UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2011
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Paramount Gold and Silver Corp.
(Exact name of registrant as specified in its charter)
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Delaware
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0-51600
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20-3690109
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(State or Other Jurisdiction of Incorporation)
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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665 Anderson Street, Winnemucca, Nevada 89445
(Address of Principal Executive Office) (Zip Code)
(775)625-3600
(Issuer’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to the filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ¨
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Accelerated filer x
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Non-accelerated filer ¨
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Smaller reporting company ¨
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(Do not check if smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨ No x
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13, or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock as of the latest practicable date: 136,195,117 shares of Common Stock, $.001 par value as of April 29, 2011.
i
PARAMOUNT GOLD AND SILVER CORP.
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1
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1
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Item 2.
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23
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Item 3.
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31
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Item 4.
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32
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33
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Item 1.
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33
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Item 1A.
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33
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Item 2.
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33
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Item 3.
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33
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Item 4.
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33
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Item 5.
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33
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Item 6.
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ii
This Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011 contains “forward-looking statements”. Generally, the words “believes”, “anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,” “continue,” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements which include, but are not limited to, statements concerning the Company’s expectations regarding its working capital requirements, financing requirements, business prospects, and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Such statements are subject to certain risks and uncertainties, including the matters set forth in this Quarterly Report or other reports or documents the Company files with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected.
These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein.
Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. For any forward-looking statements contained in any document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
OTHER PERTINENT INFORMATION
When used in this report, the terms "Paramount," the "Company," “we," "our," and "us" refers to Paramount Gold and Silver Corp., a Delaware corporation.
PART I. – FINANCIAL INFORMATION
Item 1. Financial Statements
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Consolidated Financial Statements
(Unaudited)
Period ended March 31, 2011 and 2010
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Consolidated Balance Sheets
As at March 31, 2011(Unaudited) and June 30, 2010 (Audited)
(Expressed in United States dollars, unless otherwise stated)
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As at March 31,
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As at June 30,
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|||||||
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2011 (Unaudited)
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2010 (Audited)
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|||||||
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Assets
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||||||||
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Current Assets
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||||||||
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Cash and cash equivalents
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$ | 16,264,965 | $ | 21,380,505 | ||||
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Amounts receivable
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1,881,297 | 1,511,619 | ||||||
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Equity conversion right (Note 12)
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501,078 | 516,545 | ||||||
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Loan advance
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- | 243,495 | ||||||
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Prepaid and deposits
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130,690 | 45,368 | ||||||
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Prepaid insurance, current portion (Note 11)
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245,215 | - | ||||||
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Marketable sercurities
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1,800 | - | ||||||
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Total Current Assets
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19,025,045 | 23,697,532 | ||||||
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Non-Current Assets
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||||||||
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Mineral properties (Note 7)
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48,666,487 | 22,111,203 | ||||||
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Fixed assets (Note 8)
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493,244 | 519,446 | ||||||
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Prepaid insurance, non current portion (Note 11)
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674,340 | |||||||
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Reclamation bond (Note 11)
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2,801,797 | |||||||
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Total Non-Current Assets
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52,635,868 | 22,630,649 | ||||||
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Total Assets
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$ | 71,660,913 | $ | 46,328,181 | ||||
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Liabilities and Shareholder’s Equity
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||||||||
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Current Liabilities
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||||||||
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Accounts payable
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$ | 419,376 | $ | 430,323 | ||||
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Warrant Liability (Note 2)
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21,726,833 | 5,979,767 | ||||||
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Total Current Liabilities
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22,146,209 | 6,410,090 | ||||||
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Non-Current Liabilities
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Reclamation and Enviromental Obligation
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1,146,574 | - | ||||||
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Total Non-Current Liabilities
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1,146,574 | - | ||||||
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Shareholder’s Equity
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||||||||
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Capital stock (Note 5)
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136,182 | 110,069 | ||||||
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Additional paid in capital
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129,529,437 | 90,613,573 | ||||||
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Contributed surplus
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11,240,782 | 10,825,222 | ||||||
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Deficit accumulated during the exploration stage
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(92,587,140 | ) | (61,187,098 | ) | ||||
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Cumulative translation adjustment
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48,869 | (443,675 | ) | |||||
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Total Shareholder's Equity
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48,368,130 | 39,918,091 | ||||||
| Total Liabilities and Shareholder's Equity | $ | 71,660,913 | $ | 46,328,181 | ||||
Subsequent Events (Note 14)
The accompanying notes are an integral part of the consolidated financial statements
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Consolidated Statements of Operations (Unaudited)
(Expressed in United States dollars, unless otherwise stated)
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Three Month
Period Ended
March 31,
2011
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Nine Month
Period Ended
March 31,
2011
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Three Month
Period Ended
March 31,
2010
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Nine Month
Period Ended
March 31,
2010
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Cumulative
Since Inception
March 29, 2005 to
to March 31, 2011
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||||||||||||||||
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Revenue
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Interest Income
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$ | 39,474 | $ | 85,826 | $ | 14,446 | $ | 80,755 | $ | 1,103,789 | ||||||||||
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Other Income
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$ | 2,603 | $ | 180,833 | $ | - | $ | - | $ | 180,833 | ||||||||||
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Total Revenue
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42,077 | 266,659 | 14,446 | 80,755 | 1,284,622 | |||||||||||||||
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Expenses:
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Incorporation Costs
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- | - | - | - | 1,773 | |||||||||||||||
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Exploration
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2,531,665 | 6,244,524 | 1,338,425 | 3,982,744 | 30,041,788 | |||||||||||||||
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Professional Fees
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283,796 | 919,805 | 284,518 | 691,893 | 7,144,913 | |||||||||||||||
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Directors Compensation
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551,895 | 744,677 | 58,258 | 94,468 | 885,846 | |||||||||||||||
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Travel & Lodging
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46,214 | 164,369 | 70,962 | 158,072 | 1,213,617 | |||||||||||||||
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Corporate Communications
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137,346 | 218,770 | 158,545 | 322,219 | 3,335,868 | |||||||||||||||
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Consulting Fees
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119,690 | 365,315 | 66,088 | 348,127 | 14,170,136 | |||||||||||||||
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Office & Administration
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59,376 | 282,207 | 112,959 | 265,723 | 2,638,039 | |||||||||||||||
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Interest & Service Charges
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3,467 | 9,483 | 4,293 | 54,640 | 106,324 | |||||||||||||||
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Loss on disposal of Fixed Assets
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- | - | - | - | 44,669 | |||||||||||||||
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Insurance
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95,334 | 233,922 | 11,085 | 36,596 | 509,794 | |||||||||||||||
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Depreciation
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16,738 | 54,915 | 15,700 | 46,965 | 351,194 | |||||||||||||||
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Accretion
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35,210 | 84,674 | - | - | 84,674 | |||||||||||||||
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Miscellaneous
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- | - | 32,387 | 7,281 | 203,097 | |||||||||||||||
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Financing & Listing Fees
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- | - | - | - | (22,024 | ) | ||||||||||||||
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Acquisition Expenses
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45 | 1,081,075 | - | 1,060,180 | 2,323,646 | |||||||||||||||
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Income and other taxes
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13,015 | 13,015 | 43,101 | 43,101 | 64,747 | |||||||||||||||
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Write Down of Mineral Property
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- | - | - | 275,000 | 1,746,049 | |||||||||||||||
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Total Expense
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3,893,791 | 10,416,751 | 2,196,321 | 7,387,009 | 64,844,150 | |||||||||||||||
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Net Loss before other item
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3,851,714 | 10,150,092 | 2,181,875 | 7,306,254 | 63,559,528 | |||||||||||||||
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Other items
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Change in fair value of Equity Conversion Right
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(164,488 | ) | 15,467 | 419,525 | 419,525 | 836,622 | ||||||||||||||
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Change in fair value of warrant liability
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(1,085,671 | ) | 21,233,585 | (1,628,829 | ) | (4,546,442 | ) | 28,190,090 | ||||||||||||
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Other Income & Expenses
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900 | 900 | - | - | 900 | |||||||||||||||
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Net Loss
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$ | 2,602,455 | $ | 31,400,044 | $ | 972,571 | $ | 3,179,337 | $ | 92,587,140 | ||||||||||
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Other comprehensive loss
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||||||||||||||||||||
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Foreign Currency Translation Adjustment
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(220,765 | ) | (492,544 | ) | 165,884 | 107,618 | (48,869 | ) | ||||||||||||
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Total Comprehensive Loss for the Period
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$ | 2,381,690 | $ | 30,907,500 | $ | 1,138,455 | $ | 3,286,955 | $ | 92,538,271 | ||||||||||
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Loss per Common share
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||||||||||||||||||||
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Basic and Diluted
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$ | 0.02 | $ | 0.24 | $ | 0.01 | $ | 0.03 | ||||||||||||
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Weighted Average Number of Common
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||||||||||||||||||||
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Shares Used in Per Share Calculations
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Basic
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135,096,531 | 128,841,845 | 101,742,087 | 91,771,247 | ||||||||||||||||
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Diluted
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135,096,531 | 128,841,845 | 105,742,087 | 95,771,247 | ||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Consolidated Statements of Cash Flows (Unaudited)
(Expressed in United States dollars, unless otherwise stated)
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For the Nine Month Period Ended March 31, 2011
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For the Nine Month Period Ended March 31, 2010
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Cummulative Since Inception to March 31, 2011
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||||||||||
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Operating Activities
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||||||||||||
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Net Loss
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$ | (31,400,044 | ) | (3,179,337 | ) | (92,587,142 | ) | |||||
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Adjustment for:
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||||||||||||
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Depreciation
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54,915 | 46,965 | 351,194 | |||||||||
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Loss on disposal of assets
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- | - | 44,669 | |||||||||
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Stock based compensation
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1,154,415 | 256,407 | 17,611,939 | |||||||||
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Accrued interest
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- | - | (58,875 | ) | ||||||||
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Write-down of mineral properties
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- | 275,000 | 1,746,049 | |||||||||
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Accretion expense
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84,674 | - | 84,674 | |||||||||
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Change in reclamation
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(19,532 | ) | - | (19,532 | ) | |||||||
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Insurance expense
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96,648 | - | 96,648 | |||||||||
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Other non-cash transactions
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900 | 836,622 | ||||||||||
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Change in fair value of equity conversion right
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15,467 | 419,525 | 836,622 | |||||||||
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Change in fair value of warrant liability
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21,233,585 | (4,546,442 | ) | 28,190,090 | ||||||||
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(Increase) Decrease in accounts receivable
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(369,678 | ) | (1,143,648 | ) | (1,881,297 | ) | ||||||
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(Increase) Decrease in prepaid expenses
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(85,322 | ) | 43,172 | (130,690 | ) | |||||||
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Increase (Decrease) in accounts payable
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(10,947 | ) | (187,107 | ) | 419,377 | |||||||
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Cash used in Operating Activities
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(9,244,919 | ) | (8,015,465 | ) | (44,459,652 | ) | ||||||
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Purchase of GIC receivable
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- | 9,961 | 58,875 | |||||||||
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Notes receivable issued
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243,495 | 91,365 | 21,365 | |||||||||
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Purchase of Equity conversion right
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- | (1,337,700 | ) | (1,337,700 | ) | |||||||
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Purchase of Mineral Properties
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(150,000 | ) | (3,574,252 | ) | (7,068,809 | ) | ||||||
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Purchase of Equipment
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(28,712 | ) | (28,296 | ) | (919,585 | ) | ||||||
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Cash used in Investing Activities
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64,783 | (4,838,922 | ) | (9,245,854 | ) | |||||||
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Demand notes payable issued
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- | - | 105,580 | |||||||||
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Issuance of capital Stock
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3,572,052 | 26,239,904 | 70,696,692 | |||||||||
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Cash used in Financing Activities
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3,572,052 | 26,239,904 | 70,802,272 | |||||||||
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Effect of echange rate changes on Cash
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492,544 | (107,618 | ) | 3,921 | ||||||||
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Change in cash during period
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(5,115,540 | ) | 13,277,899 | 16,264,965 | ||||||||
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Cash at beginning of period
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21,380,505 | 7,040,999 | - | |||||||||
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Cash at end of period
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$ | 16,264,965 | $ | 20,318,898 | $ | 16,264,965 | ||||||
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Supplemental Cash Flow Disclosure
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||||||||||||
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Interest Received
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$ | 85,826 | $ | 80,755 | ||||||||
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Cash
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4,454,979 | 7,310,932 | ||||||||||
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Short-term investments
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11,809,986 | 13,007,966 | ||||||||||
The accompanying notes are an integral part of the consolidated financial statements
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Consolidated Statements of Stockholders’ Equity (Unaudited)
For the Nine Month Period Ended March 31, 2011
(Expressed in United States dollars, unless otherwise stated)
|
Shares
|
Par
Value
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Capital in
Excess of
Par Value
|
Deficit
|
Contributed
Surplus
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Cumulative
Translation
Adjustment
|
Total
Stockholders
Equity
|
||||||||||||||||||||||
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Balance at September 30, 2005
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11,267,726 | $ | 11,268 | $ | 1,755 | $ | (1,773 | ) | $ | — | $ | — | $ | 11,250 | ||||||||||||||
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Forward split
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45,267,726 | 45,267 | (45,267 | ) | — | — | — | — | ||||||||||||||||||||
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Returned to treasury
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(61,660,000 | ) | (61,660 | ) | 61,660 | — | ||||||||||||||||||||||
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Capital issued for financing
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48,289,835 | 48,291 | 20,320,683 | — | — | — | 20,368,974 | |||||||||||||||||||||
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Capital issued for services
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4,157,500 | 4,157 | 9,477,295 | — | — | — | 9,481,452 | |||||||||||||||||||||
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Capital issued for mineral properties
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1,178,519 | 1,179 | 2,682,617 | — | — | — | 2,683,796 | |||||||||||||||||||||
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Capital issued on settlement of notes payable
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39,691 | 39 | 105,541 | — | — | — | 105,580 | |||||||||||||||||||||
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Fair Value of warrants
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— | — | — | — | 8,460,682 | 8,460,682 | ||||||||||||||||||||||
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Stock based compensation
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— | — | — | — | 5,080,263 | — | 5,080,263 | |||||||||||||||||||||
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Foreign currency translation
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— | — | — | — | — | (19,977 | ) | (19,977 | ) | |||||||||||||||||||
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Net Income (Loss)
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— | — | — | (35,954,312 | ) | — | — | (35,954,312 | ) | |||||||||||||||||||
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Balance at June 30, 2008
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48,540,997 | 48,541 | 32,604,284 | (35,956,085 | ) | 13,540,945 | (19,977 | ) | 10,217,708 | |||||||||||||||||||
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Capital issued for financing
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16,707,791 | 16,707 | 5,828,684 | — | — | — | 5,845,391 | |||||||||||||||||||||
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Capital issued for services
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1,184,804 | 1,185 | 683,437 | — | — | — | 684,622 | |||||||||||||||||||||
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Capital issued from stock options exercised
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384,627 | 385 | 249,623 | — | (237,008 | ) | — | 13,000 | ||||||||||||||||||||
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Capital issued for mineral properties
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16,200,000 | 16,200 | 13,140,250 | — | — | — | 13,156,450 | |||||||||||||||||||||
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Fair Value of warrants
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— | — | — | — | 3,612,864 | — | 3,612,864 | |||||||||||||||||||||
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Stock based compensation
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— | — | — | — | 1,052,709 | — | 1,052,709 | |||||||||||||||||||||
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Foreign currency translation
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— | — | — | — | — | (267,215 | ) | (267,215 | ) | |||||||||||||||||||
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Net Income (Loss)
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— | — | — | (7,241,179 | ) | — | — | (7,241,179 | ) | |||||||||||||||||||
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Balance at June 30, 2009
|
83,018,219 | $ | 83,018 | $ | 52,506,278 | $ | (43,197,264 | ) | $ | 17,969,510 | $ | (287,192 | ) | $ | 27,074,350 | |||||||||||||
The accompanying notes are an integral part of the consolidated financial statements
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Consolidated Statements of Stockholders’ Equity (Unaudited)
For the Nine Month Period Ended March 31, 2011
(Expressed in United States dollars, unless otherwise stated)
|
Shares
|
Par
Value
|
Capital in
Excess of
Par Value
|
Deficit
|
Contributed
Surplus
|
Cumulative
Translation
Adjustment
|
Total
Stockholders
Equity
|
||||||||||||||||||||||
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Balance at June 30, 2009
|
83,018,219 | $ | 83,018 | $ | 52,506,278 | $ | (43,197,264 | ) | $ | 17,969,510 | $ | (287,192 | ) | $ | 27,074,350 | |||||||||||||
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Capital issued for financing
|
18,400,000 | 18,400 | 21,371,043 | — | — | — | 21,389,443 | |||||||||||||||||||||
|
Capital issued from stock options and warrants exercised
|
835,136,060 | 8,351 | 16,361,552 | — | (3,841,264 | ) | — | 12,528,639 | ||||||||||||||||||||
|
Capital issued for mineral properties
|
300,000 | 300 | 374,700 | — | — | — | 375,000 | |||||||||||||||||||||
|
Fair Value of warrants
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Stock based compensation
|
— | — | — | — | 309,840 | — | 309,840 | |||||||||||||||||||||
|
Transition Adjustment (Note 2)
|
— | — | — | (12,637,875 | ) | (3,612,864 | ) | — | (16,250,739 | ) | ||||||||||||||||||
|
Foreign currency translation
|
— | — | — | — | — | (156,483 | ) | (156,483 | ) | |||||||||||||||||||
|
Net Income (loss)
|
— | — | — | (5,351,958 | ) | — | — | (5,351,908 | ) | |||||||||||||||||||
|
Balance at June 30, 2010
|
110,069,579 | 110,069 | 90,613,573 | (61,187,098 | ) | 10,825,222 | (443,675 | ) | 39,918,091 | |||||||||||||||||||
|
Capital issued for financing
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Capital issued from stock options and warrants exercised
|
170,690 | 171 | 146,623 | — | (146,794 | ) | — | — | ||||||||||||||||||||
|
Capital issued for acquisition
|
22,007,453 | 22,007 | 28,807,756 | — | 314,790 | — | 29,144,553 | |||||||||||||||||||||
|
Stock based compensation
|
— | — | — | — | 33,611 | — | 33,611 | |||||||||||||||||||||
|
Foreign currency translation
|
— | — | — | — | — | 435,107 | 435,107 | |||||||||||||||||||||
|
Net Income (loss)
|
— | — | — | (3,861,229 | ) | — | — | (3,861,229 | ) | |||||||||||||||||||
|
Balance at September 30, 2010
|
132,247,722 | 132,247 | 119,567,952 | (65,048,327 | ) | 11,026,829 | (8,568 | ) | 65,670,133 | |||||||||||||||||||
|
Capital issued for financing
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Capital issued from stock options and warrants exercised
|
1,371,250 | 1,371 | 4,539,579 | — | (37,372 | ) | — | 4,503,578 | ||||||||||||||||||||
|
Capital issued for acquisition
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Stock based compensation
|
— | — | — | — | 272,700 | — | 272,700 | |||||||||||||||||||||
|
Foreign currency translation
|
— | — | — | — | — | (163,328 | ) | (163,328 | ) | |||||||||||||||||||
|
Net Income (loss)
|
— | — | — | (24,936,358 | ) | — | — | (24,936,358 | ) | |||||||||||||||||||
|
Balance at December 31, 2010
|
133,618,972 | 133,618 | 124,107,531 | (89,984,685 | ) | 11,262,157 | (171,896 | ) | 45,346,725 | |||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Consolidated Statements of Stockholders’ Equity (Unaudited)
For the Nine Month Period Ended March 31, 2011
(Expressed in United States dollars, unless otherwise stated)
|
Shares
|
Par
Value
|
Capital in
Excess of
Par Value
|
Deficit
|
Contributed
Surplus
|
Cumulative
Translation
Adjustment
|
Total
Stockholders
Equity
|
||||||||||||||||||||||
|
Balance at December 31, 2010
|
133,618,972 | 133,618 | 124,107,531 | (89,984,685 | ) | 11,262,157 | (171,896 | ) | 45,346,725 | |||||||||||||||||||
|
Capital issued for financing
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Capital issued from stock options and warrants exercised
|
2,563,642 | 2,564 | 5,421,906 | — | (869,479 | ) | — | 4,554,991 | ||||||||||||||||||||
|
Capital issued for acquisition
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
Stock based compensation
|
— | — | — | — | 848,104 | — | 848,104 | |||||||||||||||||||||
|
Foreign currency translation
|
— | — | — | — | — | 220,765 | 220,765 | |||||||||||||||||||||
|
Net Income (loss)
|
— | — | — | (2,602,455 | ) | — | — | (2,602,455 | ) | |||||||||||||||||||
|
Balance at March 31, 2011
|
136,182,614 | 136,182 | 129,529,437 | (92,587,140 | ) | 11,240,782 | 48,869 | 48,368,130 | ||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Notes to Consolidated Financial Statements (Unaudited)
For the Nine Month Period Ended March 31, 2011
(Expressed in United States dollars, unless otherwise stated)
|
1.
|
Organization and Business Activity:
|
Paramount Gold and Silver Corp. (‘the Company’), incorporated under the General Corporation Law of the State of Delaware, is a natural resource company engaged in the acquisition, exploration and development of gold, silver and precious metal properties. The Company’s wholly owned subsidiaries include Paramount Gold de Mexico S.A. de C.V., Magnetic Resources Ltd, Minera Gama SA de CV, Compania Minera Paramount SAC and X-Cal Resources Ltd. The Company is an exploration stage company in the process of exploring its mineral properties, and has not yet determined whether these properties contain reserves that are economically recoverable.
|
2.
|
Principal Accounting Policies:
|
Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the do not include all of the disclosures required by generally accepted accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all of the normal and recurring adjustments necessary to fairly present the interim financial information set forth herein have been included. The results of operations for interim periods are not necessarily indicative of the operating results of a full year or of future years.
These interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States and, with the exception of new accounting pronouncements described in Note 2, follow the same accounting policies and methods of their application as the most recent annual financial statements. These interim financial statements should be read in conjunction with the financial statements and related footnotes included in the Annual Report on Form 10-K of Paramount Gold and Silver Corp. for the year ended June 30, 2010.
Use of Estimates
The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash and cash equivalents.
Fair Value Measurements
The Company has adopted FASB ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. The company applies fair value accounting for all financial assets and liabilities and non – financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The Company has adopted FASB ASC 825, Financial Instruments, which allows companies to choose to measure eligible financial instruments and certain other items at fair value that are not required to be measured at fair value. The Company has not elected the fair value option for any eligible financial instruments.
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Notes to Consolidated Financial Statements (Unaudited)
For the Nine Month Period Ended March 31, 2011
(Expressed in United States dollars, unless otherwise stated)
|
2.
|
Principal Accounting Policies (Continued):
|
Notes Receivable
Notes receivable are classified as available-for-sale or held-to-maturity, depending on our intent with respect to holding such investments. If it is readily determinable, notes receivable classified as available-for-sale is accounted for at fair value. Unrealized gains and losses on available-for-sale securities are excluded from earnings and reported net of tax as a component of other comprehensive income within shareholders’ equity. Interest income is recognized when earned.
Stock Based Compensation
The Company has adopted the provisions of FASB ASC 718, “Stock Compensation” (“ASC 718”), which establishes accounting for equity instruments exchanged for employee services. Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employees’ requisite service period (generally the vesting period of the equity grant).
Comprehensive Income
FASB ASC 220“Reporting Comprehensive Income” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As of June 30, 2010 and June 30 2009, the Company’s only component of comprehensive income is foreign currency translation adjustments.
Long Term Assets
Mineral Properties
Mineral property acquisition costs are capitalized when incurred and will be amortized using the units –of – production method over the estimated life of the probable reserve following the commencement of production. If a mineral property is subsequently abandoned or impaired, any capitalized costs will be expensed in the period of abandonment or impairment.
Acquisition costs include cash consideration and the fair market value of shares issued on the acquisition of mineral properties.
Exploration Costs
Exploration costs, which include maintenance, development and exploration of mineral claims, are expensed as incurred. When it is determined that a mineral deposit can be economically developed as a result of establishing proven and probable reserves, the costs incurred after such determination will be capitalized and amortized over their useful lives. To date, the Company has not established the commercial feasibility of its exploration prospects; therefore, all exploration costs are being expensed.
Fixed Assets
Equipment is recorded at cost less accumulated depreciation. All equipment is amortized over its estimated useful life at the following annual rates, with half the rate being applied in the period of acquisition:
|
Computer equipment
|
30% declining balance
|
|
Equipment
|
20% declining balance
|
|
Furniture and fixtures
|
20% declining balance
|
|
Exploration equipment
|
20% declining balance
|
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Notes to Consolidated Financial Statements (Unaudited)
For the Nine Month Period Ended March 31, 2011
(Expressed in United States dollars, unless otherwise stated)
|
2.
|
Principal Accounting Policies (Continued):
|
|
Income Taxes
|
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted FASB ASC 740 as of its inception. Pursuant to FASB ASC 740 the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future periods; and accordingly is offset by a valuation allowance. FIN No.48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of tax positions taken into in tax returns.
To the extent interest and penalties may be assessed by taxing authorities on any underpayment of income tax, such amounts would be accrued and classified as a component of income tax expense in our Consolidated Statements of Operations. The Company elected this accounting policy, which is a continuation of our historical policy, in connection with our adoption of FIN 48.
Foreign Currency Translation
The parent company’s functional currency is the United States dollar. The consolidated financial statements of the Company are translated to United States dollars in accordance with FASB ASC 830 “Foreign Currency Translation” (“ASC 830”). Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the consolidated balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Mexican pesos and Canadian Dollars. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
The functional currencies of the Company’s wholly-owned subsidiaries are the U.S. Dollar and the Canadian Dollar. The financial statements of the subsidiaries are translated to United States dollars in accordance with ASC 830 using period-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues and expenses. Translation gains (losses) are recorded in accumulated other comprehensive income (loss) as a component of stockholders’ equity. Foreign currency transaction gains and losses are included in the statement of operations.
Asset Retirement Obligation
The Company has adopted ASC 410-20 “Accounting for Asset Retirement Obligations”, which requires that an asset retirement obligation (“ARO”) associated with the retirement of a tangible long-lived asset be recognized as a liability in the period in which it is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated asset. The cost of the tangible asset, including the initially recognized ARO, is depleted such that the cost of the ARO is recognized over the useful life of the asset. The ARO is recorded at fair value, and accretion expense is recognizable over time as the discounted liability is accreted to its expected settlement value. The fair value of the ARO is measured using expected future cash flows, discounted at the Company’s credit-adjusted-risk-free interest rate.
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Notes to Consolidated Financial Statements (Unaudited)
For the Nine Month Period Ended March 31, 2011
(Expressed in United States dollars, unless otherwise stated)
|
2.
|
Principal Accounting Policies (Continued):
|
Environmental Protection and Reclamation Costs
The operations of the Company have been, and may in the future be affected from time to time in varying degrees by changes in environmental regulations, including those for future removal and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company may vary from region to region and are not predictable.
Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against statements of operations as incurred or capitalized and amortized depending upon their future economic benefits.
Loss per Share
The Company computes net income (loss) per share in accordance with FASB ASC 260, “Earnings per Share”. FASB ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS give effect to all dilutive potential common shares outstanding during the period using the treasury stock method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.
Concentration of Credit and Foreign Exchange Rate Risk
Financial instruments that potentially subject the Company to credit and foreign exchange risk consist principally of cash, deposited with a high quality credit institution and amounts receivable, mainly representing value added tax recoverable from a foreign government. Management does not believe that the Company is subject to significant credit or foreign exchange risk from these financial instruments.
Fair Value Measurements
On July 1, 2008, the Company adopted FASB ASC 820, Fair Value Measurements as it relates to financial assets and financial liabilities. In February 2008, the FASB staff issued ASC 845, Effective Date of ASC 820 (“ASC 820”). ASC 845 delayed the effective date of ASC 820 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The provisions of ASC 845 are effective for the Company’s fiscal year beginning July 1, 2009.
ASC 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This standard is now the single source in GAAP for the definition of fair value, except for the fair value of leased property as defined in ASC 820. ASC 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed, based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed, based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Notes to Consolidated Financial Statements (Unaudited)
For the Nine Month Period Ended March 31, 2011
(Expressed in United States dollars, unless otherwise stated)
|
2.
|
Principal Accounting Policies (Continued):
|
Fair Value Measurements (Continued)
The three levels of the fair value hierarchy under ASC 820 are described below:
|
Level 1
|
|
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
|
|
Level 2
|
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
|
Level 3
|
Inputs that are both significant to the fair value measurement and unobservable.
|
The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required by ASC 820, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
|
Fair Value at March 31, 2011
|
June 30, 2010
|
|||||||||||||||||||
|
Assets
|
Total
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
|
Cash equivalents
|
16,264,965 | 16,264,965 | - | - | 21,380,505 | |||||||||||||||
|
Accounts receivable
|
1,881,297 | 1,881,297 | - | - | 1,511,619 | |||||||||||||||
|
Loan Advance
|
- | - | - | - | 243,495 | |||||||||||||||
|
Equity Conversion Right
|
501,078 | 501,078 | - | - | 516,545 | |||||||||||||||
|
Marketable Securities
|
1,800 | 1,800 | - | - | - | |||||||||||||||
|
Liabilities
|
||||||||||||||||||||
|
Warrant liability
|
21,726,833 | - | - | 21,726,833 | 5,979,767 | |||||||||||||||
The Company’s cash equivalents and GIC are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The cash equivalents that are valued based on quoted market prices in active markets are primarily comprised of commercial paper, short-term certificates of deposit and U.S. Treasury securities. The accounts receivable represent amounts due from a national government regarding refund of taxes. The notes receivable is classified within Level 2 of the fair value hierarchy.
The Equity Conversion Right is accounted for as an asset and is classified within Level 1 because the underlying security has a published and observable market. The Company uses the published closing stock price of the underlying security at the end of the financial reporting period to determine the fair value of the asset. The change in fair value is recorded in the statement of operations as a loss (gain).
The changes in fair value of the Equity Conversion Right during the period ended March 31, 2011 was as follows:
|
Balance at December 31, 2010
|
$ | 336,590 | ||
|
Change in fair value recorded in earnings
|
164,488 | |||
|
Balance at March 31, 2011
|
$ | 501,078 |
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Notes to Consolidated Financial Statements (Unaudited)
For the Nine Month Period Ended March 31, 2011
(Expressed in United States dollars, unless otherwise stated)
|
2.
|
Principal Accounting Policies (Continued):
|
Fair Value Measurements (Continued)
The estimated fair value of warrants and options accounted for as liabilities was determined on the date of closing and marked to market at each financial reporting period. The change in fair value of the warrants is recorded in the statement of operations as a gain (loss) and is estimated using the Black-Scholes option-pricing model with the following inputs:
|
March 31, 2011
|
||||
|
Risk free interest rate
|
0.29 | % | ||
|
Expected life of warrants and options
|
1 year
|
|||
|
Expected stock price volatility
|
71 | % | ||
|
Expected dividend yield
|
0 | % | ||
The changes in fair value of the warrants during the period ended March 31, 2011 were as follows:
|
Balance at December 31, 2010
|
$ | 25,232,895 | ||
|
Issuance of warrants and options
|
- | |||
|
Change in fair value recorded in earnings
|
(1,085,671 | ) | ||
|
Transferred to equity upon exercise
|
(2,420,391 | ) | ||
|
Balance at March 31, 2011
|
$ | 21,726,833 |
Derivatives
In March 2008, the FASB issued ASC 815, “Disclosures about Derivative Instruments and Hedging Activities” (“ASC 815”). ASC 815 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. This statement is effective for financial statements issued for fiscal periods beginning after November 15, 2008.
Effective July 1, 2009, we adopted the amended provisions of ASC 815 on determining what types of instruments or embedded features in an instrument held by a reporting entity can be considered indexed to its own stock for the purpose of evaluating the first criteria of the scope exception in ASC 815. Warrants and options issued in prior periods with exercise prices denominated in Canadian dollars are no longer considered indexed to our stock, as their exercise price is not in the Company’s functional currency of the US dollar, and therefore no longer qualify for the scope exception and must be accounted for as a derivative. These warrants and options are reclassified as liabilities under the caption “Warrant liability” and recorded at estimated fair value at each reporting date, computed using the Black-Scholes valuation method. Changes in the liability from period to period are recorded in the Statements of Operations under the caption “Change in fair value of warrant liability.” On July 1, 2010, we recorded a cumulative effect adjustment based on the grant date fair value of warrants issued during the year ended June 30, 2009 that were outstanding at July 1, 2009 and the change in fair value of the warrant liability from the issuance date through to July 1, 2009.
We have elected to record the change in fair value of the warrant liability as a component of other income and expense on the statement of operations as we believe the amounts recorded relate to financing activities and not as a result of our operations.
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Notes to Consolidated Financial Statements (Unaudited)
For the Nine Month Period Ended March 31, 2011
(Expressed in United States dollars, unless otherwise stated)
|
2.
|
Principal Accounting Policies (Continued):
|
Accounting Standards Adopted (Continued)
(i) Derivatives (Continued)
We recorded the following cumulative effect of change in accounting principal pursuant to its adoption of the amendment as of July 1, 2009:
|
Contributed surplus
|
Warrant liability
|
Accumulated deficit
|
||||||||||
|
Grant date fair value of previously issued warrants outstanding as of July 1, 2009
|
3,612,865 | (3,612,865 | ) | — | ||||||||
|
Change in fair value of previously issued warrants outstanding as of July 1, 2009
|
— | (12,637,875 | ) | 12,637,875 | ||||||||
|
Cumulative effect of change in accounting principal
|
3,612,865 | (16,250,740 | ) | 12,637,875 | ||||||||
In addition, we have recorded a gain related to the change in fair value of the warrant liability of $5,681,370 on the Consolidated Statements of Operations for the year ended June 30, 2010 and $21,233,585 for the nine months ended March 31, 2011.
|
3.
|
Recent Accounting Pronouncements:
|
ASC 860
In June 2009, the FASB issued ASC 860, “Accounting for Transfers of Financial Assets—an amendment of FASB Statement” (“ASC 860”). ASC 860 is intended to establish standards of financial reporting for the transfer of assets to improve the relevance, representational faithfulness, and comparability. ASC 860 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2009. The Company has adopted ASC 860 on July 1, 2010. The Company has determined that the adoption of ASC 860 will have no impact on its consolidated financial statements.
ASC 810
In June 2009, the FASB issued ASC 810, “Amendments to FASB Interpretation No. 46(R)” (“ASC 810”). ASC 810 eliminates the exception to consolidate a qualifying special-purpose entity, changes the approach to determining the primary beneficiary of a variable interest entity, and requires companies to more frequently re-assess whether they must consolidate variable interest entities. Under the new guidance, the primary beneficiary of a variable interest entity is identified qualitatively as the enterprise that has both (a) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance, and (b) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. ASC 810 becomes effective for the Company’s fiscal 2011 year-end and interim reporting periods thereafter. The Company does not expect ASC 810 to have a material impact on its financial statements.
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Notes to Consolidated Financial Statements (Unaudited)
For the Nine Month Period Ended March 31, 2011
(Expressed in United States dollars, unless otherwise stated)
|
3.
|
Recent Accounting Pronouncements: (Continued)
|
ASU 2010-29
In December 2010, the Financial Accounting Standards Board (FASB) issued additional Accounting Standards Update (ASU) 2010-29 on interim and annual disclosure of pro forma financial information related to business combinations. The new guidance clarifies the acquisition date that should be used for reporting the pro forma financial information in which comparative financial statements are presented. It is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010.
ASU 2010-6
In January 2010, the FASB issued guidance regarding fair value: 1) adding new requirements for disclosures about transfers into and out of Levels 1 and 2 measurements and separate disclosures about purchases, sales, issuances and settlements relating to Level 3 measurements, and 2) clarifying existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The guidance also required that disclosures about postretirement benefit plan assets be provided by classes of assets instead of by major categories of assets. The guidance is effective for the first reporting period beginning after December 15, 2009, except for the requirement to provide Level 3 activity, which was effective for fiscal years beginning after December 15, 2010. The Company has adopted this guidance, which did not have any effect on its results of operations, financial position and cash flows.
|
4.
|
Non-Cash Transactions:
|
During the nine month period ended March 31, 2011 and 2010, the Company entered into certain non-cash activities as follows:
|
2011
|
2010
|
|||||||
|
Operating and Financing Activities
|
||||||||
|
From issuance of shares for acquisitions
|
$ | 28,829,763 | $ | - | ||||
|
From issuance of shares for cashless exercise of options
|
$ | 2,341,322 | $ | 636,491 | ||||
|
From issuance of shares for mineral property
|
$ | - | $ | 375,000 | ||||
|
5.
|
Capital Stock:
|
a) Share issuances:
Authorized capital stock consists of 200,000,000 common shares with par value of $0.001 each.
During the nine month period ended March 31, 2011, the Company issued a total of 26,113,035 common shares which are summarized as follows:
|
Common Shares
|
||||||||
|
2011
|
2010
|
|||||||
|
Financing
|
- | 18,400,000 | ||||||
|
Acquisition of mineral properties
|
- | 300,000 | ||||||
|
For exercise of warrants and options
|
4,105,582 | 4,754,835 | ||||||
|
For acquisition of companies
|
22,007,453 | - | ||||||
| 26,113,035 | 23,454,835 | |||||||
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Notes to Consolidated Financial Statements (Unaudited)
For the Nine Month Period Ended March 31, 2011
(Expressed in United States dollars, unless otherwise stated)
|
5.
|
Capital Stock (Continued):
|
During the nine month period ended March 31, 2011, the company issued 22,007,453 shares in exchange for all the outstanding and issued shares of X-Cal Resources Ltd. The Company also issued 1,965,582 common shares pursuant to the exercise of options and 2,140,000 shares pursuant to the exercise of share purchase warrants.
b) Warrants:
The following share purchase warrants were outstanding at March 31, 2011:
|
Exercise price in CAD
|
Exercise price in USD at March 31, 2011
|
Number of warrants
|
Remaining contractual life (years)
|
|||||||||||||
|
Warrants *
|
$ | 1.05 | $ | 1.08 | 7,700,000 | 1.97 | ||||||||||
|
Outstanding and exercisable at March 31, 2011
|
7,700,000 | |||||||||||||||
* Strike price of warrant contract in Canadian dollars. At March 31, 2011 $1.00 USD = $1.0290 CAD.
|
March 31, 2011
|
March 31, 2010
|
|||||||
|
Risk free interest rate
|
.29 | % |
.24 to 1.02%
|
|||||
|
Expected life of warrants
|
1 year
|
1.5 years
|
||||||
|
Expected stock price volatility
|
70.9 | % |
68 to 88
|
% | ||||
|
Expected dividend yield
|
0 | % | 0 | % | ||||
c) Stock options:
On August 23, 2007, the board and stockholders approved the 2007/2008 Stock Incentive & Compensation Plan thereby reserving an additional 4,000,000 common shares for issuance to employees, directors and consultants.
On February 24, 2009 the stockholders approved the 2008/2009 Stock Incentive & Equity Compensation Plan thereby reserving an additional 3,000,000 common shares for future issuance. The stockholders also approved the re-pricing of the exercise price of all outstanding stock options to $0.65 per share.
Stock Based Compensation
The Company uses the Black-Scholes option valuation model to value stock options granted. The Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The model requires management to make estimates which are subjective and may not be representative of actual results. Changes in assumptions can materially affect estimates of fair values. For purposes of the calculation, the following assumptions were used:
|
March 31, 2011
|
March 31, 2010
|
|||||||
|
Risk free interest rate
|
0.43 | % | 0.40%-0.47 | % | ||||
|
Expected dividend yield
|
0 | % | 0 | % | ||||
|
Expected stock price volatility
|
62%-87 | % | 114%-116 | % | ||||
|
Expected life of options
|
1 to 2 years
|
3 years
|
||||||
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Notes to Consolidated Financial Statements (Unaudited)
For the Nine Month Period Ended March 31, 2011
(Expressed in United States dollars, unless otherwise stated)
Changes in the Company’s stock options for the three month period ended March 31, 2011are summarized below:
|
Options
|
Number
|
Weighted Avg. Exercise Price
|
Weighted-Average
Remaining
Contractual Term
|
Aggregate Intrinsic Value
|
||||||||||||
|
Balance, beginning of period
|
4,263,125 | 1.45 | 1.90 | 10,657,119 | ||||||||||||
|
Issued
|
- | - | ||||||||||||||
|
Cancelled / Expired
|
- | - | ||||||||||||||
|
Exercised
|
2,027,005 | 1.12 | ||||||||||||||
|
Outstanding at March 31, 2011
|
2,223,620 | 1.77 | 2.27 | 4,697,055 | ||||||||||||
|
Exercisable at March 31, 2011
|
1,993,621 | 1.65 | 2.07 | 4,077,655 | ||||||||||||
At March 31, 2011, there were 2,223,620 options outstanding. Options outstanding above that have not been vested at period end are 229,999 which have a maximum service term of 1- 4 years. The vesting of these options is dependent on market conditions which have yet to be met.
For the three and nine month period ended March 31, 2011 the Company recognized stock based compensation expense in the amount of $848,104 (2010 - $47,216) and $1,154,415 (2010 - $256,407) respectively.
|
6.
|
Related Party Transactions:
|
During the three and nine month period ended March 31, 2011, directors received payments in the amount of $82,500 (2010: $51,000) and $162,500 (2010 - $51,000).
During the three and nine month period ended March 31, 2011 the Company made payments of $23,228 (2010- $26,097) and $71,729 (2010-$69,094) pursuant to a premises lease agreement to a corporation with a shareholder in common with the Company.
All transactions with related parties are made in the normal course of operations and measured at exchange value.
|
7.
|
Mineral Properties:
|
The Company has capitalized acquisition costs on mineral properties as follows:
|
March 31, 2011
|
June 30, 2010
|
|||||||
|
Temoris
|
4,074,754 | 4,074,754 | ||||||
|
Iris Royalty
|
50,000 | 50,000 | ||||||
|
Morelos
|
100,000 | 100,000 | ||||||
|
San Miguel Project
|
17,855,824 | 17,855,824 | ||||||
|
Andrea
|
20,625 | 20,625 | ||||||
|
Sleeper
|
24,009,179 | − | ||||||
|
Mill Creek
|
2,096,616 | − | ||||||
|
Spring Valley
|
385,429 | − | ||||||
|
Reese River
|
64,061 | − | ||||||
|
Peru
|
10,000 | 10,000 | ||||||
| $ | 48,666,487 | $ | 22,111,203 | |||||
During the nine month period ended December 31, 2010, the Company made a payment of $150,000 towards a previously purchased mineral claim that is part of the Sleeper Gold project. The Company has one payment remaining due December 7, 2011 for $100,000.
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Notes to Consolidated Financial Statements (Unaudited)
For the Nine Month Period Ended March 31, 2011
(Expressed in United States dollars, unless otherwise stated)
|
8.
|
Fixed Assets:
|
|
Net Book Value
|
||||||||||||||||
|
Cost
|
Accumulated Amortization
|
March 31, 2011
|
June 30, 2010
|
|||||||||||||
|
Property and Equipment
|
$ | 795,053 | $ | 301,809 | $ | 493,244 | $ | 519,446 | ||||||||
During the nine month period ended March 31, 2011, total additions to property, plant and equipment were $28,712 (2010- $28,296). During the nine month period ended March 31, 2011 the Company recorded depreciation of $54,915.
|
9.
|
Investments:
|
Mexoro Minerals Ltd.
The Company holds 250,000 shares of common stock of Mexoro Minerals Ltd. It has not recorded these shares in its financial statements because the shares as of the date of this report were restricted from sale and the Company cannot determine if there is any net realizable value until the shares have been liquidated.
Garibaldi Resources Corp.
During the nine month period ended, March 31, 2011, the Company sold 400,000 shares of common stock of Garibaldi Resources Corp for net proceeds of $154,590. It recorded the gain as other income in its Consolidated Statements of Operations.
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Notes to Consolidated Financial Statements (Unaudited)
For the Nine Month Period Ended March 31, 2011
(Expressed in United States dollars, unless otherwise stated)
|
10.
|
Segmented Information:
|
Segmented information has been compiled based on the geographic regions in which the Company has acquired mineral properties and performs exploration activities.
Loss by geographical segment for the nine month period ended March 31, 2011:
|
United States
|
Mexico
|
Total
|
||||||||||
|
Interest income
|
$ | 65,652 | $ | 20,174 | $ | 85,826 | ||||||
|
Other income
|
$ | 178,230 | $ | 2,603 | $ | 180,833 | ||||||
|
Total income
|
$ | 243,882 | $ | 22,777 | $ | 266,659 | ||||||
|
Expenses:
|
||||||||||||
|
Exploration
|
2,683,214 | 3,561,310 | 6,244,524 | |||||||||
|
Professional fees
|
919,805 | - | 919,805 | |||||||||
|
Directors compensation
|
744,677 | - | 744,677 | |||||||||
|
Travel and lodging
|
164,369 | - | 164,369 | |||||||||
|
Corporate communications
|
218,770 | - | 218,770 | |||||||||
|
Consulting fees
|
365,315 | - | 365,315 | |||||||||
|
Office and administration
|
246,407 | 35,800 | 282,207 | |||||||||
|
Interest and service charges
|
7,190 | 2,293 | 9,483 | |||||||||
|
Insurance
|
233,922 | - | 233,922 | |||||||||
|
Amortization
|
13,414 | 41,501 | 54,915 | |||||||||
|
Accretion
|
84,674 | - | 84,674 | |||||||||
|
Acquisition Expenses
|
1,081,075 | - | 1,081,075 | |||||||||
|
Income and other taxes
|
13,015 | - | 13,015 | |||||||||
|
Total Expenses
|
6,775,847 | 3,640,904 | 10,416,751 | |||||||||
|
Net loss before other items
|
$ | 6,531,965 | $ | 3,618,127 | $ | 10,150,092 | ||||||
|
Other item
|
||||||||||||
|
Change in fair value of Equity Conversion Right
|
15,467 | - | 15,467 | |||||||||
|
Change in fair value of warrant liability
|
21,233,585 | - | 21,233,585 | |||||||||
|
Other Income & Expenses
|
900 | - | 900 | |||||||||
|
Net Loss
|
$ | 27,781,917 | $ | 3,618,127 | $ | 31,400,044 | ||||||
|
Other comprehensive loss
|
||||||||||||
|
Foreign Currency Translation Adjustment
|
(492,544 | ) | $ | - | (492,544 | ) | ||||||
|
Total Comprehensive Loss for the Period
|
$ | 27,289,373 | 3,618,127 | $ | 30,907,500 | |||||||
PARAMOUNT GOLD AND SILVER CORP.
(An Exploration Stage Mining Company)
Notes to Consolidated Financial Statements (Unaudited)
For the Nine Month Period Ended March 31, 2011
(Expressed in United States dollars, unless otherwise stated)
|
10.
|
Segmented Information (Continued):
|
Loss by geographical segment for the nine month period ended March 31, 2010: