The accompanying notes are an integral part of these condensed consolidated interim financial statements.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Notes to Condensed
Consolidated Interim Financial Statements
Note 1. Description of Business and Summary of Significant Accounting Policies
Paramount Gold Nevada Corp. (the “Company” or “Paramount”), incorporated under the General Corporation Law of the State of Nevada, and its wholly-owned subsidiaries are engaged in the acquisition, exploration and development of precious metal properties. The Company’s wholly owned subsidiaries include New Sleeper Gold LLC and Sleeper Mining Company, LLC. The Company is in the process of exploring its mineral properties in Nevada, United States. The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to advance its projects and to date has not determined whether these properties contain reserves that are economically recoverable.
Spin-Off from Paramount Gold and Silver Corp.
Paramount Gold and Silver Corp. (“PGSC”) owned, prior to the separation (defined below), 100% of the issued and outstanding shares of the Company. On April 17, 2015, we entered into the previously disclosed separation and distribution agreement (the “Separation Agreement”) with PGSC, to effect the separation (the “Separation”) of the Company from PGSC, and to provide for the allocation between the Company and PGSC of the Company’s and PGSC’s assets, liabilities and obligations attributable to periods prior to, at and after the Separation.
We filed a registration statement on Form S-1 in connection with the distribution (the “Distribution”) by PGSC to its stockholders of all the outstanding shares of common stock of the Company, par value $0.01 per share. The registration statement was declared effective by the Securities and Exchange Commission (“SEC”) on April 9, 2015. On April 6, 2015, the Company filed a Form 8-A with the SEC to register its shares of common stock under Section 12(b) of the Securities Exchange Act of 1934, as amended. The distribution, which effected a spin-off of the Company from PGSC, was made on April 17, 2015, to PGSC stockholders of record on April 14, 2015. On the distribution date, stockholders of PGSC received one share of Company common stock for every twenty shares of PGSC common stock held. Up to and including the distribution date, PGSC common stock traded on the “regular-way” market; that is, with an entitlement to shares of Company common stock distributed pursuant to the distribution. As a result of the distribution, the Company is now a publicly traded company independent from PGSC. On April 20, 2015, the Company’s shares of common stock commenced trading on the NYSE MKT LLC under the symbol “PZG”. An aggregate of 8,101,371 shares of Company common stock were issued in the Distribution.
Basis of Presentation and Preparation
The unaudited condensed consolidated interim financial statements are prepared by management in accordance with accounting principles for interim financial information 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 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 future years.
The condensed consolidated interim financial statements have been prepared in accordance with U.S. GAAP and 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. The condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and related footnotes for the year ended June 30, 2015.
Marketable Securities
The Company classifies its marketable securities as available-for-sale securities. The securities are measured at fair market value in the financial statements with 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 or expenses. 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.
Use of Estimates
The preparation of these consolidated financial statements in conformity with U.S. GAAP 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 condensed consolidated interim financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
6
PARAMOUNT GOLD NEVADA CORP.
Notes to Condensed Consolidated Interim Financial Statements — Continued
Significant estimates made by
management in the
condensed consolidated interim financial statements include the adequacy of the Company’s asset retirement obligations, valuation of deferred tax asset,
and valuation of mineral properties
.
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. The carrying amount of these securities approximates fair value because of the short-term maturity of these instruments.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash and cash equivalents and amounts receivable. The Company maintains cash in accounts which may, at times, exceed federally insured limits. At March 31, 2016, the balances of approximately $7 million were in excess of federally insured limits. We deposit our cash with financial institutions which we believe have sufficient credit quality to minimize the risk of loss.
Allocations
PGSC, prior to the Separation, provided administrative support to the Company for executive management, information systems and certain accounting, legal and other administrative functions. The costs of these services were allocated to the Company based primarily on a percentage of the Company’s exploration costs as compared to PGSC’s consolidated exploration costs. The allocations may not reflect the expense the Company would have incurred as an independent, publicly traded company for the periods presented.
The consolidated financial statements for the year ended June 30, 2015 and condensed consolidated interim financial statements for the period ended March 31 2016, also reflect interest expense imputed by the Company on the non-interest bearing loans from PGSC.
Management believes that its allocations are reasonable and based on a systematic and rational method; however, they are not necessarily indicative of the actual financial results of the Company, including such expenses that would have been incurred by the Company had it been operating as a separate, stand-alone entity for the periods presented. As a stand-alone entity, the Company expects to incur expenses that may not be comparable in future periods to what is presented for the historical periods. Consequently, the financial information herein may not reflect the financial position, results of operations and cash flows of the Company in the future or if the Company had been an independent stand-alone entity during all of the periods presented. The comparative condensed consolidated interim financial statements include all adjustments necessary for a fair presentation of the Company’s results of operations.
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.
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). Shares of the Company’s common stock will be issued for any options exercised.
7
PARAMOUNT GOLD NEVADA CORP.
Notes to Condensed Consolidated Interim Financial Statements — Continued
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.
Property and Equipment
Equipment is recorded at cost less accumulated depreciation. All equipment is depreciated over its estimated useful life at the following annual rates:
Computer equipment
|
|
30% declining balance
|
|
Equipment
|
|
20% declining balance
|
|
Asset Retirement Obligations
The Company follows the provisions of ASC 440, “Asset Retirement and Environmental Obligations”, which establishes the standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment, or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets. The Company’s asset retirement obligations are further described in Note 10.
Loss per Common Share
Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of shares outstanding during each period. Diluted loss 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. Basic and diluted loss per share were adjusted retroactively for all periods presented to reflect the Distribution that occurred on April 17, 2015.
For the three and nine months periods ended March 31, 2016 and 2015, the shares of common stock equivalents related to outstanding stock options have not been included in the diluted per share calculation as they are anti-dilutive as the Company has recorded a net loss from continuing operations for each period.
Revenue Recognition
Revenue is recognized when persuasive evidence that an agreement exists, the risks and rewards of ownership pass to the purchaser, the selling price is fixed and determinable; or collection is reasonably assured. The passing of title to the purchaser is based on the terms of the purchase and sale agreement.
Note 2. Recent Accounting Guidance
In January 2016, the FASB issued ASU 2016-01, Financial Instruments. ASU 2016-01 make targeted improvements to generally accepted accounting principles as follows:
1. Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to
8
PARAMOUNT GOLD NEVADA CORP.
Notes to Condensed Consolidated Interim Financial Statements — Continued
measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a s
imilar investment of the same issuer.
2. Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value.
3. Eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities.
4. Eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.
5. Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.
6. Require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.
7. Require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.
8. Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets
ASU 2016-01 is effective for annual periods beginning after December 15, 2017. The adoption of ASU 2016-01 is not expected to have a material impact on the Company’s condensed consolidated interim financial statements.
Note 3. Marketable Securities and Investments
The following table summarizes the Company’s available-for sale securities on hand as of March 31, 2016 and June 30, 2015:
|
|
Cost
Basis
|
|
|
Impairment Charge
|
|
|
Adjusted
Cost
|
|
|
Gross
Unrealized
Losses
|
|
|
Gross
Unrealized
Gains
|
|
|
Fair
Value
|
|
Marketable securities at March 31, 2016
|
|
$
|
69,850
|
|
|
|
69,850
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
-
|
|
Marketable securities at June 30, 2015
|
|
$
|
69,850
|
|
|
|
—
|
|
|
|
69,850
|
|
|
|
55,193
|
|
|
|
—
|
|
|
$
|
14,657
|
|
The marketable securities reflected in the table above includes stock purchase warrants of a single entity involved in the exploration of precious metals. Each stock purchase warrant is exercisable for a common share of the entity. The Company performs a quarterly assessment on its marketable securities with unrealized losses to determine if the security is other than temporarily impaired. Based on an evaluation by management, the Company determined that the severity of the impairment (approximately 95 percent less than cost), that the unrealized losses are other than temporary, as a result, an other than temporary impairment charge of $69,850 was recorded for the nine month period ended March 31, 2016 for securities with a cost basis of $69,850.
9
PARAMOUNT GOLD NEVADA CORP.
Notes to Condensed Consolidated Interim Financial Statements — Continued
Note 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.
|
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, 2016
|
|
|
June 30, 2015
|
|
Assets
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Cash and cash equivalents
|
|
$
|
7,070,985
|
|
|
|
7,070,985
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
9,282,534
|
|
Marketable Securities
|
|
$
|
-
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
14,657
|
|
The Company’s cash and cash equivalents 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.
.
Note 5. Non-Cash Transactions
During the nine month period ended March 31, 2016 and 2015, the Company did not enter into any non-cash activities.
Note 6. Capital Stock
Authorized Capital
Authorized capital stock consists of 50,000,000 common shares with par value of $0.01 per common share (June 31, 2015 – 50,000,000 common shares with par value $0.01 per common share). At March 31, 2016 there were 8,518,791 common shares issued and outstanding (June 30, 2015- 8,518,791 common shares).
On February 19, 2015, the Company amended its articles of incorporation to replace its authorized capital of 25,000 common shares with no par value (“Old Common Shares”) with 50,000,000 common shares with par value of $0.01 per common share (“New Common Shares”). In connection with the amendment PGSC returned 1,000 Old Common Shares to treasury for cancellation in exchange for 8,101,371 New Common Shares.
10
PARAMOUNT GOLD NEVADA CORP.
Notes to Condensed Consolidated Interim Financial Statements — Continued
Stock Options and Stock Based Compensation
Paramount’s 2015 Stock Incentive and Compensation Plan, which is shareholder-approved, permits the grant of share options and shares to its employees for up to 1.278 million shares of common stock. Option awards are generally granted with an exercise price equal to the market price of Paramount’s stock at the date of grant and have contractual lives of 5 years. To better align the interests of its key executives and employees with those of its shareholders a significant portion of those share option awards will vest contingent upon meeting certain stock price appreciation performance goals. Option and share awards provide for accelerated vesting if there is a change in control (as defined in the employee share option plan).
The Company did not grant stock options for the nine month period ending March 31, 2016.
A summary of option activity under the Stock Incentive and Compensation Plan as of March 31, 2016, and changes during the three month period ended is presented below.
Options
|
|
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted-
Average Remaining
Contractual Term
|
|
|
Aggregate
Intrinsic
Value
($)
|
|
Outstanding at July 1, 2015
|
|
|
995,000
|
|
|
$
|
1.53
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2016
|
|
|
995,000
|
|
|
$
|
1.53
|
|
|
|
4.25
|
|
|
|
—
|
|
Exercisable at March 31, 2016
|
|
|
331,670
|
|
|
$
|
1.53
|
|
|
|
4.25
|
|
|
|
—
|
|
A summary of the status of Paramount’s non-vested shares as of July 1, 2015 and changes during the nine month period ended March 31, 2016 is presented below.
Non-vested Options
|
|
Shares
|
|
|
Weighted-
Average
Grant-
Date Fair Value
|
|
Non-vested at July 1, 2015
|
|
|
663,330
|
|
|
$
|
1.13
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
Vested
|
|
|
—
|
|
|
|
—
|
|
Forfeited
|
|
|
—
|
|
|
|
—
|
|
Non-vested at March 31, 2016
|
|
|
663,330
|
|
|
$
|
1.13
|
|
As of March 31, 2016, there was $320,241 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the employee share option plan. That cost is expected to be recognized over a weighted-average period of 1.1 years. The total fair value of shares vested during the nine month period ended March 31, 2016 and 2015, was $nil and $nil, respectively.
11
PARAMOUNT GOLD NEVADA CORP.
Notes to Condensed Consolidated Interim Financial Statements — Continued
Note 7. Related Party Transactions
The Company’s expenses includes allocations from PGSC of costs associated with administrative support functions which included executive management, information systems, finance, legal, accounting and certain other administrative functions and stock-based compensation. Allocated stock-based compensation includes equity awards granted to employees of the Company as well as allocated stock-based compensation expense associated with PGSC employees that provided administrative support to the Company. For the three and nine month period ended March 31, 2016 and 2015, the Company’s allocated expenses from PGSC were as follows:
|
|
Three Month
Period Ended
|
|
|
Nine Month
Period Ended
|
|
|
Three Month
Period Ended
|
|
|
Nine Month
Period Ended
|
|
|
|
2016
|
|
|
2016
|
|
|
2015
|
|
|
2015
|
|
Allocated expenses included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,700
|
|
|
$
|
11,100
|
|
Salaries and Professional fees
|
|
|
—
|
|
|
|
—
|
|
|
|
149,626
|
|
|
|
197,738
|
|
Directors compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
14,067
|
|
|
|
31,060
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
167,393
|
|
|
$
|
239,898
|
|
As discussed in Note 1, the Company believes the assumptions and methodologies underlying the allocation of administrative expenses and stock-based compensation are reasonable. However, such expenses may not be indicative of the actual expenses that would have been incurred by the Company as a stand-alone company. As such, the financial information herein may not necessarily reflect the consolidated financial position, results of operation, and cash flows of the Company in the future or if the Company had been a stand-alone entity during the comparative presented period ended March 31, 2015.
During the three and nine month period ended March 31, 2016, directors were paid or accrued $17,329 and $63,681 respectively (2015- $14,067 and $27,848) for their services as directors of the Company’s Board. During the three and nine month period ended March 31, 2016, the Company also recorded stock based compensation for directors for previously awarded stock options that have not vested in the amount of $31,206 and $94,302 respectively (2015 - $ - and $3,212 ).
All transactions with related parties are made in the normal course of operations and are measured at exchange value.
Note 8. Mineral Properties
The Company has capitalized acquisition costs on mineral properties as follows:
|
|
March
31, 2016
|
|
|
June 30, 2015
|
|
Sleeper
|
|
$
|
25,554,090
|
|
|
$
|
25,554,090
|
|
Mill Creek
|
|
|
2,096,616
|
|
|
|
2,096,616
|
|
Spring Valley
|
|
|
385,429
|
|
|
|
385,429
|
|
|
|
$
|
28,036,135
|
|
|
$
|
28,036,135
|
|
Sleeper:
Sleeper is located in northern Nevada approximately 26 miles northwest of the town of Winnemucca. The Sleeper Gold Mine consists of 2,322 unpatented mining claims totaling approximately 72.5 square miles.
Mill Creek:
The Mill Creek property consists of 36 unpatented lode mining claims totaling 720 acres south of Battle Mountain Nevada.
Spring Valley:
The Spring Valley property consists of 38 unpatented lode mining claims totaling approximately 760 acres located in Pershing County, Nevada.
12
PARAMOUNT GOLD NEVADA CORP.
Notes to Condensed Consolidated Interim Financial Statements — Continued
Note 9.
Property and Equipment:
At March 31, 2016, and June 30, 2015, property and equipment consisted of the following:
|
|
March 31,2016
|
|
|
June 30, 2015
|
|
Computer equipment
|
|
$
|
16,365
|
|
|
$
|
8,000
|
|
Equipment
|
|
|
1,329
|
|
|
|
1,329
|
|
Subtotal
|
|
|
17,694
|
|
|
|
9,329
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
(4,305
|
)
|
|
|
(1,333
|
)
|
Total
|
|
$
|
13,389
|
|
|
$
|
7,996
|
|
During the nine month period ended March 31, 2016, net additions to property, and equipment were $8,365 (2015- $—). During the nine month period ended March 31, 2016 the Company recorded depreciation of $2,972 (2015-$—).
Note 10. 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 unamortized insurance premium is being amortized to December 31, 2016 and the current and non-current prepaid insurance balance at March 31, 2016 is $36,778 (June 30, 2015 - $73,561).
As a part of its insurance policy, the Company has funds in a commutation account which is used to reimburse reclamation costs and indemnity claims. The balance of the commutation account at March 31, 2016 is $2,386,336 (June 30, 2015 - $2,499,396).
Reclamation and environmental costs are based principally on legal requirements. Management estimates costs associated with reclamation of mineral properties and properties under mine closure. On an ongoing basis the Company evaluates its estimates and assumptions; however, actual amounts could differ from those based on estimates and assumptions.
The asset retirement obligation at the Sleeper Gold Project has been measured using the following variables: 1) Expected costs for earthwork, re-vegetation, in-pit water treatment, on-going monitoring, labor and management, 2) Inflation adjustment, and 3) Market risk premium. The sum of the expected costs by year is discounted using the Company’s credit adjusted risk free interest rate from the time it expects to pay the retirement obligation to the time it incurs the obligation. The reclamation and environmental obligation recorded on the balance sheet is equal to the present value of the estimated costs.
The current undiscounted estimate of the reclamation costs for existing disturbances at the Sleeper Gold Project is $3,915,626 as required by U.S Bureau of Land Management and the Nevada Department of Environmental Protection. Assumptions used to compute the asset retirement obligations as at March 31, 2016 and June 30, 2015 for the Sleeper Gold Project included a credit adjusted risk free rate and inflation rate of 9.76% (June 30, 2015 – 9.76%) and 2.0% (June 30, 2015 – 2.0%), respectively. Expenses are expected to be incurred between the years 2014 and 2053.
Changes to the Company’s asset retirement obligations for the nine month period ended March 31, 2016 and the year ended June 30, 2015 are as follows:
|
|
Nine
Month Period
|
|
|
June 30, 2015
|
|
Balance at beginning of period
|
|
$
|
1,294,497
|
|
|
$
|
1,291,066
|
|
Accretion expense
|
|
|
110,995
|
|
|
|
134,768
|
|
Payments
|
|
|
(125,222
|
)
|
|
|
(131,337
|
)
|
Balance at end of period
|
|
$
|
1,280,270
|
|
|
$
|
1,294,497
|
|
13
PARAMOUNT GOLD NEVADA CORP.
Notes to Condensed Consolidated Interim Financial Statements — Continued
Note 11. Other Income
The Company’s other income details were as follows:
|
|
Three Month Period
|
|
|
Three Month Period
|
|
|
Nine Month Period
|
|
|
Nine Month Period
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Re-imbursement of reclamation costs
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
125,222
|
|
|
$
|
92,435
|
|
Leasing of water rights to third party
|
|
|
—
|
|
|
|
—
|
|
|
|
5,202
|
|
|
|
5,100
|
|
Gain on disposal of fixed assets
|
|
|
-
|
|
|
|
—
|
|
|
|
500
|
|
|
|
—
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
130,924
|
|
|
$
|
97,535
|
|
Note 12. Commitments and Contingencies:
Lease Commitments
During the nine month period ended March 31, 2016, the Company entered into office premises leases that expire at various dates until June 30, 2018. The aggregate minimum rentals payable for these operating leases are as follows:
Year
|
|
Total Amount
|
|
2016
|
|
$
|
7,122
|
|
2017
|
|
$
|
19,444
|
|
2018
|
|
$
|
18,400
|
|
During the nine month period ended March 31, 2016, $22,073 was recognized as rent expense in the statement of operations and comprehensive loss.
Calico Resources Corp.
On March 14, 2016, Paramount Gold Nevada Corp. (“Paramount”) and Calico Resources Corp. (“Calico”) entered into an Arrangement Agreement (the “Agreement”) providing for the acquisition of Calico by Paramount (the “Transaction”). The principal asset of Calico is the Grassy Mountain Gold Project in Oregon, USA.
The Transaction is structured as a Plan of Arrangement under the Business Corporations Act (British Columbia) and is subject to approval by the Supreme Court of British Columbia (the “Court”). Under the terms of the Agreement, each issued and outstanding share of Calico’s common shares will be converted into the right to receive 0.07 of a share of common stock of Paramount. All outstanding stock options to purchase common shares of Calico will be terminated prior to the closing of the Transaction. After the closing of the Transaction, it is projected that existing shareholders of Calico will own approximately 46% of Paramount’s common stock, while existing stockholders of Paramount will continue to own the remaining 54%. Paramount stockholder are expected to hold 57% of the pro forma entity's common stock on a fully-diluted basis, and Calico’s shareholders are expected to hold the remaining 43%. No fractional shares of Paramount’s common stock will be issued in the Transaction, and Calico’s shareholders will receive cash in lieu of any such fractional shares.
The Transaction was unanimously approved by the board of directors of both parties.
The completion of the Transaction is subject to customary closing conditions, including, among others: (i) receipt of an interim order from the Court: (ii) the approval of Calico’s shareholders of the Transaction: (iii) the approval by Paramount’s stockholders of the issuance of Paramount’s common stock to Calico’s shareholders: (iv) the approval for listing by the NYSE MKT LLC of Paramount’s common stock issuable to Calico’s shareholders: (v) the absence of material adverse effect on either Paramount or Calico, and (vi) the receipt of a final order from the Court.
The Agreement contains customary representations, warranties and covenants. Certain covenants require that each of the parties: (i) use reasonable best efforts to cause the Transaction to be completed, including with regard to obtaining all the regulatory approvals and (ii) call and hold a special stockholders’ meeting and in the case of Calico, recommend approval of the Transaction, and, in the
14
PARAMOUNT GOLD NEVADA CORP.
Notes to Condensed Consolidated Interim Financial Statements — Continued
case of Paramount recommend approval of the issuance of Paramount’s common stock. In addition, Calico has agreed not to solicit alternative transaction proposals.
The Agreement contains certain termination rights and provides that (i) upon termination of the Agreement under specified circumstances, including a change in the recommendation of Calico’s board of directors, Calico will owe Paramount a cash breakup fee of $300,000, and (ii) upon the termination of the Agreement under certain other specified circumstances, including a change in the recommendation of Paramount’s board of directors, Paramount will owe Calico a cash breakup fee of $300,000.
In connection with the Transaction, Paramount and Calico have entered into a loan agreement dated March 14, 2016 (the “Loan Agreement”). Pursuant to the Loan Agreement, Paramount will provide Calico with interim debt financing of up to US$800,000 (the “Interim Loan”), to be repaid 90 days following the termination of the Agreement. The loan will be convertible into shares of Calico’s common shares at a price of CDN$0.10 per share, subject to the approval of the TSX Venture Exchange, and will be secured by all of Calico’s assets. The proceeds of the Interim Loan will be used by Calico for general corporate purposes prior to the completion of the Transaction.
15