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
December 31 2009
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)
———————
Delaware
|
|
0-51600
|
|
20-3690109
|
(State
or Other Jurisdiction of
Incorporation)
|
|
(Commission
File
Number)
|
|
(I.R.S.
Employer Identification
No.)
|
|
|
|
|
|
|
346 Waverley
Street |
|
|
Ottawa, Ontario, Canada K2P
0W5 |
|
|
(Address of
Principal Executive Office) (Zip Code) |
|
|
(613) 226-9881 |
|
|
(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 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
|
o
|
Accelerated
filer
|
o
|
Non-accelerated
filer
|
o
|
Smaller
reporting company
|
þ
|
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 o 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:
106,178,991
shares of Common Stock, $.001 par value as of February 10, 2010
Paramount
Gold and Silver Corp.
INDEX
|
PART I. – FINANCIAL INFORMATION
|
|
|
|
|
|
|
Item 1. |
Financial Statements
|
|
1 |
|
|
|
|
|
Consolidated Balance Sheets at December 31, 2009 (unaudited)
and June 30, 2009 (audited)
|
|
2 |
|
|
|
|
|
Consolidated Statements of Operations for the Three and Six Months
Ended
December 31, 2009 and for the Three and Six Months Ended
December 31, 2008 (unaudited)
and Cumulative Since Inception, (March 29, 2005 to
December 31, 2009)
|
|
3 |
|
|
|
|
|
Consolidated Statements of Cash Flows for the Period
Ended December 31, 2009 and December 31,
2008 and Cumulative Since Inception to December 31, 2008
(unaudited)
|
|
4 |
|
|
|
|
|
Consolidated Statement of Stockholders’ Equity for the Period
Ended
December 31, 2009 (unaudited)
|
|
5 |
|
|
|
|
|
Notes to Interim Financial Statements as of December 31,
2009
|
|
7 |
|
|
|
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and
Results of Operation
|
|
27 |
|
|
|
|
Item 3. |
Quantitative and Qualitative Disclosure About Market
Risk
|
|
33 |
|
|
|
|
Item 4. |
Controls and Procedures
|
|
33 |
|
|
|
|
Item 4T. |
The information required by Item 4t is contained in Item
4.
|
|
33 |
|
|
|
|
|
PART
II. – OTHER INFORMATION |
|
34 |
|
|
|
|
Item 1
|
Legal Proceedings.
|
|
34 |
|
|
|
|
Item 1A. |
Risk
Factors
|
|
34 |
|
|
|
|
Item 2. |
Unregistered Sales of Equity Securities.
|
|
34 |
|
|
|
|
Item 3. |
Defaults upon senior securities.
|
|
34 |
|
|
|
|
Item 4. |
Submission of matters to a vote of security holders.
|
|
34 |
|
|
|
|
Item 5. |
Other information
|
|
34 |
|
|
|
|
Item 6. |
Exhibits |
|
35 |
PART
I. FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS.
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Consolidated
Financial Statements
(Unaudited)
Period
ended December 31, 2009 and 2008
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Consolidated
Balance Sheets (Unaudited)
As
at December 31, 2009 and June 30, 2009
(Expressed
in United States dollars, unless otherwise stated)
|
|
As
at December 31,
2009
|
|
|
As
at June 30,
2009
|
|
Assets
|
|
(Unaudited) |
|
|
(Audited) |
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
19,095,311 |
|
|
$ |
7,040,999 |
|
Amounts
receivable
|
|
|
473,052 |
|
|
|
221,267 |
|
Notes
Receivable (Note 9)
|
|
|
- |
|
|
|
91,365 |
|
Prepaid
and Deposits
|
|
|
51,971 |
|
|
|
82,583 |
|
Term
deposit
|
|
|
1,053,811 |
|
|
|
1,063,772 |
|
|
|
|
20,674,145 |
|
|
|
8,499,986 |
|
|
|
|
|
|
|
|
|
|
Long
Term Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral
properties (Note 7)
|
|
|
22,111,203 |
|
|
|
18,436,951 |
|
Fixed
assets (Note 8)
|
|
|
517,661 |
|
|
|
520,858 |
|
|
|
|
22,628,864 |
|
|
|
18,957,809 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
43,303,009 |
|
|
$ |
27,457,795 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
287,240 |
|
|
$ |
383,445 |
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
stock (Note 5)
|
|
|
102,392 |
|
|
|
83,018 |
|
Additional
paid in capital
|
|
|
74,596,812 |
|
|
|
52,506,278 |
|
Contributed
surplus
|
|
|
18,204,835 |
|
|
|
17,969,510 |
|
Deficit
accumulated during the exploration stage
|
|
|
(49,659,344 |
) |
|
|
(43,197,264 |
) |
Cumulative
translation adjustment
|
|
|
(228,926 |
) |
|
|
(287,192 |
) |
|
|
|
43,015,769 |
|
|
|
27,074,350 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
43,303,009 |
|
|
$ |
27,457,795 |
|
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)
|
|
Three
Month
Period
Ended
December
31,
2009
|
|
|
Six
Month
Period
Ended
December
31,
2009
|
|
|
Three
Month
Period
Ended
December
31,
2008
|
|
|
Six
Month
Period
Ended
December
31,
2008
|
|
|
Cumulative
Since Inception March 29, 2005 to
December
31, 2009
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
$ |
- |
|
|
$ |
66,309 |
|
|
$ |
52,930 |
|
|
$ |
150,207 |
|
|
$ |
1,036,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporation
Costs
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,773 |
|
Exploration
|
|
|
2,875,770 |
|
|
|
3,954,269 |
|
|
|
481,495 |
|
|
|
2,270,134 |
|
|
|
20,555,886 |
|
Professional
Fees
|
|
|
167,442 |
|
|
|
407,374 |
|
|
|
173,597 |
|
|
|
408,573 |
|
|
|
3,664,940 |
|
Travel
& Lodging
|
|
|
64,986 |
|
|
|
87,110 |
|
|
|
41,385 |
|
|
|
114,338 |
|
|
|
943,716 |
|
Corporate
Communications
|
|
|
46,564 |
|
|
|
86,190 |
|
|
|
202,839 |
|
|
|
458,125 |
|
|
|
2,871,148 |
|
Consulting
Fees
|
|
|
64,600 |
|
|
|
136,807 |
|
|
|
28,921 |
|
|
|
70,926 |
|
|
|
770,683 |
|
Office
& Administration
|
|
|
71,827 |
|
|
|
152,764 |
|
|
|
266,245 |
|
|
|
582,634 |
|
|
|
2,079,447 |
|
Interest
& Service Charges
|
|
|
32,115 |
|
|
|
50,347 |
|
|
|
1,452 |
|
|
|
3,991 |
|
|
|
77,751 |
|
Loss
on disposal of Fixed Assets
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
44,669 |
|
|
|
44,669 |
|
Insurance
|
|
|
11,367 |
|
|
|
25,511 |
|
|
|
20,626 |
|
|
|
48,819 |
|
|
|
253,579 |
|
Depreciation
|
|
|
16,614 |
|
|
|
31,265 |
|
|
|
24,930 |
|
|
|
52,278 |
|
|
|
261,177 |
|
Miscellaneous
|
|
|
(30,118 |
) |
|
|
(25,103 |
) |
|
|
(990 |
) |
|
|
(2,738 |
) |
|
|
159,873 |
|
Financing
& Listing Fees
|
|
|
77,484 |
|
|
|
77,484 |
|
|
|
12,525 |
|
|
|
12,525 |
|
|
|
90,009 |
|
Acquisition
Expenses
|
|
|
695,721 |
|
|
|
1,060,180 |
|
|
|
- |
|
|
|
- |
|
|
|
1,060,180 |
|
Stock
Based Compensation
|
|
|
47,216 |
|
|
|
209,191 |
|
|
|
200,587 |
|
|
|
547,153 |
|
|
|
16,140,228 |
|
Write
Down of Mineral Property
|
|
|
275,000 |
|
|
|
275,000 |
|
|
|
- |
|
|
|
- |
|
|
|
1,746,049 |
|
Total
Expense
|
|
|
4,416,588 |
|
|
|
6,528,389 |
|
|
|
1,453,612 |
|
|
|
4,611,427 |
|
|
|
50,721,108 |
|
Net
Loss
|
|
|
4,416,588 |
|
|
|
6,462,080 |
|
|
|
1,400,682 |
|
|
|
4,461,220 |
|
|
|
49,684,485 |
|
Other
comprehensive loss (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency Translation Adjustment
|
|
|
(47,603 |
) |
|
|
(58,266 |
) |
|
|
192,598 |
|
|
|
224,892 |
|
|
|
228,926 |
|
Total
Comprehensive Loss for the Period |
|
$ |
4,368,985 |
|
|
$ |
6,403,814 |
|
|
$ |
1,593,280 |
|
|
$ |
4,686,112 |
|
|
$ |
49,455,559 |
|
Basic
& Diluted Loss per Common Share |
|
$ |
(0.04 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.08 |
) |
|
|
|
|
Weighted
Average Number of Common Shares Used in Per Share
Calculations |
|
$ |
98,764,765 |
|
|
$ |
90,894,206 |
|
|
|
57,674,756 |
|
|
|
55,148,086 |
|
|
|
|
|
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)
|
|
For
the Six Month Period Ended December 31, 2009
|
|
|
For
the Six Month Period Ended
December
31, 2008
|
|
|
Cumulative
Since Inception to December 31, 2009
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$ |
(6,462,080 |
) |
|
$ |
(4,462,220 |
) |
|
$ |
(49,759,003 |
) |
Adjustment
for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
31,265 |
|
|
|
53,278 |
|
|
|
261,177 |
|
Allowance
for doubtful accounts
|
|
|
172,170 |
|
|
|
172,170 |
|
|
|
172,170 |
|
Loss
on disposal of assets
|
|
|
- |
|
|
|
44,669 |
|
|
|
44,669 |
|
Write
down on mineral property
|
|
|
275,000 |
|
|
|
- |
|
|
|
275,000 |
|
Stock
based compensation
|
|
|
209,191 |
|
|
|
547,153 |
|
|
|
17,827,923 |
|
Accrued
interest
|
|
|
- |
|
|
|
(21,364 |
) |
|
|
(58,875 |
) |
(Increase)
Decrease in accounts receivable
|
|
|
(423,955 |
) |
|
|
946,537 |
|
|
|
(620,393 |
) |
(Increase)
Decrease in prepaid expenses
|
|
|
30,612 |
|
|
|
196,075 |
|
|
|
129,451 |
|
Increase
(Decrease) in accounts payable
|
|
|
(96,205 |
) |
|
|
(391,563 |
) |
|
|
55,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
used in Operating Activities
|
|
|
(6,264,002 |
) |
|
|
(2,915,265 |
) |
|
|
(31,672,662 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of GIC receivable
|
|
|
- |
|
|
|
(16,384 |
) |
|
|
(1,004,897 |
) |
Note
receivable
|
|
|
91,365 |
|
|
|
(500,000 |
) |
|
|
(3,253,192 |
) |
Purchase
of Mineral Properties
|
|
|
(3,574,251 |
) |
|
|
(112,000 |
) |
|
|
(4,400,168 |
) |
Purchase
of Equipment
|
|
|
(28,068 |
) |
|
|
(343,443 |
) |
|
|
(98,068 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
used in Investing Activities
|
|
|
(3,510,954 |
) |
|
|
(971,827 |
) |
|
|
(8,756,325 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in demand notes payable
|
|
|
- |
|
|
|
- |
|
|
|
105,580 |
|
Issuance
of capital stock
|
|
|
21,761,042 |
|
|
|
2,859,676 |
|
|
|
59,656,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
from Financing Activities:
|
|
|
21,761,042 |
|
|
|
2,859,676 |
|
|
|
59,762,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
68,226 |
|
|
|
(88,954 |
) |
|
|
(238,143 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(Decrease) in Cash
|
|
|
12,054,312 |
|
|
|
(1,116,370 |
) |
|
|
19,095,311 |
|
Cash,
beginning
|
|
|
7,040,999 |
|
|
|
3,199,848 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
ending
|
|
$ |
19,095,311 |
|
|
$ |
2,083,478 |
|
|
$ |
19,095,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Cash Flow Disclosure:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Received |
|
$ |
7,642 |
|
|
$ |
36,994 |
|
|
|
7,642 |
|
Taxes
Paid |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Cash |
|
|
2,066,115 |
|
|
|
1,687,439 |
|
|
|
2,066,115 |
|
Short
term investments |
|
|
17,021,554 |
|
|
|
394,883 |
|
|
|
17,021,554 |
|
The accompanying notes are an
integral part of the consolidated financial statements.
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Consolidated
Statement of Stockholders’ Equity (Unaudited)
For
the Six Months Period Ended December 31, 2009
(Expressed in United States dollars, unless
otherwise stated)
|
|
Shares
|
|
|
Par
Value
|
|
|
Capital
in Excess
of
Par Value
|
|
|
Accumulated
Earnings (Deficiency)
|
|
|
Contributed
Surplus
|
|
|
Cumulative
Translation Adjustment
|
|
|
Total
Stockholders Equity
|
|
Balance
at June 30, 2007
|
|
|
46,502,478 |
|
|
|
46,502 |
|
|
|
28,742,381 |
|
|
|
(17,546,124 |
) |
|
|
10,159,322 |
|
|
|
8,412 |
|
|
|
21,410,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
issued for financing
|
|
|
1,000,000 |
|
|
|
1,000 |
|
|
|
1,778,590 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,779,590 |
|
Capital
issued for services
|
|
|
770,000 |
|
|
|
770 |
|
|
|
1,593,582 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,594,352 |
|
Capital
issued for mineral properties
|
|
|
268,519 |
|
|
|
269 |
|
|
|
489,731 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
490,000 |
|
Fair
Value of warrants
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
470,410 |
|
|
|
|
|
|
|
470,410 |
|
Stock
based compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,911,213 |
|
|
|
- |
|
|
|
2,911,213 |
|
Foreign
currency translation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(28,389 |
) |
|
|
(28,389 |
) |
Net
Income (loss)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(18,409,961 |
) |
|
|
- |
|
|
|
- |
|
|
|
(18,409,961 |
) |
Balance
at June 30, 2008
|
|
|
48,540,997 |
|
|
|
48,541 |
|
|
|
32,604,284 |
|
|
|
(35,956,085 |
) |
|
|
13,382,573 |
|
|
|
(19,977 |
) |
|
|
10,217,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
issued for financing
|
|
|
16,707,791 |
|
|
|
16,707 |
|
|
|
5,828,684 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,845,391 |
|
Capital
issued for services
|
|
|
1,184,804 |
|
|
|
1,185 |
|
|
|
683,437 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
684,622 |
|
Capital
issued from stock options exercised
|
|
|
384,627 |
|
|
|
385 |
|
|
|
249,623 |
|
|
|
- |
|
|
|
(237,008 |
) |
|
|
- |
|
|
|
13,000 |
|
Capital
issued for mineral properties
|
|
|
16,200,000 |
|
|
|
16,200 |
|
|
|
13,140,250 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
13,156,450 |
|
Fair
Value of warrants
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,612,864 |
|
|
|
- |
|
|
|
3,612,864 |
|
Stock
based compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,052,709 |
|
|
|
- |
|
|
|
1,052,709 |
|
Foreign
currency translation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(267,215 |
) |
|
|
(267,215 |
) |
Net
Income (loss)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(7,241,179 |
) |
|
|
- |
|
|
|
- |
|
|
|
(7,241,179 |
) |
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
Statement of Stockholders’ Equity (Unaudited)
For
the Six Months Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
|
|
Shares
|
|
|
Par
Value
|
|
|
Capital
in Excess
of
Par Value
|
|
|
Accumulated
Earnings (Deficiency)
|
|
|
Contributed
Surplus
|
|
|
Cumulative
Translation Adjustment
|
|
|
Total
Stockholders’ Equity
|
|
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 from stock options exercised
|
|
|
5,429 |
|
|
|
5 |
|
|
|
3,524 |
|
|
|
- |
|
|
|
(3,529 |
) |
|
|
- |
|
|
|
- |
|
Stock
based compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
161,975 |
|
|
|
- |
|
|
|
161,975 |
|
Foreign
currency translation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,663 |
|
|
|
10,663 |
|
Net
Income (loss)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,045,492 |
) |
|
|
- |
|
|
|
- |
|
|
|
(2,045,492 |
) |
Balance
at September 30, 2009
|
|
|
83,023,648 |
|
|
|
83,023 |
|
|
|
52,509,802 |
|
|
|
(45,242,756 |
) |
|
|
18,127,956 |
|
|
|
(276,529 |
) |
|
|
25,201,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
issued for financing
|
|
|
18,400,000 |
|
|
|
18,400 |
|
|
|
21,371,043 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
21,389,443 |
|
Capital
issued for mineral properties
|
|
|
300,000 |
|
|
|
300 |
|
|
|
374,700 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
375,000 |
|
Capital
issued from stock options and warrants exercised
|
|
|
668,979 |
|
|
|
669 |
|
|
|
341,267 |
|
|
|
- |
|
|
|
29,663 |
|
|
|
- |
|
|
|
371,599 |
|
Stock
based compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
47,216 |
|
|
|
- |
|
|
|
47,216 |
|
Foreign
currency translation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
47,603 |
|
|
|
47,603 |
|
Net
Income (loss)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,416,588 |
) |
|
|
- |
|
|
|
- |
|
|
|
(4,416,588 |
) |
Balance
at December 31, 2009
|
|
|
102,392,627 |
|
|
|
102,392 |
|
|
|
74,596,812 |
|
|
|
(49,659,344 |
) |
|
|
18,204,835 |
|
|
|
(228,926 |
) |
|
|
43,015,769 |
|
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 Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
1.
Basis of
Presentation:
a) |
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 unaudited consolidated financial statements of
Paramount Gold and Silver Corp. (“The Company”) include the accounts of
its wholly owned subsidiaries, Paramount Gold de Mexico S.A. de C.V.,
Magnetic Resources Ltd, and Compania Minera Paramount SAC. On August 23,
2007 the board of directors and stockholders’ approved the name change
from Paramount Gold Mining Corp. to Paramount Gold & Silver
Corp.
These
unaudited consolidated financial statements of the Company have been
prepared in accordance with accounting principles generally accepted in
the United States for interim financial information. These financial
statements are condensed and do not include all disclosures required for
annual financial statements. The organization and business of the Company,
accounting policies followed by the Company and other information are
contained in the notes to the Company’s audited consolidated financial
statements filed as part of the Company’s June 30, 2009 Annual Report on
Form 10-K. This quarterly report should be read in conjunction with the
annual report.
In the
opinion of the Company’s management, these consolidated financial
statements reflect all adjustments necessary to present fairly the
Company’s consolidated financial position at December 31, 2009, and the
consolidated results of operations and the consolidated statements of cash
flows for the six months ended December 31, 2009 and 2008. The results of
operations for the three and six months ended December 31, 2009 are not
necessarily indicative of the results to be expected for the entire fiscal
year.
|
|
|
b) |
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
|
|
|
c) |
Exploration
Stage Enterprise
The
Company’s consolidated financial statements are prepared using the accrual
method of accounting and according to the provision of FASB ASC 915,
“Accounting and
Reporting for Development Stage Enterprises”, as it were devoting
substantially all of its efforts to acquiring and exploring mineral
properties. It is industry practice that mining companies in
the development stage are classified under Generally Accepted Accounting
Principles as exploration stage companies. Until such
properties are acquired and developed, the Company will continue to
prepare its consolidated financial statements and related disclosures in
accordance with entities in the exploration or development
stage.
|
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
2.
Principal Accounting Policies
The
consolidated financial statements are prepared by management in accordance with
generally accepted accounting principles of the United States of
America. The principal accounting policies followed by the Company
are as follows:
Cash
and Cash Equivalents
Cash and
cash equivalents include cash and highly liquid investments with an original
maturity of three months or less.
Fair
Value of Financial Instruments
The fair
market value of the Company’s financial instruments comprising cash, accounts
receivable and accounts payable and accrued liabilities were estimated to
approximate their carrying values due to immediate or short-term maturity of
these financial instruments. The Company maintains cash balances at
financial institutions which at times, exceed federally insured amounts. The
Company has not experienced any material losses in such accounts.
Term
Deposit
The GIC
is non-redeemable until May 7, 2010 and bears an interest rate of 3.25% and has
been pledged as collateral to support a letter of credit issued by a secured
lender.
Notes
Receivable
Notes
receivable are classified as available-for-sale or held-to-maturity, depending
on the Company’s intent with respect to holding such investments. If it is
readily determinable, notes receivable classified as available-for-sale are
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 stockholders’ 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 December 31, 2009, the Company’s only component of
comprehensive income is foreign currency translation adjustments.
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
2. Principal Accounting Policies:
(Continued)
Long
Term Assets
Mineral
Properties
The
Company has been in the exploration stage since its inception on March 29, 2005,
and has not yet realized any revenues from its planned operations. It
is primarily engaged in the acquisition and exploration of mining
properties. The Company expenses all costs related to the
maintenance, development and exploration of mineral claims in which it has
secured exploration rights prior to establishment of proven and probable
reserves. To date, the Company has not established the commercial
feasibility of its exploration prospects; therefore, all exploration costs are
expensed.
Mineral
property acquisition costs are initially capitalized when incurred using the
guidance in ASC 360-10, “Whether Mineral Rights Are Tangible
or Intangible Assets.” The Company assesses the carrying cost for
impairment under ASC 360-10, “Accounting for Impairment or
Disposal of Long Lived Assets” at each fiscal quarter
end. When it has been determined that a mineral property can be
economically developed as a result of establishing proven and probable reserves,
the costs then incurred to develop such property are
capitalized. Such costs will be amortized using the
units-of-production method over the estimated life of the probable
reserve. If mineral properties are subsequently abandoned or
impaired, any capitalized costs will be charged to operations.
Fixed
Assets
Property
and equipment are recorded at cost and are amortized over their estimated useful
lives 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
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 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 the Company’s Consolidated Statements of
Operations. The Company elected this accounting policy, which is a continuation
of the Company’s historical policy, in connection with the Company’s adoption of
FIN 48
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
2.
Principal Accounting Policies:
(Continued)
Foreign
Currency Translation
The
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 Euros. 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 Mexican
peso 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. To date, no material asset
retirement obligation exists due to the early stage of the Company’s mineral
exploration. Accordingly, no liability has been
recorded.
Environmental
Protection and Reclamation Costs
The
operations of the Company have been, and may in the future be affected 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. The Company
does not anticipate any material capital expenditures for environmental control
facilities.
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
2. Principal Accounting
Policies: (Continued)
Basic
and Diluted Net Loss Per Share
The
Company computes net income (loss) per share in accordance with FASB ASC 260,
“Earnings per Share”
and 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 stockholders (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 Option for Financial Assets
On July
1, 2008, the Company adopted FASB ASC 825-10, The Fair Value Option for
Financial Assets and Financial Liabilities (“ASC 825-10”). ASC 825-10 permits
entities to choose to measure many financial instruments and certain other
assets and liabilities at fair value on an instrument-by-instrument basis (fair
value option) with changes in fair value reported in earnings. The
adoption of ASC 825-10 has no impact on the financial statements as management
did not elect the fair value option for any other financial instruments or other
assets and liabilities.
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
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
2. Principal Accounting
Policies: (Continued)
Fair
Value Measurements (continued)
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). 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 December 31, 2009
|
|
|
June
30, 2009
|
|
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Assets
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Cash
equivalents
|
|
|
19,095,311 |
|
|
|
19,095,311 |
|
|
|
|
|
|
|
|
|
|
|
7,040,999 |
|
Accounts
receivable |
|
|
473,052 |
|
|
|
473,052 |
|
|
|
|
|
|
|
|
|
|
|
221,267 |
|
Notes
receivable |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
91,365 |
|
GIC
|
|
|
1,053,811 |
|
|
|
1,053,811 |
|
|
|
- |
|
|
|
|
|
|
|
1,063,772 |
|
The
Company’s cash equivalents, accounts receivables 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. Accounts
receivable represents amounts due from a national government regarding the
refund of taxes. Notes receivable is classified within Level 2 of the fair value
hierarchy.
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
3. Recent Accounting
Pronouncements:
(i) Business
Combinations
In December 2007, the FASB
issued FASB ASC 805(revised 2007), Business Combinations (ASC
805). ASC 805 significantly changes the accounting for business combinations in
a number of areas including the treatment of contingent consideration, pre
acquisition contingencies, transaction costs, in-process research and
development, and restructuring costs. In addition, under ASC 805, changes in an
acquired entity's deferred tax assets and uncertain tax positions after the
measurement period will impact income tax expense. ASC 805 is effective for
fiscal periods beginning after December 15, 2008. The Company has adopted
ASC 805 on July 1, 2009. This standard will change the accounting treatment
for business combinations on a prospective basis.
In December 2007, the FASB
issued ASC 810, “No
controlling Interests in Consolidated Financial Statements – an
amendment of Accounting Research Bulletin No. 51” (“ASC 810”), which
establishes accounting and reporting standards for ownership interests in
subsidiaries held by parties other than the parent, the amount of consolidated
net income attributable to the parent and to the non controlling interest,
changes in a parent’s ownership interest and the valuation of retained
non-controlling equity investments when a subsidiary is
deconsolidated. The Statement also establishes reporting requirements
that clearly identify and distinguish between the interests of the parent and
the interests of the non-controlling owners. ASC 810 is effective for
fiscal periods beginning after December 15, 2008. The Company has
adopted ASC 810 on July 1, 2009. Adoption of this standard did not have a
material impact on the Company’s financial position, results of operations, or
cash flows.
(ii) ASC 815
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. The
Company has adopted ASC 815 on July 1, 2009. Adoption of this standard did not
have a material impact on the Company’s financial position, results of
operations, or cash flows.
(iii) ASC 460
In May 2008, the FASB issued ASC 460, "Accounting
for Financial Guarantee Insurance Contracts - an interpretation of
FASB Statement No. 60." ASC 460 requires that an insurance enterprise
recognize a claim liability prior to an event of default (insured event)
when there is evidence that credit deterioration has occurred in an insured
financial obligation. This Statement also clarifies how Statement 60
applies to financial guarantee insurance contracts, including the
recognition and measurement to be used to account for premium revenue and claim
liabilities. Those clarifications will increase comparability in
financial reporting of financial guarantee insurance contracts by
insurance enterprises. This Statement requires expanded
disclosures about financial guarantee insurance contracts. The accounting
and disclosure requirements of the Statement will improve the quality of
information provided to users of financial statements. ASC 460 will be
effective for financial statements issued for fiscal
years beginning after December 15, 2008.
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
3. Recent Accounting
Pronouncements: (Continued)
The
Company adopted ASC 460 on July 1, 2009. Adoption of this standard did not have
a material impact on the Company’s financial condition or results of
operation.
(iv) ASC 855
In May 2009, the FASB issued ASC 855, "Subsequent Events," which
establishes general standards for accounting for, and disclosures of, events
that occur after the balance sheet date, but before the financial statements are
issued or are available to be issued. The pronouncement requires the disclosure
of the date through which an entity has evaluated subsequent events and the
basis for that date and whether that date represents the date the financial
statements were issued or were available to be issued. ASC 855 is effective with
interim and annual financial periods ending after June 15, 2009. The Company
adopted ASC 855on July 1, 2009. Adoption of this standard did not have an impact
on the Company's results of operations, financial position, or cash flows.
(v) 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 will adopt ASC 860 on July 1, 2010. The Company has
determined that the adoption of ASC 860 will have no impact will have on its
consolidated financial statements.
(vi) 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.
(vii) ASC 105-10-05
In July 2009, the FASB issued ASC 105-20-05, "FASB Accounting Standards
Codification" ("ASC 105-10-05"), as the single source of authoritative
nongovernmental U.S. generally accepted accounting principles (GAAP). The
Codification is effective for interim and annual periods ending after September
15, 2009. All existing accounting standards are superseded as described in ASC
105-10-05. All other accounting literature not included in the Codification is
non-authoritative.
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
3. Recent Accounting
Pronouncements: (Continued)
Management
is currently evaluating the impact of the adoption of ASC 105-10-05 but does not
expect the adoption of ASC 105-10-05 to impact the Company's results of
operations, financial position, or cash flows.
(viii)
ASC 470-20
In May 2008,
the FASB issued FSP No. APB 14-1, “Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)” (“FSP 14-1”). FSP 14-1 applies to convertible debt
instruments that, by their stated terms, may be settled in cash (or other
assets) upon conversion, including partial cash settlement, unless the embedded
conversion option is required to be separately accounted for as a derivative
under FASB Statement No. 133. Convertible debt instruments within the scope of
FSP 14-1 are not addressed by the existing APB 14. FSP 14-1 would require that
the liability and equity components of convertible debt instruments within the
scope of FSP 14-1 be separately accounted for in a manner that reflects the
entity’s nonconvertible debt borrowing rate. This will require an allocation of
the convertible debt proceeds between the liability component and the embedded
conversion option (i.e., the equity component). The difference between the
principal amount of the debt and the amount of the proceeds allocated to the
liability component would be reported as a debt discount and subsequently
amortized to earnings over the instrument’s expected life using the effective
interest method. FSP APB 14-1 is effective for the Company’s fiscal year
beginning July 1, 2009 and will be applied retrospectively to all periods
presented. Adoption of this standard is not expected to have a material impact
on the Company’s financial position, results of operations, or cash flows.
4. Non-Cash
Transactions:
During
the six month period ended December 31, 2009 and 2008, the Company entered into
certain non-cash activities as follows:
|
|
2009
|
|
|
2008
|
|
Operating
and Financing Activities
|
|
|
|
|
|
|
From
issuance of shares for consulting and geological services |
|
$ |
- |
|
|
$ |
210,988 |
|
From
issuance of shares for cashless exercise of options |
|
$ |
142,462 |
|
|
$ |
- |
|
From
issuance of shares for mineral property |
|
$ |
375,000 |
|
|
$ |
8,828,450 |
|
5. Capital
Stock:
Authorized capital stock consists of
200,000,000 common shares with par value of $0.001 each. During the
six month period ending December 31, 2009, the Company issued a total of
19,374,408 common shares which are summarized as follows:
|
|
2009 |
|
|
2008 |
|
|
|
Common
Shares |
|
|
|
|
18,400,000 |
|
|
|
1,071,429 |
|
Financing |
|
|
300,000 |
|
|
|
7,350,000 |
|
Acquisition of
mineral properties |
|
|
674,408 |
|
|
|
551,206 |
|
For exercise
of warrants and options |
|
|
19,374,408 |
|
|
|
8,972,635 |
|
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
5. Capital Stock: (Continued)
During
the six month period ended December 31, 2009, the Company issued 19,374,408
common shares. The Company completed a financing in the current
quarter and issued 18,400,000 common shares at $1.25 per share. The
company also issued an additional 300,000 shares at $1.25 per share related to a
mineral property and 181, 818 warrants were exercised at $0.95 per
share. The options for 5,429 shares were exercised at
$0.65 during the three month period ending September 30, 2009.
The
following share purchase warrants and agent compensation warrants were
outstanding at December 31, 2009:
|
|
Exercise
price
|
|
|
Number
of
warrants
|
|
|
Remaining
contractual life
(years)
|
|
Warrants
|
|
|
.90 |
|
|
|
12,000,000 |
|
|
|
3.16 |
|
Agent
compensation warrants
|
|
|
.90 |
|
|
|
840,000 |
|
|
|
3.16 |
|
Warrants
|
|
|
.85 |
|
|
|
3,636,362 |
|
|
|
1.00 |
|
Warrants
|
|
|
2.15 |
|
|
|
35,715 |
|
|
|
1.10 |
|
Outstanding
and exercisable at December 31, 2009
|
|
|
|
|
|
|
16,512,077 |
|
|
|
|
|
|
December
31, 2009
|
December
31, 2008
|
Risk
free interest rate
|
N/A
|
0.40%
|
Expected
life of warrants
|
N/A
|
1
year
|
Expected
stock price volatility
|
N/A
|
110%
|
Expected
dividend yield
|
N/A
|
0%
|
6. Related Party
Transactions:
During
the period ended December 31, 2009, directors received payments for professional
fees in the amount of $90,601 (2008: $51,520).
During
the period ended December 31, 2009 the Company made payments of $20,613 pursuant
to a premises lease agreement to a corporation with a director in common with
the Company.
All
transactions with related parties are made in the normal course of operations
and measured at exchange value.
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
The
Company has capitalized acquisition costs on mineral properties as
follows:
|
|
December
31 ,
2009
|
|
|
June
30,
2009
|
|
Vidette
Lake – Canada
|
|
$ |
- |
|
|
$ |
275,000 |
|
Temoris
|
|
|
4,074,754 |
|
|
|
4,074,754 |
|
Iris
Royalty
|
|
|
50,000 |
|
|
|
50,000 |
|
Morelos
|
|
|
100,000 |
|
|
|
100,000 |
|
San
Miguel Project
|
|
|
17,855,824 |
|
|
|
13,906,572 |
|
Andrea
|
|
|
20,625 |
|
|
|
20,625 |
|
Peru
|
|
|
10,000 |
|
|
|
10,000 |
|
|
|
$ |
22,111,203 |
|
|
$ |
18,436,951 |
|
a. |
San
Miguel Project
The
Company has an option to acquire a 100% in the La Blanca property located
in Guazaparez, Chihuahua, Mexico. Pursuant to the option agreement,
payments of $180,000 have been made. Furthermore, the company
must pay a royalty of $1.00 for each ounce proven or probable gold
reserves. No gold reserves have been established as at December 31, 2009.
The Company has incurred $500,000 in exploration
expenses.
The
Company has a 100% interest in the Santa Cruz mining concession located in
the San Miguel Project, subject to satisfactory title transfer. The terms
of the agreement called for a payment of $50,000 prior to March 7, 2006
and the required payment was made by the Company. The option
also includes a 3% NSR payable to optioner. This concession was acquired
as part of the San Miguel asset project purchased from Tara
Gold.
|
|
|
b. |
Temoris
On
March 19, 2009 the Company closed an agreement with Garibaldi Resources
Corp. in which the company acquired the outstanding option on the Temoris
project. The option covers an area of approximately 54,000 hectares
adjacent to the San Miguel groupings and Andrea project. In consideration
for the acquisition, the company paid Garibaldi $400,000 and issued six
million shares of the Company’s common stock.
The
shares of common stock were delivered to an escrow agent who released
500,000 shares of common stock six months from the date of closing and
will release an additional 500,000 shares of common stock every three
months thereafter.
On
February 12, 2009, the company acquired all of the issued and outstanding
shares of common stock of Magnetic Resources Ltd. (“Magnetic”). Magnetic
is the sole beneficial stockholder of Minera Gama, S.A. de C.V. which
holds interests in various mineral concessions in Mexico known as the
Temoris Project and the Morelos Project and also holds a royalty in the
Iris Project.
|
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated
7. Mineral Properties
(contintued)
In
consideration for the acquisition of all of the issued and outstanding common
shares of Magnetic and the assumption and discharge of the stockholder loans,
the company issued to the stockholders of Magnetic 1,350,000 shares of the
Company’s common stock valued at $675,000 and an advisor was paid a finder’s fee
of 200,000 common shares of the Company valued at $100,000.
These
financial statements reflect income earned and expenses incurred by Magnetic
Resources Ltd. as of February 12, 2009. The following is the purchase price
allocation at date of acquisition:
Total
purchase price
|
|
$ |
775,000 |
|
|
|
|
|
|
Garibaldi
mineral property
|
|
|
604,754 |
|
Irish
mineral property
|
|
|
50,000 |
|
Moralos
mineral property
|
|
|
100,000 |
|
Other
asset
|
|
|
20,246 |
|
|
|
$ |
775,000 |
|
c. |
Andrea
The
Company staked the Andrea mining concession located in the Guazaparez
mining
district
in Chihuahua, Mexico for a cost of $20,000.
|
|
|
d. |
Vidette
Lake, Canada
During
the period ended December 31, 2009, the Company terminated its option to
acquire the Vidette Lake Gold Mine and the related costs totaling $275,000
were written off in the consolidated statement of
operations.
|
8. Fixed
Assets:
|
|
|
|
|
|
|
|
Net
Book Value
|
|
|
|
Cost
|
|
|
|
|
|
December
31, 2009
|
|
|
June
30,
2009
|
|
Property
and Equipment
|
|
$ |
729,454 |
|
|
$ |
211,793 |
|
|
$ |
517,661 |
|
|
$ |
520,858 |
|
During
the period ended December 31, 2009, total additions to property, plant and
equipment were $28,069 (2008- $340,173). During the period ended
December 31, 2009 the Company recorded depreciation of $ 31,265.
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
9. Notes
Receivable:
The
Company held convertible notes receivable with face value of $70,000 plus
accrued interest issued by Mexoro Minerals Ltd. (“Mexoro”) pursuant to a Letter
of Intent dated May 2, 2008 between Mexoro Minerals Ltd. and the Company with
respect to the proposed Strategic Alliance between Mexoro and
Paramount. The interest rate of the convertible notes is 8% but by
mutual agreement, no interest was accrued for three months ending September 30,
2009. These notes were repaid to the Company on October 1, 2009.
|
|
Maturity
Date
|
|
|
Interest
Rate
|
|
|
December
31,
2009
|
|
|
June
30,
2009
|
|
Note
Receivable – Mexoro Minerals
|
|
September
18, 2009
|
|
|
8%
per annum
|
|
|
$ |
- |
|
|
$ |
70,000 |
|
Note
Receivable – Mexoro Minerals
|
|
May
7, 2009
|
|
|
8%
per annum
|
|
|
|
- |
|
|
|
- |
|
|
|
July
10, 2009
|
|
|
8%
per annum
|
|
|
|
- |
|
|
|
- |
|
Accrued
Interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
21,365 |
|
|
|
|
|
|
|
|
|
|
|
$ |
- |
|
|
$ |
91,365 |
|
On May
19, 2009 the Company entered into a letter of agreement with Mexoro Minerals
Ltd. to acquire all its legal and beneficial interest to 12 mining
concessions adjacent to Paramount’s San Miguel Project resource areas in
Chihuahua, Mexico . The purchase price is $3.7 million and all
underlying property payments are to be deferred for 36 months and further, if
Paramount or its assets are sold within this period an additional payment will
be made to the vendors. Any amounts owing to Paramount by Mexoro on
closing will be paid out of the closing proceeds. During the period
ending September 30, 2009, the purchase price was deposited into an escrow
account pending completion of all due diligence issues.
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(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 for
the period by geographical segment for the six month period ended December 31,
2009:
|
|
United
States
|
|
|
Mexico
/ Latin America
|
|
|
Total
|
|
Interest
income
|
|
$ |
66,244 |
|
|
$ |
65 |
|
|
$ |
66,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
|
|
|
1,332,173 |
|
|
|
2,160,625 |
|
|
|
3,492,798 |
|
Professional
fees
|
|
|
407,374 |
|
|
|
- |
|
|
|
407,374 |
|
Travel
and lodging
|
|
|
87,110 |
|
|
|
- |
|
|
|
87,110 |
|
Geologist
fees and expenses
|
|
|
372,725 |
|
|
|
88,746 |
|
|
|
461,471 |
|
Corporate
communications
|
|
|
86,190 |
|
|
|
- |
|
|
|
86,190 |
|
Consulting
fees
|
|
|
136,807 |
|
|
|
- |
|
|
|
136,807 |
|
Office
and administration
|
|
|
79,384 |
|
|
|
30,384 |
|
|
|
109,768 |
|
Interest
and service charges
|
|
|
48,416 |
|
|
|
1,931 |
|
|
|
50,347 |
|
Loss
on Disposal of Assets
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Insurance
|
|
|
25,511 |
|
|
|
- |
|
|
|
25,511 |
|
Amortization
|
|
|
11,421 |
|
|
|
19,844 |
|
|
|
31,265 |
|
Office
|
|
|
42,996 |
|
|
|
- |
|
|
|
42,996 |
|
Acquisition
Expenses
|
|
|
1,060,180 |
|
|
|
- |
|
|
|
1,060,180 |
|
Miscellaneous
|
|
|
(25,103 |
) |
|
|
- |
|
|
|
(25,103 |
) |
Stock
based compensation
|
|
|
209,191 |
|
|
|
- |
|
|
|
209,191 |
|
Write
off of mineral property
|
|
|
275,000 |
|
|
|
- |
|
|
|
275,000 |
|
Financing
& listing fees
|
|
|
77,484 |
|
|
|
- |
|
|
|
77,484 |
|
Total
Expenses
|
|
|
4,226,859 |
|
|
|
2,301,530 |
|
|
|
6,528,389 |
|
Net
loss
|
|
$ |
4,160,615 |
|
|
$ |
2,301,465 |
|
|
$ |
6,462,080 |
|
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
10.
Segmented Information (Continued):
Loss for
the period by geographical segment for the six month period ended December 31,
2008:
|
|
United
States
|
|
|
Mexico
/ Latin America
|
|
|
Total
|
|
Interest
income
|
|
$ |
96,954 |
|
|
$ |
53,253 |
|
|
$ |
150,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
(note 15)
|
|
|
619,817 |
|
|
|
1,170,448 |
|
|
|
1,790,265 |
|
Professional
fees
|
|
|
381,595 |
|
|
|
26,978 |
|
|
|
408,573 |
|
Travel
and lodging
|
|
|
114,338 |
|
|
|
- |
|
|
|
114,338 |
|
Geologist
fees and expenses
|
|
|
258,395 |
|
|
|
221,484 |
|
|
|
479,879 |
|
Corporate
communications
|
|
|
138,698 |
|
|
|
- |
|
|
|
138,698 |
|
Consulting
fees
|
|
|
70,926 |
|
|
|
- |
|
|
|
70,926 |
|
Marketing
|
|
|
319,427 |
|
|
|
- |
|
|
|
319,427 |
|
Office
and administration
|
|
|
136,853 |
|
|
|
401,895 |
|
|
|
538,748 |
|
Interest
and service charges
|
|
|
3,018 |
|
|
|
973 |
|
|
|
3,991 |
|
Loss
on Disposal of Assets
|
|
|
- |
|
|
|
44,669 |
|
|
|
44,669 |
|
Insurance
|
|
|
31,010 |
|
|
|
17,809 |
|
|
|
48,819 |
|
Amortization
|
|
|
27,103 |
|
|
|
25,175 |
|
|
|
52,278 |
|
Rent
|
|
|
43,886 |
|
|
|
- |
|
|
|
43,886 |
|
Financing
|
|
|
12,525 |
|
|
|
- |
|
|
|
12,525 |
|
Miscellaneous
|
|
|
(2,738 |
) |
|
|
- |
|
|
|
(2,738 |
) |
Stock
based compensation
|
|
|
547,143 |
|
|
|
- |
|
|
|
547,143 |
|
Total
Expenses
|
|
|
2,701,996 |
|
|
|
1,909,431 |
|
|
|
4,611,427 |
|
Net
loss
|
|
$ |
2,605,042 |
|
|
$ |
1,856,178 |
|
|
$ |
4,461,220 |
|
Assets by
geographical segment:
|
|
United
States
|
|
|
Mexico
/ Latin America
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2009
|
|
|
|
|
|
|
|
|
|
Mineral
properties
|
|
$ |
- |
|
|
$ |
22,111,203 |
|
|
$ |
22,111,203 |
|
Equipment
|
|
|
114,489 |
|
|
|
403,172 |
|
|
|
517,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral
properties
|
|
|
- |
|
|
|
14,054,197 |
|
|
|
14,054,197 |
|
Equipment
|
|
$ |
144,306 |
|
|
$ |
423,109 |
|
|
$ |
$567,415 |
|
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
11.
Employee Stock Option Plan:
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.
Changes
in the Company’s stock options for the period ending December 31, 2009 are
summarized below:
|
|
Number
|
|
|
Weighted
Avg. Exercise Price
|
|
Balance,
beginning of period
|
|
|
4,612,000 |
|
|
$ |
0.98 |
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
- |
|
|
|
- |
|
Cancelled
/ Expired
|
|
|
85,000 |
|
|
|
1.46 |
|
Exercised
|
|
|
232,000 |
|
|
|
0.65 |
|
Granted
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Balance,
end of period
|
|
|
4,295,000 |
|
|
$ |
0.98 |
|
At
December 31, 2009, there were 3,520,000 exercisable options outstanding. Options
outstanding above that have not been vested at year end amount to 775,000 which
have a maximum service term of 1- 4 years and weighted average exercise price of
$1.46. The vesting of these options is dependent on market conditions which have
yet to be met.
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:
|
December 31, 2009
|
December 31, 2008
|
Risk
free interest rate
|
.040%
- .47%
|
0.40%
|
Expected
dividend yield
|
0%
|
0%
|
Expected
stock price volatility
|
114%
- 116%
|
110%
|
Expected
life of options
|
3
years
|
2
to 5 years
|
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
11.
Employee Stock Option Plan (continued):
During
the period ended December 31, 2009 the Company recognized stock based
compensation expense in the amount of $ 209,191 (2008: $ 274,928) for
the vested portion of options issued in the previous year.
12.
Differences Between US and Canadian Generally Accepted Accounting
Principles:
The
consolidated financial statements of the Company are prepared in accordance with
accounting principles generally accepted in the United States (“US GAAP”). Set
out below are the material adjustments to net loss for the period ending
December 31, 2009 and December 31, 2008 and to stockholders’ equity at December
31, 2009 and December 31, 2008 in order to conform to accounting principles
generally accepted in Canada (“Canadian GAAP”).
Statement
of Loss
|
|
Period
ended
December
31,
2009
|
|
|
Period
ended December 31,
2008
|
|
|
|
|
|
|
|
|
Net
loss based on US GAAP
|
|
$ |
(6,561,739 |
) |
|
$ |
(4,461,220 |
) |
Deferred
exploration costs prior to the establishment of proven and probable
reserves
|
|
|
3,954,269 |
|
|
|
2,207,134 |
|
Net
loss for the period based on Canadian GAAP
|
|
|
(2,607,470 |
) |
|
|
(2,750,003 |
) |
Stockholders’
Equity
|
|
December
31, 2009
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
Stockholders’
Equity based on US GAAP
|
|
$ |
43,015,769 |
|
|
$ |
18,144,913 |
|
Deferred
exploration costs prior to the establishment of proven and probable
reserves
|
|
|
20,555,886 |
|
|
|
13,131,097 |
|
Stockholders’
Equity based on Canadian GAAP
|
|
|
63,571,655 |
|
|
|
31,276,010 |
|
The
following sets out the material balance sheet differences between Canadian and
U.S. GAAP:
Mineral
Properties
|
|
December
31, 2009
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
US
GAAP
|
|
$ |
22,111,203 |
|
|
$ |
14,054,197 |
|
Deferred
exploration costs prior to the establishment of proven and probable
reserves
|
|
|
20,555,886 |
|
|
|
13,131,097 |
|
Canadian
GAAP
|
|
|
42,667,089 |
|
|
|
27,185,294 |
|
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
12.
Differences Between US and Canadian Generally Accepted Accounting Principles
(Continued):
(a) |
Interest
in Exploration Properties and Deferred Exploration Costs
Under
U.S. GAAP, acquisition costs are capitalized, but exploration costs are
not considered to have the characteristics of property, plant and
equipment and, accordingly, are expensed prior to the Company determining
that economically proven and probable mineral reserves
exist. Subsequent to that determination, all such costs are
capitalized.
Under
Canadian GAAP, acquisition and exploration expenditures on properties less
recoveries in the pre-production stage are deferred until such time as the
properties are put into commercial production, sold or become impaired. On
the commencement of commercial production, the deferred costs are charged
to operations on the unit-of-production method based upon estimated
recoverable proven and probable reserves. General exploration expenditures
are charged to operations in the period in which they are incurred. The
Company recognizes the payment or receipt of payment required under option
agreements when paid or received.
|
|
|
(b) |
Statement
of Cash Flows
As a
result of the treatment of mining interests under item (a) above, cash
expended for the exploration costs would have been classified as investing
rather than operating, resulting in the following totals under Canadian
GAAP:
|
|
|
December
31, 2009
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
Cash
used in operating activities
|
|
$ |
(
2,309,733 |
) |
|
$ |
(
708,131 |
) |
Cash
used in investing activities
|
|
|
(7,465,223 |
) |
|
|
(3,178,961 |
) |
(c) |
Recent
Accounting Pronouncements
International
Financial Reporting Standards (“IFRS”)
In
2006, the Canadian Accounting Standards Board (“AcSB”) published a new
strategic plan that will significantly affect financial reporting
requirements for Canadian companies. The AcSB strategic plan outlines the
convergence of Canadian GAAP with IFRS over an expected five period
transitional period. In February 2008 the AcSB announced that 2011 is the
changeover date for publicly-listed companies to use IFRS, replacing
Canada’s own GAAP. The date is for interim and annual financial statements
relating to fiscal periods beginning on or after January 1, 2011. The
changeover date of June 30, 2012 will require the restatement for
comparative purposes of amounts reported by the Company for the period
ended June 30, 2011. While the Company has begun assessing the adoption of
IFRS for 2011, the financial reporting impact of the transition to IFRS
cannot be reasonably estimated at this
time.
|
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
12.
Differences Between US and Canadian Generally Accepted Accounting Principles
(Continued):
Capital
Disclosures
As a
result of new Section 1535, Capital Disclosures, the Company will be required to
include additional information in the notes to the financial statements about
its capital and the manner in which it is managed. This additional disclosure
includes quantitative and qualitative information regarding an entity’s
objectives, policies and procedures for managing capital.
Disclosure
and Presentation of Financial Instruments
New
accounting recommendations for disclosure and presentation of financial
instruments are effective for the Company beginning July 1, 2008. The new
recommendations require disclosures of both qualitative and quantitative
information that enables users of financial statements to evaluate the nature
and extent of risks from financial instruments to which the Company is
exposed.
Goodwill
and Intangible Assets
The
Accounting Standards Board has also issued a new Section 3064, Goodwill and
Intangible Assets, to replace current Section 3062, Goodwill and Other
Intangible Assets. The new section establishes revised standards for
recognizing, measuring, presenting and disclosing goodwill and intangible
assets. Canadian Institute of Chartered Accountants Handbook Section 3064 is
effective for fiscal periods beginning on or after October 1, 2008. The Company
adopted Section 3064 on July 1, 2009. Adoption of this standard did not have a
material impact on the Company’s financial position, results of operations, or
cash flows.
13.
Klondex Mines Ltd.
On
October 2, 2009, the Company filed a statement of claim in the Supreme Court of
British Columbia, Canada, naming Klondex Mines Ltd as a defendant in connection
with the termination by Klondex of the binding Letter Agreement dated July 20,
2009 whereby Klondex agreed to be acquired by Paramount on the basis of 1.45
shares of Paramount common stock for each common share of Klondex. The Statement
of Claim alleges Klondex acted in bad faith and in breach of the Agreement along
with damages for breach of contract and, in addition, damages for malicious
falsehood and defamation.
14.
SNS Silver Corp.:
On
December 4, 2009, the Company entered into an Earn-In Agreement with SNS Silver
Corp (“SNS”) of Vancouver BC wherein the Company has acquired the right and
option to earn up to 30% of SNS’s interest in and to the Claims of
the Northern Nickel Agreement that SNS holds by incurring Exploration
Expenditures of CAD $1,400,000 by December 31, 2009. SNS has confirmed that said
expenditures of CAD $1,400,000 were incurred by the Company by December 31, 2009
and that the Company now holds an option to acquire a 30% interest in the
Northern Nickel claims.
PARAMOUNT
GOLD AND SILVER CORP.
(An
Exploration Stage Mining Company)
Notes
to Consolidated financial statements) (Continued)
(Unaudited)
For
the Six Month Period Ended December 31, 2009
(Expressed
in United States dollars, unless otherwise stated)
14.
SNS Silver Corp.: (Continued)
Under
terms of the Agreement with SNS, the Company has the option to convert the
“Equity Conversion Right” on any and all sums spent on the Exploration Program
into shares of SNS at a price of CAD $0.23 per share.
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This
Quarterly Report on Form 10-Q for the quarterly period ended December 31,
2009 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.
Overview
and History:
We are an
exploration stage mining company which has as its core business, precious metals
exploration in Mexico. We are a Delaware corporation and we were
incorporated on March 29, 2005. Our administrative office is located at
Suite 110, 346 Waverley Street, Ottawa, Canada K2P 0W5. We also have a field
office located in Temoris, Mexico. Our objective is to explore and develop the
San Miguel Project located in the State of Chihuahua, Mexico. Through our wholly
owned Mexican subsidiary, Paramount Gold de Mexico S.A. de C.V., we own a 100%
interest in the San Miguel property. We also own additional
mining concessions in the state of Chihuahua, Mexico.
In
December 2008, we entered into an option to acquire an interest in the
Vidette Lake Gold Mine located in British Columbia,
Canada. Upon further geological and mining studies, we have
determined that it would not be in the best interests of the Company to pursue
the purchase of this property.
In 2009, we
also entered into an option agreement to acquire up to a 30% interest in the
Golden Rose project in Ontario, Canada from SNS Silver Corp.
We will
continue to explore additional opportunities through other joint ventures and
acquisitions. We do not expect to generate revenues from these projects nor is
it our objective to enter the mine management business. Rather we hope to
identify a resource that will enable us to attract a larger company to partner
with who has experience developing and managing a mine.
The
San Miguel Project
Location
The San
Miguel Project is located in southwestern Chihuahua in Northern Mexico, and is
approximately 400 km by road from the state capital. The project is about 20 km
north of the town of Temoris, adjacent to the village of Guazapares. It is in
the Guazapares mining district, which is part of the Sierra Madre Occidental
gold-silver belt.
The
location of the San Miguel Project is shown in Map 1. The coordinate system
used for all maps and sections in this report is the Universal Transverse
Mercator system, Zone 12. GPS coordinates are referenced to NAD 27
Mexico.
MAP
1 – SAN MIGUEL PROJECT LOCATION
The
Chihuahua Informe Pericial (Department of Mines) administers the concessions in
this area. As part of the concession acquisition process, concession boundaries
are surveyed.
Deposit
Types
At the
San Miguel project, mineralization consists of epithermal, low sulfidation,
gold/silver vein and breccia deposits which occur in north-northwest trending,
steeply dipping structures. This type of mineralization is typical of the Sierra
Madre Occidental gold-silver metallogenic province.
These are
multi-phase deposits which produced several phases of cross-cutting breccias and
related hydrothermal alteration. Alteration ranges from peripheral
propylitization to argillic alteration to strong to intense silicification,
often with adularia development. This mineralization is physically expressed as
sheeted quartz veins, silicified hydrothermal breccias, and vuggy, quartz-
filled expansion breccias. Amethystine quartz is locally present. The following
table outlines our concessions within the San Miguel Project:
San
Miguel Project Concession Data
Concession
|
Owner
|
Title
No.
|
Date
Staked
|
Hectares
|
San
Miguel Group
|
|
|
|
|
SAN
MIGUEL
|
Paramount
|
166401
|
4-Jun-80
|
12.9458
|
SAN
LUIS
|
Paramount
|
166422
|
4-Jun-80
|
4
|
EMPALME
|
Paramount
|
166423
|
4-Jun-80
|
6
|
SANGRE
DE CRISTO
|
Paramount
|
166424
|
4-Jun-80
|
41
|
SANTA
CLARA
|
Paramount
|
166425
|
4-Jun-80
|
15
|
EL
CARMEN
|
Paramount
|
166426
|
4-Jun-80
|
59.0864
|
LAS
TRES B.B.B.
|
Paramount
|
166427
|
4-Jun-80
|
23.001
|
SWANWICK
|
Paramount
|
166428
|
4-Jun-80
|
70.1316
|
LAS
TRES S.S.S.
|
Paramount
|
166429
|
4-Jun-80
|
19.1908
|
SAN
JUAN
|
Paramount
|
166402
|
4-Jun-80
|
3
|
EL
ROSARIO
|
Paramount
|
166430
|
4-Jun-80
|
14
|
GUADALUPE
DE LOS REYES
|
Paramount
|
172225
|
4-Jun-80
|
8
|
CONSTITUYENTES
1917
|
Paramount*
|
199402
|
19-Apr-94
|
66.2403
|
MONTECRISTO
|
Paramount*
|
213579
|
18-May-01
|
38.056
|
MONTECRISTO
FRACCION
|
Paramount*
|
213580
|
18-May-01
|
0.2813
|
MONTECRISTO
II
|
Paramount*
|
226590
|
2-Feb-06
|
27.1426
|
SANTA
CRUZ
|
Amermin
|
186960
|
17-May-90
|
10
|
ANDREA
|
Paramount
|
231075
|
16-Jan-08
|
84112.6183
|
GISSEL
|
Paramount
|
228244
|
17-Oct-06
|
880
|
ISABEL
|
Paramount
|
228724
|
17-Jan-07
|
348.285
|
ELYCA
|
Paramount
|
179842
|
17-Dec-86
|
10.0924
|
|
|
|
T o
t a l
|
85768.0715
|
Temoris
Project
|
|
|
|
Guazapares
|
Minera
Gama
|
232082
|
18-May-07
|
6265.2328
|
Roble
|
Minera
Gama
|
232084
|
18-May-07
|
797.795
|
Temoris
Centro
|
Minera
Gama
|
232081
|
18-May-07
|
40386.1449
|
Temoris
Fracción 2
|
Minera
Gama
|
229551
|
18-May-07
|
7328.1302
|
Temoris
Fracción 3
|
Minera
Gama
|
229552
|
18-May-07
|
14.0432
|
Temoris
Fracción 4
|
Minera
Gama
|
229553
|
18-May-07
|
18.6567
|
|
|
|
T o
t a l
|
100713.042
|
Guazapares
Claims
|
|
|
|
San
Francisco
|
Paramount*
|
191486
|
19-Dec-91
|
38.1598
|
Ampliación
San Antonio
|
Paramount*
|
196127
|
23-Sep-92
|
20.9174
|
San
Antonio
|
Paramount*
|
204385
|
13-Feb-97
|
14.8932
|
Guazaparez
|
Paramount
|
209497
|
3-Aug-99
|
30.9111
|
Guazaparez
3
|
Paramount
|
211040
|
24-Mar-00
|
250
|
Guazaparez
1
|
Paramount
|
212890
|
13-Feb-01
|
451.9655
|
Guazaparez
5
|
Paramount
|
213572
|
18-May-01
|
88.8744
|
Cantilito
|
Paramount
|
220788
|
7-Oct-03
|
37.035
|
San
Antonio
|
Paramount
|
222869
|
14-Sep-04
|
105.1116
|
Guazaparez
4
|
Paramount
|
223664
|
2-Feb-05
|
63.9713
|
Guazaparez
2
|
Paramount
|
226217
|
2-Dec-05
|
404.0016
|
Vinorama
|
Paramount
|
226884
|
17-Mar-06
|
474.222
|
San
Antonio
|
CA
T-204385*
|
181963
|
17-Mar-88
|
15
|
|
|
|
T o
t a l
|
1980.0629
|
|
|
|
Grand
Total
|
188461.176
|
(*) Under
option
Market for Gold and
Silver:
The
demand for gold and silver has created a bull market for both metals over the
past several years. While there will likely continue to be increased volatility
of market prices in the short run due to seasonality or speculation, the growth
of the world’s economy is driving demand for raw materials that has drawn down
supplies. Despite a slowing U.S. economy, a growing middle class in both China
and India is driving demand for precious metals. There also remains increased
interest in holding precious metals such as gold and silver as a store of value
during periods of increasing anxiety of either errant monetary policies or
strained international relations. Contributing further to the increasing price
of both gold and silver has been the fall in the value of the US dollar against
other major foreign currencies and the deteriorating economic indicators in the
United States and throughout the world.
Gold
prices have generally trended upward during the last nine years, from a low of
just under $260 per ounce in early 2001 to a high of more than $1,200
per ounce in December2009. Despite declining from a high of $21.00 per ounce in
March 2008 to approximately $18.75 per ounce in November 2009, silver has
trended upward as well over the past 9 years from a low of approximately $8.50
per ounce. Management remains encouraged with its ongoing drilling
program. If commercially recoverable deposits are identified,
management believes that the Company will enter into an agreement with a mining
partner who has experience implementing mining operations.
Recent
Financings and Related Agreements:
On
October 15, 2009 we offered 16 million shares of our common stock at an offering
price of $1.25 per share. Our underwriters exercised all of their
overallotment of 2.4 million shares. As a result of the
foregoing, we received net proceeds of approximately $21.7
million. The shares of common stock were offered pursuant to the
Company’s registration statement declared effective by the Commission
on Paramount’s shelf registration statement on Form S-3 (Registration No.
333-153104) (the “Registration Statement”), including a base prospectus dated
January 8, 2009, as supplemented by a prospectus supplement dated October 8,
2009. FCMI Financial Corporation (“FCMI”), the Company’s largest
stockholder, purchased 4,000,000 Shares in the Offering.
The
proceeds from the offering will allow us to further develop the San Miguel
project and to explore other precious metal
opportunities. We believe that these funds will be adequate to meet
our budgeted expenses.
On
December 4, 2009, we entered into an Earn -In Agreement with SNS
Silver Corp (“SNS”) whereby we acquired the right and option to earn
up to 30% of SNS’s interest in and to the Claims of the Northern
Nickel Agreement by incurring Exploration Expenditures of $1,400,000
Cdn by December 31, 2009. We have expended the required sums and as a
result, we currently hold an option to acquire a 30% interest in the Northern
Nickel claims. Under terms of the Agreement with SNS, we have been
granted an “Equity Conversion Right” on any and all sums
spent on the Exploration Program into shares of SNS at a price of $0.23 Cdn per
share.
Comparison
of Operating Results for the Three and Six Months ended December 31, 2009
to the Three and Six Months Ended December 31, 2008 and cumulative from
Inception (March 29, 2005)
Revenues
We are an
exploratory mining company with no revenues from operations to date. All of our
revenues to date represent interest income which we have earned as a result of
our cash holdings and notes receivable. Our cash holdings were generated from
the sale of our securities. Interest income for the three and six months ended
December 31, 2009 were $0 and $66,309 as
compared to $52,930 and $150,207 for the three
and six months ended December 31, 2008. Monies are deposited in
interest bearing accounts until such time as needed for drilling and general
working capital purposes.
Operating
Expenses
For the
three and six months ended December 31, 2009 our total
operating expenses were $4,416,588 and $6,528,389 as
compared to $1,453,612 and $4,611,427 for the
comparable periods in 2008. The significant increase in operating
expenses is primarily attributable to a significant increase in our
exploration expenses. We were able to significantly expand our
drilling program due in part to the proceeds we received from the
sale of our securities.
Exploration
costs continue to be our largest expense totaling $2,875,770 and $3,954,269 for
the three and six months ended December 31, 2009 as compared to $481,495 and
$2,270,134 for the three and six months ended December 31, 2008. We
have incurred exploration costs since Inception totaling
$20,555,886.
With
increased drilling activities, our geology fees for the three months ended
December 31, 2009 totaled $242,183 as compared to $140,274 during the second
quarter of 2008. Total geology fees for the six months ended December
31, 2009 and 2008 were $461,471 and $479,869. Geology fees
since inception totaled $3,046,680. Geology fees will continue to
increase as we continue with an expanding drilling program.
We
incurred acquisition costs of $695,721 and $1,060,180 for the three
and six months ended December 31, 2009 related to the Klondex
transaction. We did not incur similar expenses in 2008. During
the three months ended December 31, 2009 stock based compensation was
$47,216 and have incurred $209,191 for the six months ended December 31,
2009. This compares with $200,587 and $547,153 during
2008.
With our
dual listings on the NYSE AMEX and the Toronto Stock Exchange market awareness
and investor relations continues to be a critical component of our business
strategy. We believe that this program has been successful and as a result have
been able to reduce these fees from $202,839 and $458,125 for the three and six
months ended December 31, 2008 to $46,564 and $86,190 for the comparative
periods in 2009. With most of our focus on mining activities
and costs related thereto, we have been able to significantly reduce our office
and administrative expenses. For the three and six months ended
December 31, 2009, we incurred expenses of $71,827 and $152,764 as compared to
$266,245 and $582,634.
Professional
fees for the three and six months ended December 31, 2009 and 2008 remain
relatively unchanged totaling $163,442 and $403,374 in 2009 as compared to
$173,597 and $408,573. With increased activities in Mexico, corporate
compliance and regulatory issues with respect to compliance
matters for the SEC , NYSE AMEX and the Toronto Stock
Exchange we expect that these fees will continue at their current
level.
Net
Income (loss)
Our Net
Loss for the three and six months ended December 31, 2009 was $(4,416,588) and
$(6,462,080) as compared to $(1,400,682) and $(4,461,220), in 2008.
Cumulative loss since inception totaled $(49,684,485) Our Net Loss
per Share was $(0.04) and $(0.07) as compared to a
Net Loss per share of $(0.02) and
$(0.08) during the comparable periods in 2008. Until such time as we
are able to identify mineral deposits which we believe can be extracted in a
commercially reasonable manner, of which there can be no assurance, we will
continue to incur ongoing losses.
Liquidity
and Capital Resources
Assets
and Liabilities
At December 31,
2009, we had cash totaling $19,095,311 as compared to $7,040,999,
at June 30, 2009, an increase of approximately
170% which is due to our recent financing
activities. Amounts receivable totaled $473,052 at
December 31, 2009 as compared to $221,267. This increase is
primarily attributable to value added tax refunds due from the
Mexican government.. Total current assets at December 31, 2009 were
$20,674,145 as compared to $8,499,986 at June 30,
2009.
Our long
term assets at December 31, 2009 totaled $22,628,864 consisting of mineral
properties and fixed assets totaling $22,111,203 and $517,661
respectively as compared to long terms assets at June 30, 2009
totaling $18,957,809 consisting of mineral properties totaling $18,436,951 and
$520,858 for fixed assets. Long term assets consist of our
mineral properties located within the Sierra Madre gold district in Mexico in
addition to an option we acquired for mineral properties located at Vidette Lake
in British Columbia. The increase in our mineral properties is directly
attributable to an increase of the capitalized costs of the San Miguel Project
from $13,906,572 to $17,855,824. We capitalize the acquisition costs of these
properties.
Total
assets at December 31, 2009 were $43,303,009 as compared to $27,457,795 as
of June 30, 2009. This represents an increase of approximately 58% due to
increased cash position.
Our
current liabilities as of December 31, 2009 totaled $287,240 as compared to
$383,445 at June 30, 2009.
We have a
working capital surplus at December 31, 2009 (current assets less current
liabilities) of $20,386,905 as compared to a working capital surplus
of $8,116,541 as of June 30, 2009. As a result of this
working capital surplus we will be able to meet our currently existing ongoing
contractual commitments for any property or mineral rights and have sufficient
financial resources to fund our ongoing exploration and geological
endeavors.
Critical
Accounting Policies
Use of
Estimates - Management’s discussion and analysis or plan of operation is based
upon the Company’s consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires management to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues, and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, management evaluates these estimates,
including those related to allowances for doubtful accounts receivable and
long-lived assets. Management bases these estimates on historical experience and
on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis of making judgments about the
carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
We review
the carrying value of property and equipment for impairment at least annually or
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of long-lived assets is measured
by comparison of its carrying amount to the undiscounted cash flows that the
asset or asset group is expected to generate. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the property, if any, exceeds its fair market
value.
Effective
January 1, 2006, we adopted the provisions of SFAS No. 123(R),
“Share-Based Payment,” under the modified prospective method. SFAS
No. 123(R) eliminates accounting for share-based compensation transactions
using the intrinsic value method prescribed under APB Opinion No. 25,
“Accounting for Stock Issued to Employees,” and requires instead that such
transactions be accounted for using a fair-value-based method. Under the
modified prospective method, we are required to recognize compensation cost for
share-based payments to employees based on their grant-date fair value from the
beginning of the fiscal period in which the recognition provisions are first
applied. For periods prior to adoption, the financial statements are unchanged,
and the pro forma disclosures previously required by SFAS No. 123, as
amended by SFAS No. 148, will continue to be required under SFAS
No. 123(R) to the extent those amounts differ from those in the Statement
of Operations.
Mineral
property acquisition costs are initially capitalized when incurred using the
guidance in EITF 04-02, “Whether Mineral Rights Are Tangible
or Intangible Assets.” The Company assesses the carrying cost for
impairment under SFAS No. 144, “Accounting for Impairment or
Disposal of Long Lived Assets” at each fiscal quarter end. When it has
been determined that a mineral property can be economically developed as a
result of establishing proven and probable reserves, the costs then incurred to
develop such property are capitalized. Such costs will be amortized using the
units-of-production method over the estimated lie of the probable reserve. If
mineral properties are subsequently abandoned or impaired, any capitalized costs
will be charged to operations.
The
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 SFAS No. 52 “Foreign Currency Translation”
(“SFAS No. 52). 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 Peruvian sols. 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 Mexican
peso and Peruvian sol. The financial statements of the subsidiaries are
translated to United States dollars in accordance with SFAS No. 52 using
period-end rates of exchange for assets and liabilities, and average rates of
exchange for the year 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 current operations.
The
preparation of financial statements in conformity with generally accepted
accounting principles (GAAP) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those
estimates.
Off-Balance
Sheet Arrangements
We are
not currently a party to, or otherwise involved with, any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
material effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources.
ITEM 3. QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND
PROCEDURES
|
(a)
|
Evaluation
of Disclosure Controls and
Procedures
|
Our
management, with the participation of our Chief Executive Officer and our Chief
Financial Officer, evaluated the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) and determined that our disclosure controls
and procedures were effective as of the end of the period covered by this
Quarterly Report on Form 10-Q. The evaluation considered the procedures
designed to ensure that the information required to be disclosed by us in
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms and communicated to our management as appropriate to allow timely
decisions regarding required disclosure.
|
(b)
|
Changes
in Internal Control over Financial
Reporting
|
During
the period covered by this Quarterly Report on Form 10-Q, there was no
change in our internal control over financial reporting (as such term is defined
in Rules 13a-15(d) and 13d-15(d) under the Exchange Act) that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
|
(c)
|
Inherent
Limitations of Disclosure Controls and Internal Controls over Financial
Reporting
|
Because
of its inherent limitations, internal controls over financial reporting may not
prevent or detect misstatements. Projections of any evaluation or effectiveness
to future periods are subject to risks that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
ITEM 4T. THE INFORMATION
REQUIRED BY ITEM 4T IS CONTAINED IN ITEM 4.
PART
II. OTHER INFORMATION
ITEM 1. LEGAL
PROCEDINGS.
On
October 2, 2009, we filed a statement of claim in the Supreme Court of British
Columbia, Canada, naming Klondex Mines Ltd as a defendant in connection with the
termination by Klondex of the binding Letter Agreement dated July 20, 2009
whereby Klondex agreed to be acquired by Paramount on the basis of 1.45 shares
of our common stock for each common share of Klondex. The Statement of Claim
alleges Klondex acted in bad faith and in breach of the Agreement along with
damages for breach of contract and, in addition, damages for malicious falsehood
and defamation. Klondex has denied the allegations.
ITEM 1A. RISK
FACTORS
There
have been no material changes in our risk factors from those disclosed in our
Annual Report on Form 10-K for the period ended June 30, 2009.
ITEM 2. UNREGISTERED
SALES OF EQUITY SECURITIES.
During
the quarter ended December 31, 2009, we issued 300,000 shares of our
common stock in connection with the acquisition of mineral
properties. We relied on the exemptive provisions of
Section 4(2) of the Securities Act in connection with the issuance of the
shares of common stock.
ITEM 3. DEFAULTS UPON
SENIOR SECURITIES.
ITEM 4. SUBMISSION OF
MATTERS TO A VOTE SECURITY HOLDERS.
None.
We did
however, hold our annual shareholders meeting
on February 24, 2009 at which time we
elected Christopher Crupi, Christopher Reynolds, Michel Yvan
Stinglhamber, John Carden, Robert Dinning, Rudi P. Fronk and Eliseo
Gonzalez-Urien as directors.
Also at
that meeting, the firm of HLB Cinnamon Jang Willoughby & Company
was appointed our independent registered public accounting firm for
the fiscal year ending June 30, 2010.
ITEM 5. OTHER INFORMATION
None.
ITEM 6.
EXHIBITS
Exhibit Number
|
|
Description
|
|
|
|
|
2.1 |
|
Binding
Letter Agreement, dated July 20, 2009, between the Company and
Klondex Mines Ltd., incorporated by reference to Exhibit 2.1 to
Form 8-K filed July 22, 2009
|
|
3.1 |
|
Certificate
of Incorporation, effective March 31, 2005, incorporated by reference
to Exhibit 3.1 to Form 10-SB filed November 2,
2005
|
|
3.2 |
|
Certificate
of Amendment to Certificate of Incorporation, effective August 23,
2007, incorporated by reference to Exhibit 3 to Form 8-K filed
August 28, 2007
|
|
3.2(b) |
|
Certificate
of Amendment to Certificate of Incorporation, effective March 3,
2009, incorporated by reference to Exhibit 3.1 to Form 8-K filed
February 26, 2009
|
|
3.3 |
|
Restated
Bylaws, effective April 18, 2005
|
|
4.1 |
|
Registration
Rights Agreement, dated March 30, 2007, incorporated by reference to
Exhibit 10.2 to Form 8-K filed April 6,
2007
|
|
4.2 |
|
Form of
Investor Warrant, incorporated by reference to Exhibit 10.3 to
Form 8-K filed April 6, 2007
|
|
4.3 |
|
Form of
Broker Warrant, incorporated by reference to Exhibit 10.4 to
Form 8-K filed April 6, 2007
|
|
4.4 |
|
Warrant
Certificate, dated March 20, 2009, issued by the Company to Dahlman
Rose & Company LLC, incorporated by reference to Exhibit 4.1 to
Form 8-K/A filed April 21, 2009
|
|
10.1 |
|
Option
Agreement on San Miguel properties, dated December 19, 2005,
incorporated by reference to Exhibit 10.11 to our Amendment to
Form 10-SB filed February 9, 2006
|
|
10.2 |
|
Agency
Agreement with Blackmont Capital, Inc., et al., dated March 30, 2007,
incorporated by reference to Exhibit 10.1 to Form 8-K filed
April 6, 2007
|
|
10.3 |
|
Agreement
of Purchase and Sale between the Company and Tara Gold Resources, dated
August 22, 2008, incorporated by reference to Exhibit 10.4 to
Form 8-K filed September 2, 2008
|
|
10.4 |
|
Forebearance
Agreement between the Company and Mexoro Minerals Ltd., dated
March 17, 2009, incorporated by reference to Exhibit 10.5 to
Form 8-K on March 23, 2009
|
|
10.5 |
|
Letter
Agreement for Purchase and Sale of Magnetic Resources Ltd., dated
February 12, 2009, incorporated by reference to Exhibit 10.6 to
Form 8-K filed on March 23, 2009
|
|
10.6 |
|
Letter
Agreement for Assignment of Option Agreement between the Company and
Garibaldi Resources Corp., dated February 2, 2009, incorporated by
reference to Exhibit 10.7 to Form 8-K on March 23,
2009
|
|
10.7 |
|
2006/07
Stock Incentive and Compensation Plan, incorporated by reference to
Exhibit 10.1 to Form S-8 filed November 8,
2006
|
|
10.8 |
|
2007/08
Stock Incentive and Equity Compensation Plan, incorporated by reference to
Exhibit A to our proxy statement filed June 29,
2007
|
|
10.9 |
|
2008/09
Stock Incentive and Equity Compensation Plan, incorporated by reference to
Exhibit B to our proxy statement filed January 8,
2009
|
|
10.10 |
|
Financial
Advisory Services Agreement, effective March 1, 2009, by and between
the Company and Dahlman Rose & Company LLC, incorporated by reference
to Exhibit 10.1 to Form 8-K filed April 21,
2009
|
|
10.11 |
|
Form of
Klondex Support Agreement, incorporated by reference to Schedule “A” to
Exhibit 2.1 to Form 8-K filed July 22,
2009
|
|
10.12 |
|
Form of
Paramount Support Agreement, incorporated by reference to Schedule “B” to
Exhibit 2.1 to Form 8-K filed July 22,
2009
|
|
10.13 |
|
Support
Agreement between the Company and FCMI Financial Corporation, dated
August 5, 2009, incorporated by reference to Exhibit 10.1 to
Form 8-K filed August 6, 2009
|
|
10.14 |
|
Support
Agreement between the Company and Garibaldi Resources Corp., dated
August 5, 2009, incorporated by reference to Exhibit 10.2 to
Form 8-K filed August 6, 2009
|
|
31.1* |
|
Certificate
of the Chief Executive Officer pursuant Section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith)
|
|
31.2* |
|
Certificate
of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith)
|
|
32.1* |
|
Certificate
of the Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (filed herewith)
|
|
32.2* |
|
Certificate
of the Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (filed
herewith)
|
———————
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized
|
PARAMOUNT
GOLD AND SILVER CORP.
|
|
|
|
|
|
|
Date:
February 12,
2010
|
By:
|
/s/
Christopher
Crupi
|
|
|
Christopher
Crupi
|
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
Date:
February 12, 2010
|
|
/s/
Carlo
Buffone
|
|
|
Carlo
Buffone
|
|
|
Chief
Financial Officer
|