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Item 7. Management’s Discussion and Analysis

2020-09-25 compared with 2019-09-16 · 80 added, 62 removed, 79 unchanged (64% of the section changed)

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

We are an emerging growth company engaged in the business of acquiring, exploring and developing precious metal projects in the United States of America.

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.

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Operating Highlights:

In July 2018, the Company issued 2,400,000 units at $1.25 per unit for gross proceeds of $3,000,000.

Each unit consists of one share of common stock and one warrant to purchase one-half of a share of common stock.

Each warrant will have a two-year term and will be exercisable at the following exercise prices:

in the first year at $1.30 per share and in the second year at $1.50 per share.

In October 2018, Paramount entered into an agreement with Cryla that gives the Company the right to acquire 44 mining claims covering 580 acres located immediately to the west of the proposed Grassy Mountain Project.

Paramount will make annual lease payments to Cryla and following year three of the agreement, Paramount has the right to purchase the claims for a cash payment of $560,000.

If purchased Cryla will maintain a production Net Smelter Royalty (“NSR”) based on the prevailing price of gold.

Paramount has the right to reduce the NSR to 1% for a payment of $800,000.

In November 2018, Paramount entered into an agreement with Nevada Select to purchase 100% in the Frost Project, which consists of 40 mining claims located approximately 12 miles west of its Grassy Mountain Project.

A total consideration of $250,000 payable to Nevada Select will be based on certain events over time.

Nevada Select will retain a 2% NSR on the Frost Claims and Paramount has the right to reduce the NSR from 2% to 1% for a payment of $1 million.

In December 2018, Paramount completed an airborne helicopter magnetic and radiometric survey that was conducted over the entire Grassy Mountain Project to map structures and magnetic anomalies.

The survey data was integrated with previously completed surface geochemistry, mapping and resistivity data to assist in defining future drilling targets.

In January 2019, the Company’s 1,045,000 warrants that were issued and outstanding with an exercise price of $2.25 and an expiry date of February 13, 2019 were repriced by the Company to an exercise price of $0.93.

As result of the repricing, 1,045,000 warrants were exercised and shares of common stock were issued for gross proceeds of $971,850.

During fiscal year ended June 30, 2019, we continued to receive acceptances from the Oregon Department of Geology and Mineral Industries (“DOGAMI”) of submitted baseline environmental reports, bringing the total to 17 reports accepted by the appropriate state agencies.

These baseline reports are required for permitting the Company’s 100%-owned Grassy Mountain gold project in eastern Oregon.

In June 2019, we announced that we had entered into an agreement with Ausenco Engineering Canada Inc.

(“Ausenco”) to complete a National Instrument 43-101 Feasibility Study (“FS”) for its proposed Grassy Mountain gold mine in eastern Oregon.

In lieu of cash compensation, Ausenco or a wholly owned subsidiary in the Ausenco Pty Ltd Group will receive 100% of its fees in restricted common stock of Paramount, resulting in the issuance of 1,109,225 shares to Ausenco.

The common stock will be escrowed until Ausenco delivers a final FS to Paramount.

Outlook and Plan of Operati on:

In June 2020, the Company closed a non-brokered registered direct offering and a concurrent best efforts agency offering in Canada (the “Offerings”) of 4,807,700 shares of its common stock at a price of $1.04 per common stock for aggregate gross proceeds of $5.0 million.

In May 2020, the Company entered into an Controlled Equity Offering SM Sales Agreement (“Sales Agreement”) with Cantor Fitzgerald & Co.

and Canaccord Genuity LLC (together, the “Agents”), pursuant to which the Company may issue and sell shares of its common stock from time to time through the Agents for aggregate sales proceeds of up to $8,000,000, subject to the offering limitations currently applicable to the Company under General Instruction I.B.6.

Sales of the Company’s common stock through the Agents will be made by any method that is deemed to be an “at-the-market” equity offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.

As of June 30, 2020, we sold 372,742 shares of common stock under the Sales Agreement at an average approximate price of $1.17 per share for gross proceeds of $436,783.

After deducting transaction fees and commissions and all other costs, we received net proceeds of $312,518.

In February 2020, the Company submitted a revised POO to the 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 POO 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.

In November 2019, Paramount submitted its CPA to 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 during the Company’s second quarter for the year-ended June 30, 2021.

In September 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 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 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, pursuant to the terms of the convertible notes, the Company is required to maintain a working capital balance of $250,000.

In September 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 management of surface and underground water.

In August 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 report to the Company.

Outlook and Plan of Operation:

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

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For the upcoming fiscal year, we intend to undertake the following:

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.

For these activities, the Company has budgeted approximately $0.7 million.

Of this budgeted amount approximately $0.4 million has been allocated for claim maintenance and the remaining amount of $0.3 to other general and administration expenses.

All reclamation expenses are reimbursed by an in place insurance program.

Grassy Mountain Project:

Paramount expects to perform multiple activities for its Grassy Mountain Project in the upcoming fiscal year.

Paramount expects to submit a consolidated mining permit application and allocate resources for the application’s evaluation by the State of Oregon.

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.

The Company has estimated costs of approximately $4 million for these activities for the fiscal year ending June 30, 2020.

Paramount expects to complete the Feasibility Study in its second quarter and to focus its efforts on continued state and federal mining permitting for the fiscal year ending June 30, 2021.

As a follow up to submitting the CPA in November 2019, Paramount will respond to the State of Oregon’s CPA completeness review (“Review”) received in February 2019.

The Review provided included proposed resolutions and additional information required by the Company and will assist the Company in submitting a revised CPA.

The Company expects the revised CPA to address all the comments and requests for additional information with the objective of submitting a complete revised CPA that allows the State of Oregon to determine whether to issue a state mining permit for the Grassy Mountain Project.

In addition to the State of Oregon permitting activities, Paramount expects to respond to BLM comments it received on its POO.

Once all the comments have been addressed, the BLM will register a Notice in the Federal Register once the application is deemed complete.

The Notice initiates the EIS process under the National Environmental Policy Act.

To complete these activities Paramount will engage specialized mining consulting firms, work with State and Federal contracted thirds parties and work directly with both state and federal permitting agencies.

The Company has budgeted approximately $1.5 million to complete these permitting activities during the upcoming fiscal year.

The Company has also budgeted approximately $0.4 million for general and administration expenses and annual claim maintenance fees for a total budget at Grassy Mountain of $1.9 million.

Sleeper Gold Project:

Paramount is planning to initiate several programs during the upcoming fiscal year that it believes will enhance the value of the Sleeper Gold Project.

The programs planned include:

1) A review of all geological, geochemical and geophysical data for the purposes of generating targets for exploration drilling to locate additional higher-grade mineralization in the close proximity of the original Sleeper pit or in the large mining claim package owned by the Company.;

(2) Evaluate the various successful metallurgical tests, previously conducted on the sulfide bearing mineralized material in order to optimize the best economic alternatives and increase the number of gold ounces produced in a proposed mining scenario.

This could include bio or alkaline oxidation in a heap leach scenario, flotation and oxidation and gold recoveries from concentrates.;

and (3) Update the resource estimation and preliminary economic assessment with the best alternatives identified for the project.

These exploration programs are expected to cost approximate $0.5 million to $0.75 million.

The Company is also budgeting $0.75 million for claim management and general and administration expenses at the Sleeper Gold Project.

If all exploration programs are completed the total budget for fiscal year ended June 30, 2021 will be approximately $1.25 to $1.50 million.

Frost Project:

The Company will implement an initial reverse circulation drill program to test historical drill results and additional selective targets.

The estimated budget to complete the drill program, assay lab testing and geological model is approximately $0.5 million.

Comparison of Operating Results for the year ended June 30, 2020 as compared to June 30, 2019

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Our net loss for the year ended June 30, 2020 was $6,430,141 compared to a net loss of $5,970,048 in the previous year.

The decrease of approximately 2% is fully described below.

We will continue to incur losses for the foreseeable future as we continue with our planned exploration programs.

The increase of approximately 8% is fully described below.

We will continue to incur losses for the foreseeable future as we continue with our planned exploration and development programs.

Exploration and Land Holding Costs

For the year ended June 30, 2020, exploration expenses were $4,201,138 compared to $3,558,663 in the prior year.

This represents a decrease of 16% or $663,949.

In the current fiscal year, the Company completed activities related to the PFS on Grassy Mountain.

This represents an increase of 18% or $642,475.

In the current fiscal year, the Company submitted the consolidated mining permit application with the State of Oregon and submitted a revised POO for its Grassy Mountain Project.

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

Total exploration expenses at Grassy Mountain during the year were $3,348,180 .

For the year ended June 30, 2019, the Company continued developing mine design plans required to satisfy permit application requirements at the Grassy Mountain Project.

The Company also submitted its conditional land use permit application with the county of Malheur, the approval of which is a required component of the Company’s upcoming consolidated permit application with the state of Oregon for its Grassy Mountain Project.

Also included were other expenses related to the permitting activities in the state of Oregon .

For the year ended June 30, 2019, land holding costs increased by 17% or by $90,436 from the prior year to $610,018.

The increase was due to the additional claim fees payments and agreement payments related to the Cryla and Nevada Select transactions.

Included were expenses of $723,279 related to the Company’s reclamation activities at the Sleeper Project to reclaim various water collection ponds from the past mining operation.

These reclamation expenses are reimbursed from funds held in a commutation account as part of the Company’s insurance program for outstanding reclamation and environmental obligations at the Sleeper Gold Project.

For the year ended June 30, 2019, the Company developed mine design plans required to satisfy permit application requirements at the Grassy Mountain Project.

The Company received its conditional land use permit application with the county of Malheur.

For the year ended June 30, 2020, land holding costs decreased by 3% or by $17,040 from the prior year to $592,978.

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

Salaries and Benefits

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

The increase reflects the addition of corporate management from the comparable prior year period.

Included in the salary and benefits expense amount for the year ended June 30, 2019 and 2018 was a non-cash stock based compensation of $231,527 and $71,335, respectively.

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

Included in the salary and benefits expense amount for the year ended June 30, 2020 and 2019 was non-cash stock based compensation of $132,286 and $231,527, respectively.

Directors’ Compensation

For the year ended June 30, 2020, directors’ compensation decreased by 40% or by $60,979 from the prior year ended June 30, 2019.

The decrease reflects the reduction in stock-based compensation recorded in the current year-ended June 30, 2020 compared to the prior year ended June 30, 2019.

Professional Fees and General and Administration

For the year ended June 30, 2020, professional fees were $166,894 compared to $186,852 in the prior year.

This represents a increase of 64% or $73,069.

For the year ended June 30, 2019, the Company incurred one-time legal fees related to permitting at its Grassy Mountain Project.

For the year ended June 30, 2019, general and administration expenses increased by 24% to $651,538 from $523,890 in the prior year.

The increase reflects additional general and administration expenses, increased compliance costs and increased travel and marketing expenses from the prior year.

This represents a decrease of 11% or $19,958.

The decrease is mainly due to the one time nature of legal expenses incurred for the various permitting activities undertaken for the Grassy Mountain Project in the comparative year.

For the year ended June 30, 2020, general and administration expenses decreased by 24% to $495,628 from $651,538 in the prior year.

The decrease is mainly a result of decreased travel and marketing costs incurred by the Company.

Liquidity and Capital Resources

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Cash used to fund our operations which included general and administration expenses, land holding costs, exploration programs at our Grassy Mountain of $ 5,145,291.

Cash used in operating activities were offset by the following:

Cash received from the sale of a royalty on its Sleeper Gold Project of $1,927,659;

Cash received from financing and exercise of warrants of $3,872,156.

In addition to cash used in operating activities, the Company used and received cash as follows:

Cash used to purchase computer equipment of $ 4,719 ;

Cash received from equity financings, convertible debt financing and issuance of a promissory note of $10,120,401.

We anticipate our twelve-month cash expenditures for our fiscal year ending June 30, 2021 to be as follows:

$1.8 million on corporate administration expenses (expenses include executive management and employee salaries, legal, audit, marketing and other general and administrative expenses)

$0.70 million on the Sleeper Gold Project (expenses include reclamation costs, employee salary and benefits, and land holding costs)

$4 million on the Grassy Mountain Project (expenses include consulting fees, land holding costs and general and administration expenses, environmental impact statement preparation, State of Oregon permit application and evaluation activities)

Subsequent to the year-ended June 30, 2019, the issued 1,096,791 shares of common stock to 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 our fiscal year ending June 30, 2020.

Subsequent to the year-ended June 30, 2019, the Company entered into definitive agreements with accredited investors to issue convertible notes in a private transaction (the “Transaction”).

Under the terms of the Transaction, Paramount has agreed to sell 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 will bear interest rate of 7.5% per annum, payable semi-annually.

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

In order for us to complete our anticipated cash-budget, the company will require further capital resources.

$1.25 million to $1.50 million on the Sleeper Gold Project (exploration programs, expenses include reclamation costs, employee salary and benefits, and land holding costs)

$2.4 million on the Grassy Mountain Project and Frost Project (expenses include consulting fees, land holding costs and general and administration expenses, environmental impact statement preparation, and costs associated with the State of Oregon permit revised CPA)

Our anticipated expenditures will be funded by our cash on hand and other capital resources.

Historically, we and other similar exploration and development public companies have accessed capital through equity financing arrangements or by the sale of royalties on its mineral properties .

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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.

The amounts recorded as mineral properties reflect actual cost s incurred to acquire the properties and do not indicate any present or future value of economically recoverable reserves.

Exploration expenses

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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-K

Item 7. Management’s Discussion and Analysis