 2021, we entered into the ATM Agreement with Wainwright, under which we may, from time to time, issue and sell shares of our common stock through Wainwright as sales manager in an at-the-market offering for aggregate sales proceeds of up to $9.0 million. During the three and nine months ended September 30, 2021, we sold an aggregate of 190,000 and 340,400 shares, respectively, of common stock under the ATM Program at an average price of $0.55 and $0.82 per share, respectively, of common stock for net proceeds after commissions, sale and one-time expenses of $104,000 and $137,000, respectively. During the nine months ended September 30, 2021, Solitario recorded $144,000 as a charge to additional paid-in-capital for one-time expenses related to entering into the ATM Agreement.

Share Repurchase Program

On October 28, 2015, our Board of Directors approved a share repurchase program that authorized us to purchase up to two million shares of our outstanding common stock. During 2020, our Board of Directors extended the term of the share repurchase program until December 31, 2021. All shares purchased to date have been cancelled and reduced the number of shares of outstanding common stock. The amount and timing of any shares purchased has been determined by our management and the purchases were effected in the open market or in privately negotiated transactions based upon market conditions and other factors, including price, regulatory requirements and capital availability and in compliance with applicable state and federal securities laws. The repurchase program does not require the purchase of any minimum number of shares of common stock by the Company, and may be suspended, modified or discontinued at any time without prior notice. No purchases have been made outside of the United States, including on the TSX. Payments for shares of common stock repurchased under the program have been funded using the Company’s working capital. As of September 30, 2021, we have purchased a total of 990,400 shares for an aggregate purchase price of $466,000 under the share repurchase program since its inception and these shares are no longer included in our issued and outstanding shares. We did not purchase any shares under the share repurchase plan during the nine months ended September 30, 2021. Subject to any legal restrictions and our available financial resources, we may purchase a limited number of shares under the share repurchase plan during the remainder of 2021 as determined by management.

(d) Cash Flows

Net cash used in operations during the nine months ended September 30, 2021 increased to $1,723,000 compared to $716,000 of net cash used in operations for the nine months ended September 30, 2020 primarily as a result of (i) an increase in exploration expense to $826,000 during the nine months ended September 30, 2021 compared to exploration expense of $269,000 during the nine months ended September 30, 2020; (ii) a decrease in interest income during the nine months ended September 30, 2021 to $23,000 compared to interest income of $111,000 during the nine months ended September 30, 2020; (iii) an increase in non-stock option general and administrative expense to $639,000 during the nine months ended September 30, 2021 compared to $529,000 during the nine months ended September 30, 2020, discussed above; and (iv) an increase in prepaid expenses of $281,000 during the nine months ended September 30, 2021 compared to reduction in prepaid expenses of $60,000 during the nine months ended September 30, 2020. The increase in prepaid expenses during the nine months ended September 30, 2021 was primarily related to the remaining balance of an advance on exploration expenses paid to Teck at our Lik project, which totaled $294,000 at September 30, 2021. Partially offsetting these increases in the use of cash were a decrease of $30,000 in accounts payable and other liabilities during the nine months ended September 30, 2021 compared to a decrease in accounts payable and other liabilities of $118,000 during the nine months ended September 30, 2020. Based upon projected expenditures in our 2021 budget, we anticipate continued use of funds from operations through the remainder of 2021, primarily for exploration related to our Lik and Golden Crest projects and reconnaissance exploration. See “Results of Operations” discussed above for further explanation of some of these variances.

During the nine months ended September 30, 2021, we provided $1,452,000 in cash from investing activities compared to $490,000 of cash provided from investing activities during the nine months ended September 30, 2020. The primary sources of the cash provided related to the net proceeds from short-term investment sales and purchases of $1,837,000 and $488,000, respectively, during the nine months ended September 30, 2021 and 2020. During the nine months ended September 30, 2021 we acquired the Golden Crest project, discussed above in Note 2, “Mineral Property” for $518,000, of which $60,000 were accrued costs in accounts payable at September 30, 2021. We sold certain covered calls during the nine months ended September 30, 2021 for proceeds of $8,000 compared to the nine months ended September 30, 2020 when we had net repurchases of covered calls, for a use of cash of $121,000. We acquired other assets of $39,000 during the nine months ended September 30, 2021, with no similar items in the nine months ended September 30, 2020. In addition, during the nine months ended September 30, 2021 and 2020 we sold marketable equity securities for proceeds of $104,000 and $123,000, respectively, as discussed above in Note 3, “Marketable Equity Securities.” We may sell additional marketable equity securities during the remainder of 2021, as discussed above. However, we do not anticipate the sale of marketable equity securities will be a significant source of cash during the remainder of 2021. We will continue to liquidate a portion of our short-term investments as needed to fund our operations and any potential mineral property acquisitions during the remainder of 2021. Any potential mineral property acquisition or strategic corporate investment during the remainder of 2021, discussed above under “Business Overview and Summary,” could involve a significant change in our cash provided or used for investing activities, depending on the structure of any potential transaction.

During the nine months ended September 30, 2021, we recorded net proceeds of $137,000 from the issuance of common stock pursuant to the ATM Program, discussed above in Note 11, “Shareholders’ Equity.” During the nine months ended September 30, 2021, we received $83,000 from the issuance of common stock from the exercise of stock options, discussed above in Note 11, “Employee Stock Compensation Plans,” with no comparable amount during the nine months ended September 30, 2020. During the nine months ended September 30, 2020 we received $70,000 from the PPP Loan and we used $5,000 for the purchase of our common stock, with no comparable amounts during the nine months ended September 30, 2021, as discussed above under “Share Repurchase Program” in “Liquidity and Capital Resources.”

(e) Off-balance sheet arrangements

As of September 30, 2021, and December 31, 2020 we had no off-balance sheet obligations.

(f) Development Activities, Exploration Activities, Environmental Compliance and Contractual Obligations

We are not involved in any development activities, nor do we have any contractual obligations related to any potential development activities as of September 30, 2021. As of September 30, 2021, other than our obligations under the Golden Crest agreement, discussed above in Note 2 to the condensed consolidated financial statements, there have been no changes to our contractual obligations for exploration activities, environmental compliance or other obligations from those disclosed in our Management’s Discussion and Analysis included in our Annual Report on Form 10-K for the year ended December 31, 2020.

(g) Discontinued Projects

We recorded a mineral property write-down of $17,000 during the three and nine months ended September 30, 2021 related to our Gold Coin project. We did not record any mineral property write-downs during the three and nine months ended September 30, 2020.

(h) Critical Accounting Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 1 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, describes the significant accounting estimates and policies used in preparation of our consolidated financial statements. Actual results in these areas could differ from management’s estimates.

(i) Related Party Transactions

As of September 30, 2021, and for the three and nine months ended September 30, 2021, we have no related party transactions or balances.

(j) Recent Accounting Pronouncements

See Note 1, “Business and Summary of Significant Accounting Policies,” to the unaudited condensed consolidated financial statements under Recent Accounting Pronouncements” above for a discussion of our significant accounting policies.

(k) Forward Looking Statements

This Form 10-Q contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “1934 Act”), with respect to our financial condition, results of operations, business prospects, plans, objectives, goals, strategies, future events, capital expenditures, and exploration and development efforts. Words such as “anticipates,” “expects,” “intends,” “forecasts,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will,” and similar expressions identify forward-looking statements. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described herein and under the heading “Risk Factors” included in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2020. These forward-looking statements appear in a number of places in this report and include statements with respect to, among other things:

Although we have attempted to identify important factors that could cause actual results to differ materially from those described in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that these statements will prove to be accurate as actual results and future events could differ materially from those anticipated in the statements. Except as required by law, we assume no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.