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EX-31.2 - EX-31.2 - Paramount Gold Nevada Corp.pzg-ex312_7.htm
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EX-32.1 - EX-32.1 - Paramount Gold Nevada Corp.pzg-ex321_6.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x

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

For the quarterly period ended December 31, 2015

OR

o

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 if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    YES  o    NO  x

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  x    NO  o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    YES  x    NO  o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

 

o

  

Accelerated filer

 

o

 

 

 

 

Non-accelerated filer

 

o  (Do not check if a small reporting company)

  

Small reporting company

 

x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  o    NO  x

The number of shares of Registrant’s Common Stock outstanding, $0.01 par value per share, as of February 2, 2016 was 8,518,791.

 

 

 

 


Table of Contents

 

 

 

 

 

Page

PART I

 

FINANCIAL INFORMATION

 

 

Item 1.

 

Financial Statements (Unaudited)

 

2

 

 

Condensed Consolidated Interim Balance Sheets

 

2

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

 

3

 

 

Condensed Consolidated Interim Statements of Shareholders’ Equity

 

4

 

 

Condensed Consolidated Statements of Cash Flows

 

5

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

6

Item 2.

 

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

 

15

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

18

Item 4.

 

Controls and Procedures

 

18

 

 

 

 

 

PART II

 

OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

19

Item 1A.

 

Risk Factors

 

19

Item 4.

 

Mine Safety Disclosures

 

19

Item 6.

 

Exhibits

 

20

 

 

 

 

 

Signatures

 

Directors, Executive Officers and Corporate Governance

 

21

 

 

 

 

 

Exhibit Index

 

 

 

22

 

 

 

i


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

PARAMOUNT GOLD NEVADA CORP.

Condensed Consolidated Interim Balance Sheets

as at December 31, 2015 and June 30, 2015

(Unaudited)

 

 

 

As at December 31,

 

 

As at June 30,

 

 

 

2015

 

 

2015

 

Assets

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,906,761

 

 

$

9,282,534

 

Prepaid and deposits

 

 

329,329

 

 

 

198,676

 

Accounts receivable

 

 

 

 

 

37,071

 

Prepaid insurance, current portion (Note 10)

 

 

49,043

 

 

 

49,043

 

Marketable securities (Note 3)

 

 

80

 

 

 

14,657

 

Total Current Assets

 

 

8,285,213

 

 

 

9,581,981

 

Non-Current Assets

 

 

 

 

 

 

 

 

Mineral properties (Note 8)

 

 

28,036,135

 

 

 

28,036,135

 

Prepaid insurance, non-current portion (Note 10)

 

 

 

 

 

24,518

 

Property and equipment (Note 9)

 

 

13,957

 

 

 

7,996

 

Reclamation bond (Note 10)

 

 

2,383,039

 

 

 

2,499,396

 

Total Non-Current Assets

 

 

30,433,131

 

 

 

30,568,045

 

Total Assets

 

$

38,718,344

 

 

$

40,150,026

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

125,187

 

 

$

233,200

 

Total Current Liabilities

 

 

125,187

 

 

 

233,200

 

Non-Current Liabilities

 

 

 

 

 

 

 

 

Reclamation and environmental obligation (Note 10)

 

 

1,243,271

 

 

 

1,294,497

 

Total Liabilities

 

 

1,368,458

 

 

 

1,527,697

 

Stockholders' Equity

 

 

 

 

 

 

 

 

Common stock, par value $0.01, 50,000,000 authorized shares, 8,518,791 issued and

   outstanding at December 31, 2015 and at June 30, 2015

 

 

85,188

 

 

 

85,188

 

Additional paid in capital

 

 

64,851,640

 

 

 

64,572,546

 

Deficit

 

 

(27,517,172

)

 

 

(25,980,212

)

Accumulated other comprehensive loss

 

 

(69,770

)

 

 

(55,193

)

Total Stockholders' Equity

 

 

37,349,886

 

 

 

38,622,329

 

Total Liabilities and Stockholders' Equity

 

$

38,718,344

 

 

$

40,150,026

 

 

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

 

 

2


 

PARAMOUNT GOLD NEVADA CORP.

Consolidated Statements of Operations and Comprehensive Loss

for the Three and Six Month Periods ended December 31, 2015 and 2014

(Unaudited)

 

 

 

For the

Three Month

Period Ended

December 31, 2015

 

 

For the

Three Month

Period Ended

December 31, 2014

 

 

For the

Six Month

Period Ended

December 31, 2015

 

 

For the

Six Month

Period Ended

December 31, 2014

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (Note 11)

 

$

125,722

 

 

$

67,049

 

 

$

130,924

 

 

$

97,535

 

Total Revenue

 

 

125,722

 

 

 

67,049

 

 

 

130,924

 

 

 

97,535

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exploration

 

 

171,296

 

 

 

251,483

 

 

 

446,171

 

 

 

489,843

 

Land holding costs

 

 

101,591

 

 

 

108,553

 

 

 

195,237

 

 

 

234,775

 

Professional fees

 

 

108,581

 

 

 

10,103

 

 

 

150,286

 

 

 

27,755

 

Salaries and benefits

 

 

226,675

 

 

 

13,436

 

 

 

434,966

 

 

 

46,798

 

Directors compensation

 

 

58,183

 

 

 

6,271

 

 

 

109,448

 

 

 

16,993

 

General and administrative

 

 

109,738

 

 

 

10,126

 

 

 

167,954

 

 

 

20,626

 

Insurance

 

 

48,079

 

 

 

18,686

 

 

 

90,020

 

 

 

54,946

 

Depreciation

 

 

858

 

 

 

 

 

 

2,404

 

 

 

 

Accretion (Note 10)

 

 

36,998

 

 

 

33,692

 

 

 

73,996

 

 

 

67,384

 

Write down of mineral properties

 

 

 

 

 

 

 

 

 

 

 

337,400

 

Total Expenses

 

 

861,999

 

 

 

452,350

 

 

 

1,670,482

 

 

 

1,296,520

 

Net Loss before other items

 

 

736,277

 

 

 

385,301

 

 

 

1,539,558

 

 

 

1,198,985

 

Other items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(1,350

)

 

 

(731

)

 

 

(2,711

)

 

 

(1,477

)

Interest and service charges

 

 

40

 

 

 

776,629

 

 

 

113

 

 

 

1,529,868

 

Gain on sale of marketable securities

 

 

 

 

 

 

 

 

 

 

 

(31,975

)

Net Loss

 

 

734,967

 

 

 

1,161,199

 

 

 

1,536,960

 

 

 

2,695,401

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on available-for-sale-securities

 

 

698

 

 

 

1,183

 

 

 

14,577

 

 

 

124,848

 

Total Comprehensive Loss for the Period

 

$

735,665

 

 

$

1,162,382

 

 

$

1,551,537

 

 

$

2,820,249

 

Loss per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.09

 

 

$

0.14

 

 

$

0.18

 

 

$

0.33

 

Diluted

 

$

0.09

 

 

$

0.14

 

 

$

0.18

 

 

$

0.33

 

Weighted Average Number of Common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares Used in Per Share Calculations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

8,518,791

 

 

 

8,101,371

 

 

 

8,518,791

 

 

 

8,101,371

 

Diluted

 

 

8,518,791

 

 

 

8,101,371

 

 

 

8,518,791

 

 

 

8,101,371

 

 

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

for the Six Month Period Ended December 31, 2015 and Years ended June 30, 2015 and 2014

(Unaudited)

 

 

 

Shares

 

 

Common Stock

 

 

Additional

Paid-In Capital

 

 

Deficit

 

 

Accumulated  Other

Comprehensive

Income (Loss)

 

 

Total Stockholders'

Equity

 

Balance at June 30, 2014

 

 

1,000

 

 

 

29,701,475

 

 

 

6,545,714

 

 

 

(20,749,005

)

 

 

60,149

 

 

 

15,558,333

 

Returned to treasury by PGSC

   for Spin-off

 

 

(1,000

)

 

 

(29,701,475

)

 

 

 

 

 

 

 

 

 

 

 

(29,701,475

)

Capital issued for Spin-off transaction

 

 

8,101,371

 

 

 

81,014

 

 

 

29,620,461

 

 

 

 

 

 

 

 

 

29,701,475

 

Contributed capital by PGSC - Cash

 

 

 

 

 

 

 

 

8,445,860

 

 

 

 

 

 

 

 

 

8,445,860

 

Contributed capital by PGSC - Loan

   reclassified to equity

 

 

 

 

 

 

 

 

15,866,870

 

 

 

 

 

 

 

 

 

15,866,870

 

Capital issued for financing

 

 

417,420

 

 

 

4,174

 

 

 

1,465,826

 

 

 

 

 

 

 

 

 

1,470,000

 

Stock based compensation

 

 

 

 

 

 

 

 

375,788

 

 

 

 

 

 

 

 

 

375,788

 

Imputed interest on loans due to PGSC

 

 

 

 

 

 

 

 

2,252,027

 

 

 

 

 

 

 

 

 

2,252,027

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,711

)

 

 

(8,711

)

Transfer on realized gain on sale of

   marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(106,631

)

 

 

(106,631

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(5,231,207

)

 

 

 

 

 

(5,231,207

)

Balance at June 30, 2015

 

 

8,518,791

 

 

 

85,188

 

 

 

64,572,546

 

 

 

(25,980,212

)

 

 

(55,193

)

 

 

38,622,329

 

Stock based compensation

 

 

 

 

 

 

 

 

139,547

 

 

 

 

 

 

 

 

 

139,547

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,879

)

 

 

(13,879

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(801,993

)

 

 

 

 

 

(801,993

)

Balance at September 30, 2015

 

 

8,518,791

 

 

 

85,188

 

 

 

64,712,093

 

 

 

(26,782,205

)

 

 

(69,072

)

 

 

37,946,004

 

Stock based compensation

 

 

 

 

 

 

 

 

139,547

 

 

 

 

 

 

 

 

 

139,547

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(698

)

 

 

(698

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(734,967

)

 

 

 

 

 

(734,967

)

Balance at December 31, 2015

 

 

8,518,791

 

 

 

85,188

 

 

 

64,851,640

 

 

 

(27,517,172

)

 

 

(69,770

)

 

 

37,349,886

 

 

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

 

 

4


 

PARAMOUNT GOLD NEVADA CORP.

Condensed Consolidated Statements of Cash Flows

for the Six Month Period ended December 31, 2015 and 2014

(Unaudited)

 

 

 

For the

Six Month

Period Ended

December 31, 2015

 

 

For the

Six Month

Period Ended

December 30, 2014

 

Net Loss

 

$

(1,536,960

)

 

$

(2,695,401

)

Adjustment for:

 

 

 

 

 

 

 

 

Depreciation

 

 

2,404

 

 

 

 

Stock based compensation

 

 

279,094

 

 

 

11,569

 

Write-down of mineral properties

 

 

 

 

 

337,400

 

Interest expense on loans due to PGSC

 

 

 

 

 

1,529,504

 

Accretion expense (Note 10)

 

 

73,996

 

 

 

67,384

 

Change in reclamation

 

 

(8,865

)

 

 

(1,477

)

Insurance expense

 

 

24,518

 

 

 

24,522

 

Gain on sale of marketable securities (Note 3)

 

 

 

 

 

(31,975

)

(Increase) decrease in accounts receivable

 

 

37,071

 

 

 

 

(Increase) decrease in prepaid expenses

 

 

(130,653

)

 

 

(158,503

)

Increase (decrease) in accounts payable

 

 

(108,013

)

 

 

(25,733

)

Cash used in operating activities

 

 

(1,367,408

)

 

 

(942,710

)

Sale of marketable securities

 

 

 

 

 

462,075

 

Purchase of equipment

 

 

(8,365

)

 

 

 

Cash provided by (used in) investing activities

 

 

(8,365

)

 

 

462,075

 

Loan from PGSC

 

 

 

 

 

958,493

 

Cash provided by financing activities

 

 

 

 

 

958,493

 

 

 

 

 

 

 

 

 

 

Change in cash during period

 

 

(1,375,773

)

 

 

477,858

 

Cash at beginning of period

 

 

9,282,534

 

 

 

460,220

 

Cash at end of period

 

$

7,906,761

 

 

$

938,078

 

 

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

 

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

Paramount Gold Nevada Corp. (the “Company” or “Paramount”), incorporated under the General Corporation Law of the State of Nevada, 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 and Sleeper Mining Company, LLC.   The Company is in the process of exploring its mineral properties in Nevada, United States. The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to advance its projects and to date has not determined whether these properties contain reserves that are economically recoverable.

Spin-Off from Paramount Gold and Silver Corp.  Paramount Gold and Silver Corp. (“PGSC”) owned, prior to the separation (defined below), 100% of the issued and outstanding shares of the Company.   On April 17, 2015, we entered into the previously disclosed separation and distribution agreement (the “Separation Agreement”) with PGSC, to effect the separation (the “Separation”) of the Company from PGSC, and to provide for the allocation between the Company and PGSC of the Company’s and PGSC’s assets, liabilities and obligations attributable to periods prior to, at and after the Separation.

We filed a registration statement on Form S-1 in connection with the distribution (the “Distribution”) by PGSC to its stockholders of all the outstanding shares of common stock of the Company, par value $0.01 per share. The registration statement was declared effective by the Securities and Exchange Commission (“SEC”) on April 9, 2015. On April 6, 2015, the Company filed a Form 8-A with the SEC to register its shares of common stock under Section 12(b) of the Securities Exchange Act of 1934, as amended. The distribution, which effected a spin-off of the Company from PGSC, was made on April 17, 2015, to PGSC stockholders of record on April 14, 2015. On the distribution date, stockholders of PGSC received one share of Company common stock for every twenty shares of PGSC common stock held. Up to and including the distribution date, PGSC common stock traded on the “regular-way” market; that is, with an entitlement to shares of Company common stock distributed pursuant to the distribution. As a result of the distribution, the Company is now a publicly traded company independent from PGSC. On April 20, 2015, the Company’s shares of common stock commenced trading on the NYSE MKT LLC under the symbol “PZG”. An aggregate of 8,101,371 shares of Company common stock were issued in the Distribution.

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 results of operations for interim periods are not necessarily indicative of the operating results of a full year or future years.

The condensed consolidated interim financial statements have been prepared in accordance with U.S. GAAP 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, 2015.

Marketable Securities

The Company classifies its marketable securities as available-for-sale securities.  The securities are measured at fair market value in the financial statements with unrealized gains and temporary losses on investments classified as available for sale are included within accumulated other comprehensive income, net of any related tax effect. Upon realization, such amounts are reclassified from accumulated other comprehensive income to other income, net, realized gains and losses and other than temporary impairments, if any, are reflected in the statements of operations as other income or expenses. The Company does not recognize changes in the fair value of its investments in income unless a decline in value is considered other than temporary.

Use of Estimates

The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated interim financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

6


PARAMOUNT GOLD NEVADA CORP.

Notes to Condensed Consolidated Interim Financial Statements — Continued

 

Significant estimates made by management in the condensed consolidated interim financial statements include the adequacy of the Company’s asset retirement obligations, valuation of deferred tax asset, and valuation of mineral properties.

Cash and Cash Equivalents

All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash and cash equivalents. The carrying amount of these securities approximates fair value because of the short-term maturity of these instruments.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash and cash equivalents and amounts receivable.  The Company maintains cash in accounts which may, at times, exceed federally insured limits.  At December 31, 2015, the balances of approximately $8 million were in excess of federally insured limits.  We deposit our cash with financial institutions which we believe have sufficient credit quality to minimize the risk of loss.

Allocations

PGSC, prior to the Separation, provided administrative support to the Company for executive management, information systems and certain accounting, legal and other administrative functions.  The costs of these services were allocated to the Company based primarily on a percentage of the Company’s exploration costs as compared to PGSC’s consolidated exploration costs.  The allocations may not reflect the expense the Company would have incurred as an independent, publicly traded company for the periods presented.

The consolidated financial statements for the year ended June 30, 2015 and condensed consolidated interim financial statements for the period ended December 31 2014 also reflect interest expense imputed by the Company on the non-interest bearing loans from PGSC.

Management believes that its allocations are reasonable and based on a systematic and rational method; however, they are not necessarily indicative of the actual financial results of the Company, including such expenses that would have been incurred by the Company had it been operating as a separate, stand-alone entity for the periods presented.  As a stand-alone entity, the Company expects to incur expenses that may not be comparable in future periods to what is presented for the historical periods.  Consequently, the financial information herein may not reflect the financial position, results of operations and cash flows of the Company in the future or if the Company had been an independent stand-alone entity during all of the periods presented.  The comparative condensed consolidated interim financial statements include all adjustments necessary for a fair presentation of the Company’s results of operations.

Fair Value Measurements

The Company has adopted FASB ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. The Company applies fair value accounting for all financial assets and liabilities and non – financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as 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.

The Company has adopted FASB ASC 825, Financial Instruments, which allows companies to choose to measure eligible financial instruments and certain other items at fair value that are not required to be measured at fair value. The Company has not elected the fair value option for any eligible financial instruments.

Stock Based Compensation

The Company has adopted the provisions of FASB ASC 718, “Stock Compensation” (“ASC 718”), which establishes accounting for equity instruments exchanged for employee services. Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant).  Shares of the Company’s common stock will be issued for any options exercised.

7


PARAMOUNT GOLD NEVADA CORP.

Notes to Condensed Consolidated Interim Financial Statements — Continued

 

Mineral Properties

Mineral property acquisition costs are capitalized when incurred and will be amortized using the units-of-production method over the estimated life of the reserve following the commencement of production.  If a mineral property is subsequently abandoned or impaired, any capitalized costs will be expensed in the period of abandonment or impairment.

Acquisition costs include cash consideration and the fair market value of shares issued on the acquisition of mineral properties.

Exploration Costs

Exploration costs, which include maintenance, development and exploration of mineral claims, are expensed as incurred.  When it is determined that a mineral deposit can be economically developed as a result of establishing proven and probable reserves, the costs incurred after such determination will be capitalized and amortized over their useful lives.  To date, the Company has not established the commercial feasibility of its exploration prospects; therefore, all exploration costs are being expensed.

Property and Equipment

Equipment is recorded at cost less accumulated depreciation. All equipment is depreciated over its estimated useful life at the following annual rates:

 

 Computer equipment

 

30% declining balance

 

 Equipment

 

20% declining balance

 

 

Asset Retirement Obligations

The Company follows the provisions of ASC 440, “Asset Retirement and Environmental Obligations”, which establishes the standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment, or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets.  The Company’s asset retirement obligations are further described in Note 10.

Loss per Common Share

Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of shares outstanding during each period.  Diluted loss per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Basic and diluted loss per share were adjusted retroactively for all periods presented to reflect the Distribution that occurred on April 17, 2015.

For the three and six months periods ended December 31, 2015 and 2014, the shares of common stock equivalents related to outstanding stock options have not been included in the diluted per share calculation as they are anti-dilutive as the Company has recorded a net loss from continuing operations for each period.

Revenue Recognition

Revenue is recognized when persuasive evidence that an agreement exists, the risks and rewards of ownership pass to the purchaser, the selling price is fixed and determinable; or collection is reasonably assured. The passing of title to the purchaser is based on the terms of the purchase and sale agreement.

 

 

Note 2. Recent Accounting Guidance

 

In January 2016, the FASB issued ASU 2016-01, Financial Instruments.  ASU 2016-01 make targeted improvements to generally accepted accounting principles as follows:

 

 

1. Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to

8


PARAMOUNT GOLD NEVADA CORP.

Notes to Condensed Consolidated Interim Financial Statements — Continued

 

measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

 

2. Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value.

3. Eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities.

 

4. Eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.

 

5. Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.

 

6. Require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.

 

7. Require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.

 

8. Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets

 

ASU 2016-01 is effective for annual periods beginning after December 15, 2017.  The adoption of ASU 2016-01 is not expected to have a material impact on the Company’s condensed consolidated interim financial statements.

 

 

Note 3. Marketable Securities and Investments

The following table summarizes the Company’s available-for sale securities on hand as of December 31, 2015 and June 30, 2015:

 

 

 

Cost Basis

 

 

Impairment Charge

 

 

Adjusted Cost

 

 

Gross

Unrealized

Losses

 

 

Gross

Unrealized

Gains

 

 

Fair Value

 

Marketable securities at December 31, 2015

 

$

69,850

 

 

 

 

 

 

69,850

 

 

 

69,770

 

 

 

 

 

$

80

 

Marketable securities at June 30, 2015

 

$

69,850

 

 

 

 

 

 

69,850

 

 

 

55,193

 

 

 

 

 

$

14,657

 

 

During the six month period ended December 31, 2015, the Company recorded an unrealized loss of $14,577 (2014 – $124,848).

The marketable securities reflected in the table above includes stock purchase warrants of a single entity involved in the exploration of precious metals.  Each stock purchase warrant is exercisable for a common share of the entity.  The Company performs a quarterly assessment on its marketable securities with unrealized losses to determine if the security is other than temporarily impaired.

 

 

Note 4. 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).

9


PARAMOUNT GOLD NEVADA CORP.

Notes to Condensed Consolidated Interim Financial Statements — Continued

 

The three levels of the fair value hierarchy under ASC 820 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.

The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required by ASC 820, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

 

 

 

 

 

 

Fair Value at December 31, 2015

 

 

June 30, 2015

 

Assets

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash and cash equivalents

 

$

7,906,761

 

 

 

7,906,761

 

 

 

 

 

 

 

 

$

9,282,534

 

Marketable Securities

 

$

80

 

 

 

 

 

 

 

 

 

80

 

 

$

14,657

 

 

The Company’s cash and cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The cash and cash equivalents that are valued based on quoted market prices in active markets are primarily comprised of commercial paper, short-term certificates of deposit and U.S. Treasury securities.

At December 31, 2015, the Company’s marketable securities are comprised of stock purchase warrants. The stock purchase warrants’ fair value is recorded using a Black Scholes options model using inputs such as contractual terms, stock volatility and implied interest rates. The Company’s marketable securities are classified within Level 3 of the fair value hierarchy.

 

 

Note 5. Non-Cash Transactions

During the six month period ended December 31, 2015 and 2014, the Company did not enter into any non-cash activities.

 

 

Note 6. Capital Stock

Authorized Capital

Authorized capital stock consists of 50,000,000 common shares with par value of $0.01 per common share (June 31, 2015 – 50,000,000 common shares with par value $0.01 per common share).  At December 31, 2015 there were 8,518,791 common shares issued and outstanding (June 30, 2015- 8,518,791 common shares).

On February 19, 2015, the Company amended its articles of incorporation to replace its authorized capital of 25,000 common shares with no par value (“Old Common Shares”) with 50,000,000 common shares with par value of $0.01 per common share (“New Common Shares”). In connection with the amendment PGSC returned 1,000 Old Common Shares to treasury for cancellation in exchange for 8,101,371 New Common Shares.

 

Stock Options and Stock Based Compensation

Paramount’s 2015 Stock Incentive and Compensation Plan, which is shareholder-approved, permits the grant of share options and shares to its employees for up to 1.278 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 and employees with those of its shareholders a significant portion of those share option awards will vest contingent upon meeting certain stock price appreciation performance goals. Option and share awards provide for accelerated vesting if there is a change in control (as defined in the employee share option plan).

The Company did not grant stock options for the six month period ending December 31, 2015.

 

10


PARAMOUNT GOLD NEVADA CORP.

Notes to Condensed Consolidated Interim Financial Statements — Continued

 

A summary of option activity under the Stock Incentive and Compensation Plan  as of December 31, 2015, and changes during the three month period ended is presented below.

 

Options

 

Options

 

 

Weighted

Average

Exercise Price

 

 

Weighted-

Average Remaining

Contractual Term

 

 

Aggregate

Intrinsic Value

($)

 

Outstanding at July 1, 2015

 

 

995,000

 

 

$

1.53

 

 

 

 

 

 

 

 

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeited or expired

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2015

 

 

995,000

 

 

$

1.53

 

 

 

4.50

 

 

 

 

Exercisable at December 31, 2015

 

 

331,670

 

 

$

1.53

 

 

 

4.50

 

 

 

 

 

A summary of the status of Paramount’s non-vested shares as of July 1, 2015 and changes during the six month period ended December 31, 2015 is presented below.

 

Non-vested Options

 

Shares

 

 

Weighted-

Average Grant-

Date Fair Value

 

Non-vested at July 1, 2015

 

 

663,330

 

 

$

1.13

 

Granted

 

 

 

 

 

 

Vested

 

 

 

 

 

 

Forfeited

 

 

 

 

 

 

Non-vested at December 31, 2015

 

 

663,330

 

 

$

1.13

 

 

As of December 31, 2015, there was $458,274 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the employee share option plan. That cost is expected to be recognized over a weighted-average period of 1.1 years. The total fair value of shares vested during the six month period ended December 31, 2015 and 2014, was $nil and $nil, respectively.

 

 

Note 7. Related Party Transactions

The Company’s expenses includes allocations from PGSC of costs associated with administrative support functions which included executive management, information systems, finance, legal, accounting and certain other administrative functions and stock-based compensation.  Allocated stock-based compensation includes equity awards granted to employees of the Company as well as allocated stock-based compensation expense associated with PGSC employees that provided administrative support to the Company.  For the three and six month period ended December 31, 2015 and 2014, the Company’s allocated expenses from PGSC were as follows:

 

 

 

Three Month

Period Ended

 

 

Six Month

Period Ended

 

 

Three Month

Period Ended

 

 

Six Month

Period Ended

 

 

 

2015

 

 

2015

 

 

2014

 

 

2014

 

Allocated expenses included in:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exploration

 

$

 

 

$

 

 

$

3,700

 

 

$

7,400

 

Salaries and Professional fees

 

 

 

 

 

 

 

 

13,436

 

 

 

48,112

 

Directors compensation

 

 

 

 

 

 

 

 

6,271

 

 

 

16,993

 

Total

 

$

 

 

$

 

 

$

23,407

 

 

$

72,505

 

 

As discussed in Note 1, the Company believes the assumptions and methodologies underlying the allocation of administrative expenses and stock-based compensation are reasonable.  However, such expenses may not be indicative of the actual expenses that would have been incurred by the Company as a stand-alone company.  As such, the financial information herein may not necessarily reflect the consolidated financial position, results of operation, and cash flows of the Company in the future or if the Company had been a stand-alone entity during the comparative presented period ended December 31, 2014.

11


PARAMOUNT GOLD NEVADA CORP.

Notes to Condensed Consolidated Interim Financial Statements — Continued

 

During the three and six month period ended December 31, 2015, directors were paid or accrued $26,635 and $46,352 respectively (2014- $5,304 and $13,781) for their services as directors of the Company’s Board.  During the three and six month period ended December 31, 2015, the Company also recorded a non-cash transaction to recognize stock based compensation for directors in the amount of $31,548 and $63,096 respectively (2014 - $968 and $3,212 ).  

All transactions with related parties are made in the normal course of operations and are measured at exchange value.

 

 

Note 8. Mineral Properties

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

 

 

 

December 31, 2015

 

 

June 30, 2015

 

Sleeper

 

$

25,554,090

 

 

$

25,554,090

 

Mill Creek

 

 

2,096,616

 

 

 

2,096,616

 

Spring Valley

 

 

385,429

 

 

 

385,429

 

 

 

$

28,036,135

 

 

$

28,036,135

 

 

Sleeper:

Sleeper is located in northern Nevada approximately 26 miles northwest of the town of Winnemucca.  The Sleeper Gold Mine consists of 2,322 unpatented mining claims totaling approximately 72.5 square miles.

Mill Creek:

The Mill Creek property consists of 36 unpatented lode mining claims totaling 720 acres south of Battle Mountain Nevada.

Spring Valley:

The Spring Valley property consists of 38 unpatented lode mining claims totaling approximately 760 acres located in Pershing County, Nevada.

 

 

Note 9. Property and Equipment:

At December 31, 2015, and June 30, 2015, property and equipment consisted of the following:

 

 

 

December 30, 2015

 

 

June 30, 2015

 

Computer equipment

 

$

16,365

 

 

$

8,000

 

Equipment

 

 

1,329

 

 

 

1,329

 

Subtotal

 

 

17,694

 

 

 

9,329

 

 

 

 

 

 

 

 

 

 

Accumulated  depreciation

 

 

(3,737

)

 

 

(1,333

)

Total

 

$

13,957

 

 

$

7,996

 

 

During the six month period ended December 31, 2015, net additions to property, and equipment were $8,365 (2014- $—). During the six month period ended December 31, 2015 the Company recorded depreciation of $2,404 (2014-$—).

 

 

Note 10. Reclamation and Environmental:

The Company holds an insurance policy related to its Sleeper Gold Project that covers reclamation costs in the event the Company defaults on payments of its reclamation costs up to an aggregate of $25 million.  The unamortized insurance premium is being amortized to December 31, 2016 and the current and non-current prepaid insurance balance at December 31, 2015 is $49,043 (June 30, 2015 - $73,561).

12


PARAMOUNT GOLD NEVADA CORP.

Notes to Condensed Consolidated Interim Financial Statements — Continued

 

As a part of its insurance policy, the Company has funds in a commutation account which is used to reimburse reclamation costs and indemnity claims.  The balance of the commutation account at December 31, 2015 is $2,383,039 (June 30, 2015 - $2,499,396).

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 $3,915,626 as required by U.S Bureau of Land Management and the Nevada Department of Environmental Protection. Assumptions used to compute the asset retirement obligations as at December 31, 2015 and June 30, 2015 for the Sleeper Gold Project included a credit adjusted risk free rate and inflation rate of 9.76% (June 30, 2015 – 9.76%) and 2.0% (June 30, 2015 – 2.0%), respectively. Expenses are expected to be incurred between the years 2014 and 2053.

Changes to the Company’s asset retirement obligations for the six month period ended December 31, 2015 and the year ended June 30, 2015 are as follows:

 

 

 

Six Month Period

 

 

June 30, 2015

 

Balance at beginning of period

 

$

1,294,497

 

 

$

1,291,066

 

Accretion expense

 

 

73,996

 

 

 

134,768

 

Payments

 

 

(125,222

)

 

 

(131,337

)

Balance at end of period

 

$

1,243,271

 

 

$

1,294,497

 

 

 

Note 11. Other Income

The Company’s other income details were as follows:

 

 

 

Three Month Period

 

 

Three Month Period

 

 

Six Month Period

 

 

Six Month Period

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Re-imbursement of reclamation costs