Paramount Gold Nevada Corp. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Certain statements in this Quarterly Report on Form 10-Q (“Form 10-Q”) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give the Company's current expectations and forecasts of future events. All statements other than statements of current or historical fact contained in this quarterly report, including statements regarding the Company's future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” and similar expressions, as they relate to the Company, are intended to identify forward-looking statements. These statements are based on the Company's current plans, and the Company's actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Any or all of the forward-looking statements in this quarterly report may turn out to be inaccurate. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and assumptions. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-Q, and in the risk factors on Form 10-K that was filed with the U.S. Securities and Exchange Commission ("SEC") on September 26, 2023. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based. Cautionary Note to U.S. Investors We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and applicable Canadian securities laws, and as a result we report our mineral reserves and mineral resources according to two different standards. U.S. reporting requirements, for disclosure of mineral properties, are governed by Item 1300 of Regulation S-K (“S-K 1300”), as issued by the SEC. Canadian reporting requirements for disclosure of mineral properties are governed by National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”), as adopted from the definitions provided by the Canadian Institute of Mining, Metallurgy and Petroleum. Both sets of reporting standards have similar goals in terms of conveying an appropriate level of confidence in the disclosures being reported, but the standards embody slightly different approaches and definitions. In our public filings in the U.S. and Canada and in certain other announcements not filed with the SEC, we disclose proven and probable reserves and measured, indicated and inferred resources, each as defined in S-K 1300. The estimation of measured resources and indicated resources involves greater uncertainty as to their existence and economic feasibility than the estimation of proven and probable reserves, and therefore investors are cautioned not to assume that all or any part of measured or indicated resources will ever be converted into S-K 1300-compliant reserves. The estimation of inferred resources involves far greater uncertainty as to their existence and economic viability than the estimation of other categories of resources, and therefore it cannot be assumed that all or any part of inferred resources will ever be upgraded to a higher category. Therefore, investors are cautioned not to assume that all or any part of inferred resources exist, or that they can be mined legally or economically. Overview We are a company engaged in the business of acquiring, exploring and developing precious metal projects in the United States of America. Paramount owns advanced stage exploration projects in the states of Nevada and Oregon. We enhance the value of our projects by implementing exploration and engineering programs that have the goal to expand and upgrade known mineralized material to reserves. The following discussion updates our outlook and plan of operations for the foreseeable future. It also analyzes our financial condition and summarizes the results of our operations for the three and nine months ended March 31, 2024 and compares these results to the results of the prior year three and nine months ended March 31, 2023. Operating Highlights: For the three and nine months ended March 31, 2024, the Company highlights include: • The BLM filed the Notice of Intent in the Federal Registry, initiating the preparation of an Environmental Impact Statement in compliance with the National Environmental Policy Act process for the proposed Grassy Mountain Gold mine. • Paramount closed a $15 million financing with Sprott through the issuance of a Debenture. The proceeds of the Debenture will be used to fund the continued permitting of the proposed Grassy Mountain Gold Mine and general corporate purposes. It was also used to repay the Company's outstanding debt. • The State of Oregon issued a Notice to Proceed with the permitting and preparation of draft permits. • The State of Oregon's Technical Review Team determined that Paramount's Consolidated Permit Application for the Grassy Mountain Project is complete. 15 • Completed an updated technical report summary ("TRS") for the Sleeper Gold Property under Item 1300 of Regulation S-K. Outlook and Plan of Operation: We believe that investors will gain a better understanding of the Company if they understand how we measure and disclose our results. As a development stage company, we do not generate cash flow from our operations. We recognize the importance of managing our liquidity and capital resources. We pay close attention to all cash expenses and look for ways to minimize them when possible. We ensure we have sufficient cash on hand to meet our annual land holding costs as the maintenance of mining claims and leases are essential to preserve the value of our mineral property assets. Comparison of Operating Results for the nine months ended March 31, 2024 and 2023 We did not earn any revenue from mining operations for the nine months ended March 31, 2024 and 2023. Net Loss Our net loss for three months ended March 31, 2024 was $1,814,045 compared to a net loss of $1,647,760 in the previous three months ended March 31, 2023. The drivers of the increase in net loss of 10% are fully described below. Our net loss for nine months ended March 31, 2024, was $5,462,764 compared to a net loss of $4,920,461 in the previous nine month period ended March 31, 2023. The drivers of the increase in net loss of 11% are fully described below. The Company expects to incur losses for the foreseeable future as we continue with our planned exploration and development programs. Expenses Exploration and Land Holding Costs For the three months ended March 31, 2024 and 2023, exploration expenses were $965,938 and $597,315, respectively. This represents an increase of 62% or $368,623. Expenses related to our exploration or development activities are generally not comparable from period to period as activities will vary based on several factors. At Grassy Mountain the Company continued with permitting activities with state and federal permitting agencies. These expenses totaled $604,716. A significant amount of the expenses incurred were related to the State of Oregon completing its environmental evaluation of the proposed gold mine at Grassy Mountain. At Sleeper, the Company completed the conversion of several collection ponds from the previous mining operations to evaporation cells with expenses totaling $361,222. For the three months ended March 31, 2024 and 2023, $1,088,339 and $47,123 of the costs associated with the reclamation work have been reimbursed by an insurance policy and these reimbursements have been recorded as other income on the Statement of Operations, respectively. In the prior year comparable period, the Company focused its efforts on completing permit applications for the Grassy Mountain Project and incurred expenses related to reclamation activities its Sleeper Gold Project. For the three months ended March 31, 2024 and 2023, land holding costs were $157,143 and $157,143, respectively. There were no changes in our land holdings and costs associated with holding our mining claims remaining unchanged from last year to this year. For the nine months ended March 31, 2024 and 2023, exploration expenses were $3,999,659 and $1,902,312, respectively. This represents a increase of 110% or $2,097,347. Expenses related to our exploration or development activities are generally not comparable from period to period as activities will vary based on several factors. At Grassy Mountain the Company continued with permitting activities with state and federal permitting agencies. These expenses totaled $1,170,834. At Sleeper, the Company completed an updated TRS and completed converting several collection ponds from the previous mining operations to evaporation cells with expenses totaling $2,828,825. For the nine months ended March 31, 2024 and 2023, $2,381,272 and $87,431 of the costs associated with the reclamation work have been reimbursed by an insurance policy and these reimbursements have been recorded as other income on the Statement of Operations, respectively. In the prior year comparable period, the Company focused its efforts on completing permit applications for the Grassy Mountain Project and incurred expenses related to reclamation activities its Sleeper Gold Project. For the nine months ended March 31, 2024 and 2023, land holding costs were $471,429 and $475,341, respectively. This represents a decrease of 1% or $3,912. The immaterial change is due to no changes in our land holdings and costs associated with holding our mining claims remaining unchanged from last year to this year. 16 Salaries and Benefits For the three month period ended March 31, 2024 and 2023, salary and benefits were $675,952 and $393,219, respectively. This represents an increase of 72%. Salary and benefits are comprised of cash and equity based compensation of the Company’s executive and corporate administration teams. The increase primarily reflects annual bonuses for 2023 paid to employees in the three month period ended March 31, 2024 compared to the three month period ended March 31, 2023. Included in the salary and benefits expense amount for the three months ended March 31, 2024 and 2023 was non-cash equity based compensation of $65,134 and $72,490, respectively. For the nine months ended March 31, 2024 and 2023, salary and benefits were $1,214,742 and $961,512, respectively. This represents an increase of 26% or $253,230. Salary and benefits are comprised of cash and equity based compensation of the Company’s executive and corporate administration teams. The increase primarily reflects annual bonuses for 2023 paid to employees during the nine month period ended March 31, 2024 compared to the nine month period ended March 31, 2023. Included in the salary and benefits expense amount for the nine months ended March 31, 2024 and 2023 was non-cash equity based compensation of $168,471 and $237,037. Directors’ Compensation For the three month period ended March 31, 2024 and 2023, directors’ compensation expenses were $90,076 and $55,366, respectively. This represents an increase of 63%. Directors’ compensation consists of cash and stock-based compensation of the Company’s board of directors. The increase reflects higher equity based compensation recorded in the current quarter compared to the prior year’s comparable period. For the nine months ended March 31, 2024 and 2023, directors' compensation expenses were $148,059 and $113,940, respectively. This represents an increase of 30%. The increase reflects higher equity based compensation recorded in the current quarter compared to the prior year’s period. Professional Fees and General and Administration For the three months ended March 31, 2024 and 2023, professional fees were $52,156 and $12,919, respectively. This represents an increase of $39,237. The increase was mainly due to in one-time consulting fees and legal fees incurred in the period. Professional fees include legal, audit, advisory and consultant expenses incurred on corporate and operational activities being performed by the Company on a period-by-period basis. For the nine months ended March 31, 2024 and 2023, professional fees were $205,722 and $281,542, respectively. This represents a decrease of $75,820. The decrease was mainly due to the recording of audit fees for our fiscal year ended June 30, 2022 during the three months ended September 30, 2022. Professional fees include legal, audit, advisory and consultant expenses incurred on corporate and operational activities being performed by the Company on a period-by-period basis. For the three months ended March 31, 2024 and 2023, general and administration expenses decreased by 39% to $148,306 from $242,858. The decrease in general and administration expenses from the previous year’s comparable period was mainly due to lower insurance and travel costs. For the nine months ended March 31, 2024 and 2023, general and administration expenses decreased by 25% to $462,951 from $616,396. The decrease in general and administration expenses from the previous year’s comparable period was mainly due to lower insurance and travel costs. Liquidity and Capital Resources As an exploration and development company, Paramount funds its operations, reclamation activities and discretionary exploration programs with its cash on hand. At March 31, 2024, we had cash and cash equivalents of $7,012,365 compared to $824,920 as at June 30, 2023. We had working capital of approximately $4,245,018. Our plans to manage our liquidity position is described below under Going Concern and Capital Resources. In May 2020, the Company established an $8.0 million “at the market” equity offering program with Cantor Fitzgerald & Co. ("Cantor") and Canaccord Genuity LLC to proactively increase its financial flexibility. In March 2024, the Company established a new $3.1 million "at the market" offering program with Cantor and A.G.P./Alliance Global Partners. During the nine months ended March 31, 2024, the Company issued 4,261,515 shares under the program for net proceeds of $1,167,893. Subsequent to the period ended March 31, 2024, the Company sold 1,727,026 shares under the program for gross proceeds of $719,351. During the month of December 2023, the Company entered into a Debenture in favor of Sprott. Pursuant to the Debenture, Sprott advanced $15,000,000 to Paramount, which will be used to fund the continued permitting of the proposed Grassy Mountain Gold Mine and for general corporate purposes. Proceeds from the Debenture were also used for the repayment of the Company’s outstanding 2019 secured convertible notes and its bridge promissory note in favor of Seabridge Gold Inc. 17 The main uses of cash for the nine months ended March 31, 2024 were: • Cash used in operating activities of $3,064,814 were mainly used to fund our permitting and exploration activities at our projects, salary and benefits costs of our employees and ongoing general and administration costs. • Cash used in investing activities of $100,000 for the payment on the agreement to purchase the Bald Peak claims and on the agreement to purchase the Frost claims. In addition to cash used in operating and investing activities, the Company received cash during the nine months ended March 31, 2024 as follows: • Cash provided by financing activities of $9,352,259 which included sales under the ATM program, proceeds from the issuance of the Debenture to Sprott which were offset by the repayment of the 2019 convertible notes and Seabridge Loan. Going Concern and Capital Resources The Consolidated Financial Statements of the Company have been prepared on a “going concern” basis, which means that the continuation of the Company is presumed even though events and conditions exist that, when considered in aggregate, raise substantial doubt about the Company’s ability to continue as a going concern because it is possible that the Company will be required to adversely change its current business plan or may be unable to meet its obligations as they become due within one year after the date that these financial statements were issued. Paramount expects to continue to incur losses as a result of costs and expenses related to maintaining its properties and general and administrative expenses. Since 2015, the Company has relied on equity financings, debt financings and sale of royalties to fund its operations and the Company expects to rely on these forms of financing to fund operations into the near future. Paramount’s current business plan requires working capital to fund non-discretionary expenditures for its exploration and development activities on its mineral properties, mineral property holding costs and general and administrative expenses. We anticipate our twelve-month cash expenditures to be as follows: • $4.0 million on corporate, land claim maintenance and general expenses We anticipate our twelve-month cash discretionary exploration and development, subject to available cash on hand as follows: • $1.8 million on the Grassy Mountain Project state and federal permitting activities • $1.7 million on the Bald Peak Project For any interest that accrues and is owing on the outstanding Debenture, the Company expects to elect to pay the quarterly-annual interest payment in shares of its Common Stock. Subsequent to May 14, 2024, the Company expects to fund operations as follows: • Existing cash on hand and working capital. • The existing ATM program with Cantor Fitzgerald & Co. and A.G.P./Alliance Global Partners • Insurance proceeds to fund reclamation and environmental obligations at its Sleeper Gold Project. • Equity financings or sale of royalties. Historically, we have been successful in accessing capital through equity and debt financing arrangements or by the sale of royalties on its mineral properties, no assurance can be given that additional financing will be available to it in amounts sufficient to meet its needs, or on terms acceptable to the Company. In the event that we are unable to obtain additional capital or financing, our operations, exploration and development activities will be significantly adversely affected. The continuation of the Company as a going concern is dependent on having sufficient capital to maintain our operations. In considering our financing plans, our current working capital position and our ability to reduce operating expenses the Company believes there is substantial doubt about its ability to continue as a going concern twelve months after the date that our financial statements are issued. Critical Accounting Policies and Estimates Management considers the following policies to be most critical in understanding the judgments that are involved in preparing the Company’s consolidated financial statements and the uncertainties that could impact the results of operations, financial condition and cash flows. Our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. Management believes the Company’s critical accounting policies are those related to mineral property acquisition costs, exploration and development cost, derivative accounting and foreign currency translation. 18 Estimates The Company prepares its consolidated financial statements and notes in conformity to United States Generally Accepted Accounting Principles (“U.S. GAAP”) and requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, management evaluates these estimates, including those related the adequacy of the Company’s reclamation and environmental obligation, and assessment of impairment of mineral properties. Management bases these estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Mineral property acquisition costs The Company capitalizes the cost of acquiring mineral properties and will amortize these costs over the useful life of a property following the commencement of production or expense these costs if it is determined that the mineral property has no future economic value or the properties are sold or abandoned. Costs include cash consideration and the fair market value of shares issued on the acquisition of mineral properties. Properties acquired under option agreements, whereby payments are made at the sole discretion of the Company, are recorded in the accounts of the specific mineral property at the time the payments are made. The amounts recorded as mineral properties reflect actual costs incurred to acquire the properties and do not indicate any present or future value of economically recoverable reserves. Exploration expenses We record exploration expenses as incurred. When we determine that precious metal resource deposit can be economically and legally extracted or produced based on established proven and probable reserves, further exploration expenses related to such reserves incurred after such a determination will be capitalized. To date, we have not established any proven or probable reserves and will continue to expense exploration costs as incurred. Asset Retirement Obligation The fair value of the Company’s asset retirement obligation (“ARO”) is measured by discounting the expected cash flows using a discount factor that reflects the credit-adjusted risk free rate of interest, while taking into account the inflation rate. The Company prepares estimates of the timing and amounts of expected cash flows and ongoing reclamation expenditures are charged against the ARO as incurred to the extent they relate to the ARO. Significant judgments and estimates are made when estimating the fair value of ARO. Convertible debt and derivative liabilities We account for convertible notes with conversion features in accordance with ASC 815, Derivatives and Hedging. The embedded conversion features are assessed to determine whether they meet the criteria for separate accounting as derivatives. If so, they are bifurcated and recorded at fair value with changes in fair value recognized in our Statement of Operations and the remaining value allocated to the convertible notes net the unamortized debt issuance costs. The determination of fair value involves the use of estimates, assumptions, and valuation models, including but not limited to discounted cash flow analysis and option pricing models. These estimates and assumptions may include, but are not limited to, future interest rates, volatility of gold and silver prices, and credit spreads. Changes in these inputs could result in significant adjustments to the fair value of our derivatives and may impact our financial results. Off-Balance Sheet Arrangements We are not currently a party to, or otherwise involved with, any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, or capital resources. 19 Item 3. Quantitative and Qualitati ve Disclosures About Market Risk. Not applicable as a smaller reporting company. 20