Edgar Filing: PARAMOUNT GOLD & SILVER CORP.

form10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2013

¨	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)

Delaware	0-51600	20-3690109
(State or Other Jurisdiction	(Commission	(I.R.S. Employer
of Incorporation)	File Number)	Identification No.)

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 þ No o

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.

	Large accelerated filer ¨		Accelerated filer þ
	Non-accelerated filer ¨		Smaller reporting company ¨
	(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No þ

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 o

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: 155,531,068 shares of Common Stock, $.001 par value as of May 3, 2013.

PART I.	FINANCIAL INFORMATION	4

Item 1.	Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25

Item 4.	Controls and Procedures	26

PART II.	OTHER INFORMATION	26

Item 1.	Legal Proceedings	26

Item 1A.	Risk Factors	26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 6.	Exhibits	27

Index

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013 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, the prevailing market price for gold and silver, 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.

Index

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Condensed Consolidated Interim Financial Statements

(Unaudited)

Period ended March 31, 2013 and 2012

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Condensed Consolidated Interim Balance Sheets

As at March 31, 2013 and June 30, 2012

(Expressed in United States dollars, unless otherwise stated)

	As at March 31,			As at June 30,
	2013			2012
Assets

Current Assets
Cash and cash equivalents	$	14,303,077		$	12,500,708
Short-term investments		-			7,500,000
Amounts receivable		1,371,889			1,458,365
Prepaid and deposits		356,602			354,667
Investments- available-for-sale securities (Note 3)		2,640,000			-
Prepaid insurance, current portion (Note 11)		245,215			245,215
Total Current Assets		18,916,783			22,058,955
Non-Current Assets
Mineral properties (Note 8)		51,875,798			50,479,859
Property and equipment (Note 9)		439,396			458,937
Prepaid insurance, non current portion (Note 11)		183,910			367,822
Reclamation bond (Note 11)		2,755,292			2,754,316
Total Non-Current Assets		55,254,396			54,060,934

Total Assets	$	74,171,179		$	76,119,889

Liabilities and Stockholders' Equity

Liabilities

Current Liabilities
Accounts payable and accrued liabilities	$	684,871		$	1,364,419
Warrant liability (Note 4)		-			10,746,787
Total Current Liabilities		684,871			12,111,206

Non-Current Liabilities
Reclamation and environmental obligation (Note 11)		1,259,661			1,198,179
Total Liabilities	$	1,944,532		$	13,309,385

Stockholders' Equity
Capital Stock, par value $0.001 per share; authorized 200,000,000 shares, 155,531,068 issued and outstanding at March 31, 2013 and 147,412,603 shares issued and outstanding at June 30, 2012		155,532			147,413
Additional paid in capital		168,337,535			151,564,888
Contributed surplus		12,872,935			12,892,174
Deficit accumulated during the exploration stage		(104,310,346	)		(101,729,241	)
Accumulated other comprehensive income (loss)		(4,829,009	)		(64,730	)
Total Stockholders' Equity		72,226,647			62,810,504

Total Liabilities and Stockholders' Equity Subsequent Events (Note 12)	$	74,171,179		$	76,119,889

The accompanying notes are an integral part of the condensed consolidated interim financial statements

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Condensed Consolidated Interim Statements of Operations and Comprehensive Loss

For the Three and Nine Month Period Ended March 31, 2013 and 2012

(Expressed in United States dollars, unless otherwise stated)

	For the Three Month Period Ended March 31, 2013			For the Nine Month Period Ended March 31, 2013			For the Three Month Period Ended March 31, 2012		For the Nine Month Period Ended March 31, 2012			Cumulative Since Inception to March 31 2013
Revenue
Interest income	$	8,000		$	40,645		$	6,297	$	23,237		$	1,220,137
Gain on sale of mineral property		-			7,361,233			-		-			7,361,233
Other income		-			61,530			-		73,130			315,493
Total Revenue	$	8,000		$	7,463,408		$	6,297	$	96,367		$	8,896,863

Expenses:
Incorporation costs		-			-			-		-			1,773
Exploration		3,028,463			9,827,297			3,046,194		9,850,449			55,036,710
Professional fees		206,388			867,249			265,380		874,308			9,540,053
Directors compensation		136,924			341,527			948,312		1,172,080			2,652,956
Travel & lodging		79,397			184,441			53,997		162,850			1,671,393
Corporate communications		160,641			267,819			146,822		314,266			4,085,608
Consulting fees		54,525			246,268			116,975		373,605			14,990,965
Office & administration		79,184			348,130			121,706		332,103			3,489,525
Interest & service charges		2,787			9,264			3,062		7,498			129,397
Loss on disposal of fixed assets		-			-			-		-			44,669
Insurance		107,634			285,827			81,409		237,387			1,202,933
Depreciation		15,367			48,498			19,547		58,985			495,231
Accretion		41,936			125,808			38,426		115,278			399,396
Miscellaneous		-			-			-		-			203,097
Financing & listing fees		-			-			-		-			(22,024	)
Acquisition expenses		-			-			-		-			1,505,334
Income and other taxes		-			-			-		-			64,747
Write down of mineral property		-			-			100,000		100,000			1,856,049
Total Expenses		3,913,246			12,552,128			4,941,830		13,598,809			97,347,812
Net Loss before other items	$	3,905,246		$	5,088,720		$	4,935,533	$	13,502,442		$	88,450,949

Other items
Change in fair value of equity conversion right		-			-			-		-			990,236
Change in fair value of warrant liability		(1,504,439	)		(2,507,615	)		228,312		(7,059,807	)		14,702,429
Loss on sale of marketable securities		-			-			162,603		166,732			166,732
Net Loss	$	2,400,807		$	2,581,105		$	5,326,448	$	6,609,367		$	104,310,346

Other comprehensive loss (gain)
Foreign currency translation adjustment		(23,491	)		(35,721	)		59,217		120,343			29,009
Unrealized loss on available-for-sale-investments		1,860,000			4,800,000			-		-			4,800,000
Total Comprehensive Loss for the Period	$	4,237,316		$	7,345,384		$	5,385,665	$	6,729,710		$	109,139,355

Loss (Gain) per Common share
Basic	$	0.02		$	0.02			0.04	$	0.05
Diluted	$	0.02		$	0.02			0.04	$	0.05

Weighted Average Number of Common		149,085,869			149,064,418			136,962,960		136,799,824
Shares Used in Per Share Calculations
Basic
Diluted		149,085,869			149,064,418			136,970,327		136,809,006

The accompanying notes are an integral part of the condensed consolidated interim financial statements

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Condensed Consolidated Interim Statements of Cash Flows

For the Nine Month Period Ended March 31, 2013 and 2012

(Expressed in United States dollars, unless otherwise stated)

	For the Nine Month Period Ended March 31, 2013			For the Nine Month Period Ended March 31, 2012			Cumulative Since Inception to March 31, 2013

Net Gain (Loss)	$	(2,581,105	)	$	(6,609,367	)	$	(104,310,346	)
Adjustment for:
Depreciation		48,498			58,985			495,231
Loss on disposal of assets		-			-			44,669
Stock based compensation		379,735			1,511,822			19,956,858
Accrued interest		-			-			(58,875	)
Write-down of mineral properties		-			100,000			1,856,049
Accretion expense		125,808			115,278			399,396
Change in reclamation		(2,308	)		(4,555	)		55,971
Insurance expense		183,912			183,911			611,360
Other non cash transactions		(7,361,233	)		205,474			(7,156,658	)
Change in fair value of equity conversion right		-			-			990,236
Change in fair value of warrant liability		(2,507,615	)		(7,059,807	)		14,702,429
(Increase) Decrease in accounts receivable		86,476			10,239			(1,288,463	)
(Increase) Decrease in prepaid expenses		(1,935	)		(307,321	)		(356,602	)
Increase (Decrease) in accounts payable		(679,548	)		1,507,237			(1,198,912	)
Cash used in operating activities	$	(12,309,315	)	$	(10,288,104	)	$	(75,257,657	)

Sale (purchase) of marketable securities		-			144,690			144,690
Increase of reclamation bond		(62,994	)		(82,678	)		(145,672	)
Sale (purchase) of GIC receivable		7,500,000			-			58,875
Notes receivable issued		-			-			21,365
Purchase of equity conversion right		-			-			(1,337,700	)
Purchase of mineral properties		(1,460,000	)		(100,000	)		(8,669,870	)
Sale of mineral properties		(14,706	)		-			(14,706	)
Cash acquired on acquisition of X-Cal		-			-			843,101
Purchase of equipment		(28,957	)		(36,218	)		(979,171	)
Cash provided by (used in) investing activities	$	5,933,343		$	(74,206	)	$	(10,079,088	)

Demand notes payable issued		-			-			105,580
Issuance of capital Stock		8,142,620			11,936,020			99,608,199
Cash provided by financing activities	$	8,142,620		$	11,936,020		$	99,713,779

Effect of exchange rate changes on cash		35,721			(120,343	)		(73,957	)

Change in cash during period		1,802,369			1,453,367			14,303,077

Cash at beginning of period		12,500,708			14,689,241			-
Cash at end of period	$	14,303,077		$	16,142,608		$	14,303,077

Supplemental Cash Flow Disclosure
Cash	$	1,696,862		$	13,584,103
Cash Equivalents	$	12,606,215		$	2,558,505

The accompanying notes are an integral part of the condensed consolidated interim financial statements

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Condensed Consolidated Interim Statements of Shareholders’ Equity

From Inception to the Nine Month Period Ended March 31, 2013

(Expressed in United States dollars, unless otherwise stated)

	Shares			Par Value			Additional Paid in Capital		Deficit Accumulated During Exploration Stage			Contributed Surplus			Accumulated Other Comprehensive Income (Loss)			Total Stockholders Equity
Balance at inception	—		$	—		$	—	$	—		$	—		$	—		$	—
Capital issued for financing	121,533,078			121,533			26,105,855		—			—			—			26,227,388
Capital issued for services	5,342,304			5,342			10,160,732		—			—			—			10,166,074
Capital issued from stock options and warrants exercised	384,627			385			249,623					(237,008	)					13,000
Capital issued for mineral properties	17,378,519			17,379			15,822,867		—			—			—			15,840,246
Capital issued on settlement of notes payable	39,691			39			105,541		—			—			—			105,580
Returned to treasury	(61,660,000	)		(61,660	)		61,660		—			—			—			—
Fair value of warrants	—			—			—		—			12,073,546			—			12,073,546
Stock based compensation	—			—			—		—			6,132,972			—			6,132,972
Foreign currency translation	—			—			—		—			—			(287,192	)		(287,192	)
Net Income (loss)	—			—			—		(43,197,264	)		—			—			(43,197,264	)
Balance at June 30, 2009	83,018,219		$	83,018		$	52,506,278	$	(43,197,264	)	$	17,969,510		$	(287,192	)	$	27,074,350
Capital issued for financing	18,400,000			18,400			21,371,043		—			—			—			21,389,443
Capital issued from stock options and warrants exercised	8,351,360			8,351			16,361,552		—			(3,841,264	)		—			12,528,639
Capital issued for mineral properties	300,000			300			374,700		—			—			—			375,000
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	)		—			—			(5,351,958	)
Balance at June 30, 2010	110,069,579		$	110,069		$	90,613,573	$	(61,187,097	)	$	10,825,222		$	(443,675	)	$	39,918,092
Capital issued for financing	19,395			19			23,970		—			—			—			23,989
Capital issued from stock options and warrants exercised	4,153,085			4,154			10,219,361		—			(1,053,645	)		—			9,169,870
Capital issued for acquisition	22,007,453			22,007			28,807,756		—			314,790			—			29,144,553
Stock based compensation	—			—			—		—			1,200,875			—			1,200,875
Foreign currency translation	—			—			—		—			—			492,405			492,405
Unrealized loss on available for sale securities	—			—			—		—			—			(30,945	)		(30,945	)
Net Income (loss)	—			—			—		(28,450,536	)		—			—			(28,450,536	)
Balance at June 30, 2011	136,249,512		$	136,249		$	129,664,660	$	(89,637,633	)	$	11,287,242		$	17,785		$	51,468,303

The accompanying notes are an integral part of the condensed consolidated interim financial statements

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Condensed Consolidated Interim Statements of Shareholders’ Equity

From Inception to the Nine Month Period Ended March 31, 2013

(Expressed in United States dollars, unless otherwise stated)

	Shares		Par Value		Additional Paid in Capital		Deficit Accumulated During Exploration Stage			Contributed Surplus			Accumulated Other Comprehensive Income (Loss)			Total Stockholders Equity
Capital issued for financing		—		—		—		—			—			—			—
Capital issued for financing		10,417,776		10,418		20,335,755		—			—			—			20,346,173
Capital issued from stock options and warrants exercised		345,315		346		600,873		—			(313,792	)		—			287,427
Capital issued for mineral properties		400,000		400		963,600		—			—			—			964,000
Stock based compensation		—		—		—		—			1,918,724			—			1,918,724
Foreign currency translation		—		—		—		—			—			(113,460	)		(113,460	)
Unrealized loss on available for sale securities		—		—		—		—			—			30,945			30,945
Net Income (loss)		—		—		—		(12,091,608	)		—			—			(12,091,608	)
Balance at June 30, 2012		147,412,603	$	147,413	$	151,564,888	$	(101,729,241	)	$	12,892,174		$	(64,730	)	$	62,810,504
Capital issued from stock options and warrants exercised		133,581		134		269,478		—			(217,612	)		—			52,000
Stock based compensation		—		—		—		—			266,039			—			266,039
Foreign currency translation		—		—		—		—			—			27,287			27,287
Net Income (loss)		—		—		—		(5,859,463	)		—			—			(5,859,463	)
Balance at September 30, 2012		147,546,184	$	147,547	$	151,834,366	$	(107,588,704	)	$	12,940,601		$	(37,443	)	$	57,296,367
Stock based compensation		—		—		—		—			23,372			—			23,372
Foreign currency translation		—		—		—		—			—			(15,057	)		(15,057	)
Unrealized loss on available for sale investments		—		—		—		—			—			(2,940,000	)		(2,940,000	)
Net Income (loss)		—		—		—		5,679,165			—			—			5,679,165
Balance at December 31, 2012		147,546,184	$	147,547	$	151,834,366	$	(101,909,539	)	$	12,963,973		$	(2,992,500	)	$	60,043,847
Capital issued from stock options and warrants exercised		7,984,884		7,985		16,503,169		—			(181,362	)		—			16,329,792
Stock based compensation		—		—		—		—			90,324			—			90,324
Foreign currency translation		—		—		—		—			—			23,491			23,491
Unrealized loss on available for sale investments		—		—		—		—			—			(1,860,000	)		(1,860,000	)
Net Income (loss)		—		—		—		(2,400,807	)		—			—			(2,400,807	)
Balance at March 31, 2013		155,531,068	$	155,532	$	168,337,535	$	(104,310,346	)	$	12,872,935		$	(4,829,009	)	$	72,226,647

The accompanying notes are an integral part of the condensed consolidated interim financial statements

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Condensed Consolidated Interim Financial Statements

For the Nine Month Period Ended March 31, 2013

(Expressed in United States dollars, unless otherwise stated)

1.	Principal Accounting Policies:

Paramount Gold and Silver Corp. (the “Company”), incorporated under the General Corporation Law of the State of Delaware, and its wholly-owned subsidiaries are engaged in the acquisition, exploration and development of 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, and X-Cal Resources Ltd. The Company is an exploration stage mining company operating in both the United States and Mexico, and has not yet determined whether its properties contain reserves that are economically recoverable.

Basis of Presentation and Preparation

The accompanying unaudited condensed consolidated interim 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, they do not include all of the disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) 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. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. These interim financial statements should be read in conjunction with the consolidated 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, 2012.

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 employee’s requisite service period (generally the vesting period of the equity grant). New shares of the Company’s Common Stock will be issued for any options exercised or awards granted.

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 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.

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Condensed Consolidated Interim Financial Statements

For the Nine Month Period Ended March 31, 2013

(Expressed in United States dollars, unless otherwise stated)

1.	Principle Accounting Policies (Continued):

Derivatives

The Company accounts for its derivative instruments not indexed to our stock as either assets or liabilities and carries them at fair value. Derivatives that are not defined as hedges must be adjusted to fair value through earnings.

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.”

The Company 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.

Net Income per Share

Basic earnings per share is computed by dividing net loss available to common shareholders by the weighted average number of shares outstanding during each period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

Concentration of Credit Risk and Amounts Receivable

Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash and cash equivalents and amounts receivable. We deposit our cash with financial institutions which we believe have sufficient credit quality to minimize risk of loss.

Impuesto al Valor Agregado taxes (IVA) are recoverable value-added taxes charged by the Mexican government on goods sold and services rendered at a rate of 16%. Under certain circumstances, these taxes are recoverable by filing a tax return and as determined by the Mexican taxing authority. Each period, receivables are reviewed for collectability. When a receivable is determined to not be collectable we allow for the receivable until we are either assured of collection or assured that a write-off is necessary. Allowances in association with our receivable from IVA from our Mexico subsidiaries is based on our determination that the Mexican government may not allow the complete refund of these taxes. The Company believes that all amounts recorded as a receivable from the Mexican government will be recovered.

Investments- Available-for-Sale Securities

Unrealized gains and temporary losses on investments classified as available for sale are included within accumulated other comprehensive income, net of any related tax effect. Upon realization, such amounts are reclassified from accumulated other comprehensive income to other income, net. Realized gains and losses and other than temporary impairments, if any, are reflected in the statements of operations as other income, net. The Company does not recognize changes in the fair value of its investments in income unless a decline in value is considered other than temporary.

Foreign Currency

The parent company’s functional currency is the United States dollar. The functional currencies of the Company’s wholly-owned subsidiaries are the U.S. Dollar and the Canadian Dollar. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the consolidated balance sheet date. Foreign currency transaction gains and losses are included in the statement of operations and comprehensive loss. The aggregate foreign transaction gain for the nine month period ended March 31, 2013 is $215,778 (2012- $10,217 aggregate foreign transaction loss).

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Condensed Consolidated Interim Financial Statements

For the Nine Month Period Ended March 31, 2013

(Expressed in United States dollars, unless otherwise stated)

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.

2.	Recent Accounting Pronouncements:

ASU 2012-03

In August 2012, the FASB issued ASU 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the

issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.

ii)

ASU 2012-04

In October 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.

iii)

ASU 2013-02

In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income. The guidance in ASU 2013-02 is intended to provide guidance in the reclassification of Accumulated Other Comprehensive Income to net income. The amendments in this ASU are effective for fiscal years beginning after December 15, 2012. Early adoption is permitted if an entity’s financial statements for the most recent annual or interim period have yet been issued. The adoption of ASU 2013-02 is not expected to have a material impact on our financial position or results of operations.

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Condensed Consolidated Interim Financial Statements

For the Nine Month Period Ended March 31, 2013

(Expressed in United States dollars, unless otherwise stated)

3.	Marketable Securities and Investments:

The investments reflected in the table below include certain equity securities of entities involved in the exploration of precious metals. The following table summarizes the Company’s available-for sale securities on hand as of March 31, 2013:

	Investments in available-securities-for-sale

	Cost		Gross Unrealized Losses		Gross Realized Gains		Fair Value
Equity Securities	$	7,440,000	$	4,800,000		-	$	2,640,000

During the nine month period ended March 31, 2013, the Company recorded an unrealized loss on available-for-sale securities of $4,800,000. This loss is recorded as other comprehensive loss on the consolidated statement of shareholders’ equity.

4.	Fair Value Measurements:

Fair value is 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. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization with the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

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).

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.

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Condensed Consolidated Interim Financial Statements

For the Nine Month Period Ended March 31, 2013

(Expressed in United States dollars, unless otherwise stated)

4.	Fair Value Measurements (Continued):

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, 2013						June 30, 2012
Assets	Total		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	14,303,077		14,303,077		-		-		12,500,708
Short-term investments		-		-		-		-		7,500,000
Investments- available for sale		2,640,000		2,640,000		-		-		-

Liabilities
Warrant liability	$	-		-		-		-		10,746,787

The Company’s cash and cash equivalents, available for sale investments and short-term investments are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The cash and 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 available for sale investments that are valued based on quoted market prices in active markets are comprised of publicly traded common shares.

The changes in fair value of the warrants during the nine month period ended March 31, 2013 were as follows:

Balance at June30, 2012	$	10,746,787
Issuance of warrants and options		-
Change in fair value recorded in earnings		(2,507,615	)
Transferred to equity upon exercise		(8,239,172	)
Balance at March 31, 2013	$	-

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Condensed Consolidated Interim Financial Statements

For the Nine Month Period Ended March 31, 2013

(Expressed in United States dollars, unless otherwise stated)

5.	Non-Cash Transactions:

During the nine month period ended March 31, 2013 and 2012, the Company entered into certain non-cash activities as follows:

	2013		2012
Operating and Financing Activities
From issuance of shares for cashless exercise of options	$	113,975	$	-
From issuance of shares for purchase of mineral properties	$	-	$	964,000
Receipt of shares for sale of mineral properties	$	7,361,233	$	-

6.	Capital Stock:

a) Share issuances:

Authorized capital stock consists of 200,000,000 common shares with par value of $0.001 per share. At March 31, 2013 there were 155,531,068 shares issued and outstanding and 147,412,603 shares issued and outstanding at June 30, 2012.

During the nine month period ended March 31, 2013 and 2012, the Company issued the following shares:

	Common Shares
	2013		2012
Financing		-		10,417,776
Acquisition of mineral properties		-		400,000
For exercise of warrants and options		8,118,465		237,500
		8,118,465		11,055,276

For the nine month period ended March 31, 2013, the Company issued 418,465 shares for the exercise of 498,120 options and received cash in the amount of $272,680. Also during the nine month period ended March 31, 2013, the Company issued 7,700,000 shares for the exercise of warrants and received cash in the amount of $7,869,939.

b) 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.

On December 2, 2011, the stockholders approved the 2011/2012 Stock Incentive & Equity Compensation Plan thereby reserving an additional 4,000,000 common shares for future issuance to employees, directors and consultants.

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Condensed Consolidated Interim Financial Statements

For the Nine Month Period Ended March 31, 2013

(Expressed in United States dollars, unless otherwise stated)

6.	Capital Stock (Continued):

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 for the three month periods ended March 31, 2013 and 2012:

	March 31, 2013			March 31, 2012
WA Risk free interest rate		0.18	%		0.323	%
WA Expected dividend yield		0	%		0	%
WA Expected stock price volatility		61	%		82	%
WA Expected life of options	2 years			1 to 4 years

Changes in the Company’s stock options for the nine-month period ended March 31, 2013 are summarized below:

Options	Number			Weighted Avg. Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at June 30, 2012		3,129,120		$	2.16		2.41	$	1,166,543
Issued		132,500			2.87
Cancelled / Expired		(125,000	)		2.78
Exercised		(498,120	)		0.87			$	398,975
Outstanding at March 31, 2013		2,638,500		$	2.41		2.00	$	264,250
Exercisable at March 31, 2013		2,448,501		$	2.38		2.00	$	264,250

At March 31, 2013, there were 2,638,500 options outstanding. Options outstanding above that have not been vested at period end are 189,999 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. As of March 31, 2013, there was $185,452 (2012 - $701,164) of unrecognized compensation cost related to non-vested stock options to be recognized over a weighted average period of 1.48 years.

A summary of the non-vested options as of June 30, 2012 and changes during the nine month period ended March 31, 2013 is as follows:

Non-vested Options	Number			Weighted Avg. Grant-Date Fair Value
Non-vested at June 30, 2012		704,999		$	1.84
Issued		132,500			0.65
Vested		(647,500	)		1.52
Forfeited		-			-
Non-vested at March 31, 2013		189,999		$	1.84

For the three and nine month period ended March 31, 2013, the Company recognized a stock based compensation expense in the amount of $90,324 and $379,735 respectively (2012 - $1,125,068 and $1,511,822) .

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Condensed Consolidated Interim Financial Statements

For the Nine Month Period Ended March 31, 2013

(Expressed in United States dollars, unless otherwise stated)

7.	Related Party Transactions:

During the three month period ended March 31, 2013, the Company accrued director fees in the amount of $54,000 (2012 – $45,000) for their services as directors or members of committees of the Company’s Board. During the three month period ended March 31, 2013, the Company also recorded a non-cash transaction to recognize stock based compensation for directors in the amount of $79,251 (2012 -$903,312)

During the three month period ended March 31, 2013 the Company made payments of $23,233 (2012 - $24,041) pursuant to a premises lease agreement to a corporation in which an officer is a shareholder.

All transactions with related parties are made in the normal course of operations and measured at exchange value.

8.	Mineral Properties:

The Company has capitalized acquisition costs on mineral properties as follows:

	March 31, 2013		June 30, 2012
Iris Royalty		50,000		50,000
San Miguel Project		23,452,263		21,992,263
Sleeper		25,891,490		25,891,490
Mill Creek		2,096,616		2,096,616
Spring Valley		385,429		385,429
Reese River		-		64,061
	$	51,875,798	$	50,479,859

For the three month period ended September 30, 2012, the Company exercised two options to acquire 11 mining concessions located in Mexico and related to its San Miguel project. In consideration for the mining concessions, the Company has made cash payments totaling $1,693,000. Included in the payment is a value added tax amount of $233,000 due from the Mexican Government.

For the three month period ended December 31, 2012, the Company sold its Reese River mineral claims with a recorded book value of $64,061 to Valor Gold Corp. for $21,000 in cash and 6 million restricted shares of Valor Gold Corp. with a market value of $7,440,000. A gain on disposal of mineral property, net of transaction costs, of $7,361,233 has been recorded on the statement of operations.

9.	Property and Equipment:

							Net Book Value
	Cost			Accumulated Amortization			March 31, 2013			June 30,2012

Property and Equipment		$	885,242		$	445,846		$	439,396		$	458,937

During the nine month period ended March 31, 2013, net additions to property, and equipment were $28,957 (2012- $36,218). During the nine month period ended March 31, 2013 the Company recorded depreciation of $48,498 (2012-$58,985).

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Condensed Consolidated Interim Financial Statements

For the Nine Month Period Ended March 31, 2013

(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 (Gain) for the period by geographical segment for the nine month period ended March 31, 2013:

	United States			Mexico		Total
Interest income	$	33,963		$	6,682	$	40,645
Gain on sale of mineral property		7,361,233			-		7,361,233
Other income		57,500			4,030		61,530
Total income	$	7,452,696		$	10,712	$	7,463,408

Expenses:
Exploration		5,313,666			4,513,631		9,827,297
Professional fees		867,249			-		867,249
Directors compensation		341,527			-		341,527
Travel and lodging		184,441			-		184,441
Corporate communications		267,819			-		267,819
Consulting fees		246,268			-		246,268
Office and administration		274,102			74,028		348,130
Interest and service charges		7,063			2,201		9,264
Insurance		285,827			-		285,827
Amortization		25,115			23,383		48,498
Accretion		125,808			-		125,808
Total Expenses		7,938,885			4,613,243		12,552,128
Net loss before other items	$	486,189		$	4,602,531	$	5,088,720

Other items
Change in fair value of warrant liability		(2,507,615	)		-		(2,507,615	)
Net Loss (Gain)	$	(2,021,426	)	$	4,602,531	$	2,581,105

Other comprehensive loss (gain)
Foreign currency translation adjustment		(35,721	)		-		(35,721	)
Unrealized loss on available for sale investments		4,800,000			-		4,800,000
Total Comprehensive Loss for the Period	$	2,742,853		$	4,602,531	$	7,345,384

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Condensed Consolidated Interim Financial Statements

For the Nine Month Period Ended March 31, 2013

(Expressed in United States dollars, unless otherwise stated)

10.	Segmented Information (Continued):

Loss for the period by geographical segment for nine month period ended March 31, 2012:

	United States			Mexico		Total
Interest income	$	17,046		$	6,191	$	23,237
Other income		73,130			-		73,130
Total income	$	90,176		$	6,191	$	96,367

Expenses:
Exploration		3,344,404			6,506,045		9,850,449
Professional fees		874,308			-		874,308
Directors compensation		1,172,080			-		1,172,080
Travel and lodging		162,850			-		162,850
Corporate communications		314,266			-		314,266
Consulting fees		373,605			-		373,605
Office and administration		289,139			42,964		332,103
Interest and service charges		5,097			2,401		7,498
Insurance		237,387			-		237,387
Amortization		30,984			28,001		58,985
Accretion		115,278			-		115,278
Write-down of mineral properties		100,000			-		100,000
Total Expenses		7,019,398			6,579,411		13,598,809
Net loss before other items	$	6,929,222		$	6,573,220	$	13,502,442

Other items
Change in fair value of warrant liability		(7,059,807	)		-		(7,059,807	)
Loss on sale of marketable securities		166,732			-		166,732
Net Loss	$	36,147		$	6,573,220	$	6,609,367

Other comprehensive loss
Foreign currency translation adjustment		120,343			-		120,343
Total Comprehensive Loss for the Period	$	156,490		$	6,573,220	$	6,729,710

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Condensed Consolidated Interim Financial Statements

For the Nine Month Period Ended March 31, 2013

(Expressed in United States dollars, unless otherwise stated)

10.	Segmented Information (Continued):

Assets by geographical segment:

	United States		Mexico		Total
March 31, 2013
Mineral properties	$	28,273,535	$	23,602,263	$	51,875,798
Property and equipment		74,571		364,825		439,396

June 30, 2012
Mineral properties		28,337,596	$	22,142,263		50,479,859
Property and equipment	$	99,686		359,251	$	458,937

11.	Reclamation and Environmental:

The Company holds an insurance policy related to its Sleeper Gold Project that covers reclamation costs in the event the Company defaults on payments of its reclamation costs up to an aggregate of $25 million. The insurance premium is being amortized over ten years and the current and non-current prepaid insurance balance at March 31, 2013 is $429,125 ($613,037 - June 30, 2012).

As a part of the policy, the Company has funds in a commutation account which is used to reimburse reclamation costs and indemnity claims. For the nine month period ended March 31, 2013, The Bureau of Land Management of Nevada issued an exploration permit to the Company and as a result, the Company was required to post a bond to cover any future reclamation costs for the exploration activities performed by the Company associated with the permit in the amount of $62,994. The bond amount was added to the commutation account and at March 31, 2013 the balance of the account was $2,755,292 ($2,754,316 – June 30, 2012).

Reclamation and environmental costs are based principally on legal requirements. Management estimates costs associated with reclamation of mineral properties. On an ongoing basis the Company evaluates its estimates and assumptions; however, actual amounts could differ from those based on estimates and assumptions. A liability has been established equal to the present value of the obligation, and the carrying amount of the mineral properties has been increased by the same amount.

Changes to the Company’s asset retirement obligations for the nine month period ended March 31, 2013 are as follows:

Balance at beginning of period	$	1,198,179
Accretion expense		125,808
Payments		(64,326	)
Balance at end of period	$	1,259,661

12.	Subsequent Events:

On May 3, 2013, the Company issued 1,430,000 stock options to directors, officers, employees and consultants vesting immediately with a three year term and exercise price of $1.70 per share.

Index

Item 2.

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

The following information should be read in conjunction with (i) our accompanying interim consolidated financial statements and related notes (included elsewhere in this report) and (ii) our consolidated financial statements, related notes and management’s discussion and analysis of financial condition and results of operations included in our June 30, 2012 annual report filed on Form 10-K with the Securities and Exchange Commission on September 11, 2012.

We are an exploratory stage mining company that currently has mining concessions in Mexico and mining claims in Nevada, USA. We have no proven reserves at our San Miguel project in Mexico or at our Sleeper Gold project in Nevada but are currently exploring both projects. The following discussion updates our planned operations for this fiscal year. It also analyzes our financial condition and summarizes the results of operations for the three and nine month period ended March 31, 2013 and compares those results to the three and nine month period ended March 31, 2012.

Plan of Operation:

Exploration

The Company has set its exploration budget to $7.6 million for the 2013 calendar year. We plan to allocate $4.0 million to our Sleeper Gold Project in Nevada and $3.6 million to our San Miguel Project in Mexico.

Our work at both the San Miguel Project and Sleeper Gold Project is consistent with Paramount’s strategy of expanding and upgrading known, large-scale precious metal occurrences in established mining camps, defining their economic potential and then partnering them with nearby producers.

Nevada

Our plan in 2013 is to continue focusing on our Sleeper Gold Project. Our budget for this period is approximately $4.0 million. The budget activities will include drilling, modeling and metallurgical testing. The drill plans include drilling to obtain metallurgical samples, infill drilling to increase confidence in mineralized material and exploration drilling in the south Sleeper zone.

We plan to update our mineralized material model with drill hole data that was not included. This will allow us, along with a newly created geo-metallurgical model, to update our Preliminary Economic Assessment (the “PEA”) which we completed in 2012. An updated material estimate and PEA is expected by the end of 2013.

During the three month period ended December 31, 2012, the Company sold its Reese River property located in Lander County Nevada to Valor Gold Corp. for $21,000 cash and 6,000,000 shares in Valor Gold Corp.’s common equity.

Mexico

At our San Miguel Project we continue to conduct exploration drilling by testing new areas or expanding on known mineralized zones with infill drilling. The plan is to maintain one core drill rig throughout the year. Over fifty drill holes have been completed since our last material estimate. The Company plans to update this estimate in the second half of 2013. The Company also intends to evaluate silver metallurgical recovery alternatives for the Don Ese Zone. The exploration budget for the 2013 calendar year has been set to $3.6 million.

Index

During the nine-month period ended March 31, 2013, the Company exercised two options to acquire 11 mining concessions located in Mexico and related to its San Miguel project. In consideration for the mining concessions, the Company made cash payments totaling $1,693,000. Included in the payment is a value added tax amount of $233,000 due from the Mexican Government.

Liquidity and Capital Resources

At March 31, 2013, we had cash and cash equivalents and short-term investments balances of $14,303,077 compared to $20,000,708 as at June 30, 2012. The decrease of $5,697,631 was the result of the funding of our exploration programs, corporate overhead and option payments on mineral concessions.

At March 31, 2013, we had working capital in the amount of $18,231,912. We anticipate our cash expenditures to fund exploration programs and general corporate expenses to be approximately $850,000 per month for the remainder of 2013. Anticipated cash outlays will be funded by our available cash reserves.

During the nine month period ended March 31, 2013, the Company received $272,680 pursuant to the exercise of stock options.

During the three month period ended March 31, 2013, the Company’s largest shareholder FCMI Financial Corporation exercised 7,700,000 “in-the-money” stock purchase warrants for total proceeds to the Company of $7,869,939.

At March 31, 2013, the amounts receivable amount of $1,371,889 primarily consisted of value added tax due from the Mexican government

Historically, we have funded our exploration and development activities through equity financing arrangements. We continue to assess our needs for additional capital to ensure sufficient financial resources are available to fund our exploration and working capital needs. We believe that our existing cash resources will be sufficient to meet our needs for the next twelve months. If, however, we are unable to obtain additional capital or financing, our exploration and development activities will be significantly affected.

Comparison of Operating Results for the nine month period ended March 31, 2013 as to the nine month period ended March 31, 2012

Net Loss

Our net loss before other items for the nine month period ended March 31, 2013 was $5,088,720 compared to a loss of $13,502,442 in the comparable period in the prior year. The decrease in net loss of $8,413,722 or 62% was due to the gain on sale of the Reese River property recorded in the period. We will continue to incur losses for the foreseeable future as we continue with our planned explorations programs at both projects.

Expenses

Our level of exploration expenditures for the nine month period ended March 31, 2013 has remained consistent from the prior year period as we continue to advance both the Sleeper Gold and the San Miguel Projects.

Index

The following table summarizes our drilling activities at both projects for the nine month period ended March 31, 2013 and 2012:

Nine month period ended March 31,

2013

Nine month period ended March 31,

2012