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Item 2. Management’s Discussion and Analysis

2020-05-07 compared with 2020-02-05 · 61 added, 62 removed, 81 unchanged (60% of the section changed)

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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 six month periods ended December 31, 2019 and compares these results to the results of the prior year three and six month periods ended December 31, 2018.

It also analyzes our financial condition and summarizes the results of our operations for the three and nine-month periods ended March 31, 2020 and compares these results to the results of the prior year three and nine-month periods ended March 31, 2019.

Operating Highlights:

In November 2019, Paramount submitted its Consolidated Permit Application (“Application”) to the Oregon Department of Geology and Mineral Industries (“DOGAMI”) to enable the Company to build and operate its proposed, high grade underground gold mine located in Malheur County of eastern Oregon.

The Application will be reviewed by the DOGAMI and cooperating agencies for completeness.

Under Oregon law, the State has 90 days for the completeness review of the Application.

When the Application is deemed complete, the State will issue a notice to proceed with the evaluation stage of the process.

The Company is currently finalizing the Amended Plan of Operation that it will submit to the US Bureau of Land Management thereby initiating the federal permitting process.

During the three-month period ended March 31, 2020, the Company submitted a revised Plan of Operation (the ”Plan”) to the Federal Bureau of Land Management (“ BLM ”) outlining the Company’s plans to build and operate the proposed Grassy Mountain underground gold mine located in Malheur County, eastern Oregon.

The BLM will review the Plan for completeness, which is expected to take 30 days, and will subsequently provide the Company with comments, if any.

The BLM has previously reviewed 19 of the baseline data reports (“BDRs”) and their requests for clarifications have all been addressed.

The BLM will register a Notice of Intent (the ”Notice”) in the Federal Register once the application is deemed complete.

The Notice initiates the Environmental Impact Statement (“ EIS ”) process under the National Environmental Policy Act.

During the nine-month period ended March 31, 2020, Paramount submitted its Consolidated Permit Application (“Application”) to the Oregon Department of Geology and Mineral Industries (“DOGAMI”) to enable the Company to build and operate its proposed, high grade underground gold mine located in Malheur County of eastern Oregon.

The Application was reviewed by the DOGAMI and cooperating agencies for completeness.

As part of this process, the permitting agencies have provided Paramount with a list of supplemental information and recommendations required to submit a modified CPA.

Paramount, the DOGAMI and the permitting agencies will continue to work together to discuss the additional information requested, ensuring the submission of a complete modified CPA which will trigger the 225 day maximum permit evaluation process, upon which draft permits are issued.

The NI 43-101 Feasibility Study for the Grassy Mountain Project is well underway and being led by Ausenco Engineering Canada Inc.

with expected completion in mid-2020.

During the six-month period ended December 31, 2019, the Company issued 1,096,791 shares of common stock to Ausenco Engineering USA South Inc.

On June 25, 2019, the Company issued 1,096,791 shares of common stock to Ausenco Engineering USA South Inc.

(“Ausenco”) in exchange for services to complete a feasibility study at its Grassy Mountain Project.

The shares will be held in escrow until Ausenco delivers a feasibility study to the Company which is expected to be completed in mid-2020.

During the six-month period ended December 31, 2019, the Company entered into agreements with accredited investors and issued convertible notes in a private transaction (the “Transaction”).

Under the terms of the Transaction, Paramount sold an aggregate of 5,478 notes at $975 per $1000 face amount with a four year maturity for aggregate proceeds of $5.34 million.

Each convertible note bears an interest at a rate of 7.5% per annum, payable semi-annually.

The principle amount of the convertible notes is convertible at a price of $1.00 per share of Paramount common stock.

At any point after the second anniversary of the issuance of the convertible notes, Paramount may force conversion if the share price of its common stock remains above $1.75 for 20 consecutive trading days.

The convertible notes are secured by a lien on all assets of the Company and the Company is required to maintain a working capital balance of $250,000.

During the six-month period ended December 31, 2019, Paramount received from the State of Nevada’s Division of Minerals, the Excellence in Mine Reclamation Award for the Company’s reclamation efforts at the Sleeper Project.

The award was based on an assessment from representatives from the US Forest Service, the Nevada Department of Environmental Protection, the Nevada

Division of Minerals, the Nevada Department of Wildlife, and the Bureau of Land Management who visited and reviewed the reclamation of the Sleeper Pit and our manage ment of surface and underground water.

On September 10, 2019, the Company entered into agreements with accredited investors and issued convertible notes in a private transaction (the “Private Placement”).

Under the terms of the Private Placement, Paramount sold an aggregat e of 5,478 notes at $975 per $1000 face amount with a four-year maturity for aggregate proceeds of $5.34 million.

Each convertible note bears an interest rate of 7.5% per annum, payable semi-annually.

The principle amount of the convertible notes is conv ertible at a price of $1.00 per share of Paramount common stock.

The convertible notes are secured by a lien on all assets of the Company and, pursuant to the terms of the convertible notes, the Company is required to maintain a working capital balance of $250,000.

During the nine-month period ended March 31, 2020, Paramount received from the State of Nevada’s Division of Minerals, the Excellence in Mine Reclamation Award for the Company’s reclamation efforts at the Sleeper Project.

The award was based on an assessment from representatives from the US Forest Service, the Nevada Department of Environmental Protection, the Nevada Division of Minerals, the Nevada Department of Wildlife, and the Bureau of Land Management who visited and reviewed the reclamation of the Sleeper Pit and our management of surface and underground water.

Outlook and Plan of Operation:

We believe that investors will gain a better understanding of the Company if they understand how we measure and talk about our results.

We believe that investors will gain a better understanding of the Company if they understand how we measure and disclose our results.

As an exploration and development company, we do not generate cash flow from our operations.

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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.

For the remainder of the fiscal year, we intend to undertake the following:

Grassy Mountain Project:

Paramount expects to respond to any inquiries by the State of Oregon related to the consolidated mining permit application it has submitted and provide additional information if required.

The Company will also submit a plan of operations with the Bureau of Land Management, which will initiate a federal environmental review process for the Grassy Mountain Project.

As previously reported, Ausenco will complete a feasibility study for the project.

In addition to its permitting activities, the Company will implement an exploration program on selective targets on the recently acquired Frost Project

Sleeper Gold Project:

The Company is expected to focus its efforts on its reclamation and claim management activities for the fiscal year ending June 30, 2020.

Comparison of Operating Results for the three and six months ended December 31, 2019 and 2018

Paramount has been closely monitoring the evolution of the COVID-19 pandemic and continues to evaluate its business activities and plans.

Since March 2020, all of the Company’s employees have been working from home.

Paramount believes that completion of the NI-43-101 Feasibility Study for the proposed high-grade Grassy Mountain underground gold mine in eastern Oregon is not likely to face disruption or delays and its completion remains on track for mid-2020.

As previously reported, Ausenco, the lead consultant of the study, agreed to accept a fixed number of Paramount shares in lieu of cash to complete the study.

This allows the Company to reduce cash expenses in the current challenging environment.

Comparison of Operating Results for the three and nine-months ended March 31, 2020 and 2019

Results of Operations

We did not earn any revenue from mining operations for the three and six months ended December 31, 2019 and 2018.

During the six month period ended December 31, 2019, we submitted a consolidated mining permit application with the State of Oregon for our Grassy Mountain Project.

In addition, Ausenco continued with activities related to completing a feasibility study on its Grassy Mountain Project.

Our net loss before income taxes for the three months ended December 31, 2019 was $2,342,517 compared to a net loss before income taxes of $1,430,323 in the previous year.

The increase in net loss before income taxes of 64% is fully described below.

Our net loss before income taxes for the six months ended December 31, 2019 was $3,349,016 compared to a net loss before income taxes of $2,489,216 in the previous year.

The increase of $859,800 or 35% in net loss before income taxes is fully described below.

We did not earn any revenue from mining operations for the three and nine-months ended March 31, 2020 and 2019.

During the nine-month period ended March 31, 2020, we submitted a consolidated mining permit application with the State of Oregon for our Grassy Mountain Project.

In addition, Ausenco continued with activities related to completing a feasibility study on the Grassy Mountain Project.

Our net loss before income taxes for the three-months ended March 31, 2020 was $1,440,372 compared to a net loss before income taxes of $1,173,413 in the previous year.

The drivers of the increase in net loss before income taxes of 23% are fully described below.

Our net loss before income taxes for the nine-months ended March 31, 2020 was $4,789,388 compared to a net loss before income taxes of $3,662,629 in the previous year.

The drivers of the increase of $1,126,759 or 31% in net loss before income taxes are fully described below.

The Company expects to incur losses for the foreseeable future as we continue with our planned exploration programs.

Exploration and Land Holding Costs

For the three-month period ended December 31, 2019, exploration expenses were $1,808,632 compared to $838,354 in the prior year comparable period.

For the three-month period ended March 31, 2020, exploration expenses were $1,068,021 compared to $712,623 in the prior year comparable period.

This represents an increase of 50% or $355,398.

During the three-month period ended December 31, 2019, the Company focused its efforts on preparing and submitting the consolidated mining permit application for its Grassy Mountain Project.

During the three-month period ended March 31, 2020, the Company focused its efforts on preparing and submitting a revised plan of operations to the BLM for its Grassy Mountain Project.

It also continued to work on its previously announced feasibility study for the Grassy Mountain project.

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Total exploration expenses at the Grassy Mountain Project during the current three-month period were $968,059.

For the three - month period ended December 31 , 2019 , land holding costs were $ 132,137 compared to $ 147,143 in the prior yea r comparable period.

The decrease of $ 15,006 is primary a result of the Company no longer incurring costs for non-essential mining claims leased from third parties .

For the six-month period ended December 31, 2019, exploration expenses were $2,267,200 compared to $1,307,212 in the prior year comparable period.

For the three-month pe riod ended March 31, 2020, land holding costs were $131,633 compared to $130,550 in the prior year comparable period.

For the nine-month period ended March 31, 2020, exploration expenses were $3,335,221 compared to $2,019,837 in the prior year comparable period.

This represents an increase of 65% or $1,315,384.

During the current six month period, the Company submitted the consolidated mining permit application for its Grassy Mountain Project and completed the reclamation of two ponds at its Sleeper Project in Nevada.

For the six-month period ended December 31, 2019, land holding costs decreased by $39,204 or by 13% from the prior year comparable period.

During the current nine-month period, the Company submitted the consolidated mining permit application and a revised Plan for its Grassy Mountain Project and completed the reclamation of two ponds at its Sleeper Project in Nevada.

For the nine-month period ended March 31, 2020, land holding costs decreased by $38,122 from the prior year comparable period.

The decrease is primarily due to not incurring lease costs for non-essential mining claims leased from third parties.

Salaries and Benefits

For the three-month period ended December 31, 2019, salary and benefits increased by 28% or by $66,732 to $303,922 from the prior year’s three-month period ended December 31, 2018.

For the three-month period ended March 31, 2020, salary and benefits increased by 6% or by $12,222 to $228,680 from the prior year’s three-month period ended March 31, 2019.

Salary and benefits is comprised of cash and stock based compensation of the Company’s executive and corporate administration teams.

The increase reflects bonuses awarded to the Company’s employee’s and changes to stock-based compensation incurred during the three-month period ended December 31, 2019 compared to the three-month period ended December 31, 2018 which were partially offset by lower salaries paid due to a departure of one of the Company’s senior executives .

Included in the salary and benefits expense amount for the three-month period ended December 31, 2019 and 2018 was a non-cash stock-based compensation of $23,361 and $43,409, respectively.

For the six-month period ended December 31, 2019, salary and benefits increased by 5% or by $26,134 to $511,689 from the prior year’s six-month period ended December 31, 2018.

The increase in expenses was due to bonuses awarded to the Company’s employee’s and stock-based compensation incurred for new option grants which were partially offset by lower salaries paid due to a departure of one of the Company’s senior executives.

Included in the salary and benefits expense amount for the six-month period ended December 31, 2019 and 2018 was a non-cash stock-based compensation of $34,970 and $86,817.

The increase primarily reflects changes to stock-based compensation incurred during the three-month period ended March 31, 2020 compared to the three-month period ended March 31, 2019.

Included in the salary and benefits expense amount for the three-month period ended March 31, 2020 and 2019 was a non-cash stock-based compensation of $23,361 and $43,409, respectively.

For the nine-month period ended March 31, 2020, salary and benefits increased by 5% or by $38,356 to $740,369 from the prior year’s nine-month period ended March 31, 2019.

The increase in expenses was due to bonuses awarded to the Company’s employee’s and stock-based compensation incurred for new option grants.

Included in the salary and benefits expense amount for the nine-month period ended March 31, 2020 and 2019 was a non-cash stock-based compensation of $34,970 and $86,817.

Directors’ Compensation

For the three-month period ended December 31, 2019, directors’ compensation decreased by 51% or by $12,649 from the prior year’s three-month period ended December 31, 2018.

For the three-month period ended March 31, 2020, directors’ compensation decreased by 51% or by $28,412 from the prior year’s three-month period ended March 31, 2019.

Directors’ compensation consists of cash and stock-based compensation of the Company’s board of directors.

The decrease reflects the reduction in stock-based compensation recorded in the current quarter compared to the prior year’s comparable period.

For the six-month period ended December 31, 2019, directors’ compensation decreased by 28% or by $14,334 from the prior year’s six months ended December 31, 2018.

The decrease reflects the reduction in stock-based compensation recorded in the current six-month period compared to the prior year’s comparable period.

For the nine-month period ended March 31, 2020, directors’ compensation decreased by 40% or by $42,746 from the prior year’s nine-months ended March 31, 2019.

The decrease reflects the reduction in stock-based compensation recorded in the current nine-month period compared to the prior year’s comparable period.

Professional Fees and General and Administration

For the three-month period ended December 31, 2019, professional fees were $65,695 compared to $31,192 in the prior year’s comparable period.

For the three-month period ended March 31, 2020, professional fees were $35,477 compared to $24,654 in the prior year’s comparable period.

This represents an increase of 44% or $10,823.

Comparable legal costs and advisory fees related to permitting Grassy Mountain were the main factors for the increase in these expenses from the prior year comparable period.

For the three-month period ended December 31, 2019, general and administration expenses decreased by 11% to $150,743 from $168,829 in the prior year comparable period.

Legal costs and advisory fees related to permitting Grassy Mountain were the main factors for the increase in these expenses from the prior year comparable period.

For the three-month period ended March 31, 2020, general and administration expenses decreased by 9% to $160,868 from $176,972 in the prior year comparable period.

This decrease was a result of lower travel and marketing costs incurred by the Company.

For the six-month period ended December 31, 2019, professional fees were $89,332 compared to $72,773 in the prior year’s comparable period.

For the nine-month period ended March 31, 2020, professional fees were $124,809 compared to $97,428 in the prior year’s comparable period.

This represents an increase of 28%.

Comparable legal costs and advisory fees related to permitting Grassy Mountain were the main factors in the increase in these expenses from the prior year comparable period.

For the six-month ended December 31, 2019, general and administration expenses decreased by 17% to $262,867 from $315,971 in the prior year comparable period.

The decrease was a result of lower travel and marketing costs incurred by the Company.

Legal costs and advisory fees related to permitting Grassy Mountain were the main factors in the increase in these expenses from the prior year comparable period.

For the nine-month ended March 31, 2020, general and administration expenses decreased by 14% to $423,736 from $492,943 in the prior year comparable period.

This decrease was a result of lower travel and marketing costs incurred by the Company.

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 December 31, 2019, we had cash and cash equivalents of $2,007,303 compared to $463,690 as at June 30, 2019.

During the six months ended December 31, 2019, the Company issued 5,478 convertible notes for net proceeds of $5,201,807.

The main uses of cash comprised of the following material amounts:

At March 31, 2020, we had cash and cash equivalents of $1,414,308 compared to $463,690 as at June 30, 2019.

During the nine-months ended March 31, 2020, the Company issued 5,478 convertible notes for net proceeds of $5,201,807.

The main uses of cash for the nine-month period ending comprised of the following material amounts:

Cash used in operating activities which included general and administration expenses, land holding costs, exploration programs at our Grassy Mountain and Sleeper Gold Projects and reclamation activities of $4,246,470

We anticipate our operating expenditures for the remainder of the fiscal year ending June 30, 2020 to be as follows

Due to COVID-19, we anticipate our operating expenditures for the remainder of the fiscal year ending June 30, 2020 to be reduced.

$0.4 million on corporate administration expenses (expenses include executive management and employee salaries, legal, audit, marketing and other general and administrative expenses)

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For stock option grants with market conditions that affect vesting, the Company uses a lattice approach incorporating a Monte Carlo simulation to value stock option granted.

For stock option grants that have no market conditions that affect vesting, the Company uses the Black-Scholes option valuation model to value stock options granted.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable.

For stock option grants that have no market conditions that affect vesting, th e Company uses the Black-Scholes option valuation model to value stock options granted.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferab le.

The model requires management to make estimates which are subjective and may not be representative of actual results.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis