10-Q 1 pzg-20231231.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 December 31, 2023

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 001-36908

 

PARAMOUNT GOLD NEVADA CORP.

 

(Exact name of registrant as specified in its charter)

 

 

Nevada

98-0138393

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

665 Anderson Street

Winnemucca, NV

89445

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (775) 625-3600

 

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, or a smaller reporting company or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Small 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 Exchange Act). Yes No ☒

The number of shares of registrant’s Common Stock outstanding, $0.01 par value per share, as of February 12, 2024 was 60,310,334.

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.01 Par Value Per Share

 

PZG

 

NYSE American

 

 


 

Table of Contents

 

 

 

Page

PART I

 

FINANCIAL INFORMATION

 

 

Item 1.

 

Financial Statements

 

2

 

 

Condensed Consolidated Interim Balance Sheets as of December 31, 2023 (Unaudited) and June 30, 2023

 

2

 

 

Condensed Consolidated Interim Statements of Operations for the Three Months Ended and Six Months Ended December 31, 2023 and December 31, 2022 (Unaudited)

 

3

 

 

Condensed Consolidated Interim Statements of Stockholders’ Equity for the Six Months Ended December 31, 2023 (Unaudited) and Six Months Ended December 31, 2022

 

4

 

 

Condensed Consolidated Interim Statement of Cash Flows for Six Months Ended December 31, 2023 and December 31, 2022 (Unaudited)

 

5

 

 

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

 

6

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

16

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

21

Item 4.

 

Controls and Procedures

 

22

 

 

 

PART II

 

OTHER INFORMATION

 

 

Item 1A.

 

Risk Factors

 

23

Item 4.

 

Mine Safety Disclosures

 

23

Item 6.

 

Exhibits

 

24

 

 

 

Signatures

 

Directors, Executive Officers and Corporate Governance

 

25

 

 

 

 

 

 

i


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

PARAMOUNT GOLD NEVADA CORP.

Condensed Consolidated Interim Balance Sheets

(Unaudited)

 

 

 

 

 

 

 

 

 

December 31,
2023

 

 

June 30,
2023

 

Assets

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,572,919

 

 

$

824,920

 

Prepaid expenses and deposits

 

 

811,461

 

 

 

1,472,286

 

Total Current Assets

 

 

9,384,380

 

 

 

2,297,206

 

Non-Current Assets

 

 

 

 

 

 

Mineral properties

 

 

51,508,261

 

 

 

51,458,261

 

Reclamation bonds

 

 

546,176

 

 

 

546,176

 

Property and equipment

 

 

3,896

 

 

 

4,579

 

Total Non-Current Assets

 

 

52,058,333

 

 

 

52,009,016

 

Total Assets

 

$

61,442,713

 

 

$

54,306,222

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

1,690,044

 

 

$

937,219

 

Reclamation and environmental obligation, current portion

 

 

2,560,515

 

 

 

2,560,515

 

2019 convertible notes

 

 

 

 

 

3,614,465

 

2019 convertible notes, related parties

 

 

 

 

 

658,363

 

Notes payable, related party

 

 

 

 

 

1,579,397

 

Total Current Liabilities

 

 

4,250,559

 

 

 

9,349,959

 

Non-Current Liabilities

 

 

 

 

 

 

Debt liability of royalty convertible debenture, net

 

 

11,369,511

 

 

 

 

Derivative liability of royalty convertible debenture

 

 

2,760,378

 

 

 

 

Deferred tax liability

 

 

240,043

 

 

 

240,043

 

Reclamation and environmental obligation, non-current portion

 

 

2,037,504

 

 

 

1,876,387

 

Total Non-Current Liabilities

 

 

16,407,436

 

 

 

2,116,430

 

Total Liabilities

 

 

20,657,995

 

 

 

11,466,389

 

Commitments and Contingencies (Note 12)

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

Common stock, par value $0.01, 200,000,000 authorized shares, 59,685,334 issued and outstanding at December 31, 2023 and 200,000,000 authorized shares, 54,812,248 issued and outstanding at June 30, 2023

 

 

596,855

 

 

 

548,124

 

Additional paid in capital

 

 

118,158,376

 

 

 

116,613,503

 

Accumulated deficit

 

 

(77,970,513

)

 

 

(74,321,794

)

Total Stockholders' Equity

 

 

40,784,718

 

 

 

42,839,833

 

Total Liabilities and Stockholders' Equity

 

$

61,442,713

 

 

$

54,306,222

 

 

 

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

 

 

 

 

2


 

PARAMOUNT GOLD NEVADA CORP.

Condensed Consolidated Interim Statements of Operations

(Unaudited)

 

 

Three Months Ended December 31,

 

 

Six Months Ended December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Exploration

 

$

1,773,930

 

 

$

465,402

 

 

$

3,033,720

 

 

$

1,304,997

 

Land holding costs

 

 

157,143

 

 

 

157,143

 

 

 

314,287

 

 

 

318,199

 

Professional fees

 

 

98,315

 

 

 

135,295

 

 

 

153,567

 

 

 

268,622

 

Salaries and benefits

 

 

259,194

 

 

 

260,920

 

 

 

538,790

 

 

 

568,294

 

Directors' compensation

 

 

28,951

 

 

 

23,233

 

 

 

57,984

 

 

 

58,574

 

General and administrative

 

 

181,012

 

 

 

214,365

 

 

 

314,644

 

 

 

373,539

 

Accretion

 

 

110,558

 

 

 

111,561

 

 

 

221,117

 

 

 

223,122

 

Total Expenses

 

 

2,609,103

 

 

 

1,367,919

 

 

 

4,634,109

 

 

 

3,115,347

 

Net Loss Before Other Expense

 

 

2,609,103

 

 

 

1,367,919

 

 

 

4,634,109

 

 

 

3,115,347

 

Other Expense (Income)

 

 

 

 

 

 

 

 

 

 

 

 

Other income

 

 

(1,217,131

)

 

 

(40,308

)

 

 

(1,302,813

)

 

 

(46,283

)

Interest and service charges

 

 

182,587

 

 

 

104,874

 

 

 

317,423

 

 

 

203,637

 

Net Loss

 

$

1,574,559

 

 

$

1,432,485

 

 

$

3,648,719

 

 

$

3,272,701

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

0.03

 

 

$

0.03

 

 

$

0.06

 

 

$

0.07

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Number of Common

 

 

 

 

 

 

 

 

 

 

 

 

Shares Used in Per Share Calculations

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

59,077,284

 

 

 

47,014,116

 

 

 

57,688,376

 

 

 

46,971,392

 

 

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

 

3


 

PARAMOUNT GOLD NEVADA CORP.

 

Condensed Consolidated Interim Statements of Stockholders’ Equity

(Unaudited)

 

 

Shares (#)

 

 

 

Common Stock

 

 

 

Additional
Paid-In
Capital

 

 

 

Deficit

 

 

 

Total Stockholders'
Equity

 

Balance at June 30, 2023

 

 

54,812,248

 

 

 

$

548,124

 

 

 

$

116,613,503

 

 

 

$

(74,321,794

)

 

 

$

42,839,833

 

Stock based compensation

 

 

 

 

 

 

 

 

 

 

66,684

 

 

 

 

 

 

 

 

66,684

 

Capital issued for financing

 

 

3,515,257

 

 

 

 

35,153

 

 

 

 

1,053,375

 

 

 

 

 

 

 

 

1,088,528

 

Capital issued for payment of interest

 

 

553,141

 

 

 

 

5,531

 

 

 

 

154,882

 

 

 

 

 

 

 

 

160,413

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,074,160

)

 

 

 

(2,074,160

)

Balance at September 30, 2023

 

 

58,880,646

 

 

 

 

588,808

 

 

 

 

117,888,444

 

 

 

 

(76,395,954

)

 

 

 

42,081,298

 

Stock based compensation

 

 

 

 

 

 

 

 

 

 

43,431

 

 

 

 

 

 

 

 

43,431

 

Capital issued for financing

 

 

246,258

 

 

 

 

2,463

 

 

 

 

49,661

 

 

 

 

 

 

 

 

52,124

 

Capital issued for payment of interest

 

 

558,430

 

 

 

 

5,584

 

 

 

 

176,840

 

 

 

 

 

 

 

 

182,424

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,574,559

)

 

 

 

(1,574,559

)

Balance at December 31, 2023

 

 

59,685,334

 

 

 

$

596,855

 

 

 

$

118,158,376

 

 

 

$

(77,970,513

)

 

 

$

40,784,718

 

 

 

 

Shares (#)

 

 

Common Stock

 

 

Additional
Paid-In
Capital

 

 

Deficit

 

 

Total Stockholders'
Equity

 

Balance at June 30, 2022

 

 

46,591,081

 

 

$

465,912

 

 

$

113,805,101

 

 

$

(67,871,263

)

 

$

46,399,750

 

Stock based compensation

 

 

 

 

 

 

 

 

117,826

 

 

 

 

 

 

117,826

 

Capital issued for payment of interest

 

 

341,297

 

 

 

3,413

 

 

 

157,000

 

 

 

 

 

 

160,413

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(1,840,216

)

 

 

(1,840,216

)

Balance at September 30, 2022

 

 

46,932,378

 

 

 

469,325

 

 

 

114,079,927

 

 

 

(69,711,479

)

 

 

44,837,773

 

Stock based compensation

 

 

 

 

 

 

 

 

63,005

 

 

 

 

 

 

63,005

 

Capital issued for financing

 

 

455,099

 

 

 

4,551

 

 

 

153,962

 

 

 

 

 

 

158,513

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(1,432,485

)

 

 

(1,432,485

)

Balance at December 31, 2022

 

 

47,387,477

 

 

$

473,876

 

 

$

114,296,894

 

 

$

(71,143,964

)

 

$

43,626,806

 

 

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

4


 

PARAMOUNT GOLD NEVADA CORP.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited)

 

 

Six Months Ended December 31,

 

 

 

2023

 

 

2022

 

Net Loss

 

$

(3,648,719

)

 

$

(3,272,701

)

Adjustments to reconcile net loss to net cash used in operations:

 

 

 

 

 

 

Depreciation

 

 

683

 

 

 

973

 

Stock based compensation

 

 

110,115

 

 

 

180,831

 

Amortization of debt issuance costs

 

 

4,862

 

 

 

30,402

 

Interest expense

 

 

312,875

 

 

 

168,910

 

Accretion expense

 

 

221,117

 

 

 

223,122

 

Settlement of asset retirement obligations

 

 

(60,000

)

 

 

(60,000

)

Change in reclamation bonds accounts

 

 

 

 

 

(1,200

)

Effect of changes in operating working capital items:

 

 

 

 

 

 

(Increase)/Decrease in prepaid expenses

 

 

660,825

 

 

 

603,099

 

Increase/(Decrease) in accounts payable

 

 

871,223

 

 

 

(174,746

)

Cash used in operating activities

 

 

(1,527,019

)

 

 

(2,301,310

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of mineral properties

 

 

(50,000

)

 

 

(30,000

)

Cash used in investing activities

 

 

(50,000

)

 

 

(30,000

)

Cash flows from financing activities

 

 

 

 

 

 

Capital issued for financing, net of share issuance costs

 

 

1,140,652

 

 

 

158,513

 

Proceeds from royalty convertible debenture

 

 

15,000,000

 

 

 

 

Royalty convertible debenture issuance costs

 

 

(870,111

)

 

 

 

Repayment of 2019 convertible notes

 

 

(4,277,690

)

 

 

 

Proceeds from notes payable, related parties

 

 

 

 

 

1,000,000

 

Repayment of notes payable, related parties

 

 

(1,667,833

)

 

 

 

Cash provided by financing activities

 

 

9,325,018

 

 

 

1,158,513

 

 

 

 

 

 

 

 

Change in cash during period

 

 

7,747,999

 

 

 

(1,172,797

)

Cash at beginning of period

 

 

824,920

 

 

 

2,484,156

 

Cash at end of period

 

$

8,572,919

 

 

$

1,311,359

 

 

See Note 4 for supplemental cash flow information

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

 

5


 

PARAMOUNT GOLD NEVADA CORP.

Notes to Condensed Consolidated Interim Financial Statements

For the Six Months Period Ended December 31, 2023 and 2022

(Unaudited)

 

Note 1. Description of Business and Summary of Significant Accounting Policies

Paramount Gold Nevada Corp. (the “Company” or “Paramount”), incorporated under Chapter 78 of Nevada Revised Statutes, and its wholly-owned subsidiaries are engaged in the acquisition, exploration and development of precious metal properties. The Company’s wholly owned subsidiaries include New Sleeper Gold LLC, Sleeper Mining Company, LLC, and Calico Resources USA Corp (“Calico”). The Company is in the process of exploring its mineral properties in Nevada and Oregon, United States. The Company’s activities are subject to significant risks and uncertainties, including the risk of failing to secure additional funding to advance its projects and the risks of determining whether these properties contain reserves that are economically recoverable. The Company’s shares of common stock trade on the NYSE American LLC under the symbol “PZG”.

Basis of Presentation and Preparation

The unaudited condensed consolidated interim financial statements are prepared by management in accordance with accounting principles for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, all the normal and recurring adjustments necessary to fairly present the interim financial information set forth herein have been included.

The condensed consolidated interim financial statements have been prepared on an accrual basis of accounting, in conformity with U.S. GAAP, are presented in US dollars and follow the same accounting policies and methods of their application as the most recent annual financial statements. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. The condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and related footnotes for the year ended June 30, 2023.

Significant Accounting Policies

Please see Note 1- Description of Business and Summary of Significant Accounting Policies contained in the 2023 10-K.

In addition to the significant accounting policies contained in the 2023 10-K, we have added the following policy:

Derivative Liability

The Company reviews the terms of its convertible loans to determine whether there are embedded derivatives that are required to be bifurcated and accounted for as individual derivative financial instruments. The Company determined that a conversion feature embedded in its convertible loan is required to be accounted for separately from the convertible loan as a derivative liability and recorded at fair value and the remaining value allocated to the convertible loan net the unamortized debt issuance costs. The derivative liability will be fair valued at each reporting period, with changes in fair value recorded as a gain or loss in the Consolidated Statement of Operations.

 

Note 2. Going Concern

The Company has not generated any revenues or cash flows from operations to date. As such the Company is subject to all the risks associated with development stage companies. Since inception, the Company has incurred losses and negative cash flows from operating activities which have been funded from the issuance of common stock, convertible notes, note payable and the sale of royalties on its mineral properties. The Company does not expect to generate positive cash flows from operating activities in the near future, if at all, until such time it successfully initiates production at its Grassy Mountain Project, including obtaining construction financing, completing the construction of the proposed mine and anticipates incurring operating losses for the foreseeable future.

The Consolidated Interim Financial Statements of the Company have been prepared on a “going concern” basis, which means that the continuation of the Company is presumed even though events and conditions exist that, when considered in aggregate, raise substantial doubt about the Company’s ability to continue as a going concern because it is possible that the Company will be required to adversely change its current business plan or may be unable to meet its obligations as they become due within one year after the date that these financial statements were issued.

Paramount expects to continue to incur losses as a result of costs and expenses related to maintaining its properties and general and administrative expenses. Since 2015, the Company has relied on equity financings, debt financings and sale of royalties to fund its operations and the Company expects to rely on these forms of financing to fund operations into the near future.

6


 

Paramount’s current business plan requires working capital to fund non-discretionary expenditures for its exploration and development activities on its mineral properties, mineral property holding costs and general and administrative expenses. It also requires approximately $1.0 million in the next 12 months to complete evaporation pond conversions as part of its reclamation and environmental obligations at its Sleeper Gold Project.

Subsequent to February 13, 2024, the Company expects to fund operations as follows:

Existing cash on hand and working capital.
The existing ATM with Cantor Fitzgerald & Co. and Canaccord Genuity LLC.
Insurance proceeds to fund reclamation and environmental obligations at its Sleeper Gold Project.
Equity financings and sale of royalties.

At December 31, 2023, the Company’s cash balance was $8,572,919. During the month of December 2023, the Company entered into a Secured Royalty Convertible Debenture (the “Debenture”) (Note 6) in favor of Sprott Private Resource Streaming and Royalty (US Collector), LP, as agent for itself and certain affiliates (collectively, “Sprott”). Pursuant to the Debenture, Sprott advanced $15,000,000 to Paramount, which will be used to fund the continued permitting of the proposed Grassy Mountain Gold Mine and for general corporate purposes. Proceeds from the Debenture were also used for the repayment of the Company’s outstanding 2019 secured convertible notes and notes payable, related parties. After the repayment of debt and transaction costs the net proceeds available to the Company were $8,369,602.

Historically, we have been successful in accessing capital through equity and debt financing arrangements or by the sale of royalties on its mineral properties, no assurance can be given that additional financing will be available to it in amounts sufficient to meet its needs, or on terms acceptable to the Company. In the event that we are unable to obtain additional capital or financing, our operations, exploration and development activities would be significantly adversely affected. The continuation of the Company as a going concern is dependent on having sufficient capital to maintain our operations. In considering our financing plans and our current working capital position the Company believes there is substantial doubt about its ability to continue as a going concern twelve months after the date that our financial statements are issued.

Note 3. Fair Value Measurements

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization with the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels of the fair value hierarchy are described below:

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

Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 Inputs that are both significant to the fair value measurement and unobservable.

Financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Our financial instruments include cash, accounts payable, accrued liabilities, notes payable, the royalty conversion option on the Debenture (see Note 6) and convertible debt. Due to their short maturity of our cash, accounts payable, notes payable and accrued liabilities, we believe that their carrying amounts approximate fair value as of December 31, 2023 and 2022.

The Company determined that the Royalty conversion feature (Note 6) embedded in the Debenture is required to be accounted for separately from the Debenture as a derivative liability and recorded at fair value and the remaining value allocated to the Debenture net the unamortized debt issuance costs. The derivative liability will be fair valued at each reporting period, with changes in fair value recorded as a gain or loss in the Consolidated Statement of Operations.

As of December 27, 2023 and December 31, 2023, the Royalty conversion feature is recorded at $2,760,378 and is valued based on Level 3 inputs. Several steps were used to calculate the fair value of the Royalty conversion feature on the Debenture. First, the gross

7


 

revenue estimates from the Company's 2022 Technical Report Summary on the Grassy Mountain Project, Oregon U.S.A with an effective date of June 30, 2022 served as a basis for calculating the annual gross royalty amounts, utilizing the Royalty Agreement's royalty rate of 4.75% for the life of the mine The annual royalty amounts were discounted using a long term stock market rate of return of 10%. Second, a Black-Scholes model was used to calculate the fair value of the conversion option. The key assumptions in valuing the royalty conversion option derivative include:

1.
Cumulative present value of royalty stream of $13,993,580
2.
Conversion threshold is set as the value of the Debenture of $15,000,000
3.
Term: 5 years
4.
Volatility: 16.24% (A five year portfolio volatility of gold and silver, weighted by relative value in the project, is used as the historical volatility for the royalty stream)
5.
Risk-Free Rate: 3.69% (Derived from a term-matched coupon risk-free interest rate derived from the Treasury Constant Maturities yield curve)
6.
Dividend yield is set to 0% as no value of the royalty is lost given that production is assumed to begin in year 5

 

Note 4. Non-Cash Transactions

For the six months ended December 31, 2023, the Company issued 1,111,571 shares of common stock for payment of interest accrued on its outstanding 2019 Convertible Notes with a fair value of $342,837.

For the six months ended December 31, 2022, the Company issued 341,297 shares of common stock for payment of interest accrued on its outstanding 2019 Convertible Notes with a fair value of $160,413.

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, 2023200,000,000 common shares with par value $0.01 per common share).

For the three months ended December 31, 2023, the Company issued 246,258 shares of common stock from its ATM program for net proceeds of $52,124 and issued 558,430 shares of common stock for payment of interest accrued (Note 6) with a fair value of $182,424.

For the three months ended December 31, 2022, the Company issued 341,297 shares of common stock for payment of interest accrued (Note 6) with a fair value of $160,413.

For the six months ended December 31, 2023, the Company issued 3,761,515 shares of common stock from its ATM program for net proceeds of $1,140,652 and issued 1,111,571 shares of common stock for payment of interest accrued (Note 6) with a fair value of $342,837.

For the six months ended December 31, 2022, the Company issued 455,099 shares of common stock from its ATM program for net proceeds of $158,513 and issued 341,297 shares of common stock for payment of interest accrued (Note 6) with a fair value of $160,413.

 

Stock Options, Restricted Stock Units and Stock Based Compensation

Paramount’s 2015 and 2016 Stock Incentive and Compensation Plans, which are stockholder-approved, permits the grant of stock options, restricted stock units and stock to its employees and directors for up to 5.5 million shares of common stock.

Total stock-based compensation for the six months ended December 31, 2023 and 2022 were $110,115 and $180,831, respectively.

Stock Options

Stock option awards are generally granted with an exercise price equal to the market price of Paramount’s stock at the date of grant and have contractual lives of 5 years. To better align the interests of its key executives, employees and directors with those of its shareholders a significant portion of those share option awards will vest contingent upon meeting certain stock price appreciation performance goals and other performance conditions. Option and share awards provide for accelerated vesting if there is a change in control (as defined in the Stock Incentive and Compensation Plans).

For the six months ended December 31, 2023, the Company did not grant stock options (2022 – 50,000).

8


 

The fair value for these options were calculated using the Black-Scholes option valuations method. The weighted average assumptions used were as follows:

 

 

 

Six Months Ended December 31, 2023

 

Six Months Ended December 31, 2022

 

Weighted average risk-free interest rate

 

N/A

 

 

2.79

%

Weighted-average volatility

 

N/A

 

 

58

%

Expected dividends

 

N/A

 

0

 

Weighted average expected term (years)

 

N/A

 

5

 

Weighted average fair value

 

N/A

 

$

0.19

 

For the three months ended December 31, 2023, share-based compensation expense relating to service condition options and performance condition options was $nil and $1,105, respectively (2022 -$937 and $3,186).

For the six months ended December 31, 2023, share-based compensation expense relating to service condition options and performance condition options was $nil and $2,669, respectively (2022 -$12,021 and $12,446).

A summary of stock option activity under the Stock Incentive and Compensation Plans as of December 31, 2023 is presented below:

Options

 

Options

 

 

Weighted
Average
Exercise
Price

 

 

Weighted-
Average Remaining
Contractual Term (Years)

 

 

Aggregate
Intrinsic
Value

 

Outstanding at June 30, 2022

 

 

1,808,995

 

 

$

1.14

 

 

 

2.42

 

 

$

 

Granted

 

 

50,000

 

 

 

0.60

 

 

 

4.00

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

Forfeited or expired

 

 

(453,995

)

 

 

1.37

 

 

 

 

 

 

 

Outstanding at June 30, 2023

 

 

1,405,000

 

 

$

1.05

 

 

 

2.06

 

 

$

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

Forfeited or expired

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2023

 

 

1,405,000

 

 

$

1.05

 

 

 

1.56

 

 

$

 

Exercisable at December 31, 2023

 

 

946,664

 

 

$

1.05

 

 

 

1.63

 

 

$

 

 

A summary of the status of Paramount’s non-vested options at December 31, 2023 is presented below:

 

Non-vested Options

 

Options

 

 

Weighted-
Average
Grant-
Date Fair Value

 

Non-vested at June 30, 2022

 

 

657,333

 

 

$

0.55

 

Granted

 

 

50,000

 

 

 

0.19

 

Vested

 

 

(95,002

)

 

 

0.41

 

Forfeited or expired

 

 

(153,995

)

 

 

0.82

 

Non-vested at June 30, 2023

 

 

458,336

 

 

$

0.47

 

Granted

 

 

 

 

 

 

Vested

 

 

 

 

 

 

Forfeited or expired

 

 

 

 

 

 

Non-vested at December 31, 2023

 

 

458,336

 

 

$

0.47

 

 

As of December 31, 2023, there was approximately $5,504 of unamortized stock-based compensation expense related to non-vested stock options outstanding. The expenses are expected to be recognized over a weighted-average period of 1.20 years. The total fair value of stock based compensation that vested related to outstanding stock options during the six months ended December 31, 2023 and 2022, was nil and $16,873, respectively.

Restricted Stock Units ("RSUs")

RSUs are awards for service and performance which upon vesting and settlement entitle the recipient to receive one common share of the Company's Common Stock for no additional consideration, for each RSU held.

9


 

For the six months ended December 31, 2023 and 2022, there were no RSUs granted by the Company.

For the three months ended December 31, 2023, share-based compensation expenses related to service condition RSUs and performance condition RSUs was $32,814 and $9,512, respectively (2022 - $34,251 and $24,632).

For the six months ended December 31, 2023, share-based compensation expenses related to service condition RSUs and performance condition RSUs was $76,307 and $31,138, respectively (2022 - $73,269 and $88,709).

A summary of RSUs activity is summarized as follows:

 

Restricted Share Unit Activity

 

Outstanding RSUs

 

 

Weighted average grant date fair value

 

Outstanding at June 30, 2022

 

 

701,000

 

 

$

0.65

 

Granted

 

 

630,000

 

 

 

0.30

 

Vested

 

 

(350,500

)

 

 

0.65

 

Forfeited

 

 

 

 

 

 

Outstanding at June 30, 2023

 

 

980,500

 

 

$

0.43

 

Granted

 

 

 

 

 

 

Vested

 

 

(125,000

)

 

 

0.30

 

Forfeited

 

 

 

 

 

 

Outstanding at December 31, 2023

 

 

855,500

 

 

$

0.44

 

 

As of December 31, 2023, there was approximately $62,958 of unamortized stock-based compensation expense related to outstanding RSUs. The expenses are expected to be recognized over the remaining weighted-average vesting periods of 0.68 years.

Note 6. Convertible Debt

 

$15,000,000 Secured Royalty Convertible Debenture

Effective as of December 27, 2023, Paramount closed on a Secured Royalty Convertible Debenture (the “Debenture”) with Sprott Private Resource Streaming and Royalty (US Collector), LP (“Sprott”) for $15,000,000. The Debenture bears an interest rate of 10% per annum, which, at Paramount’s discretion, will be payable in cash or shares of its common stock at a 7% discount to the 10-day volume weighted average price ("VWAP") from the scheduled date of payment of interest. The Debenture may be repaid in cash or is convertible into a gross revenue royalty (the “Royalty") of 4.75% of the gold and silver produced from the proposed Grassy Mountain Gold Mine. The Debenture may be repaid in cash or through the issuance of the Royalty at the earlier of the commencement of commercial production or five years from the Debenture closing date. The conversion to the Royalty is at Sprott's sole discretion. Paramount may elect to repay the Debenture by providing 20 business day written notice, in cash only and in whole prior to its maturity at a price equal to the sum of the principal amount plus all accrued and unpaid interest plus a prepayment interest premium of equal to 36 months of interest less interest paid prior to the date of prepayment. Upon a sale of the Sleeper Gold Project, Sprott can elect to have a portion of the Debenture repaid with proceeds from the sale. In the event of default, the debenture will accrue interest at 13% per annum. In connection with the issuance of the Debenture, the Company incurred $870,111 of debt issuance costs which will be reflected as a discount on the Debenture. Unamortized debt issuance costs will be amortized over the five year term of the Debenture and recorded as an interest expense in the Consolidated Statement of Operations.

If the Royalty is issued, Paramount has the option to buy back 50% of the Royalty by paying either $11.25 million on the second (2nd) anniversary of the Royalty or $12.375 million on the third (3rd) anniversary. The Company’s obligations under the Debenture are secured by a pledge of the assets of the Company and its subsidiaries, including without limitation by deeds of trust with respect to the Grassy Mountain project and the Company’s Nevada property, Sleeper. The Company is required to maintain a positive cash balance at all times and shall maintain a positive adjusted working capital amount at the end of each fiscal quarter commencing with the fiscal quarter March 31, 2024.

The Company has accounted for the Royalty Conversion Option and related Buyback Provision as an embedded derivative in accordance with ASC 815 and recorded the derivative as a separate liability at fair value. The fair value of the derivative was $2,760,378 at issuance and at December 31, 2023 (Note 3).

At issuance and at December 31, 2023, the Debenture consisted of the following:

10


 

 

 

 

 

 

December 31, 2023

 

 

 

Debt liability of royalty convertible debenture before issuance costs

 

$

12,239,622

 

Less: unamortized issuance costs

 

(870,111

)

Net debt liability of royalty convertible debenture

 

 

 

11,369,511

 

Derivative liability of royalty convertible debenture

 

 

 

2,760,378

 

 

 

$

14,129,889

 

 

In connection with the Debenture, Paramount and Calico entered into a Mining ROFR Option to Purchase Agreement (the “ROFR”) in favor of Sprott. Pursuant to the ROFR, we have granted to Sprott the right of first refusal with respect to any proposed grant, sale or issuance to any third party of a stream, royalty or similar interest (a “Mineral Interest”) based on or with reference to future production from the proposed Grassy Mountain gold and silver mine. If the cash equivalent value (with the value of any non-cash consideration of any third party offer (the “Third Party Consideration”) exceeds $60,000,000 then Sprott shall have the right to buy a percentage interest of the Mineral Interest equal to the percentage that $60,000,000 is to the Third Party Consideration (the “Proportionate Mineral Interest”). If the Third Party Consideration equals or is less than $60,000,000, Sprott shall have the right to buy the entire Mineral Interest subject to such third party offer.

 

The ROFR shall terminate on the date which is the earlier of (i) the seventh (7th) anniversary of the ROFR; (ii) the closing of one or more purchase transactions between us and Sprott in respect of Mineral Interests for an aggregate purchase price of $60,000,000 upon the exercise by Sprott of its rights pursuant to the ROFR; and (iii) the closing of a purchase transaction between us and third party in respect of a Mineral Interest for a purchase price in excess of $60,000,000 where Sprott does not exercise its right of first refusal pursuant to the ROFR.

 

 

2019 Senior Secured Convertible Notes

 

 

Debt

 

 

 

December 31, 2023

 

 

June 30, 2023

 

Current

 

Non-Current

 

Current

 

Non-Current

 

2019 Secured Convertible Notes

$

 

 

 

$

4,277,690

 

$

 

Less: unamortized discount and issuance costs

 

 

 

 

 

(4,862

)

 

 

 

$

 

$

 

$

4,272,828

 

$

 

 

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. In September 2023, the maturity of the 2019 Convertible Notes was extended to the earlier of September 30, 2024 or the date of funding of the transaction contemplated by a non-binding term sheet between the Company and Sprott Resource and Streaming Royalty Corp and the annual interest rate increased to 12% commencing on October 1, 2023. As of September 30, 2023, the effective interest rate of the 2019 Convertible Notes is 9.24%. 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. For the six months ended December 31, 2023 and 2022, the Company amortized $4,862 and $30,402 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 cash balance of $250,000. During December 2023, all 2019 Convertible Notes outstanding were repaid by the Company.

During the three and six months ended December 31, 2023, there were no conversions of 2019 Convertible Notes to common stock of the Company.

 

Note 7. Notes Payable, Related Party

On December 9, 2022, the Company issued a Bridge Promissory Note (the "Note") to Seabridge, an entity affiliated with the Chairman of our Board of Directors, Rudi Fronk, and an owner of approximately 4.6% of our outstanding common stock, pursuant to which the Company may borrow, in one or more advances, the principal amount of up to $1,500,000 (the "Loan"). The Loan bears

11


 

interest at a per annum rate of 12%, payable upon maturity or prepayment, and matures on the earlier of November 30, 2023 or the date of funding of transaction as described below. The Company has the right to prepay the Loan, in whole or in part, at any time without penalty.

During the period ended September 30, 2023, an agreement between the Company and Seabridge was reached to extend the maturity of the Note to the earlier of November 30, 2023 or the date of funding of the transaction contemplated by a non-binding term sheet between the Company and Sprott Resource and Streaming Royalty Corp and increase the per annum interest rate of the Loan to 13% commencing on October 1, 2023.

During December 2023, the Company repaid the balance of the loan including accrued interest in the amount of $1,667,833.

Note 8. Mineral Properties

The Company has capitalized acquisition costs on mineral properties as follows:

 

 

December 31, 2023

 

 

June 30, 2023

 

Sleeper and other Nevada based Projects

 

$

28,222,533

 

 

$

28,172,533

 

Grassy Mountain and other Oregon based Projects

 

 

23,285,728

 

 

 

23,285,728

 

 

 

$

51,508,261

 

 

$

51,458,261

 

Sleeper:

Sleeper is located in Humboldt County, Nevada, approximately 26 miles northwest of the town of Winnemucca.

Grassy Mountain:

The Grassy Mountain Project is located in Malheur County, Oregon, approximately 22 miles south of Vale, Oregon, and roughly 70 miles west of Boise, Idaho.

Other Nevada Based Projects:

During the three month period ended December 31, 2023, the Company made a payment to Nevada Select in the amount of $50,000 under its option agreement to purchase the Bald Peak claims.

Impairment of Mineral Properties

The Company reviews and evaluates its long-lived assets for impairment on an annual basis or more frequently when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. For the six months ended December 31, 2023 and 2022, no events or changes in circumstance are believed to have impacted recoverability of the Company’s long-lived assets. Accordingly, it was determined that no interim impairment was necessary.

Note 9. Reclamation and Environmental

Reclamation and environmental costs are based principally on legal requirements. Management estimates costs associated with reclamation of mineral properties and properties under mine closure. On an ongoing basis the Company evaluates its estimates and assumptions; however, actual amounts could differ from those based on estimates and assumptions.

The Company has posted several cash bonds as financial security to satisfy reclamation requirements. The balance of posted cash reclamation bonds at December 31, 2023 is $546,176 (June 30, 2023 - $546,176).

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 $3,725,110. These costs are expected to be incurred between the calendar years 2024 and 2060. At December 31, 2023, Paramount has also estimated undiscounted reclamation cost as required by the NDEP to be $4,600,515. 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 the end of calendar year 2023. These costs are expected to be incurred between calendar years 2023 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 for the reclamation 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.

12


 

The following variables were used in the calculation for the periods ending December 31, 2023 and June 30, 2023:

 

 

 

Six Months Ended
December 31, 2023

 

 

Year Ended June 30, 2023

 

Weighted-average credit adjusted risk free rate

 

 

9.93

%

 

 

9.93

%

Weighted-average inflation rate

 

 

2.49

%

 

 

2.49

%

 

Changes to the Company’s reclamation and environmental costs for the Sleeper Gold Mine for the six month period ended December 31, 2023 and the year ended June 30, 2023 are as follows:

 

 

 

Six Months Ended
December 31, 2023

 

 

Year Ended June 30, 2023

 

Balance at beginning of period

 

$

4,436,902

 

 

$

4,475,270

 

Accretion expense

 

 

221,117

 

 

 

446,245

 

Additions and change in estimates

 

 

 

 

 

(364,612

)

Settlements

 

 

(60,000

)

 

 

(120,001

)

Balance at end of period

 

$

4,598,019

 

 

$

4,436,902

 

 

The balance of the reclamation and environmental obligation of $4,598,019 at December 31, 2023 (June 30, 2023 -$4,436,902) is comprised of a current portion of $2,560,515 (June 30, 2023 -$2,560,515) and a non-current portion of $2,037,504 (June 30, 2023 - $1,876,387).

The Company recorded an accretion expense for the three and six months ended December 31, 2023 of $110,558 and $221,117 (2022 - $111,561 and $223,122).

Note 10. Other Income

The Company’s other income details for the three and six months ended December 31, 2023 and 2022 were as follows:

 

 

Three Months Ended December 31, 2023

 

 

Three Months Ended December 31, 2022

 

 

Six Months Ended
December 31, 2023

 

 

Six Months Ended
December 31, 2022

 

Re-imbursement of reclamation costs

 

$

1,217,131

 

 

$

40,308

 

 

$

1,292,933

 

 

$

40,308

 

Leasing of water rights to third party

 

 

 

 

 

 

 

 

6,095

 

 

 

5,975

 

Restitution payment

 

 

 

 

 

 

 

 

3,785

 

 

 

 

Total

 

$

1,217,131

 

 

$

40,308

 

 

$

1,302,813

 

 

$

46,283

 

The proceeds the Company receives from its reclamation insurance policy for government mandated reclamation at its Sleeper Gold Project is recorded as other income. The corresponding expenses the Company incurs for performing these reclamation expenses are included in exploration costs on the Condensed Consolidated Interim Statement of Operations.

13


 

Note 11. Segmented Information

Segmented information has been compiled based on the material mineral properties in which the Company performs exploration activities.

Expenses by material project for the three and six months ended December 31, 2023:

 

 

 

Exploration and Development Expenses

 

 

Land Holding Costs

 

 

 

Three Months Ended December 31, 2023

 

 

Six Months Ended December 31, 2023

 

 

Three Months Ended December 31, 2023

 

 

Six Months Ended December 31, 2023

 

Sleeper Gold Project and other Nevada based Projects

 

$

1,530,037

 

 

$

2,467,602

 

 

$

118,765

 

 

$

237,530

 

Grassy Mountain Project and other Oregon based Projects

 

 

243,893

 

 

 

566,118

 

 

 

38,378

 

 

 

76,757

 

 

 

$

1,773,930

 

 

$

3,033,720

 

 

$

157,143

 

 

$

314,287

 

Expenses by material project for the three and six months ended December 31, 2022:

 

 

 

Exploration and Development Expenses

 

 

Land Holding Costs

 

 

 

Three Months Ended December 31, 2022

 

 

Six Months Ended December 31, 2022

 

 

Three Months Ended December 31, 2022

 

 

Six Months Ended December 31, 2022

 

Sleeper Gold Project and other Nevada based Projects

 

$

170,431

 

 

$

611,775

 

 

$

118,765

 

 

$

241,442

 

Grassy Mountain Project and other Oregon based Projects

 

 

294,971

 

 

 

693,222

 

 

 

38,378

 

 

 

76,757

 

 

 

$

465,402

 

 

$

1,304,997

 

 

$

157,143

 

 

$

318,199

 

 

Carrying values of mineral properties by material projects:

 

 

As of December 31, 2023

 

 

As of June 30, 2023

 

 

 

 

 

Sleeper Gold Project and other Nevada based Projects

 

$

28,222,533

 

 

$

28,172,533

 

 

 

 

 

Grassy Mountain Project and other Oregon based Projects

 

 

23,285,728

 

 

 

23,285,728

 

 

 

 

 

 

 

$

51,508,261

 

 

$

51,458,261

 

 

 

 

 

Additional operating expenses incurred by the Company are treated as corporate overhead with the exception of accretion expense which is discussed in Note 9.

Note 12. Commitments and Contingencies

Other Commitments

Paramount has an agreement to acquire 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 $60,000 per year until 2033 with an option to purchase the Cryla Claims for $560,000 at any time. The term of the agreement is 25 years and commenced in 2018. 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 six month period ended December 31, 2023. 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 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. For the six month period ended December 31, 2023, all required payments under the agreement are up-to-date. The Frost Claims are without known mineral reserves.

The Company has an agreement with Nevada Select to purchase the Bald Peak mining claims in the States of Nevada and California for a total consideration of $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. During the three month period ended December 31, 2023, a payment was made to Nevada Select for $50,000 under the terms of the agreement. All payme