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EX-31.1 - EX-31.1 - Paramount Gold Nevada Corp.pzg-ex311_8.htm
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EX-32.1 - EX-32.1 - Paramount Gold Nevada Corp.pzg-ex321_9.htm
EX-32.2 - EX-32.2 - Paramount Gold Nevada Corp.pzg-ex322_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 March 31, 2016

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 May 4, 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

 

17

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

21

Item 4.

 

Controls and Procedures

 

21

 

 

 

 

 

PART II

 

OTHER INFORMATION

 

 

Item 1A.

 

Risk Factors

 

22

Item 4.

 

Mine Safety Disclosures

 

24

Item 6.

 

Exhibits

 

25

 

 

 

 

 

Signatures

 

Directors, Executive Officers and Corporate Governance

 

26

 

 

 

 

 

Exhibit Index

 

 

 

27

 

 

 

i


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

PARAMOUNT GOLD NEVADA CORP.

Condensed Consolidated Interim Balance Sheets

as at March 31, 2016 and June 30, 2015

(Unaudited)

 

 

 

As at March 31,

 

 

As at June 30,

 

 

 

2016

 

 

2015

 

Assets

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,070,985

 

 

$

9,282,534

 

Prepaid and deposits

 

 

219,939

 

 

 

198,676

 

Accounts receivable

 

 

 

 

 

37,071

 

Promissory note receivable (Note 12)

 

 

300,000

 

 

 

 

Prepaid insurance, current portion (Note 10)

 

 

36,778

 

 

 

49,043

 

Marketable securities (Note 3)

 

 

 

 

 

14,657

 

Total Current Assets

 

 

7,627,702

 

 

 

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)

 

 

13,389

 

 

 

7,996

 

Reclamation bond (Note 10)

 

 

2,386,336

 

 

 

2,499,396

 

Total Non-Current Assets

 

 

30,435,860

 

 

 

30,568,045

 

Total Assets

 

$

38,063,562

 

 

$

40,150,026

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

326,205

 

 

$

233,200

 

Total Current Liabilities

 

 

326,205

 

 

 

233,200

 

Non-Current Liabilities

 

 

 

 

 

 

 

 

Reclamation and environmental obligation (Note 10)

 

 

1,280,270

 

 

 

1,294,497

 

Total Liabilities

 

 

1,606,475

 

 

 

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

 

 

64,989,672

 

 

 

64,572,546

 

Deficit

 

 

(28,617,773

)

 

 

(25,980,212

)

Accumulated other comprehensive loss

 

 

-

 

 

 

(55,193

)

Total Stockholders' Equity

 

 

36,457,087

 

 

 

38,622,329

 

Total Liabilities and Stockholders' Equity

 

$

38,063,562

 

 

$

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 Nine Month Periods ended March 31, 2016 and 2015

(Unaudited)

 

 

 

For the

Three Month

Period Ended

March 31, 2016

 

 

For the

Three Month

Period Ended

March 31, 2015

 

 

For the

Nine Month

Period Ended

March 31, 2016

 

 

For the

Nine Month

Period Ended

March 31, 2015

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (Note 11)

 

$

 

 

$

 

 

$

130,924

 

 

$

97,535

 

Total Revenue

 

 

 

 

 

 

 

 

130,924

 

 

 

97,535

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exploration

 

 

101,938

 

 

 

156,655

 

 

 

548,113

 

 

 

645,913

 

Land holding costs

 

 

101,428

 

 

 

101,428

 

 

 

296,664

 

 

 

336,203

 

Professional fees

 

 

409,070

 

 

 

157,187

 

 

 

559,356

 

 

 

184,942

 

Salaries and benefits

 

 

202,153

 

 

 

 

 

 

637,119

 

 

 

46,798

 

Directors compensation

 

 

48,535

 

 

 

14,067

 

 

 

157,983

 

 

 

31,060

 

General and administrative

 

 

73,847

 

 

 

10,000

 

 

 

241,801

 

 

 

30,626

 

Insurance

 

 

59,434

 

 

 

22,205

 

 

 

149,454

 

 

 

77,151

 

Depreciation

 

 

568

 

 

 

 

 

 

2,972

 

 

 

 

Accretion (Note 10)

 

 

36,998

 

 

 

33,692

 

 

 

110,995

 

 

 

101,076

 

Write down of mineral properties

 

 

 

 

 

 

 

 

 

 

 

337,400

 

Total Expenses

 

 

1,033,971

 

 

 

495,234

 

 

 

2,704,457

 

 

 

1,791,169

 

Net Loss before other items

 

 

1,033,971

 

 

 

495,234

 

 

 

2,573,533

 

 

 

1,693,634

 

Other items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(3,297

)

 

 

(1,354

)

 

 

(6,008

)

 

 

(2,831

)

Interest and service charges

 

 

77

 

 

 

720,432

 

 

 

186

 

 

 

2,117,018

 

Other than temporary impairment of available-for-sale-securities (Note 3)

 

 

69,850

 

 

 

 

 

 

69,850

 

 

 

 

Gain on sale of marketable securities

 

 

 

 

 

 

 

 

 

 

 

(31,975

)

Net Loss

 

 

1,100,601

 

 

 

1,214,312

 

 

 

2,637,561

 

 

 

3,775,846

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on available-for-sale-securities

 

 

 

 

 

(16,421

)

 

 

 

 

 

108,427

 

Total Comprehensive Loss for the Period

 

$

1,100,601

 

 

$

1,197,891

 

 

$

2,637,561

 

 

$

3,884,273

 

Loss per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.13

 

 

$

0.15

 

 

$

0.31

 

 

$

0.47

 

Diluted

 

$

0.13

 

 

$

0.15

 

 

$

0.31

 

 

$

0.47

 

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 Nine Month Period Ended March 31, 2016 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

 

Stock based compensation

 

 

 

 

 

 

 

 

138,032

 

 

 

 

 

 

 

 

 

138,032

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

69,770

 

 

 

69,770

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(1,100,601

)

 

 

 

 

 

(1,100,601

)

Balance at March 31, 2016

 

 

8,518,791

 

 

 

85,188

 

 

 

64,989,672

 

 

 

(28,617,773

)

 

 

 

 

 

36,457,087

 

 

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 Nine Month Period ended March 31, 2016 and 2015

(Unaudited)

 

 

 

For the

Nine Month

Period Ended

March 31, 2016

 

 

For the

Nine Month

Period Ended

March 31, 2015

 

Net Loss

 

$

(2,637,561

)

 

$

(3,775,846

)

Adjustment for:

 

 

 

 

 

 

 

 

Depreciation

 

 

2,972

 

 

 

 

Stock based compensation

 

 

417,126

 

 

 

15,269

 

Write-down of mineral properties

 

 

 

 

 

337,400

 

Interest expense on loans due to PGSC

 

 

 

 

 

2,116,605

 

Accretion expense (Note 10)

 

 

110,995

 

 

 

101,076

 

Change in reclamation

 

 

(12,162

)

 

 

(2,831

)

Insurance expense

 

 

36,783

 

 

 

36,783

 

Gain on sale of marketable securities (Note 3)

 

 

 

 

 

(31,975

)

Other than temporary impairment of marketable securities (Note 3)

 

 

69,850

 

 

 

 

(Increase) decrease in accounts receivable

 

 

37,071

 

 

 

 

(Increase) decrease in prepaid expenses

 

 

(21,263

)

 

 

(72,997

)

Increase (decrease) in accounts payable

 

 

93,005

 

 

 

(14,889

)

Cash used in operating activities

 

 

(1,903,184

)

 

 

(1,291,405

)

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

 

 

 

 

 

1,251,028

 

Promissory note receivable (Note 12)

 

 

(300,000

)

 

 

 

Cash provided by (used in) financing activities

 

 

(300,000

)

 

 

1,251,028

 

 

 

 

 

 

 

 

 

 

Change in cash during period

 

 

(2,211,549

)

 

 

421,698

 

Cash at beginning of period

 

 

9,282,534

 

 

 

452,436

 

Cash at end of period

 

$

7,070,985

 

 

$

874,134

 

 

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 March 31, 2016, the balances of approximately $7 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 March 31 2016, 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 nine months periods ended March 31, 2016 and 2015, 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 March 31, 2016 and June 30, 2015:

 

 

 

Cost Basis

 

 

Impairment Charge

 

 

Adjusted Cost

 

 

Gross

Unrealized

Losses

 

 

Gross

Unrealized

Gains

 

 

Fair Value

 

Marketable securities at March 31, 2016

 

$

69,850

 

 

 

69,850

 

 

 

 

 

 

 

 

 

 

 

$

-

 

Marketable securities at June 30, 2015

 

$

69,850

 

 

 

 

 

 

69,850

 

 

 

55,193

 

 

 

 

 

$

14,657

 

 

  

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. Based on an evaluation by management, the Company determined that the severity of the impairment (approximately 95 percent less than cost), that the unrealized losses are other than temporary, as a result, an other than temporary impairment charge of $69,850 was recorded for the nine month period ended March 31, 2016 for securities with a cost basis of $69,850.

 

 

 

9


PARAMOUNT GOLD NEVADA CORP.

Notes to Condensed Consolidated Interim Financial Statements — Continued

 

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).

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 March 31, 2016

 

 

June 30, 2015

 

Assets

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash and cash equivalents

 

$

7,070,985

 

 

 

7,070,985

 

 

 

 

 

 

 

 

$

9,282,534

 

Marketable Securities

 

$

-

 

 

 

 

 

 

 

 

 

 

 

$

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.

.

 

 

Note 5. Non-Cash Transactions

During the nine month period ended March 31, 2016 and 2015, 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 March 31, 2016 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.

 

10


PARAMOUNT GOLD NEVADA CORP.

Notes to Condensed Consolidated Interim Financial Statements — Continued

 

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 nine month period ending March 31, 2016.

 

A summary of option activity under the Stock Incentive and Compensation Plan  as of March 31, 2016, 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 March 31, 2016

 

 

995,000

 

 

$

1.53

 

 

 

4.25

 

 

 

 

Exercisable at March 31, 2016

 

 

331,670

 

 

$

1.53

 

 

 

4.25

 

 

 

 

 

A summary of the status of Paramount’s non-vested shares as of July 1, 2015 and changes during the nine month period ended March 31, 2016 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 March 31, 2016

 

 

663,330

 

 

$

1.13

 

 

As of March 31, 2016, there was $320,241 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 nine month period ended March 31, 2016 and 2015, was $nil and $nil, respectively.

 

 

11


PARAMOUNT GOLD NEVADA CORP.

Notes to Condensed Consolidated Interim Financial Statements — Continued

 

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 nine month period ended March 31, 2016 and 2015, the Company’s allocated expenses from PGSC were as follows:

 

 

 

Three Month

Period Ended

 

 

Nine Month

Period Ended

 

 

Three Month

Period Ended

 

 

Nine Month

Period Ended

 

 

 

2016

 

 

2016

 

 

2015

 

 

2015

 

Allocated expenses included in:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exploration

 

$

 

 

$

 

 

$

3,700

 

 

$

11,100

 

Salaries and Professional fees

 

 

 

 

 

 

 

 

149,626

 

 

 

197,738

 

Directors compensation

 

 

 

 

 

 

 

 

14,067

 

 

 

31,060

 

Total

 

$

 

 

$

 

 

$

167,393

 

 

$

239,898

 

 

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 March 31, 2015.

During the three and nine month period ended March 31, 2016, directors were paid or accrued $17,329 and $63,681 respectively (2015- $14,067 and $27,848) for their services as directors of the Company’s Board.  During the three and nine month period ended March 31, 2016, the Company also recorded stock based compensation for directors for previously awarded stock options that have not vested in the amount of $31,206 and $94,302 respectively (2015 - $ - 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:

 

 

 

March 31, 2016

 

 

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.

 

 

12


PARAMOUNT GOLD NEVADA CORP.

Notes to Condensed Consolidated Interim Financial Statements — Continued

 

Note 9. Property and Equipment:

At March 31, 2016, and June 30, 2015, property and equipment consisted of the following:

 

 

March 31,2016

 

 

June 30, 2015

 

Computer equipment

 

$

16,365

 

 

$

8,000

 

Equipment

 

 

1,329