10-Q 1 pzg-10q_20210331.htm 10-Q - Q3 ENDING MARCH 31, 2021 pzg-10q_20210331.htm

 

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 March 31, 2021

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 May 4, 2021 was 37,696,420.

 

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 March 31, 2021 and June 30, 2020 (Unaudited)

 

2

 

 

Condensed Consolidated Interim Statements of Operations and Comprehensive Loss for the Three and Nine-Months Ended March 31, 2021 and March 31, 2020 (Unaudited)

 

3

 

 

Condensed Consolidated Interim Statements of Stockholders’ Equity for the Three Months Ended September 30, 2020, December 31, 2020, and March 31, 2021 and Year ended June 30, 2020 (Unaudited)

 

4

 

 

Condensed Consolidated Interim Statements of Cash Flows for the Nine-months Ended March 31, 2021 and March 31, 2020 (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

 

13

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

19

Item 4.

 

Controls and Procedures

 

20

 

 

 

 

 

PART II

 

OTHER INFORMATION

 

 

Item 1A.

 

Risk Factors

 

20

Item 4.

 

Mine Safety Disclosures

 

20

Item 6.

 

Exhibits

 

21

 

 

 

 

 

Signatures

 

Directors, Executive Officers and Corporate Governance

 

22

 

 

 

 

 

 

 

 

i


 

 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

PARAMOUNT GOLD NEVADA CORP.

Condensed Consolidated Interim Balance Sheets

(Unaudited)

 

 

 

As at March 31,

 

 

As at June 30,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,607,317

 

 

$

5,434,081

 

Prepaid expenses and other deposits

 

 

479,783

 

 

 

442,596

 

Other assets

 

 

18,182

 

 

 

 

Total Current Assets

 

 

5,105,282

 

 

 

5,876,677

 

Non-Current Assets

 

 

 

 

 

 

 

 

Mineral properties (Note 7)

 

 

47,333,313

 

 

 

47,333,313

 

Reclamation bond (Note 8)

 

 

462,952

 

 

 

695,041

 

Property and equipment

 

 

6,583

 

 

 

8,467

 

Total Non-Current Assets

 

 

47,802,848

 

 

 

48,036,821

 

Total Assets

 

$

52,908,130

 

 

$

53,913,498

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

460,992

 

 

$

925,260

 

Reclamation and environmental obligation, current portion (Note 8)

 

 

75,000

 

 

 

154,231

 

Total Current Liabilities

 

 

535,992

 

 

 

1,079,491

 

Non-Current Liabilities

 

 

 

 

 

 

 

 

Convertible debt (Note 6)

 

 

4,146,467

 

 

 

5,256,228

 

Promissory note

 

 

35,947

 

 

 

35,628

 

Reclamation and environmental obligation, non-current portion (Note 8)

 

 

336,143

 

 

 

460,939

 

Total Non-Current Liabilities

 

 

4,518,557

 

 

 

5,752,795

 

Total Liabilities

 

 

5,054,549

 

 

 

6,832,286

 

Stockholders' Equity

 

 

 

 

 

 

 

 

Common stock, par value $0.01, 200,000,000 authorized shares, 37,313,267 issued and outstanding at March 31, 2021 and 50,000,000 authorized shares, 32,958,404 issued and outstanding at June 30, 2020 (Note 5)

 

 

373,133

 

 

 

329,584

 

Additional paid in capital

 

 

106,071,651

 

 

 

100,881,957

 

Deficit

 

 

(58,591,203

)

 

 

(54,130,329

)

Total Stockholders' Equity

 

 

47,853,581

 

 

 

47,081,212

 

Total Liabilities and Stockholders' Equity

 

$

52,908,130

 

 

$

53,913,498

 

 

 

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

 

Subsequent Events: Note 12

 

 

2


 

 

PARAMOUNT GOLD NEVADA CORP.

Condensed Consolidated Interim Statements of Operations and Comprehensive Loss

(Unaudited)

 

 

 

For the

Three-Month

Period Ended March 31, 2021

 

 

For the

Three-Month

Period Ended

March 31, 2020

 

 

For the

Nine-Month

Period Ended March 31, 2021

 

 

For the

Nine-Month

Period Ended

March 31, 2020

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (Note 9)

 

$

 

 

$

391,492

 

 

$

254,800

 

 

$

728,910

 

Total Revenue

 

 

 

 

 

391,492

 

 

 

254,800

 

 

 

728,910

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exploration

 

 

590,245

 

 

 

1,068,021

 

 

 

2,100,760

 

 

 

3,335,221

 

Land holding costs

 

 

130,284

 

 

 

131,633

 

 

 

391,867

 

 

 

401,346

 

Professional fees

 

 

21,812

 

 

 

35,477

 

 

 

94,964

 

 

 

124,809

 

Salaries and benefits

 

 

277,360

 

 

 

228,680

 

 

 

1,113,237

 

 

 

740,369

 

Directors' compensation

 

 

38,891

 

 

 

27,555

 

 

 

115,002

 

 

 

64,499

 

General and administrative

 

 

130,615

 

 

 

160,868

 

 

 

369,492

 

 

 

423,736

 

Insurance

 

 

49,542

 

 

 

34,825

 

 

 

148,866

 

 

 

103,286

 

Depreciation

 

 

624

 

 

 

651

 

 

 

1,884

 

 

 

2,096

 

Accretion (Note 8)

 

 

15,010

 

 

 

23,648

 

 

 

45,030

 

 

 

70,942

 

Total Expenses

 

 

1,254,383

 

 

 

1,711,358

 

 

 

4,381,102

 

 

 

5,266,304

 

Net Loss before Other Expense

 

 

1,254,383

 

 

 

1,319,866

 

 

 

4,126,302

 

 

 

4,537,394

 

Other Expense (Income)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(27

)

 

 

(1,725

)

 

 

(2,283

)

 

 

(14,466

)

Interest and service charges

 

 

100,111

 

 

 

122,231

 

 

 

336,855

 

 

 

266,460

 

Net Loss and Comprehensive Loss

 

$

1,354,467

 

 

$

1,440,372

 

 

$

4,460,874

 

 

$

4,789,388

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.04

 

 

$

0.05

 

 

$

0.13

 

 

$

0.17

 

Diluted

 

$

0.04

 

 

$

0.05

 

 

$

0.13

 

 

$

0.17

 

Weighted Average Number of Common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares Used in Per Share Calculations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

36,323,652

 

 

 

27,774,419

 

 

 

34,783,677

 

 

 

27,489,446

 

Diluted

 

 

36,323,652

 

 

 

27,774,419

 

 

 

34,783,677

 

 

 

27,489,446

 

 

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, 2019

 

 

26,519,954

 

 

$

265,200

 

 

$

94,764,730

 

 

$

(47,700,188

)

 

$

47,329,742

 

Stock based compensation

 

 

 

 

 

 

 

 

203,192

 

 

 

 

 

 

203,192

 

Capital issued for services

 

 

1,096,791

 

 

 

10,968

 

 

 

965,176

 

 

 

 

 

 

976,144

 

Capital issued for payment of interest

 

 

161,217

 

 

 

1,612

 

 

 

117,697

 

 

 

 

 

 

119,309

 

Capital issued for financing

 

 

5,180,442

 

 

 

51,804

 

 

 

4,831,162

 

 

 

 

 

 

4,882,966

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(6,430,141

)

 

 

(6,430,141

)

Balance at June 30, 2020

 

 

32,958,404

 

 

$

329,584

 

 

$

100,881,957

 

 

$

(54,130,329

)

 

$

47,081,212

 

Stock based compensation

 

 

 

 

 

 

 

 

77,424

 

 

 

 

 

 

77,424

 

Capital issued for payment of interest

 

 

183,395

 

 

 

1,834

 

 

 

203,579

 

 

 

 

 

 

205,413

 

Capital issued for financing

 

 

595,281

 

 

 

5,953

 

 

 

764,561

 

 

 

 

 

 

770,514

 

Capital issued on conversion of debt

 

 

200,000

 

 

 

2,000

 

 

 

190,066

 

 

 

 

 

 

192,066

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(1,331,508

)

 

 

(1,331,508

)

Balance at September 30, 2020

 

 

33,937,080

 

 

$

339,371

 

 

$

102,117,587

 

 

$

(55,461,837

)

 

$

46,995,121

 

Stock based compensation

 

 

 

 

 

 

 

 

201,465

 

 

 

 

 

 

201,465

 

Capital issued for services

 

 

166,792

 

 

 

1,668

 

 

 

179,790

 

 

 

 

 

 

181,458

 

Capital issued for financing

 

 

132,500

 

 

 

1,325

 

 

 

125,517

 

 

 

 

 

 

126,842

 

Capital issued on conversion of debt

 

 

350,609

 

 

 

3,506

 

 

 

334,277

 

 

 

 

 

 

337,783

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(1,774,899

)

 

 

(1,774,899

)

Balance at December 31, 2020

 

 

34,586,981

 

 

$

345,870

 

 

$

102,958,636

 

 

$

(57,236,736

)

 

$

46,067,770

 

Stock based compensation

 

 

 

 

 

 

 

 

80,864

 

 

 

 

 

 

80,864

 

Capital issued for payment of interest

 

 

179,032

 

 

 

1,790

 

 

 

191,574

 

 

 

 

 

 

193,364

 

Capital issued for financing

 

 

1,897,863

 

 

 

18,979

 

 

 

2,219,291

 

 

 

 

 

 

2,238,270

 

Capital issued on conversion of debt

 

 

649,391

 

 

 

6,494

 

 

 

621,286

 

 

 

 

 

 

627,780

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(1,354,467

)

 

 

(1,354,467

)

Balance at March 31, 2021

 

 

37,313,267

 

 

$

373,133

 

 

$

106,071,651

 

 

$

(58,591,203

)

 

$

47,853,581

 

 

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)

 

 

 

For the

Nine-Month

Period Ended March 31, 2021

 

 

For the

Nine-Month

Period Ended

March 31, 2020

 

Net Loss

 

$

(4,460,874

)

 

$

(4,789,388

)

Adjustment for:

 

 

 

 

 

 

 

 

Depreciation

 

 

1,884

 

 

 

2,096

 

Share based payments (Note 5)

 

 

181,458

 

 

 

976,144

 

Stock based compensation (Note 5)

 

 

359,753

 

 

 

127,012

 

Amortization of debt issuance costs (Note 6)

 

 

47,868

 

 

 

37,225

 

Interest expense

 

 

278,155

 

 

 

(102,425

)

Accretion expense (Note 8)

 

 

45,030

 

 

 

70,942

 

Interest earned on reclamation bond

 

 

(16,968

)

 

 

(14,447

)

Increase in other assets

 

 

(18,182

)

 

 

 

Increase in prepaid expenses

 

 

(37,187

)

 

 

(422,089

)

Decrease in accounts payable

 

 

(343,327

)

 

 

(131,540

)

Cash used in operating activities

 

 

(3,962,390

)

 

 

(4,246,470

)

Purchase of equipment

 

 

 

 

 

(4,719

)

Cash used in investing activities

 

 

 

 

 

(4,719

)

Capital issued for financing (Note 5)

 

 

3,135,626

 

 

 

 

Convertible debt issued (Note 6)

 

 

 

 

 

5,201,807

 

Cash provided by financing activities

 

 

3,135,626

 

 

 

5,201,807

 

 

 

 

 

 

 

 

 

 

Change in cash during period

 

 

(826,764

)

 

 

950,618

 

Cash at beginning of period

 

 

5,434,081

 

 

 

463,690

 

Cash at end of period

 

$

4,607,317

 

 

$

1,414,308

 

 

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

 

 

Non-Cash Transactions: Note 4

 

5


 

 

PARAMOUNT GOLD NEVADA CORP.

Notes to Condensed Consolidated Interim Financial Statements

For the Nine-Month Periods Ended March 31, 2021 and 2020

(Unaudited)

 

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

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

Basis of Presentation and Preparation

 

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

 

The Company faces various risks related to the COVID-19 global pandemic.   The Company cannot at this time predict the impact of the COVID-19 pandemic, but it could have a material adverse effect on the business, financial position, results of operations and/or cash flows.  The results of operations for the interim period ended March 31, 2021 is not necessarily indicative of the operating results expected for the year ended June 30, 2021 or for any future period.

The condensed consolidated interim financial statements have been prepared on an accrual basis of accounting, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), are presented in US dollars and follow the same accounting policies and methods of their application as the most recent annual financial statements.   The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.  All significant intercompany accounts and transactions are eliminated in consolidation.  The condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and related footnotes for the year ended June 30, 2020.

 

Significant Accounting Policies

Please see Note 1- Description of Business and Summary of Significant Accounting Policies contained in the 2020 10-K.

 

 

 

Note 2. Recent Accounting Guidance

 

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses.  The changes were effective for the Company’s fiscal year beginning July 1, 2020.  Among other things, these amendments require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The Company adoption of this guidance on July 1, 2020 did not have a material effect on the Company’s consolidated financial position, results of operations, cash flows and related disclosures.

 

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement.  These changes were effective for the Company’s fiscal year beginning July 1, 2020.  The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted.  The Company adoption of this guidance on July 1, 2020 did not have a material effect on the Company’s consolidated financial position, results of operations, cash flows and related disclosures.

 

6


 

 

Note 3. Fair Value Measurements

Fair value accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

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

Level 1

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

Level 2

Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Financial assets carried at fair value on a recurring basis by level within the fair value hierarchy in the Condensed Consolidated Interim Balance Sheets at March 31, 2021 and June 30, 2020 are presented in the following table:

 

 

 

 

 

 

 

Fair Value at March 31, 2021

 

 

June 30, 2020

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash and cash equivalents

 

$

4,607,317

 

 

 

4,607,317

 

 

 

 

 

 

 

 

$

5,434,081

 

 

The carrying values of accounts payable, promissory note and convertible debt (Note 6) approximate fair value as of March 31, 2021 and June 30, 2020.

 

 

Note 4. Non-Cash Transactions

 

During the nine-month period ended March 31, 2021, the Company issued 362,427 shares of Common Stock for payment of interest accrued and owing on its outstanding 2019 Convertible Notes.  Additionally, 1,200,000 shares of Common Stock were issued upon the conversion of 1,200 of its outstanding 2019 Convertible Notes.  The Company also issued 166,792 shares of Common Stock to Ausenco Engineering USA South Inc. in exchange for services valued at $181,458.

During the nine-month period ended March 31, 2020, the Company issued 1,096,791 shares to Ausenco in exchange for services valued at $976,144 to complete a feasibility study at its Grassy Mountain Project.  

 

 

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, 2020 – 50,000,000 common shares with par value $0.01 per common share).  An increase to authorized capital stock was approved by the Company’s stockholders during the nine-month period ended March 31, 2021.

 

During the three-month period ended March 31, 2021, the Company issued 1,897,863 shares at an approximate average price of $1.22 for gross proceeds of $2,318,522 through its at-the-market offering.  Share issuance costs related to this were $80,252.  The Company also issued 179,032 shares for payment of interest accrued and owing at December 31, 2020 (Note 6) with a fair value of $193,364.  Additionally, the Company issued 649,391 shares upon the conversion of 649 notes of the 2019 Senior Secured Convertible Notes (Note 6).  

 

During the nine-month period ended March 31, 2021, the Company issued 2,625,644 shares at an approximate average price of $1.24 for gross proceeds of $3,266,548 through its at-the-market offering.  Share issuance costs related to this were $130,922.  The Company issued 166,792 shares at a value of $1.10 for services to complete a feasibility study at its Grassy Mountain Project (Note 4).  The Company also issued 362,427 shares for payment of interest accrued and owing at June 30, 2020 and December 31, 2020 (Note 6) with a fair value of $398,777. The Company also issued 1,200,000 shares upon the conversion of 1,200 of the 2019 Senior Secured Convertible Notes (Note 6).

 

During the three and nine-month period ended March 31, 2020, the Company issued 1,096,791 shares at a value of $0.89 per share to Ausenco in exchange for services to complete a feasibility study at its Grassy Mountain Project (Note 4).  

7


 

             

At March 31, 2021 there were 37,313,267 common shares issued and outstanding (June 30, 2020 – 32,958,404 common shares).

Warrants

A summary of warrants exercisable into common stock activity as of March 31, 2021, and changes during the nine-month period ended is presented below:

 

 

Warrants

 

 

Weighted

Average

Exercise Price

 

 

Weighted-

Average Remaining

Contractual Term (Years)

 

 

Aggregate

Intrinsic Value

($)

 

Outstanding at July 1, 2020

 

 

1,200,000

 

 

$

1.40

 

 

 

0.03

 

 

 

 

Issued

 

 

 

 

 

 

 

 

 

 

 

 

Expired

 

 

(1,200,000

)

 

 

1.40

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2021

 

 

 

 

$

 

 

 

 

 

 

 

 

 

    

Stock Options and Stock Based Compensation

Paramount’s 2015 and 2016 Stock Incentive and Compensation Plans, which are stockholder-approved, permits the grant of stock options and stock to its employees and directors for up to 2.169 million shares of common stock.  Option awards are generally granted with an exercise price equal to the market price of Paramount’s stock at the date of grant and have contractual lives of 5 years.  To better align the interests of its key executives, employees and directors with those of its stockholders, a significant portion of those stock option awards will vest contingent upon meeting certain stock price appreciation performance goals or other performance conditions. Option and stock awards provide for accelerated vesting if there is a change in control (as defined in the employee stock option plan).

 

During the three-month period ended March 31, 2021, the Company did not grant any stock options.  During the three-month period ended March 31, 2021, share-based compensation expense relating to service condition options and performance condition was $45,021 and $35,843, respectively (2020- $23,029 and $44,477).

 

 

During the nine-month period ending March 31, 2021, a total of 755,000 stock options were granted by the Company.  During the nine-month period ended March 31, 2021, share-based compensation expense relating to service condition options and performance condition was $245,022 and $114,731, respectively (2020- $50,473 and $76,539).

 

The fair value for these options was calculated using the Black-Scholes option valuations method.  The weighted average assumptions used for the nine-month period ended March 31, 2021 and fiscal year ended June 30, 2020 were as follows:

 

 

 

2021

 

 

2020

 

Weighted average risk-free interest rate

 

 

0.22

%

 

 

1.60

%

Weighted-average volatility

 

 

60

%

 

 

61

%

Expected dividends

 

$

0.00

 

 

$

0.00

 

Weighted average expected term (years)

 

 

5.00

 

 

 

5.00

 

Weighted average fair value

 

$

0.57

 

 

$

0.39

 

 

 

 

8


 

 

A summary of option activity under the Stock Incentive and Compensation Plans as of March 31, 2021, and changes during the nine-month period ended are presented below:

 

Options

 

Options

 

 

Weighted

Average

Exercise Price

 

 

Weighted-

Average Remaining

Contractual Term (Years)

 

 

Aggregate

Intrinsic Value

 

Outstanding at July 1, 2020

 

 

1,243,995

 

 

$

1.20

 

 

 

3.63

 

 

$

165,600

 

Granted

 

 

755,000

 

 

 

1.13

 

 

 

4.69

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

Forfeited or expired

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2021

 

 

1,998,995

 

 

$

1.17

 

 

 

3.56

 

 

$

 

Exercisable at March 31, 2021

 

 

964,997

 

 

$

1.19

 

 

 

3.27

 

 

$

 

 

A summary of the status of Paramount’s non-vested options as at July 1, 2020 and changes during the nine-month period ended March 31, 2021 is presented below:

 

Non-vested Options

 

Options

 

 

Weighted-

Average Grant-

Date Fair Value

 

Non-vested at July 1, 2020

 

 

943,992

 

 

$

0.51

 

Granted

 

 

755,000

 

 

 

0.57

 

Vested

 

 

664,994

 

 

 

0.50

 

Forfeited

 

 

 

 

 

 

Non-vested at March 31, 2021

 

 

1,033,998

 

 

$

0.61

 

 

As of March 31, 2021, there was $218,173 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the employee share option plans. That cost is expected to be recognized over a weighted-average period of 0.93 years. The total fair value of stock based compensation arrangements vested during the nine-month period ended March 31, 2021 and 2020, was $332,836 and $49,408, respectively.

 

 

Note 6. Convertible Debt

 

 

 

Debt

 

 

 

March 31, 2021

 

 

 

June 30, 2020

 

 

 

Current

 

 

 

Non-Current

 

 

 

Current

 

 

 

Non-Current

 

2019 Secured Convertible Notes

 

$

 

 

 

$

 

4,277,690

 

 

 

$

 

 

 

 

$

 

5,477,690

 

Less: unamortized discount and issuance costs

 

 

 

 

 

 

 

(131,223

)

 

 

 

 

 

 

 

 

 

(221,462

)

 

 

$

 

 

 

$

 

4,146,467

 

 

 

$

 

 

 

 

$

 

5,256,228

 

 

In September 2019, the Company completed a private offering of 5,478 Senior Secured Convertible Notes (“2019 Convertible Notes”) at $975 per $1,000 face amount due in 2023.  Each 2019 Convertible Note will bear an interest rate of 7.5% per annum, payable semi-annually.  The principal amount of the 2019 Convertible Notes will be convertible at a price of $1.00 per share of Paramount common stock.  Unamortized discount and issuance costs of $275,883 will be amortized as an additional interest expense over the four year term of the 2019 Convertible Notes.  During the nine-month period ended March 31, 2021, the Company amortized $47,868 (2020- $37,225) of discount and issuance costs.  At any point after the second anniversary of the issuance of the convertible notes, Paramount may force conversion if the share price of its common stock remains above $1.75 for 20 consecutive trading days. The convertible notes are secured by a lien on all assets of the Company and the Company is required to maintain a working capital balance of $250,000.  

 

During the three-month period ended March 31, 2021, 649 of the 2019 Convertible Notes outstanding were converted into 649,391 shares of common stock of the Company (Note 5) and $21,611 of unamortized discount and issuance costs were debited to additional paid in capital to reflect the issued common stock.

 

9


 

 

During the nine-month period ended March 31, 2021, 1,200 of the 2019 Convertible Notes outstanding were converted into 1,200,000 shares of common stock of the Company (Note 5) and $42,371 of unamortized discount and issuance costs were debited to additional paid in capital to reflect the issued common stock.

 

Note 7. Mineral Properties

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

 

 

 

March 31, 2021

 

 

June 30, 2020

 

Sleeper

 

$

24,147,585

 

 

$

24,147,585

 

Grassy Mountain

 

 

23,185,728

 

 

 

23,185,728

 

 

 

$

47,333,313

 

 

$

47,333,313

 

 

Sleeper:

Sleeper is located in Humboldt County, Nevada, approximately 26 miles northwest of the town of Winnemucca.  The Sleeper Gold Mine consists of 2,322 unpatented mining claims totaling approximately 38,300 acres.

Grassy Mountain:

The Grassy Mountain Project is located in Malheur County, Oregon, approximately 22 miles south of Vale, Oregon, and roughly 70 miles west of Boise, Idaho. It consists of 442 unpatented lode claims, 3 patented lode claims, and various leased fee land surface and surface/mineral rights, covering approximately 8,300 acres.

 

 

Note 8. Reclamation and Environmental

 

The Company has funds in a commutation account which is used to reimburse reclamation costs and indemnity claims at its Sleeper Gold Project. It also has provided financial security for future reclamation work in the form of reclamation bonds held by the U.S Bureau of Land Management (“BLM”) for the Sleeper Gold Project and Grassy Mountain Project.  The balance of the commutation account and reclamation bonds at March 31, 2021 is 462,952 (June 30, 2020- $695,041).

The Company holds an insurance policy which is in effect until 2033 related to its Sleeper Gold Project.  The policy covers reclamation costs up to an aggregate of $25 million in the event the Company’s commutation account is insufficient to cover any mandated reclamation obligations.

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 asset retirement obligation at the Sleeper Gold Project has been measured using the following variables: 1) Expected costs for earthwork, re-vegetation, in-pit water treatment, on-going monitoring, labor and management, 2) Inflation adjustment, and 3) Market risk premium.  The sum of the expected costs by year is discounted using the Company’s credit adjusted risk free interest rate from the time it expects to pay the retirement obligation to the time it incurs the obligation.  The reclamation and environmental obligation recorded on the balance sheet is equal to the present value of the estimated costs.

The current undiscounted estimate of the reclamation costs for existing disturbances at the Sleeper Gold Project is $4,010,403 as required by the BLM and the Nevada Department of Environmental Protection. Assumptions used to compute the asset retirement obligations as at March 31, 2021 and June 30, 2020 for the Sleeper Gold Project included a credit adjusted risk free rate and inflation rate of 9.76% (June 30, 2020– 9.76%) and 1.6% (June 30, 2020 – 1.6%), respectively. Expenses are expected to be incurred between the years 2021 and 2049.

10


 

Changes to the Company’s asset retirement obligations for the nine-month period ended March 31, 2021 and the year ended June 30, 2020 are as follows:

 

 

 

Nine-Month

Period Ended March 31, 2021

 

 

Year Ended June 30, 2020

 

Balance at beginning of period

 

$

615,170

 

 

$

965,677

 

Accretion expense

 

 

45,030

 

 

 

94,591

 

Payments

 

 

(249,057

)

 

 

(723,279

)

Change in estimate of existing obligation

 

 

 

 

 

278,181

 

Balance at end of period

 

$

411,143

 

 

$

615,170

 

 

The balance of the asset retirement obligation of $411,143 at March 31, 2021 (June 30, 2020 -$615,170 ) is comprised of a current portion of 75,000 (June 30, 2020 -$154,231 ) and a non-current portion of 336,143 (June 30, 2020 -$460,939). The Company recorded an accretion expense for the nine-month period ended March 31, 2021 of $45,030 (March 31, 2020 - $70,942)

 

 

Note 9. Other Income

The Company’s other income details for the three and nine-month period ended March 31, 2021 and 2020 were as follows:

 

 

 

Three-Month Period

 

 

Nine-Month Period

 

 

Three-Month Period

 

 

Nine-Month Period

 

 

 

Ended March 31, 2021

 

 

Ended March 31, 2021

 

 

Ended March 31, 2020

 

 

Ended March 31, 2020

 

Re-imbursement of reclamation costs

 

$

 

 

$

249,057

 

 

$

391,492

 

 

$

723,279

 

Leasing of water rights to third party

 

 

 

 

 

5,743

 

 

 

 

 

 

5,631

 

Total

 

$

 

 

$

254,800

 

 

$

391,492

 

 

$

728,910

 

 

 

Note 10. Segmented Information:

 

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

 

Expenses and mineral property carrying values by material project for the three and nine-month period ended March 31, 2021:

 

 

 

Exploration

Expenses

 

 

Land Holding

Costs

 

 

 

 

 

 

 

Three-Month Period Ended March 31, 2021

 

 

Nine-Month Period Ended March 31, 2021

 

 

Three-Month Period Ended March 31, 2021

 

 

Nine-Month Period Ended March 31, 2021

 

 

Mineral Properties

As at March 31, 2021

 

Sleeper Gold Project

 

$

219,185

 

 

$

651,070

 

 

$

106,906

 

 

$

320,715

 

 

$

24,147,585

 

Grassy Mountain Project

 

 

371,060

 

 

 

1,449,690

 

 

 

23,378

 

 

 

71,152

 

 

 

23,185,728

 

 

 

$

590,245

 

 

$

2,100,760

 

 

$

130,284

 

 

$

391,867

 

 

$

47,333,313

 

 

 

Expenses for the three and nine-month period ended March 31, 2020 and mineral property carrying values as at June 30, 2020 by material project:

 

 

 

Exploration

Expenses

 

 

Land Holding

Costs

 

 

 

 

 

 

 

Three-Month Period Ended March 31, 2020

 

 

Nine-Month Period Ended March 31, 2020

 

 

Three-Month Period Ended March 31, 2020

 

 

Nine-Month Period Ended March 31, 2020

 

 

Mineral Properties

As at June 30,

2020

 

Sleeper Gold Project

 

$

99,962

 

 

$

761,271

 

 

$

106,903

 

 

$

316,605

 

 

$

24,147,585

 

Grassy Mountain Project

 

 

968,059

 

 

 

2,573,950

 

 

 

24,730

 

 

 

84,741

 

 

 

23,185,728

 

 

 

$

1,068,021

 

 

$

3,335,221

 

 

$

131,633

 

 

$

401,346

 

 

$

47,333,313

 

11


 

 

 

 

Note 11. Commitments and Contingencies:

 

Lease Commitments

 

The Company has an office premise lease that expires on June 30, 2021.  The aggregate minimum rentals payable for these operating leases are as follows: