SOLITARIO RESOURCES CORP. 10-Q

Item 1. Financial Statements SOLITARIO ZINC CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands of U.S. dollars, September 30, December 31, except share and per share amounts) 2022 2021 Assets Current assets: Cash and cash equivalents $ 244 $ 462 Short-term investments 4,898 5,087 Investments in marketable equity securities, at fair value 953 1,307 Prepaid expenses and other 37 303 Total current assets 6,132 7,159 Mineral properties 16,692 16,306 Other assets 149 154 Total assets $ 22,973 $ 23,619 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 567 $ 239 Operating lease liability 42 37 Total current liabilities 609 276 Long-term liabilities Asset retirement obligation – Lik 125 125 Operating lease liability 4 35 Total long-term liabilities 129 160 Commitments and contingencies Equity: Shareholders’ equity: Preferred stock, $ 0.01 par value, authorized 10,000,000 shares (none issued and outstanding at September 30, 2022 and December 31, 2021) - - Common stock, $ 0.01 par value, authorized 100,000,000 shares ( 64,768,873 and 62,036,399 shares, respectively, issued and outstanding at September 30, 2022 and December 31, 2021) 648 620 Additional paid-in capital 74,809 72,523 Accumulated deficit ( 53,222 ) ( 49,960 ) Total shareholders’ equity 22,235 23,183 Total liabilities and shareholders’ equity $ 22,973 $ 23,619 See Notes to Unaudited Condensed Consolidated Financial Statements 3 Table of Contents SOLITARIO ZINC CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands of U.S. dollars, except per share amounts) Three months ended September 30 Nine months ended September 30 2022 2021 2022 2021 Costs, expenses and other: Exploration expense $ 655 $ 442 $ 1,832 $ 826 Depreciation 7 8 23 20 General and administrative 435 207 1,099 743 Property abandonment and impairment - 17 - 17 Total costs, expenses and other 1,097 674 2,954 1,606 Other income (loss) Interest income 29 34 97 100 Other income 20 - 20 10 Loss on derivative instruments - ( 1 ) ( 4 ) ( 34 ) Unrealized loss on short-term investments ( 22 ) ( 21 ) ( 120 ) ( 77 ) Loss on sale of marketable equity securities - ( 89 ) ( 159 ) ( 70 ) Unrealized gain (loss) on marketable equity securities 13 50 ( 142 ) ( 220 ) Total other income (loss) 40 ( 27 ) ( 308 ) ( 291 ) Net loss $ ( 1,057 ) $ ( 701 ) $ ( 3,262 ) $ ( 1,897 ) Loss per common share: Basic and diluted $ ( 0.02 ) $ ( 0.01 ) $ ( 0.05 ) $ ( 0.03 ) Weighted average shares outstanding: Basic and diluted 64,769 58,446 64,091 58,377 See Notes to Unaudited Condensed Consolidated Financial Statements 4 Table of Contents SOLITARIO ZINC CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of U.S. dollars) Nine months ended September 30, 2022 2021 Operating activities: Net loss $ ( 3,262 ) $ ( 1,897 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 23 20 Amortization of right of use lease asset 30 30 Unrealized loss on marketable equity securities 142 220 Unrealized loss on short-term investments 120 100 Employee stock option expense 271 104 Gain on sale of marketable equity securities 159 70 Loss on derivative instruments 4 34 Property abandonment and impairment - 17 Other income - ( 10 ) Changes in operating assets and liabilities: Prepaid expenses and other assets 266 ( 381 ) Accounts payable and other liabilities 299 ( 30 ) Net cash used in operating activities ( 1,948 ) ( 1,723 ) Investing activities: Sale of short-term investments, net 69 1,837 Purchase of mineral property ( 386 ) ( 458 ) Purchase of other assets - net ( 49 ) ( 39 ) Cash from sale of marketable equity securities 53 104 Sale of derivative instruments – net - 8 Net cash (used in) provided by investing activities ( 313 ) 1,452 Financing activities: Issuance of common stock – net of acquisition costs 2,023 137 Stock options exercised for cash 20 83 Net cash provided by financing activities 2,043 220 Net decrease in cash and cash equivalents ( 218 ) ( 51 ) Cash and cash equivalents, beginning of period 462 605 Cash and cash equivalents, end of period $ 244 $ 554 Supplemental Cash Flow information: Accrued mineral property acquisition costs included in accounts payable $ - $ 60 Acquisition of right to use asset $ - $ 99 See Notes to Unaudited Condensed Consolidated Financial Statements 5 Table of Contents NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Business and Significant Accounting Policies Business and company formation Solitario Zinc Corp. (“Solitario,” or the “Company”) is an exploration stage company as defined by rules issued by the United States Securities and Exchange Commission (“SEC”). Solitario was incorporated in the state of Colorado on November 15, 1984 as a wholly owned subsidiary of Crown Resources Corporation ("Crown"). In July 1994, Solitario became a publicly traded company on the Toronto Stock Exchange through its initial public offering. Solitario has been actively involved in mineral exploration since 1993. Solitario’s primary business is to acquire exploration mineral properties or royalties and/or discover economic deposits on its mineral properties and advance these deposits, either on its own or through joint ventures, up to the development stage. At that point, or sometime prior to that point, Solitario would likely attempt to sell its mineral properties, pursue their development either on its own or through a joint venture with a partner that has expertise in mining operations, or create a royalty with a third party that continues to advance the property. Solitario is primarily focused on the acquisition and exploration of precious metal, zinc and other base metal exploration mineral properties. In addition to focusing on its mineral exploration properties and the evaluation of mineral properties for acquisition, Solitario also evaluates potential strategic transactions for the acquisition of new precious and base metal properties and assets with exploration potential or business combinations that Solitario determines to be favorable to Solitario. Solitario has recorded revenue in the past from the sale of mineral properties, including the sale of certain mineral royalties. Revenues and / or proceeds from the sale or joint venture of properties or assets, although significant when they occur, have not been a consistent annual source of cash and would only occur in the future, if at all, on an infrequent basis. Solitario currently considers its carried interest in the Florida Canyon project in Peru, its interest in the Lik project in Alaska, and its Golden Crest project in South Dakota to be its core mineral property assets. Nexa Resources, Ltd. (“Nexa”), Solitario’s joint venture partner, is continuing the exploration and furtherance of the Florida Canyon project and Solitario is monitoring progress at Florida Canyon. Solitario is working with its 50 % joint venture partner in the Lik deposit, Teck American Incorporated, a wholly owned subsidiary of Teck Resources Limited (both companies are referred to as “Teck”), to further the exploration and evaluate potential development plans for the Lik project. Solitario is conducting mineral exploration on its Golden Crest project on its own. Solitario anticipates using its cash and short-term investments, in part, to fund costs and activities to further the exploration of the Florida Canyon, Lik and Golden Crest projects, and to potentially acquire additional mineral property assets. The fluctuations in precious metal and other commodity prices contribute to a challenging environment for mineral exploration and development, which has created opportunities as well as challenges for the potential acquisition of early-stage and advanced mineral exploration projects or other related assets at potentially attractive terms. The accompanying interim condensed consolidated financial statements of Solitario for the three and nine months ended September 30, 2022 are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles”). They do not include all disclosures required by generally accepted accounting principles for annual financial statements, but in the opinion of management, include all adjustments necessary for a fair presentation. Interim results are not necessarily indicative of results which may be achieved in the future or for the full year ending December 31, 2022. These financial statements should be read in conjunction with the financial statements and notes thereto which are included in Solitario’s Annual Report on Form 10-K for the year ended December 31, 2021. The accounting policies set forth in those annual financial statements are the same as the accounting policies utilized in the preparation of these financial statements, except as modified for an appropriate interim financial statement presentation. 6 Table of Contents Risks and Uncertainties Solitario faces risks related to health epidemics and other outbreaks of communicable diseases, which could significantly disrupt its operations and may materially and adversely affect its business and financial condition. Solitario’s business still could be adversely impacted by the effects of the coronavirus (“COVID-19”) or other epidemics or pandemics. Solitario continues to evaluate the effects of COVID-19 on its operations and at times during the pandemic has taken pro-active steps to address the impacts on its operations, including at times reducing costs, in response to the economic uncertainty associated with potential risks from COVID-19. These prior cost reductions included implementing salary reductions and evaluating and reducing certain planned 2021 exploration programs through its joint venture partners at the Florida Canyon and Lik exploration projects. Also, Solitairo has evaluated the potential impacts on its ability to access future traditional funding sources on the same or reasonably similar terms as in past periods. Solitario will continue to monitor the effects of COVID-19 on its operations, financial condition, and liquidity. However, the extent to which COVID-19 ultimately impacts Solitario’s business, including our exploration and other activities and the market for our securities, will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope of any new outbreak and the actions taken to contain or treat the COVID-19 pandemic. Financial reporting The consolidated financial statements include the accounts of Solitario and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements are prepared in accordance with generally accepted accounting principles and are expressed in US dollars. Cash equivalents Cash equivalents include investments in highly liquid money-market securities with original maturities of three months or less when purchased. As of September 30, 2022, $ 225,000 of Solitario’s cash is held in brokerage accounts and foreign banks, which are not covered under the Federal Deposit Insurance Corporation (“FDIC”) rules for the United States. Short-term investments As of September 30, 2022, Solitario has $ 4,650,000 of its current assets in United States Treasury Securities (“USTS”) with maturities of 15 days to 15 months . In addition, at September 30, 2022, Solitario has one bank certificate of deposit (“CD”) with a face value of $ 250,000 recorded at its fair value of $ 248,000 . The CD has a maturity of three months. The USTS and CD are recorded at their fair value, based upon quoted market prices. The USTS are not covered under the FDIC insurance rules for United States deposits. Solitario’s USTS and CD are highly liquid and may be sold in their entirety at any time at their quoted market price and are classified as a current asset. Financial statement classification Solitario separately shows its classification of changes in the fair value of its short-term investment in USTS and CDs as unrealized gain or loss on short-term investments in the statement of operations rather than a portion of interest and dividend income (net). During the three and nine months ended September 30, 2022 the non-cash decrease in the fair value of Solitario’s short-term investments, due primarily to changes in interest rates on held securities, was $ 22,000 and $ 120,000 , respectively. During the three and nine months ended September 30, 2021 the non-cash decrease in the fair value of its short-term investments, due primarily to changes in interest rates on held securities, was $ 21,000 and $ 77,000 , respectively. The 2021 income statement and cash flows have been reclassified for comparability to the 2022 presentation. Total other income (expense) and net cash used in operations in 2021 was not impacted by the reclassification. Earnings per share The calculation of basic and diluted earnings (loss) per share is based on the weighted average number of shares of common stock outstanding during the three and nine months ended September 30, 2022 and 2021. Potentially dilutive shares related to outstanding common stock options of 5,431,250 and 5,513,000 , respectively, for the nine months ended September 30, 2022 and 2021 were excluded from the calculation of diluted loss per share because the effects were anti-dilutive. 7 Table of Contents 2. Mineral Properties The following table details Solitario’s investment in Mineral Properties: (in thousands) September 30, December 31, 2022 2021 Exploration Lik project (Alaska – US) $ 15,611 $ 15,611 Golden Crest (South Dakota – US) 1,081 695 Total exploration mineral properties $ 16,692 $ 16,306 All exploration costs on our exploration properties, none of which have proven and probable reserves, including any additional costs incurred for subsequent lease payments or exploration activities related to our projects, are expensed as incurred. Exploration expense The following items comprised exploration expense: (in thousands) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Geologic and field expenses $ 559 $ 413 $ 1,567 $ 751 Administrative 96 29 265 75 Total exploration costs $ 655 $ 442 $ 1,832 $ 826 Asset Retirement Obligation In connection with the acquisition of its interest in the Lik project in 2017, Solitario recorded an asset retirement obligation of $ 125,000 for Solitario’s estimated reclamation cost of the existing disturbance at the Lik project. This disturbance consists of an exploration camp including certain drill sites and access roads at the camp. The estimate was based upon estimated cash costs for reclamation as determined by the permitting bond required by the State of Alaska for which Solitario has purchased a reclamation bond insurance policy in the event Solitario or its 50% partner, Teck, do not complete required reclamation. Solitario has not applied a discount rate to the recorded asset retirement obligation as the estimated time frame for reclamation is not currently known, as reclamation is not expected to occur until the end of the Lik project life, which would follow future development and operations, the start of which cannot be estimated or assured at this time. Additionally, no depreciation will be recorded on the related asset for the asset retirement obligation until the Lik project goes into operation, which cannot be assured. 3. Marketable Equity Securities Solitario's investments in marketable equity securities are carried at fair value, which is based upon quoted prices of the securities owned. The cost of marketable equity securities sold is determined by the specific identification method. Changes in market value are recorded in the condensed consolidated statement of operations. At September 30, 2022 and December 31, 2021 Solitario owns the following marketable equity securities: September 30, 2022 December 31, 2021 shares Fair value (000’s) Shares Fair value (000’s) Kinross Gold Corp 100,000 $ 376 100,000 $ 581 Vendetta Mining Corp. 8,000,000 291 9,000,000 356 Vox Royalty Corp. 134,055 286 134,055 370 Highland Silver Corp. 200,000 - - Total $ 953 $ 1,307 8 Table of Contents The following tables summarize Solitario’s marketable equity securities and adjustments to fair value: (in thousands) September 30, 2022 December 31, 2021 Marketable equity securities at cost $ 1,492 $ 1,704 Cumulative unrealized loss on marketable equity securities ( 539 ) ( 397 ) Marketable equity securities at fair value $ 953 $ 1,307 The following table represents changes in marketable equity securities: (in thousands) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Cost of marketable equity securities sold $ - $ 105 $ 212 $ 174 Realized loss on marketable equity securities sold - ( 89 ) ( 159 ) ( 70 ) Proceeds from the sale of marketable equity securities sold - ( 16 ) ( 53 ) ( 104 ) Net (gain) loss on marketable equity securities 13 ( 39 ) ( 301 ) ( 290 ) Change in marketable equity securities at fair value $ 13 $ ( 55 ) $ ( 354 ) $ ( 394 ) The following table represents the realized and unrealized (loss) gain on marketable equity securities: (in thousands) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Unrealized gain (loss) on marketable securities $ 13 $ 50 $ ( 142 ) $ ( 220 ) Realized loss on marketable equity securities sold - ( 89 ) ( 159 ) ( 70 ) Net (gain) loss on marketable securities $ 13 $ ( 39 ) $ ( 301 ) $ ( 290 ) During the nine months ended September 30, 2022, Solitario sold 1,000,000 shares of Vendetta Mining Corp. (“Vendetta”) common stock for proceeds of $ 53,000 and recorded a loss on sale of $ 159,000 on the date of sale. Solitario did not sell any marketable equity securities during the three months ended September 30, 2022. During the three months ended September 30, 2021, Solitario sold 500,000 shares of Vendetta common stock for proceeds of $ 16,000 and recorded a loss on sale of $ 89,000 . During the nine months ended September 30, 2021, Solitario sold (i) 1,510,000 shares of Vendetta common stock for proceeds of $ 69,000 and recorded a loss on sale of $ 91,000 ; (ii); 430,000 shares of TNR Gold Corp. common stock for proceeds of $ 26,000 and recorded a gain on sale of $ 19,000 , and (iii) 3,200 shares of Vox Royalty Corp. (“Vox”) for proceeds of $ 9,000 and recorded a gain on sale of $ 2,000 . Other Income: During the three months ended September 30, 2022, Solitario sold rights to certain exploration data on a non-owned mineral property upon which Solitario had previously done exploration activities. The data was sold to Highland Silver Corp., a Canadian exploration company (“Highland”) for $ 20,000 cash and 200,000 shares of Highland common stock. The Highland common stock carried a restrictive legend and was not available for trade on the date of the sale and no value was assigned to the common stock. Solitario recorded $ 20,000 of other income on the date of the sale. Any future changes to the value of the Highland common stock owned by Solitario will be recorded as changes in value of marketable equity securities. 9 Table of Contents 4. Leases Solitario accounts for its leases in accordance with ASC 842. Solitario leases one facility, its Wheat Ridge, Colorado office, that has a term of more than one year. Solitario has no other material operating lease costs. During the nine months ended September 30, 2021, Solitario entered into a new lease for the same facility (both the prior lease and new lease are referred to as the “WR Lease”) and recorded a net increase in the related asset and liability of $ 99,000 . The WR Lease is classified as an operating lease and has a term of 13 months through October 31,2023at September 30, 2022, with no renewal option. At September 30, 2022 and December 31, 2021, the right-of-use office lease asset for the WR Lease is classified as other long-term assets and the related liability as current and long-term operating lease liabilities in the condensed consolidated balance sheet. The amortization of right of use lease asset expense is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred. During the three and nine months ended September 30, 2022, cash lease payments of $ 11,000 and $ 29,000 , respectively, were made on the WR Lease. During the three and nine months ended September 30, 2021, cash lease payments of $ 11,000 and $ 28,000 , respectively, were made on the WR Lease. During the three and nine months ended September 30, 2022, Solitario recognized $ 10,000 and $ 30,000 , respectively, of non-cash amortization of right of use lease asset expense for the WR Lease included in general and administrative expense. During the three and nine months ended September 30, 2021, Solitario recognized $ 10,000 and $ 30,000 , respectively, of non-cash amortization of right of use lease asset expense for the WR Lease included in general and administrative expense. These cash payments, less imputed interest for each period, reduced the related liability on the WR Lease. The discount rate within the WR Lease is not determinable and Solitario has applied a discount rate of 5 % based upon Solitario’s estimate of its cost of capital. The maturities of Solitario’s lease liability for its WR Lease are as follows at September 30, 2022: Future lease payments (in thousands) 2022 $ 11 2023 36 Total lease payments 47 Less amount of payments representing interest ( 1 ) Present value of lease payments $ 46 Supplemental cash flow information related to our operating lease was as follows for the three and nine months ended September 30, 2022 and 2021: (in thousands) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Cash paid for amounts included in the measurement of lease liabilities Operating cash outflows from the WR Lease payments $ 11 $ 10 $ 29 $ 27 Non-cash amounts related to the WR lease Leased assets recorded in exchange for new operating lease liabilities $ - $ - $ - $ 99 5 Other Assets The following items comprised other assets: (in thousands) September 30, December 31, 2022 2021 Furniture and fixtures, net of accumulated depreciation $ 103 $ 65 Lik project equipment, net of accumulated depreciation - 10 Office lease asset 42 72 Vendetta warrants - 3 Exploration bonds and other assets 4 4 Total other $ 149 $ 154 10 Table of Contents 6. Derivative Instruments Vendetta Warrants On July 31, 2019, Solitario purchased 3,450,000 Vendetta units for a total of $ 233,000 . Each Vendetta unit consisted of one share of Vendetta common stock and one Vendetta warrant (the “Vendetta Warrants”). Each Vendetta Warrant entitled the holder to purchase one additional share of Vendetta common stock for a purchase price of Cdn$ 0.13 per share for a period of three years. The Vendetta Warrants expired unexercised on July 31, 2022. On the purchase date Solitario recorded marketable equity securities of $ 165,000 for the Vendetta shares acquired and $ 68,000 for the Vendetta Warrants based upon an allocation of the purchase price of the Vendetta units, determined by (i) the fair value of the Vendetta common shares received based upon the quoted market price for Vendetta common shares. and (ii) the fair value of Vendetta Warrants based upon a Black Scholes model. During the three and nine months ended September 30, 2022, Solitario charged loss on derivative instruments of $ 0 and $ 4,000 , respectively, for the change in the fair value of the Vendetta Warrants based on a Black Scholes model. During the three and nine months ended September 30, 2021, Solitario charged loss on derivative instruments of $ 2,000 and $ 42,000 , respectively, for the change in the fair value of the Vendetta Warrants based on a Black Scholes model. Covered call options From time-to-time Solitario has sold covered call options against its holdings of shares of common stock of Kinross Gold Corporation (“Kinross”) included in marketable equity securities. The business purpose of selling covered calls is to provide additional income on a limited portion of shares of Kinross that Solitario may sell in the near term, which is generally defined as less than one year, and any changes in the fair value of its covered calls are recognized in the statement of operations in the period of the change. Solitario did not sell any covered calls during the three and nine months ended September 30, 2022. During the nine months ended September 30, 2021, Solitario sold covered calls against its holdings of Kinross for cash proceeds of $ 8,000 and recorded a gain on derivative instruments related to those covered calls of $ 1,000 and $ 8,000 , respectively. 7. Fair Value Solitario accounts for its financial instruments under ASC 820 Fair Value Measurement . During the nine months ended September 30, 2022, there were no reclassifications in financial assets or liabilities between Level 1, 2 or 3 categories. The following is a listing of Solitario’s financial assets and liabilities required to be measured at fair value on a recurring basis and where they are classified within the hierarchy as of September 30, 2022: (in thousands) Level 1 Level 2 Level 3 Total Assets Short-term investments $ 4,898 $ - $ - $ 4,898 Marketable equity securities $ 953 $ - $ - $ 953 The following is a listing of Solitario’s financial assets and liabilities required to be measured at fair value on a recurring basis and where they are classified within the hierarchy as of December 31, 2021: (in thousands) Level 1 Level 2 Level 3 Total Assets Short-term investments $ 5,087 $ - $ - $ 5,087 Marketable equity securities $ 1,307 $ - $ - $ 1,307 Vendetta Warrants $ - $ 3 $ - $ 3 11 Table of Contents 8. Income Taxes Solitario accounts for income taxes in accordance with ASC 740 Accounting for Income Taxes . Under ASC 740, income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related to certain income and expenses recognized in different periods for financial and income tax reporting purposes. Deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses and tax credits that are available to offset future taxable income and income taxes, respectively. A valuation allowance is provided if it is more likely than not that some portion or all of the deferred tax assets will not be realized. At both September 30, 2022 and December 31, 2021, a valuation allowance has been recorded, which fully offsets Solitario’s net deferred tax assets, because it is more likely than not that the Company will not realize some portion or all of its deferred tax assets. The Company continually assesses both positive and negative evidence to determine whether it is more likely than not that the deferred tax assets can be realized prior to their expiration. During the three and nine months ended September 30, 2022 and 2021, Solitario recorded no deferred tax expense. 9. Commitments and contingencies Solitario has recorded an asset retirement obligation of $ 125,000 related to its Lik project in Alaska. See Note 2, “Mineral Properties,” above. 10. Employee Stock Compensation Plans On June 18, 2013, Solitario’s shareholders approved the 2013 Solitario Exploration & Royalty Corp. Omnibus Stock and Incentive Plan, as amended (the “2013 Plan”). Under the terms of the 2013 Plan, a total of 5,750,000 shares of Solitario common stock are reserved for awards to directors, officers, employees and consultants. Awards granted under the 2013 Plan may take the form of stock options, stock appreciation rights, restricted stock, and restricted stock units. The terms and conditions of the awards are pursuant to the 2013 Plan and are granted by the Board of Directors of the Company (the “Board of Directors”) or a committee appointed by the Board of Directors. As of September 30, 2022 there were options outstanding that are exercisable to acquire 5,431,250 shares of Solitario common stock, with exercise prices between $ 0.20 and $ 0.60 per share. As of December 31, 2021 there were options outstanding that are exercisable to acquire 5,513,000 shares of Solitario common stock, with exercise prices between $ 0.20 and $ 0.77 per share. During the three and nine months ended September 30, 2022, Solitario granted options to acquire 2,360,000 shares of Solitario common stock. The options have an exercise price of $ 0.60 per share, a five-year term and a grant date fair value of $ 876,000 based upon a Black-Scholes model, with a 73 % volatility and a 3.4 % risk-free interest rate. During the nine months ended September 30, 2022, options for 81,750 shares were exercised with an average exercise price of $ 0.24 per share for proceeds of $ 20,000 . No options were exercised during the three months ended September 30, 2022. During the nine months ended September 30, 2021, Solitario granted 140,000 options with an average exercise price of $ 0.68 per share, a five-year term and a grant date fair value of $ 58,000 based upon a Black-Scholes model, with a 76 % volatility and a 0.9 % risk-free interest rate. During the nine months ended September 30, 2021, options for 185,000 shares were exercised with an average exercise price of $ 0.45 per share for proceeds of $ 83,000 . There were no options granted or exercised during the three months ended September 30, 2021. During the three and nine months ended September 30, 2022, Solitario recorded stock option compensation expense of $ 245,000 and $ 271,000 , respectively. During the three and nine months ended September 30, 2021, Solitario recorded stock option compensation expense of $ 32,000 and $ 104,000 , respectively. At September 30, 2022, the total unrecognized stock option compensation cost related to non-vested options was $ 685,000 and is expected to be recognized over a weighted average period of 34 months. 12 Table of Contents 11. Shareholders’ Equity Shareholders’ Equity for the nine months ended September 30, 2022: (in thousands, except Share amounts) Common Common Additional Total Stock Stock Paid-in Accumulated Shareholders’ Shares Amount Capital Deficit Equity Balance at December 31, 2021 62,036,399 $ 620 $ 72,523 $ ( 49,960 ) $ 23,183 Stock option expense - - 271 - 271 Issuance of shares – ATM, net 2,650,724 27 1,996 - 2,023 Issuance of shares - option exercises 81,750 1 19 - 20 Net loss - - - ( 3,262 ) ( 3,262 ) Balance at September 30, 2022 64,768,873 $ 648 $ 74,809 $ ( 53,222 ) $ 22,235 Shareholders’ Equity for the nine months ended September 30, 2021: (in thousands, except Share amounts) Common Common Additional Total Stock Stock Paid-in Accumulated Shareholders’ Shares Amount Capital Deficit Equity Balance at December 31, 2020 58,108,366 581 $ 70,514 $ ( 47,593 ) $ 23,502 Stock option expense - - 104 - 104 Issuance of shares – ATM, net 340,400 3 134 - 137 Issuance of shares - option exercises 185,000 2 81 - 83 Net loss - - - ( 1,897 ) ( 1,897 ) Balance at September 30, 2021 58,633,766 $ 586 $ 70,833 $ ( 49,490 ) $ 21,929 At the Market Offering Agreement On February 2, 2021, Solitario entered into an at-the-market offering agreement (the “ATM Agreement”) with H. C. Wainwright & Co., LLC (“Wainwright”), under which Solitario may, from time to time, issue and sell shares of Solitario’s common stock through Wainwright as sales manager in an at-the-market offering under a prospectus supplement for aggregate sales proceeds of up to $ 9.0 million (the “ATM Program”). The common stock is distributed at the market prices prevailing at the time of sale. As a result, prices of the common stock sold under the ATM Program may vary as between purchasers and during the period of distribution. The ATM Agreement provides that Wainwright is entitled to compensation for its services at a commission rate of 3.0 % of the gross sales price per share of common stock sold. During the nine months ended September 30, 2021, Solitario recorded $ 144,000 as a charge to additional paid-in-capital for one-time expenses related to entering into the ATM Agreement. During the nine months ended September 30, 2022, Solitario sold an aggregate of 2,650,724 shares of common stock under the ATM Agreement at an average price of $ 0.79 per share for net proceeds of $ 2,023,000 after commissions and sale expenses. Solitario did not sell any shares under the ATM Agreement during the three months ended September 30, 2022. During the three and nine months ended September 30, 2021, Solitario sold an aggregate of 190,000 and 340,400 shares of common stock, respectively, under the ATM Program at an average price of $ 0.55 and $ 0.82 per share, respectively, for net proceeds of $ 104,000 and $ 137,000 , respectively, after commissions, sale and one-time expenses. 13 Table of Contents