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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,
2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission File Number. 001-39278
SOLITARIO ZINC
CORP.
|
(Exact name of registrant as specified in its charter)
|
Colorado
|
|
84-1285791
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.
|
4251 Kipling St. Suite 390, Wheat Ridge, CO
|
|
80033
|
(Address of principal executive offices)
|
|
(Zip Code)
|
(303)
534-1030
(Registrant's telephone number, including area
code)
Securities registered pursuant to Section 12(b) of the
Act:
Title of Each Class
|
|
Trading Symbol
|
|
Name of Each Exchange on Which Registered
|
Common Stock, $0.01 par value
|
|
XPL
|
|
NYSE American
|
Indicate by checkmark 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 such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant has submitted
electronically and posted on its Web site, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
Large accelerated filer ☐
|
Accelerated filer ☐
|
Non-accelerated filer ☒
|
Smaller reporting company ☒
|
Emerging Growth Company ☐
|
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
There were 64,768,873 shares of $0.01 par value common stock
outstanding as of May 4, 2022.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SOLITARIO ZINC CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands of U.S. dollars, except share and per share
amounts)
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
Assets
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
345 |
|
|
$ |
462 |
|
Short-term investments
|
|
|
6,614 |
|
|
|
5,087 |
|
Investments in marketable equity securities, at fair value
|
|
|
1,413 |
|
|
|
1,307 |
|
Prepaid expenses and other
|
|
|
317 |
|
|
|
303 |
|
Total current assets
|
|
|
8,689 |
|
|
|
7,159 |
|
|
|
|
|
|
|
|
|
|
Mineral properties
|
|
|
16,316 |
|
|
|
16,306 |
|
Other assets
|
|
|
136 |
|
|
|
154 |
|
Total assets
|
|
$ |
25,141 |
|
|
$ |
23,619 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
230 |
|
|
$ |
239 |
|
Operating lease liability
|
|
|
37 |
|
|
|
37 |
|
Total current liabilities
|
|
|
267 |
|
|
|
276 |
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
|
Asset retirement obligation – Lik
|
|
|
125 |
|
|
|
125 |
|
Operating lease liability
|
|
|
25 |
|
|
|
35 |
|
Total long-term liabilities
|
|
|
150 |
|
|
|
160 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value, authorized 10,000,000 shares
(none issued and outstanding at March 31, 2022 and December 31,
2021)
|
|
|
- |
|
|
|
- |
|
Common stock, $0.01 par value, authorized 100,000,000 shares
(64,760,123 and 62,036,399 shares, respectively, issued and
outstanding at March 31, 2022 and December 31, 2021)
|
|
|
648 |
|
|
|
620 |
|
Additional paid-in capital
|
|
|
74,550 |
|
|
|
72,523 |
|
Accumulated deficit
|
|
|
(50,474 |
) |
|
|
(49,960 |
) |
Total shareholders’ equity
|
|
|
24,724 |
|
|
|
23,183 |
|
Total liabilities and shareholders’ equity
|
|
$ |
25,141 |
|
|
$ |
23,619 |
|
See Notes to Unaudited Condensed Consolidated Financial
Statements
SOLITARIO ZINC CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands of U.S. dollars, except per share amounts)
|
|
Three months ended
March 31
|
|
|
|
2022
|
|
|
2021
|
|
Costs, expenses and other:
|
|
|
|
|
|
|
Exploration expense
|
|
$ |
226 |
|
|
$ |
147 |
|
Depreciation
|
|
|
8 |
|
|
|
5 |
|
General and administrative
|
|
|
387 |
|
|
|
280 |
|
Total costs, expenses and other
|
|
|
621 |
|
|
|
432 |
|
Other (loss) income
|
|
|
|
|
|
|
|
|
Interest and dividend income
|
|
|
27 |
|
|
|
31 |
|
Other income
|
|
|
- |
|
|
|
10 |
|
Loss on derivative instruments
|
|
|
(1 |
) |
|
|
(3 |
) |
(Loss) gain on sale of marketable equity securities
|
|
|
(81 |
) |
|
|
13 |
|
Unrealized loss on short-term investments
|
|
|
(51 |
) |
|
|
(25 |
) |
Unrealized gain (loss) on marketable equity securities
|
|
|
213 |
|
|
|
(122 |
) |
Total other loss
|
|
|
107 |
|
|
|
(96 |
) |
Net loss
|
|
$ |
(514 |
) |
|
$ |
(528 |
) |
Loss per common share:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
62,728 |
|
|
|
58,254 |
|
See Notes to Unaudited Condensed Consolidated Financial
Statements
SOLITARIO ZINC CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of U.S. dollars)
|
|
Three months ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$ |
(514 |
) |
|
$ |
(528 |
) |
Adjustments to reconcile net loss to net cash used
in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
8 |
|
|
|
5 |
|
Amortization of right of use lease asset
|
|
|
10 |
|
|
|
10 |
|
Unrealized (gain) loss of marketable equity securities
|
|
|
(213 |
) |
|
|
122 |
|
Unrealized loss on short-term investments
|
|
|
51 |
|
|
|
25 |
|
Employee stock option expense
|
|
|
13 |
|
|
|
28 |
|
Loss (gain) on sale of marketable equity securities
|
|
|
81 |
|
|
|
(13 |
) |
Loss on derivative instruments
|
|
|
1 |
|
|
|
3 |
|
Other income PPP loan forgiveness
|
|
|
- |
|
|
|
(10 |
) |
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets
|
|
|
(14 |
) |
|
|
2 |
|
Accounts payable and other current liabilities
|
|
|
(20 |
) |
|
|
(26 |
) |
Net cash used in operating activities
|
|
|
(597 |
) |
|
|
(382 |
) |
Investing activities:
|
|
|
|
|
|
|
|
|
(Purchase) sale of short-term investments, net
|
|
|
(1,578 |
) |
|
|
938 |
|
Cash from sale of marketable equity securities
|
|
|
26 |
|
|
|
78 |
|
Purchase of mineral properties
|
|
|
(10 |
) |
|
|
- |
|
Net cash (used in) provided by investing activities
|
|
|
(1,562 |
) |
|
|
1,016 |
|
Financing activities:
|
|
|
|
|
|
|
|
|
Issuance of common stock, net
|
|
|
2,023 |
|
|
|
98 |
|
Stock options exercised
|
|
|
19 |
|
|
|
67 |
|
Net cash provided by financing activities
|
|
|
2,042 |
|
|
|
165 |
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(117 |
) |
|
|
799 |
|
Cash and cash equivalents, beginning of period
|
|
|
462 |
|
|
|
605 |
|
Cash and cash equivalents, end of period
|
|
$ |
345 |
|
|
$ |
1,404 |
|
See Notes to Unaudited Condensed Consolidated Financial
Statements
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Business and Significant Accounting
Policies
Business and company formation
Solitario Zinc Corp. (“Solitario,” or the “Company”) is an
exploration stage company as defined by rules issued by the United
States Securities and Exchange Commission (“SEC”). Solitario
was incorporated in the state of Colorado on November 15, 1984 as a
wholly-owned subsidiary of Crown Resources Corporation ("Crown").
In July 1994, Solitario became a publicly traded company on
the Toronto Stock Exchange through its initial public offering.
Solitario has been actively involved in mineral exploration
since 1993. Solitario’s primary business is to acquire
exploration mineral properties or royalties and/or discover
economic deposits on its mineral properties and advance these
deposits, either on its own or through joint ventures, up to the
development stage. At that point, or sometime prior to that
point, Solitario would likely attempt to sell its mineral
properties, pursue their development either on its own or through a
joint venture with a partner that has expertise in mining
operations, or create a royalty with a third party that continues
to advance the property. Solitario is primarily focused on
the acquisition and exploration of precious metal, zinc and other
base metal exploration mineral properties. In addition to
focusing on its mineral exploration properties and the evaluation
of mineral properties for acquisition, Solitario also evaluates
potential strategic transactions for the acquisition of new
precious and base metal properties and assets with exploration
potential or business combinations that Solitario determines to be
favorable to Solitario.
Solitario has recorded revenue in the past from the sale of mineral
properties, including the sale of certain mineral royalties.
Revenues and / or proceeds from the sale or joint venture of
properties or assets, although significant when they occur, have
not been a consistent annual source of cash and would only occur in
the future, if at all, on an infrequent basis.
Solitario currently considers its carried interest in the Florida
Canyon project in Peru, its interest in the Lik project in Alaska,
and its Golden Crest project in South Dakota to be its core mineral
property assets. Nexa Resources, Ltd. (“Nexa”), Solitario’s
joint venture partner, is continuing the exploration and
furtherance of the Florida Canyon project and Solitario is
monitoring progress at Florida Canyon. Solitario is working
with its 50% joint venture partner in the Lik deposit, Teck
American Incorporated, a wholly-owned subsidiary of Teck Resources
Limited (both companies are referred to as “Teck”), to further the
exploration and evaluate potential development plans for the Lik
project. Solitario is conducting mineral exploration on its
Golden Crest project on its own.
Solitario anticipates using its cash and short-term investments, in
part, to fund costs and activities to further the exploration of
the Florida Canyon, Lik and Golden Crest projects, and to
potentially acquire additional mineral property assets. The
fluctuations in precious metal and other commodity prices
contribute to a challenging environment for mineral exploration and
development, which has created opportunities as well as challenges
for the potential acquisition of early-stage and advanced mineral
exploration projects or other related assets at potentially
attractive terms.
The accompanying interim condensed consolidated financial
statements of Solitario for the three months ended March 31, 2022
are unaudited and are prepared in accordance with accounting
principles generally accepted in the United States of America
(“generally accepted accounting principles”). They do not
include all disclosures required by generally accepted accounting
principles for annual financial statements, but in the opinion of
management, include all adjustments necessary for a fair
presentation. Interim results are not necessarily indicative
of results which may be achieved in the future or for the full year
ending December 31, 2022.
These financial statements should be read in conjunction with the
financial statements and notes thereto which are included in
Solitario’s Annual Report on Form 10-K for the year ended December
31, 2021. The accounting policies set forth in those annual
financial statements are the same as the accounting policies
utilized in the preparation of these financial statements, except
as modified for appropriate interim financial statement
presentation.
Risks and Uncertainties
Solitario faces risks related to health epidemics and other
outbreaks of communicable diseases, which could significantly
disrupt its operations and may materially and adversely affect its
business and financial condition.
Solitario’s business still could be adversely impacted by the
effects of the coronavirus (“COVID-19”) or other epidemics or
pandemics. Solitario has recommended all of its employees and
contractors follow government guidelines for health and safety
policies for employees and contractors, including encouraging
tele-commuting and working from home where possible.
Solitario has evaluated the effects of COVID-19 on its
operations and taken pro-active steps to address the impacts on its
operations, including at times reducing costs, in response to the
economic uncertainty associated with potential risks from COVID-19.
These prior cost reductions included implementing salary
reductions and evaluating and reducing certain planned 2021
exploration programs through its joint venture partners at the
Florida Canyon and Lik exploration projects. Also, Solitairo
has evaluated the potential impacts on its ability to access future
traditional funding sources on the same or reasonably similar terms
as in past periods. Solitario will continue to monitor the
effects of COVID-19 on its operations, financial condition and
liquidity. However, the extent to which COVID-19 impacts
Solitario’s business, including our exploration and other
activities and the market for our securities, will depend on future
developments, which are highly uncertain and cannot be predicted at
this time, and include the duration, severity and scope of any new
outbreak and the actions taken to contain or treat the COVID-19
pandemic.
Financial reporting
The consolidated financial statements include the accounts of
Solitario and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation. The consolidated financial statements are
prepared in accordance with generally accepted accounting
principles and are expressed in US dollars.
Cash equivalents
Cash equivalents include investments in highly liquid money-market
securities with original maturities of three months or less when
purchased. As of March 31, 2022, $309,000 of Solitario’s cash
are held in brokerage accounts and foreign banks, which are not
covered under the Federal Deposit Insurance Corporation (“FDIC”)
rules for the United States.
Short-term investments
As of March 31, 2022, Solitario has $6,015,000 of its current
assets in United States Treasury Securities (“USTS”) with
maturities of 15 days to 19 months. In addition, at March 31,
2022, Solitario has three bank certificates of deposits (“CD’s”)
with face values between $100,000 and $250,000 recorded at their
total fair value of $599,000. The CD’s have maturities of one
month to nine months. The USTS and CD’s are recorded at their
fair value, based upon quoted market prices. The USTS are not
covered under the FDIC insurance rules for United States deposits.
Solitario’s USTS and CD’s are highly liquid and may be sold
in their entirety at any time at their quoted market price and are
classified as a current asset.
Financial statement classification
Solitario separately shows its classification of changes in the
fair value of its short-term investment in USTS and CD’s as
unrealized gain or loss on short-term investments in the statement
of operations rather than a portion of interest and dividend income
(net). During the three months ended March 31, 2022 and 2021
the non-cash decrease in the fair value of its short-term
investments, due primarily to changes in interest rates on held
securities, was $51,000 and $25,000, respectively. The 2021
income statement and cash flows have been reclassified for
comparability to the 2022 presentation. Total other income
(expense) and net cash used in operations in 2021 was not impacted
by the reclassification.
Earnings per share
The calculation of basic and diluted earnings (loss) per share is
based on the weighted average number of shares of common stock
outstanding during the three months ended March 31, 2022 and 2021.
Potentially dilutive shares related to outstanding common
stock options of 5,440,000 and 5,437,650, respectively, for the
three months ended March 31, 2022 and 2021 were excluded from the
calculation of diluted loss per share because the effects were
anti-dilutive.
2. Mineral Properties
The following table details Solitario’s investment in Mineral
Properties:
(in thousands)
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2022
|
|
|
2021
|
|
Exploration
|
|
|
|
|
|
|
Lik project (Alaska – US)
|
|
$ |
15,611 |
|
|
$ |
15,611 |
|
Golden Crest (South Dakota – US)
|
|
|
705 |
|
|
|
695 |
|
Total exploration mineral properties
|
|
$ |
16,316 |
|
|
$ |
16,306 |
|
All exploration costs on our exploration properties, none of which
have proven and probable reserves, including any additional costs
incurred for subsequent lease payments or exploration activities
related to our projects, are expensed as incurred.
Exploration
expense
The following items comprised exploration expense:
(in thousands)
|
|
Three months ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Geologic and field expenses
|
|
$ |
194 |
|
|
$ |
125 |
|
Administrative
|
|
|
32 |
|
|
|
22 |
|
Total exploration costs
|
|
$ |
226 |
|
|
$ |
147 |
|
Asset Retirement
Obligation
In connection with the acquisition of its interest in the Lik
project in 2017, Solitario recorded an asset retirement obligation
of $125,000 for Solitario’s estimated reclamation cost of the
existing disturbance at the Lik project. This disturbance
consists of an exploration camp including certain drill sites and
access roads at the camp. The estimate was based upon
estimated cash costs for reclamation as determined by the
permitting bond required by the State of Alaska, for which
Solitario has purchased a reclamation bond insurance policy in the
event Solitario or its 50% partner, Teck, do not complete required
reclamation.
Solitario has not applied a discount rate to the recorded asset
retirement obligation as the estimated time frame for reclamation
is not currently known, as reclamation is not expected to occur
until the end of the Lik project life, which would follow future
development and operations, the start of which cannot be estimated
or assured at this time. Additionally, no depreciation will
be recorded on the related asset for the asset retirement
obligation until the Lik project goes into operation, which cannot
be assured.
3. Marketable Equity Securities
Solitario's investments in marketable equity securities are carried
at fair value, which is based upon quoted prices of the securities
owned. The cost of marketable equity securities sold is
determined by the specific identification method. Changes in
market value are recorded in the condensed consolidated statement
of operations.
At March 31, 2022 and December 31, 2021 Solitario owns the
following marketable equity securities:
|
|
March 31 2022
|
|
|
December 31 2021
|
|
|
|
shares
|
|
|
Fair value
(000’s)
|
|
|
Shares
|
|
|
Fair value
(000’s)
|
|
Kinross Gold Corp
|
|
|
100,000 |
|
|
$ |
588 |
|
|
|
100,000 |
|
|
$ |
581 |
|
Vendetta Mining Corp.
|
|
|
8,500,000 |
|
|
|
442 |
|
|
|
9,000,000 |
|
|
|
356 |
|
Vox Royalty Corp.
|
|
|
134,055 |
|
|
|
383 |
|
|
|
134,055 |
|
|
|
370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$ |
1,413 |
|
|
|
|
|
|
$ |
1,307 |
|
The following tables summarize Solitario’s marketable equity
securities and adjustments to fair value:
(in thousands)
|
|
March 31,
2022
|
|
|
December 31,
2021
|
|
Marketable equity securities at cost
|
|
$ |
1,597 |
|
|
$ |
1,704 |
|
Cumulative unrealized loss on marketable equity securities
|
|
|
(184 |
) |
|
|
(397 |
) |
Marketable equity securities at fair value
|
|
$ |
1,413 |
|
|
$ |
1,307 |
|
The following table represents changes in marketable equity
securities during the three months ended March 31, 2022 and
2021:
(in thousands)
|
|
Three months ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Cost of marketable equity securities sold
|
|
$ |
107 |
|
|
$ |
65 |
|
Realized (loss) gain on marketable equity securities sold
|
|
|
(81 |
) |
|
|
13 |
|
Proceeds from the sale of marketable equity securities sold
|
|
|
(26 |
) |
|
|
(78 |
) |
Net gain (loss) on marketable equity securities
|
|
|
132 |
|
|
|
(109 |
) |
Change in marketable equity securities at fair value
|
|
$ |
106 |
|
|
$ |
(187 |
) |
The following table represents the realized and unrealized gain
(loss) on marketable equity securities:
(in thousands)
|
|
Three months ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Unrealized gain (loss) on marketable securities
|
|
$ |
213 |
|
|
$ |
(122 |
) |
Realized (loss) gain on marketable equity securities sold
|
|
|
(81 |
) |
|
|
13 |
|
Net gain (loss) on marketable securities
|
|
$ |
132 |
|
|
$ |
(109 |
) |
During the three months ended March 31, 2022, Solitario sold
500,000 shares of Vendetta Mining Corp. (“Vendetta”) common stock
for proceeds of $26,000 and recorded a loss on sale of $81,000 on
the date of sale. During the three months ended March 31, 2021,
Solitario sold (i) 1,010,000 shares of Vendetta common stock for
proceeds of $51,000 and recorded a loss on sale of $2,000; (ii)
287,000 shares of TNR Gold Corp. common stock for proceeds of
$18,000 and recorded a gain on sale of $13,000 and (iii) 3,200
shares of Vox Royalty Corp. (“Vox”) for proceeds of $9,000 and
recorded a gain on sale of $2,000.
4. Leases
Solitario accounts for its leases in accordance with ASC 842.
Solitario leases one facility, its Wheat Ridge, Colorado office
(the “WR Lease”), that has a term of more than one year. Solitario
has no other material operating lease costs. During the three
months ended March 31, 2021, Solitario entered into a new lease for
the same facility under the WR Lease (both the prior and new lease
are referred to as the “WR Lease”) and recorded a net increase in
the related asset and liability of $99,000. The WR Lease is
classified as an operating lease and has a term of 19 months at
March 31, 2022, with no renewal option. At March 31, 2022 and
December 31, 2021, the right-of-use office lease asset for the WR
Lease is classified as other assets and the related liability as
current and long-term operating lease liabilities in the condensed
consolidated balance sheet. The amortization of right of use lease
asset expense is recognized on a straight-line basis over the lease
term, with variable lease payments recognized in the period those
payments are incurred. During the three months ended March 31, 2022
and 2021, Solitario recognized $10,000 and $10,000, respectively,
of non-cash amortization of right of use lease asset expense for
the WR Lease included in general and administrative expense. During
the three months ended March 31, 2022 and 2021, cash lease payments
of $11,000 and $7,000, respectively, were made on the WR Lease.
These cash payments, less $1,000 of imputed interest for each
period, reduced the related liability on the WR Lease. The discount
rate within the WR Lease is not determinable and Solitario has
applied a discount rate of 5% based upon Solitario’s estimate of
its cost of capital.
The maturities of Solitario’s lease liability for its WR Lease are
as follows at March 31, 2022:
Future lease payments (in thousands)
|
|
|
|
|
|
|
|
2022
|
|
|
29 |
|
2023
|
|
|
36 |
|
Total lease payments
|
|
|
65 |
|
Less the portion of lease payments representing interest
|
|
|
(3 |
) |
Present value of lease payments
|
|
$ |
62 |
|
Supplemental cash flow information related to our operating lease
was as follows for the three months ended March 31, 2022 and
2021:
(in thousands)
|
|
Three months ended
March 31,
|
|
|
|
2022
|
|
|
2021
|
|
Cash paid for amounts included in the measurement of lease
liabilities
|
|
|
|
|
|
|
Operating cash outflows from WR Lease payments
|
|
$ |
11 |
|
|
$ |
7 |
|
Non-cash amounts related to the WR lease
|
|
|
|
|
|
|
|
|
Leased assets recorded in exchange for new operating lease
liabilities -net
|
|
$ |
- |
|
|
$ |
99 |
|
5. Other Assets
The following items comprised other assets:
(in thousands)
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2022
|
|
|
2021
|
|
Furniture and fixtures, net of accumulated depreciation
|
|
$ |
64 |
|
|
$ |
65 |
|
Lik project equipment, net of accumulated depreciation
|
|
|
5 |
|
|
|
10 |
|
Office lease asset
|
|
|
61 |
|
|
|
72 |
|
Vendetta warrants
|
|
|
2 |
|
|
|
3 |
|
Exploration bonds and other assets
|
|
|
4 |
|
|
|
4 |
|
Total other
|
|
$ |
136 |
|
|
$ |
154 |
|
Vendetta
Warrants
On July 31, 2019, Solitario purchased 3,450,000 Vendetta units for
a total of $233,000. Each Vendetta unit consisted of one share of
Vendetta common stock and one Vendetta warrant (the “Vendetta
Warrants”). Each Vendetta Warrant entitles the holder to purchase
one additional share of Vendetta common stock for a purchase price
of Cdn$0.13 per share for a period of three years. On the purchase
date Solitario recorded marketable equity securities of $165,000
for the Vendetta shares acquired and $68,000 for the Vendetta
Warrants based upon an allocation of the purchase price of the
Vendetta units, based upon (i) the fair value of the Vendetta
common shares received, based upon the quoted market price for
Vendetta common shares and (ii) the fair value of Vendetta Warrants
based upon a Black Scholes model. During the three months ended
March 31, 2022 and 2021, Solitario charged loss on derivative
instruments $1,000 and $3,000, respectively, for the change in the
fair value of the Vendetta Warrants based upon a Black Scholes
model.
6. Fair Value
Solitario accounts for its financial instruments under ASC 820. For
certain of Solitario’s financial instruments, including cash and
cash equivalents and payables, the carrying amounts approximate
fair value due to their short-term maturities. Solitario’s
short-term investments in USTS, CD’s, and marketable equity
securities are carried at their estimated fair value based on
quoted market prices. During the three months ended March 31, 2022
there were no reclassifications in financial assets or liabilities
between Level 1, 2 or 3 categories.
The following is a listing of Solitario’s financial assets and
liabilities required to be measured at fair value on a recurring
basis and where they are classified within the hierarchy as of
March 31, 2022:
(in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
$ |
6,614 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
6,614 |
|
Marketable equity securities
|
|
$ |
1,413 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,413 |
|
Vendetta Warrants
|
|
$ |
- |
|
|
$ |
2 |
|
|
$ |
- |
|
|
$ |
2 |
|
The following is a listing of Solitario’s financial assets and
liabilities required to be measured at fair value on a recurring
basis and where they are classified within the hierarchy as of
December 31, 2021:
(in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
$ |
5,087 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
5,087 |
|
Marketable equity securities
|
|
$ |
1,307 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,307 |
|
Vendetta Warrants
|
|
$ |
- |
|
|
$ |
3 |
|
|
$ |
- |
|
|
$ |
3 |
|
7. Income Taxes
Solitario accounts for income taxes in accordance with ASC 740.
Under ASC 740, income taxes are provided for the tax effects
of transactions reported in the financial statements and consist of
taxes currently due plus deferred taxes related to certain income
and expenses recognized in different periods for financial and
income tax reporting purposes. Deferred tax assets and
liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the
assets and liabilities are recovered or settled. Deferred
taxes are also recognized for operating losses and tax credits that
are available to offset future taxable income and income taxes,
respectively. A valuation allowance is provided if it is more
likely than not that some portion or all of the deferred tax assets
will not be realized.
At both March 31, 2022 and December 31, 2021, a valuation allowance
has been recorded, which fully offsets Solitario’s net deferred tax
assets, because it is more likely than not that the Company will
not realize some portion or all of its deferred tax assets.
The Company continually assesses both positive and negative
evidence to determine whether it is more likely than not that the
deferred tax assets can be realized prior to their expiration.
During the three months ended March 31, 2022 and 2021, Solitario
recorded no deferred tax expense.
8. Commitments and contingencies
Solitario has recorded an asset retirement obligation of $125,000
related to its Lik project in Alaska. See Note 2, “Mineral
Properties,” above.
Solitario leases office space under the WR Lease which provides for
total minimum rent payments of $65,000 through October of 2023.
9. Employee Stock Compensation Plans
On June 18, 2013, Solitario’s shareholders approved the 2013
Solitario Exploration & Royalty Corp. Omnibus Stock and
Incentive Plan (the “2013 Plan”). Under the terms of the 2013
Plan, as amended, a total of 5,750,000 shares of Solitario common
stock were reserved for awards to directors, officers, employees
and consultants. Awards granted under the 2013 Plan may take
the form of stock options, stock appreciation rights, restricted
stock, and restricted stock units. The terms and conditions
of the awards are pursuant to the 2013 Plan and are granted by the
Board of Directors or a committee appointed by the Board of
Directors.
As of March 31, 2022, and December 31, 2021 there were options
outstanding that are exercisable to acquire 5,440,000 and
5,513,000, respectively, shares of Solitario common stock, with
exercise prices between $0.20 and $0.77 per share. During the
three months ended March 31, 2022 and 2021, Solitario did not grant
any options. During the three months ended March 31, 2022,
options for 73,000 shares were exercised with an average exercise
price of $0.26 per share for proceeds of $19,000. During the
three months ended March 31, 2021, options for 120,350 shares were
exercised with an average exercise price of $0.56 per share for
proceeds of $67,000. During the three months ended March 31,
2022 and 2021, Solitario recorded stock option compensation expense
of $13,000 and $28,000, respectively. At March 31, 2022, the
total unrecognized stock option compensation cost related to
non-vested options is $67,000 and is expected to be recognized over
a weighted average period of 18 months.
10. Shareholders’ Equity
Shareholders’ Equity for
the three months ended March 31, 2022:
(in thousands, except
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share amounts)
|
|
Common
|
|
|
Common
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Shareholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance at December 31, 2021
|
|
|
62,036,399 |
|
|
$ |
620 |
|
|
$ |
72,523 |
|
|
$ |
(49,960 |
) |
|
$ |
23,183 |
|
Stock option expense
|
|
|
- |
|
|
|
- |
|
|
|
13 |
|
|
|
- |
|
|
|
13 |
|
Issuance of shares – ATM, net
|
|
|
2,650,724 |
|
|
|
27 |
|
|
|
1,996 |
|
|
|
- |
|
|
|
2,023 |
|
Issuance of shares - option exercises
|
|
|
73,000 |
|
|
|
1 |
|
|
|
18 |
|
|
|
- |
|
|
|
19 |
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(514 |
) |
|
|
(514 |
) |
Balance at March 31, 2022
|
|
|
64,760,123 |
|
|
$ |
648 |
|
|
$ |
74,550 |
|
|
$ |
(50,474 |
) |
|
$ |
24,724 |
|
Shareholders’ Equity for
the three months ended March 31, 2021:
(in thousands, except
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share amounts)
|
|
Common
|
|
|
Common
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Shareholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance at December 31, 2020
|
|
|
58,108,366 |
|
|
|
581 |
|
|
$ |
70,514 |
|
|
$ |
(47,593 |
) |
|
$ |
23,502 |
|
Stock option expense
|
|
|
- |
|
|
|
- |
|
|
|
28 |
|
|
|
- |
|
|
|
28 |
|
Issuance of shares – ATM, net
|
|
|
150,400 |
|
|
|
2 |
|
|
|
96 |
|
|
|
- |
|
|
|
98 |
|
Issuance of shares - option exercises
|
|
|
120,350 |
|
|
|
1 |
|
|
|
66 |
|
|
|
- |
|
|
|
67 |
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(528 |
) |
|
|
(528 |
) |
Balance at March 31, 2021
|
|
|
58,379,116 |
|
|
$ |
584 |
|
|
$ |
70,704 |
|
|
$ |
(48,121 |
) |
|
$ |
23,167 |
|
At the Market Offering
Agreement
On February 2, 2021, Solitario entered into an at-the-market
offering agreement (the “ATM Agreement”) with H. C.
Wainwright & Co., LLC (“Wainwright”), under which
Solitario may, from time to time, issue and sell shares of
Solitario’s common stock through Wainwright as sales manager in an
at-the-market offering under a prospectus supplement for aggregate
sales proceeds of up to $9.0 million (the “ATM Program”). The
common stock is distributed at the market prices prevailing at the
time of sale. As a result, prices of the common stock sold under
the ATM Program may vary as between purchasers and during the
period of distribution. The ATM Agreement provides that Wainwright
is entitled to compensation for its services at a commission rate
of 3.0% of the gross sales price per share of common stock sold.
During the three months ended March 31, 2022, Solitario sold an
aggregate of 2,650,724 shares of common stock under the ATM
Agreement at an average price of $0.79 per share for net proceeds
of $2,023,000 after commissions and sale expenses. During the
three months ended March 31, 2021, Solitario sold an aggregate of
150,400 shares of common stock under the ATM Agreement at an
average price of $1.21 per share for net proceeds of $177,000 after
commissions and sale expenses. During the three months ended March
31, 2021, Solitario recorded $79,000 as a charge to additional
paid-in-capital for one-time expenses related to entering into the
ATM Agreement.
Share Repurchase
Program
On October 28, 2015, Solitario’s Board of Directors approved a
share repurchase program that authorized Solitario to purchase up
to two million shares of its outstanding common stock.
Solitario did not purchase any shares under the share
repurchase plan during the three months ended March 31, 2022 and
2021. Solitario has purchased a total of 994,000 shares for
an aggregate purchase price of $467,000 under the share repurchase
program since its inception. The share repurchase plan
expired on December 31, 2021, and no additional shares will be
purchased under the plan in the future.
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion should be read in conjunction with the
information contained in the consolidated financial statements of
Solitario for the years ended December 31, 2021 and 2020, and
Management’s Discussion and Analysis of Financial Condition and
Results of Operations contained in Solitario’s Annual Report on
Form 10-K for the year ended December 31, 2021. Solitario's
financial condition and results of operations are not necessarily
indicative of what may be expected in future periods. Unless
otherwise indicated, all references to dollars are to U.S.
dollars.
(a) Business Overview and Summary
We are an exploration stage company as defined by rules issued by
the SEC, with a focus on the acquisition of precious and base metal
properties with exploration potential and the development or
purchase of royalty interests. Currently our primary focus is
the acquisition and exploration of precious metal, zinc and other
base metal exploration mineral properties. We hold a
portfolio of mineral exploration properties and assets for future
sale, joint venture or on which to create a royalty prior to the
establishment of proven and probable reserves. Although our
mineral properties may be developed in the future by us, through a
joint venture or by a third party, we have never developed a
mineral property. In addition to focusing on our current
mineral exploration properties, we also from time to time evaluate
potential strategic transactions for the acquisition of new
precious and base metal properties and assets with exploration
potential.
In analyzing our activities, the most significant aspect of our
business relates to results of our exploration and potential
development activities and those of our joint venture partners on a
property-by-property basis. When our exploration or potential
development activities, including drilling, sampling and geologic
testing, indicate a project may not be economically feasible or
contain sufficient geologic or economic potential we may impair or
completely write-off the property.
Our current geographic focus for the evaluation of potential
mineral property assets is in North and South America; however, we
have conducted property evaluations for potential acquisition in
other parts of the world. At March 31, 2022, we consider our
carried interest in the Florida Canyon project in Peru, our
interest in the Lik project in Alaska, and our Golden Crest project
in South Dakota to be our core mineral property assets. We
are conducting exploration activities in Peru and the United States
both on our own and through joint ventures operated by our partners
in Peru and the United States, respectively. We also conduct
potential acquisition evaluations in other countries located in
South and North America.
We have recorded revenue in the past from the sale of mineral
properties, however, revenues and / or proceeds from the sale or
joint venture of properties or assets, although generally
significant when they have occurred in the past, have not been a
consistent source of revenue and would only occur in the future, if
at all, on an infrequent basis. We have reduced our exposure
to the costs of our exploration activities in the past through the
use of joint ventures. Although we anticipate that the use of
joint venture funding for some of our exploration activities will
continue for the foreseeable future, we can provide no assurance
that these or other sources of capital will be available in
sufficient amounts to meet our needs, if at all.
As of March 31, 2022, we have balances of cash and short-term
investments that we anticipate using, in part, to (i) fund costs
and activities intended to further the exploration of our Lik
project, (ii) fund costs and activities intended to further the
exploration at our Florida Canyon project, (iii) fund costs and
activities to further our Golden Crest project; (iv) conduct
reconnaissance exploration and (v) potentially acquire additional
mineral property assets. The fluctuations in precious metal
and other commodity prices contribute to a challenging environment
for mineral exploration and development, which has created
opportunities as well as challenges for the potential acquisition
of advanced mineral exploration projects or other related assets at
potentially attractive terms.
As of March 31, 2022, we do not expect the effects of COVID-19 or
other pandemics to have a material effect on Solitario’s planned
activities related to the exploration of its Lik, Florida Canyon
and Golden Crest projects. However, going forward for the
remainder of 2022, we will continue to monitor planned activities
for 2022 at Golden Crest, Florida Canyon and Lik. The extent
to which COVID-19 or other pandemics impacts our business,
including our exploration and other activities and the market for
our securities, will depend on future developments, which are
highly uncertain and cannot be predicted at this time. Please
see Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for
the year ended December 31, 2021.
(b) Results of Operations
Comparison of the quarter
ended March 31, 2022 to the quarter ended March 31,
2021.
We had a net loss of $514,000 or $0.01 per basic and diluted share
for the three months ended March 31, 2022 compared to a net loss of
$528,000 or $0.01 per basic and diluted share for the three months
ended March 31, 2021. As explained in more detail below, the
primary reasons for the decrease in the net loss in the three
months ended March 31, 2022 compared to the loss in the three
months ended March 31, 2021 was the recording of an unrealized gain
on marketable equity securities of $213,000 during the three months
ended March 31, 2022 compared to an unrealized loss on marketable
equity securities of $122,000 during the three months ended March
31, 2021. Partially offsetting this decrease in the net loss
were (i) an increase in exploration expense to $226,000 during the
three months ended March 31, 2022 compared to exploration expense
of $147,000 during the three months ended March 31, 2021; (ii) an
increase in general and administrative costs to $387,000 during the
three months ended March 31, 2022 compared to general and
administrative costs of $280,000 during the three months ended
March 31, 2021; (iii) a reduction in interest income to $27,000
during the three months ended March 31, 2022 compared to interest
income of $31,000 during the three months ended March 31, 2021;
(iv) a loss on the sale of marketable equity securities of $81,000
during the three months ended March 31, 2022 compared to a gain on
the sale of marketable equity securities of $13,000 during the
three months ended March 31, 2021; (v) an unrealized loss on
short-term investments of $51,000 recorded during the three months
ended March 31, 2022 compared to an unrealized loss on short-term
investments of $25,000 recorded during the three months ended March
31, 2021 and (vi) other income of $10,000 from the forgiveness and
cancellation of the Paycheck Protection Program loan during the
three months ended March 31, 2021, with no similar item in the
three months ended March 31, 2022. Each of the major
components of these items is discussed in more detail below.
Our exploration expense increased to $226,000 during the three
months ended March 31, 2022 compared to exploration expense of
$147,000 during the three months ended March 31, 2021. The
increase was primarily as a result of (i) an increase in expenses
at our Golden Crest project to $127,000 during the three months
ended March 31, 2022 with no similar expenditure during 2021; (ii)
a slight increase in exploration costs at our Lik project in Alaska
to $4,000 during the three months ended March 31, 2022 compared to
$1,000 during the three months ended March 31, 2021; and (iii) an
increase reconnaissance exploration expenses to $95,000 during the
three months ended March 31, 2022 compared to reconnaissance
exploration expenses of $87,000 during the three months ended March
31, 2021. These increased expenditures were offset by (i)
$50,000 related to our Florida Canyon project in Peru, where we
substantially completed a 43-101 resource update during the three
months ended March 31, 2021 compared to no Florida Canyon project
costs during the three months ended March 31, 2022 and (ii) we
performed certain initial exploration evaluation expenses of $9,000
during the three months ended March 31, 2021 at our former Gold
Coin project in Arizona compared to no Gold Coin costs during the
three months ended March 31, 2022 as we dropped the project during
2021; Our exploration expenditures are normally lower during
the first quarter of our fiscal year as a result of weather
limitations. During the three months ended March 31, 2022 we
had two contract geologists at our Golden Crest project along with
two full-time staff and several part-time employees at our Golden
Crest project. Our Denver personnel spent a majority of their
time on reconnaissance exploration activities described above and
related matters. Our 2022 total exploration and development
budget is approximately $2,350,000, which reflects a significant
increase in the anticipated activities at the Golden Crest project
as well as a proposed exploration and drilling program at Lik.
The proposed 2022 budget does not reflect any costs for
drilling the Golden Crest project or any exploration costs for
projects or assets we may acquire during 2022. Our planned
exploration activities in 2022 may be modified, as necessary for
any drilling programs we may undertake at Golden Crest or projects
we may acquire. Changes may occur to our planed 2022
exploration expenditures related to any number of factors including
COVID-19 adjustments and delays, potential acquisition of new
properties, joint venture funding, commodity prices and changes in
the deployment of our capital. We expect our full-year exploration
expenditures for 2022 to be above the exploration expenditures for
full-year 2021.
Exploration expense (in thousands) by project for the three months
ended March 31, 2022 and 2021 consisted of the following:
|
|
March 31,
|
|
|
March 31,
|
|
Project Name
|
|
2022
|
|
|
2021
|
|
Golden Crest
|
|
$ |
127 |
|
|
$ |
- |
|
Florida Canyon
|
|
|
- |
|
|
|
50 |
|
Lik
|
|
|
4 |
|
|
|
1 |
|
Gold Coin
|
|
|
- |
|
|
|
9 |
|
Reconnaissance
|
|
|
95 |
|
|
|
87 |
|
Total exploration expense
|
|
$ |
226 |
|
|
$ |
147 |
|
General and administrative costs, excluding stock option
compensation costs, discussed below, were $374,000 during the three
months ended March 31, 2022 compared to $252,000 during the three
months ended March 31, 2021. The major components of these
costs were related to (i) salaries and benefit expense of $119,000
during the three months ended March 31, 2022 compared to salary and
benefit costs of $58,000 during the three months ended March 31,
2021, primarily due to a bonus of $15,000 paid to our each of our
three officers during the three months ended March 31, 2022 with no
similar bonus during the three months ended March 31, 2021; (ii)
legal and professional expenditures of $132,000 during the three
months ended March 31, 2022, compared to $68,000 during the three
months ended March 31, 2021, with the increase primarily related to
increased costs for accounting services, including work performed
on our SK-1300 mineral reserve reports and increased legal fees
related to our Golden Crest project during the three months ended
March 31, 2022; (iii) office rent and expenses of $20,000 during
the three months ended March 31, 2022, compared to $20,000 during
the three months ended March 31, 2021; and (iv) travel and
shareholder relation costs of $103,000 during the three months
ended March 31, 2022 compared to $106,000 during the three months
ended March 31, 2021. We anticipate the full-year general and
administrative costs will be higher for 2022 compared to 2021
primarily due to increased activity at both our Golden Crest and
Lik projects.
We recorded $13,000 of stock option expense for the amortization of
unvested grant date fair value with a credit to additional
paid-in-capital during the three months ended March 31, 2022
compared to $28,000 of stock option compensation expense during the
three months ended March 31, 2021. The lower costs in 2022
related to the grant date fair value of certain option grants which
became fully vested during 2021 and were no longer being amortized
during 2022. These non-cash charges for the amortization of
grant date fair values are related to vesting of stock options
outstanding during the three months ended March 31, 2022 and 2021.
See Note 9, “Employee Stock Compensation Plans,” above, for
additional information on our stock option expense.
During the three months ended March 31, 2022, we sold 500,000
shares of Vendetta common stock for proceeds of $26,000 and
recorded a loss on sale of marketable equity securities of $81,000.
During the three months ended March 31, 2021, we sold various
shares of our of marketable equity securities for proceeds of
$78,000 and recorded a gain on sale of marketable equity securities
of $13,000. See Note 3 “Marketable Equity Securities” above
to the condensed consolidated financial statements for a discussion
of the sale of Marketable Equity Securities. We may sell
additional shares of our holdings of marketable equity securities
during the remainder of 2022; however, we do not expect sales of
marketable equity securities to be a significant source of cash for
the year ended December 31, 2022.
We recorded an unrealized gain on marketable equity securities of
$213,000 during the three months ended March 31, 2022 compared to
an unrealized loss on marketable equity securities of $122,000
during the three months ended March 31, 2021. The gain during
the three months ended March 31, 2022 was primarily related to an
increase in the value of our holdings, after the sales of
marketable equity securities discussed above in Note 3 “Marketable
Equity Securities” to the condensed consolidated financial
statements, of (i) 100,000 shares of Kinross Gold Corp. (“Kinross”)
common stock, which increased from a fair value of $581,000 at
December 31, 2021 to a fair value of $588,000 at March 31, 2022;
(ii) 134,055 shares of Vox common stock, which increased from a
fair value of $370,000 at December 31, 2021 to a fair value of
$383,000 at March 31, 2022; (iii) 8,500,000 shares of Vendetta
common stock, which increased from a fair value of $356,000 at
December 31, 2021 to a fair value of $442,000 at March 31, 2022;
and the transfer of $81,000 of realized loss on the sale of 500,000
shares of Vendetta common stock, discussed above, the combination
of which accounted for the bulk of the unrealized loss on
marketable equity securities during the quarter ended March 31,
2022.
We recorded interest income of $27,000 during the three months
ended March 31, 2022 compared to interest income of $31,000 during
the three months ended March 31, 2021. This reduction was
primarily due to a decrease in the interest earned on our
short-term investments in USTS as a result of a decrease in the
total amount of outstanding short-term investments during the bulk
of the time during the three months ended March 31, 2022 compared
to the three months ended March 31, 2021. We did add
$1,578,000, net, to our USTS holdings near the end of the three
months ended March 31, 2022, which did not result in any
significant interest income during 2022. We anticipate our
interest income will decrease in 2022 compared to 2021 as a result
of the use of our short-term investments and our cash balances for
ordinary overhead, operational costs, and the exploration,
evaluation and or acquisition of mineral properties discussed
above. See “Liquidity and Capital Resources” below for
further discussion of our cash and cash equivalent balances.
We recorded a non-cash unrealized loss on our short-term
investments of $51,000 during the three months ended March 31, 2022
compared to an unrealized loss on our short-term investments of
$25,000 during the three months ended March 31, 2021 primarily due
to an increase in market interest rates on USTS, which reduces the
quoted fair value of our existing USTS and to a lesser degree our
CD’s. These changes in interest rates are related to many
factors that are not related to our business and do not affect the
yield-to-maturity quoted for our investments in USTS or CD’s at the
time we acquire these short term investments, to the extent we hold
the investments to maturity.
We regularly perform evaluations of our mineral property assets to
assess the recoverability of our investments in these assets.
All long-lived assets are reviewed for impairment whenever
events or circumstances change which indicate the carrying amount
of an asset may not be recoverable utilizing guidelines based upon
future net cash flows from the asset as well as our estimates of
the geological potential of an early-stage mineral property and its
related value for future sale, joint venture or development by us
or others. During the three months ended March 31, 2022 and
2021, we recorded no property impairments.
At March 31, 2022 and 2021, our net operating loss carry-forwards
exceed our built-in gains on marketable equity securities resulting
in a net tax asset position for which we provide a valuation
allowance for all net deferred tax assets. We recorded no income
tax expense or benefit during the three months ended March 31, 2022
or 2021. As a result of our exploration activities, we
anticipate we will not have currently payable income taxes during
2022. In addition to the valuation allowance discussed above,
we provide a valuation allowance for our foreign net operating
losses, which are primarily related to our exploration activities
in Peru. We anticipate we will continue to provide a
valuation allowance for these net operating losses until we are in
a net tax liability position with regard to those countries where
we operate or until it is more likely than not that we will be able
to realize those net operating losses in the future.
(c) Liquidity and Capital Resources
Cash
As of March 31, 2022, we had $345,000 in cash. We intend to
utilize a portion of this cash and a portion of our short-term
investments, discussed below, to fund our ordinary overhead,
operational costs, exploration activities and for the potential
acquisition of additional mineral properties and other assets over
the next several years.
Short-term
Investments
As of March 31, 2022, we had $6,614,000 in short-term investments.
As of March 31, 2022, we had $6,015,000 of our current assets
in USTS with maturities of 15 days to 19 months. In addition,
as of March 31, 2022 we had three CD’s with face values between
$100,000 and $250,000, recorded at their total fair value of
$599,000. The USTS and CD’s are recorded at their fair value,
based upon quoted market prices. We anticipate we will roll
over that portion of our short-term investments not used for
exploration expenditures, operating costs or mineral property
acquisitions as they become due during the remainder of 2022.
Investment in Marketable
Equity Securities
Our marketable equity securities are carried at fair value, which
is based upon market quotes of the underlying securities. At
March 31, 2022, we owned (i) 8,500,000 shares of Vendetta common
stock with a fair value of $442,000; (ii) 100,000 shares of Kinross
common stock with a fair value of $588,000; and (iii) 134,055
shares of Vox common stock with a fair value of $383,000. All
of our marketable equity securities are carried at their fair
values based upon quoted market prices. During the three
months ended March 31, 2022 and 2021 we sold certain portions of
our marketable equity securities for proceeds of $26,000 and
$78,000, respectively and realized a (loss) gain on sale of
marketable equity securities of ($81,000) and $13,000,
respectively. We anticipate we may sell some of our
marketable equity securities during the remainder of 2022 depending
upon cash needs and market conditions.
Working Capital
We had working capital of $8,422,000 at March 31, 2022 compared to
working capital of $6,883,000 as of December 31, 2021. Our
working capital at March 31, 2022 consists primarily of our cash
and cash equivalents, our investment in USTS and CD’s, our
investment in marketable equity securities of $1,413,000, and other
current assets of $317,000, less our accounts payable of $230,000
and other current liabilities of $37,000. As of March 31,
2022, we believe our cash balances along with our short-term
investments and marketable equity securities are adequate to fund
our expected expenditures over the next year.
The nature of the mineral exploration business requires significant
sources of capital to fund exploration, development and operation
of mining projects. We will need additional capital if we
decide to develop or operate any of our current exploration
projects or any projects or assets we may acquire. We anticipate we
would finance any such development through the use of our cash
reserves, short-term investments, joint ventures, issuance of debt
or equity, or the sale of other exploration projects or assets.
Stock-Based Compensation
Plans
As of March 31, 2022, and December 31, 2021 there were options
outstanding to acquire 5,440,000 and 5,513,000, respectively,
shares of Solitario common stock. The outstanding options
have exercise prices between $0.20 per share and $0.77 per share.
During the three months ended March 31, 2022, options for
73,000 shares were exercised with an average exercise price of
$0.26 per share for proceeds of $19,000. During the three
months ended March 31, 2021, options for 120,350 shares were
exercised with an average exercise price of $0.56 per share for
proceeds of $67,000. Options for 2,360,000 shares of
Solitario Common Stock, with an exercise price of $0.77 per share,
expire in August 2022. Unless the quoted market price of a
share of our common stock exceeds $0.77 per share prior to the
exercise date of these shares, we do not anticipate the exercise of
options will be a significant source of cash flow during the
remainder of 2022.
At the Market Offering
Agreement
On February 2, 2021, Solitario entered into the ATM Agreement with
Wainwright, under which Solitario may, from time to time, issue and
sell shares of Solitario’s common stock through Wainwright as sales
manager in an at-the-market offering under a prospectus supplement
for aggregate sales proceeds of up to $9.0 million. During
the three months ended March 31, 2022, Solitario sold an aggregate
of 2,650,724 shares of common stock under the ATM Agreement at an
average price of $0.79 per share for net proceeds after commissions
and expenses of approximately $2,023,000. During the three
months ended March 31, 2021, Solitario sold an aggregate of 150,400
shares of common stock under the ATM Agreement at an average price
of $1.21 per share of common stock for net proceeds after
commissions and expenses of approximately $177,000. During
the three months ended March 31, 2021, Solitario recorded $79,000
as a charge to additional paid-in-capital for one-time expenses
related to entering into the ATM Agreement.
(d) Cash Flows
Net cash used in operations during the three months ended March 31,
2022 increased to $597,000 compared to $382,000 of net cash used in
operations for the three months ended March 31, 2021 primarily as a
result of (i) an increase in exploration expense to $226,000 during
the three months ended March 31, 2022 compared to exploration
expense of $147,000 during the three months ended March 31, 2021
(ii) an increase in non-stock option general and administrative
expense to $374,000 during the three months ended March 31, 2022
compared to $252,000 during the three months ended March 31, 2021,
discussed above (iii) a use of cash of $20,000 for the reduction of
accounts payable and other liabilities during the three months
ended March 31, 2022 compared to a use of cash from a decrease in
accounts payable and other liabilities of $26,000 during the three
months ended March 31, 2021; (iv) a decrease in interest income
during the three months ended March 31, 2022 to $27,000 compared to
interest income of $31,000 during the three months ended March 31,
2021; and (v) a use of cash of $14,000 for an increase in prepaid
and other current assets during the three months ended March 31,
2022 compared to a provision of cash from a decrease in prepaid
expenses and other current assets of $2,000 during the three months
ended March 31, 2021. Based upon projected expenditures in
our 2022 budget, we anticipate continued use of funds from
operations through the remainder of 2022, primarily for exploration
related to our Golden Crest and Lik projects and reconnaissance
exploration. See “Results of Operations” discussed above for
further explanation of some of these variances.
During the three months ended March 31, 2022, we used $1,562,000 in
cash from investing activities compared to $1,016,000 of cash
provided from investing activities during the three months ended
March 31, 2021. The primary use of the cash during the three
months ended March 31, 2022 was for the net purchase of $1,578,000
in short-term investments from the proceeds of our sales of our
common stock under our ATM program compared to the net sale of
$938,000 of short-term investments during the three months ended
March 31, 2021. In addition, during the three months ended
March 31, 2022 and 2021 we sold marketable equity securities for
proceeds of $26,000 and $78,000, respectively as discussed above in
Note 3, “Marketable Equity Securities” to the condensed
consolidated financial statements. We may sell additional
marketable equity securities during the remainder of 2022, as
discussed above, however, we do not anticipate the sale of
marketable equity securities will be a significant source of cash
during the remainder of 2022. We will continue to liquidate a
portion of our short-term investments as needed to fund our
operations and our potential mineral property acquisitions during
the remainder of 2022. Any potential mineral property
acquisition or strategic corporate investment during the remainder
of 2022 could involve a significant change in our cash provided or
used for investing activities, depending on the structure of any
potential transaction.
During the three months ended March 31, 2022, and 2021 we received
net cash of $2,023,000 and $98,000, respectively, from the issuance
of common stock under the ATM Program. In addition, during
the three months ended March 31, 2022 and 2021 we received $19,000
and $67,000, respectively, from the issuance of common stock from
the exercise of stock options, discussed above in Note 9, “Employee
Stock Compensation Plans” to the condensed consolidated financial
statements.
(e) Mineral Resources
CAUTIONARY NOTE REGARDING DISCLOSURE OF MINERAL
PROPERTIES
Mineral Reserves and Resources
We are subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the “1934 Act”) and applicable
Canadian securities laws, and as a result we report our mineral
resources according to two different standards. U.S. reporting
requirements, are governed by Item 1300 of Regulation S-K (“S-K
1300”), as issued by the SEC. Canadian reporting requirements for
disclosure of mineral properties are governed by National
Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI
43-101”), as adopted from the definitions provided by the Canadian
Institute of Mining, Metallurgy and Petroleum. Both sets of
reporting standards have similar goals in terms of conveying an
appropriate level of confidence in the disclosures being reported,
but the standards generally embody slightly different approaches
and definitions.
In our public filings in the U.S. and Canada and in certain other
announcements not filed with the SEC, we disclose measured,
indicated and inferred resources, each as defined in S-K 1300. The
estimation of measured resources and indicated resources involve
greater uncertainty as to their existence and economic feasibility
than the estimation of proven and probable reserves, and therefore
investors are cautioned not to assume that all or any part of
measured or indicated resources will ever be converted into S-K
1300-compliant reserves. The estimation of inferred resources
involves far greater uncertainty as to their existence and economic
viability than the estimation of other categories of resources, and
therefore it cannot be assumed that all or any part of inferred
resources will ever be upgraded to a higher category. Therefore,
investors are cautioned not to assume that all or any part of
inferred resources exist, or that they can be mined legally or
economically.
(f) Off-balance sheet arrangements
As of March 31, 2022, and December 31, 2021 we have no off-balance
sheet obligations.
(g) Development Activities, Exploration Activities,
Environmental Compliance and Contractual Obligations
We are not involved in any development activities, nor do we have
any contractual obligations related to any potential development
activities as of March 31, 2022. As of March 31, 2022, there
have been no changes to our exploration activities, environmental
compliance or other contractual obligations from those disclosed in
our Management’s Discussion and Analysis included in our Annual
Report on Form 10-K for the year ended December 31, 2021.
(h) Discontinued Projects
We did not record any mineral property write-downs during the three
months ended March 31, 2022 and 2021.
(i) Significant Accounting Policies and Critical Accounting
Estimates
See Note 1 to the Consolidated Financial Statements included in our
Annual Report on Form 10-K for the year ended December 31, 2021 for
a discussion of our significant accounting policies.
Solitario’s valuation of mineral properties is a critical
accounting estimate. We review and evaluate our mineral properties
for impairment when events or changes in circumstances indicate
that the related carrying amounts may not be recoverable.
Significant negative industry or economic trends, adverse social or
political developments, geologic results, geo-technical
difficulties, or other disruptions to our business are a few
examples of events that we monitor, as they could indicate that the
carrying value of the mineral properties may not be recoverable. In
such cases, a recoverability test may be necessary to determine if
an impairment charge is required. There has been no change to
our assumptions, estimates or calculations during the three months
ended March 31, 2022.
(j) Related Party Transactions
As of March 31, 2022, and for the three months ended March 31,
2022, we have no related party transactions or balances.
(k) Recent Accounting Pronouncements
See Note 1, “Business and Summary of Significant Accounting
Policies,” to the unaudited condensed consolidated financial
statements under Recent Accounting Pronouncements” above
for a discussion of our significant accounting policies.
(k) Forward Looking Statements
This Form 10-Q contains forward-looking statements, within the
meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of
1934, as amended (the “1934 Act”) with respect to our financial
condition, results of operations, business prospects, plans,
objectives, goals, strategies, future events, capital expenditures,
and exploration and development efforts. Words such as
“anticipates,” “expects,” “intends,” “forecasts,” “plans,”
“believes,” “seeks,” “estimates,” “may,” “will,” and similar
expressions identify forward-looking statements. These
forward-looking statements are based on our current expectations
and assumptions about future events and are based on currently
available information as to the outcome and timing of future
events. When considering forward-looking statements, you should
keep in mind the risk factors and other cautionary statements
described herein and under the heading "Risk Factors" included in
Item 1A of Part I of our Annual Report on Form 10-K for
the year ended December 31, 2021. These forward-looking
statements appear in a number of places in this report and include
statements with respect to, among other things:
|
·
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Our estimates of the value and
recovery of our short-term investments; |
|
|
|
|
·
|
Our estimates of the value and
recovery of our mineral resources. |
|
|
|
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·
|
Our estimates of future
exploration, development, general and administrative and other
costs; |
|
|
|
|
·
|
Our ability to realize a return on
our investment in the Lik and Golden Crest projects; |
|
|
|
|
·
|
Our ability to successfully
identify, and execute on transactions to acquire new mineral
exploration properties and other related assets; |
|
|
|
|
·
|
Our estimates of fair value of our
investment in shares of Vendetta, Vox and Kinross; |
|
|
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|
·
|
Our expectations regarding
development and exploration of our properties including those
subject to joint venture and shareholder agreements; |
|
|
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·
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The impact of political and
regulatory developments; |
|
|
|
|
·
|
Our future financial condition or
results of operations and our future revenues and expenses; |
|
|
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|
·
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Our business strategy and other
plans and objectives for future operations; and |
|
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|
|
·
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Risks related to pandemics,
including the outbreak of COVID-19. |
Although we have attempted to identify important factors that could
cause actual results to differ materially from those described in
forward-looking statements, there may be other factors that cause
results not to be as anticipated, estimated or intended. There can
be no assurance that these statements will prove to be accurate as
actual results and future events could differ materially from those
anticipated in the statements. Except as required by law, we assume
no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events
or otherwise.
Item 3. Quantitative and Qualitative
Disclosures about Market Risk
Smaller Reporting Companies are not required to provide the
information required by this item.
Item 4. Controls and
Procedures
Disclosure Controls and Procedures
As required by Rule 13a-15 under the 1934 Act, as of March 31,
2022, we carried out an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures.
This evaluation was carried out under the supervision and with the
participation of our Chief Executive Officer (our principal
executive officer) and our Chief Financial Officer (our principal
financial officer). Based upon and as of the date of that
evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures were
effective as of March 31, 2022.
Disclosure controls and procedures are controls and other
procedures that are designed to ensure that information required to
be disclosed in our reports filed or submitted under the 1934 Act
is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in our
reports filed under the 1934 Act is accumulated and communicated to
our management, including our principal executive officer and our
principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated
under the 1934 Act) during the quarter ended March 31, 2022 that
have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
As of March 31, 2022, there were no material changes to the Risk
Factors associated with our business disclosed in Part I, Item 1A
of our Annual Report on Form 10-K for the year ended December 31,
2021.
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds
None
Item 3. Defaults upon Senior
Securities
None
Item 4. Mine Safety
Disclosures
None
Item 5. Other Information
None
Item 6. Exhibits
The Exhibits to this report are listed in the Exhibit Index.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
SOLITARIO ZINC CORP.
May 4, 2022
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By:
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/s/ James R. Maronick
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Date
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James R. Maronick
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Chief Financial Officer
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EXHIBIT INDEX
3.1
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Amended and Restated Articles of Incorporation of Solitario
Exploration & Royalty Corp., as Amended (incorporated by
reference to Exhibit 3.1 to Solitario’s Form 10-Q filed on August
10, 2010)
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3.1.1
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Articles of Amendment to Restated Articles of Incorporation of
Solitario Zinc Corp. (incorporated by reference to Exhibit 3.1 to
Solitario’s Current Report on Form 8-K filed on July 14,
2017)
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3.2
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Amended and Restated By-laws of Solitario Zinc Corp.
(incorporated by reference to Exhibit 3.1 to Solitario’s Form
8-K filed on April 23, 2021)
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4.1
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Form of Common Stock Certificate of Solitario Zinc Corp.
(incorporated by reference to Exhibit 4.1 to Solitario’s Form 10-Q
filed on November 8, 2017)
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31.1*
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Certification of Chief Executive Officer
pursuant to SEC Rule 13a-14(a)/15d-14(a) as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
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31.2*
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Certification of Chief Financial Officer
pursuant to SEC Rule 13a-14(a)/15d-14(a) as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
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32.1*
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Certification of Chief Executive Officer
and Chief Financial Officer pursuant to 18 U.S.C Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
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101*
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The following financial statements, formatted in XBRL: (i)
Condensed Consolidated Balance Sheets as of March 31, 2022 and
December 31, 2021, (ii) Condensed Consolidated Statements of
Operations for the three months ended March 31, 2022 and 2021,
(iii) Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 2022 and 2021; and (iv) Notes to the
Condensed Unaudited Consolidated Financial Statements, tagged as
blocks of text.
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Solitario Zinc (AMEX:XPL)
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Solitario Zinc (AMEX:XPL)
Graphique Historique de l'Action
De Jan 2022 à Jan 2023