XPL Solitario Resources Corp

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 metals, zinc and other base metal exploration mineral properties.  However, we continue to evaluate other mineral properties for acquisition, and 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.    

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 September 30, 2022, we consider our Golden Crest project in South Dakota, our carried interest in the Florida Canyon project in Peru, and our interest in the Lik project in Alaska to be our core mineral property assets.  We are conducting exploration activities the United States on our own at Golden Crest and through joint ventures operated by our partners in Peru at the Florida Canyon project and in Alaska at the Lik project.  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 annual 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 ventures to fund 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 September 30, 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, Florida Canyon and Golden Crest projects, (ii) conduct reconnaissance exploration and (iii) 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 September 30, 2022, we do not expect the effects of the COVID-19 pandemic to have a material effect on Solitario’s planned activities related to the exploration of its Lik, Florida Canyon or Golden Crest projects.  However, we continue to monitor planned activities for the full year 2022 at our Florida Canyon, Lik and Golden Crest projects.  The extent to which the COVID-19 pandemic 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 three months ended September 30, 2022 to the three months ended September 30, 2021

We had a net loss of $1,057,000 or $0.02 per basic and diluted share for the three months ended September 30, 2022 compared to a net loss of $701,000 or $0.01 per basic and diluted share for the three months ended September 30, 2021. As explained in more detail below, the primary reasons for the increase in our net loss in the three months ended September 30, 2022 compared to the net loss during the three months ended September 30, 2021 were (i) an increase in exploration expense to $655,000 in the three months ended September 30, 2022 compared to exploration expense of $442,000 during the three months ended September 30, 2021; (ii) an increase in general and administrative expense to $435,000 in the three months ended September 30, 2022 compared to general and administrative expense of $207,000 during the three months ended September 30, 2021; (iii); a decrease in interest income to $29,000 during the three months ended September 30, 2022 compared to interest income of $34,000 during the three months ended September 30, 2021; and (iv) a decrease in the unrealized gain on marketable equity securities to $13,000 during the three months ended September 30, 2022 compared to an unrealized gain on marketable equity securities of $50,000 during the three months ended September 30, 2021. Partially offsetting the above items were (i) other income of $20,000 during the three months ended September 30, 2022 with no similar item during the three months ended September 30, 2021 and (ii) no loss on the sale of marketable equity securities during the three months ended September 30l, 2022 compared to a loss on the sale of marketable equity securities of $89,000 during the three months ended September 30, 2021. Each of the major components of these items is discussed in more detail below.

Our net exploration expense increased to $655,000 during the three months ended September 30, 2022 compared to exploration expense of $442,000 during the three months ended September 30, 2021 as a result of (i) our exploration efforts at the Golden Crest project which resulted in $354,000 of direct exploration expenditures, including a comprehensive soil and rock sampling program on a portion of our claims that cover over 34,000 acres, which was reflected in the increased costs at Golden Crest during the three months ended September 30, 2022 compared to $94,000 of direct exploration expenditures at Golden Crest during the three months ended September 30, 2021; and (ii) our share of exploration costs of $221,000 at our Lik project in Alaska (where we are responsible for one-half of the total costs incurred plus a 5% management fee) during the three months ended September 30, 2022 incurred by our joint venture partner, Teck, which included drilling expenditures, compared to our share of exploration expenditures of $207,000 during the three months ended September 30, 2021, when Teck was performing mapping and surface sampling at Lik. Partially offsetting these increases was (i) a reduction in reconnaissance exploration expenditures of $80,000, which included activities near our claims at Golden Crest and evaluation of other exploration projects for potential acquisition during the three months ended September 30, 2022 compared to reconnaissance exploration expenditures of $126,000 during the three months ended September 30, 2021 and (ii) no exploration expenditures on our Gold Coin project during the three months ended September 30, 2022, which was abandoned in 2021, compared to $15,000 of exploration expenditures at Gold Coin during the three months ended September 30, 2021. During the three and nine months ended September 30, 2022 we had three contract geologists working at our Golden Crest project, as well as several part-time employees who assisted our contract geologists in collecting, organizing, and testing soil and rock samples at Golden Crest. In addition, certain of our Denver personnel spent a portion of their time on Golden Crest and the reconnaissance exploration activities described above and related matters. We have budgeted approximately $2,350,000 for the full-year exploration expenditure for 2022, which includes approximately $1,723,000 at the Golden Crest project and $574,000 for Solitario’s share of a joint drilling program with Teck at the Lik project. 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 consisted of the following:

General and administrative costs, excluding stock option compensation costs, discussed below, were $190,000 during the three months ended September 30, 2022 compared to $175,000 during the three months ended September 30, 2021.  The major components of our general and administrative costs were (i) salaries and benefit expense of $88,000 during the three months ended September 30, 2022 compared to salary and benefit costs of $67,000 during the three months ended September 30, 2021; (ii) legal and accounting expenditures of $50,000 in the three months ended September 30, 2022 compared to $49,000 in the three months ended September 30, 2021; (iii) office rent and expenses of $29,000 during the three months ended September 30, 2022, compared to $30,000 during the three months ended September 30, 2021; and (iv) travel and shareholder relation costs of $23,000 during the three months ended September 30, 2022 compared to $29,000 during the three months ended September 30, 2021.  We anticipate the full-year general and administrative costs will be higher for 2022 compared to 2021. 

We recorded $245,000 of stock option compensation expense for the amortization of unvested grant date fair value with a credit to additional paid-in-capital during the three months ended September 30, 2022 compared to $32,000 of stock option compensation expense during the three months ended September 30, 2021.  These non-cash charges related to the expense for vesting of stock options granted and outstanding during the three months ended September 30, 2022 and 2021.  The primary reason for the increase in stock option compensation expense during the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was as a result of the grant of 2,360,000 options during the three months ended September 30, 2022 with a grant date fair value of $876,000, of which 25% or $219,000 vested on the date of grant, with the remaining grant date fair value vesting 25% on each anniversary date over the next three years.  The subsequent grant date fair value vesting is recognized on a monthly straight-line basis over the three-year period.  See Note 10, “Employee Stock Compensation Plans,” above, for additional information on our stock option expense.  

We recorded a non-cash unrealized gain on marketable equity securities of $13,000 during the three months ended September 30, 2022 compared to an unrealized gain on marketable equity securities of $50,000 during the three months ended September 30, 2021.  The non-cash unrealized gain during the three months ended September 30, 2022 was primarily related to (i) an increase in the value of our holdings of 100,000 shares of Kinross common stock, which increased to a fair value of $376,000 at September 30, 2022 from a fair value of $358,000 at June 30, 2022 or an increase of $18,000 based on quoted market prices; and (ii) an increase in the value of our 8,000,000 shares of Vendetta common stock, which increased to a fair  value of $291,000 at September 30, 2022 from a fair value of $279,000 at June 30, 2022 or an increase of $12,000, based on quoted market prices.  These increases were partially offset by a decrease in the value of our holdings of Vox Royalty common stock of $17,000 during the three months ended September 30, 2022.   The non-cash unrealized gain during the three months ended September 30, 2021 was primarily due to (i) a decrease in the value of our holdings of 100,000 shares of Kinross common stock, which decreased to a fair value of $536,000 at September 30, 2021 from a fair value of $635,000 at June 30, 2021 or an unrealized loss of $99,000 based on quoted market prices; and (ii) a decrease in the value of 10,040,000 shares of Vendetta common stock, which decreased to a fair value of $357,000 at September 30, 2021 from a fair value of $365,000 at June 30, 2021 or an unrealized loss of $7,000, based on quoted market prices; both of which offset (iii) an increase in the fair value of 134,055 shares of Vox common stock to $333,000 at September 30, 2021 from a fair value of $263,000 at June 30, 2021, or an unrealized gain of $70,000; and the recognition of $88,000 of unrealized gain on previously recorded unrealized loss on marketable equity securities from 500,000 shares of Vendetta common stock sold during the three months ended September 30, 2021.

During the three months ended September 30, 2021, we sold 500,000 shares of our holdings of Vendetta common stock for proceeds of $17,000 and recorded a loss on sale of marketable equity securities of $89,000.  We did not sell any marketable equity securities during the three months ended September 30, 2022.  See Note 3 “Marketable Equity Securities” to the condensed consolidated financial statements for a discussion of our marketable equity securities.

We recorded interest income of $29,000 during the three months ended September 30, 2022 compared to interest income of $34,000 during the three months ended September 30, 2021.  This decrease was primarily due to a decrease in the amount of USTS we held during the three months ended September 30, 2022 compared to the amount of USTS we held during the three months ended September 30, 2021.  Partially offsetting this was the average interest rate earned on our short-term investments in USTS was slightly higher during the three months ended September 30, 2022 compared to the three months ended September 30, 2021.  We anticipate interest income will decrease during the remainder of 2022 from the amounts recorded through the nine months ended September 30, 2022 as we expect to utilize the proceeds from maturing USTS to fund our exploration and general and administrative expenditures. 

We recorded a non-cash unrealized loss on our short-term investments of $22,000 during the three months ended September 30, 2022 compared to an unrealized loss on our short-term investments of $21,000 during the three months ended September 30, 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.  These changes in interest rates are a result of many factors that are not related to our business and do not affect the yield-to-maturity quoted for our investments in USTS or CDs 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 September 30, 2022 and 2021, we recorded no property impairments.    

We recorded no income tax expense or benefit during the three and nine months ended September 30, 2022 or 2021 as we provide a valuation allowance for the tax benefit arising out of our net operating losses for all periods presented.  As a result of our administrative expenses and 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 regards 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.

Comparison of the nine months ended September 30, 2022 to the nine months ended September 30, 2021

We had a net loss of $3,262,000 or $0.05 per basic and diluted share for the nine months ended September 30, 2022 compared to a net loss of $1,897,000 or $0.03 per basic and diluted share for the nine months ended September 30, 2021.  As explained in more detail below, the primary reasons for the increase in our net loss were (i) an increase in exploration expense to $1,832,000 during the nine months ended September 30, 2022 compared to exploration expense of $826,000 during the nine months ended September 30, 2021; (ii) an increase in general and administrative expenses to $1,099,000 during the nine months ended September 30, 2022 compared to general and administrative expenses of $743,000 during the nine months ended September 30, 2021; (iii) the recording of a realized loss of $159,000 from the sale of marketable equity securities during the nine months ended September 30, 2022 compared with a realized loss of $70,000 from the sale of marketable equity securities during the nine months ended September 30, 2021; and (iv) an increase in the unrealized loss on short-term investments to $120,000 during the nine months ended September 30, 2022 compared to an unrealized loss of $77,000 on our holdings of short-term investments during the nine months ended September 30, 2021.  These causes of the increase in our net loss during the first nine months of 2022 compared to the first nine months of 2021 were partially offset by (i) an increase in other income to $20,000 from the sale of certain exploration data during the nine months ended September 30, 2022 compared to other income of $10,000 from the forgiveness of our Paycheck Protection Program loan during the nine months ended September 30, 2021; and (ii) a decrease in the unrealized loss on marketable equity securities to $142,000 during the nine months ended September 30, 2022 compared to an unrealized loss on marketable equity securities of $220,000 during the nine months ended September 30, 2021.  The significant changes for these items are discussed in more detail below.

Our net exploration expense increased to $1,832,000 during the nine months ended September 30, 2022 compared to $826,000 during the nine months ended September 30, 2021.  The primary reasons for the increase were(i) the exploration expenditures at our Golden Crest project of $909,000 during the nine months ended September 30 2022 compared to Golden Crest exploration expenditures of $207,000 during the nine months ended September 30, 2021; (ii) exploration expenditures at our Lik project in Alaska of $669,000 during the nine months ended September 30, 2022, where our joint venture partner, Teck, completed a portion of a planned $1.3 million (total) exploration program for 2022, including drilling, of which we are responsible for one-half of the total costs incurred, compared to our share of expenditures at Lik during 2021 of $290,000 recorded during the nine months ended September 30, 2021; and (iii) reconnaissance exploration of $254,000 during the nine months ended September 30, 2022, which included evaluation of additional areas around Golden Crest and evaluation of other potential exploration projects, compared to $241,000 in reconnaissance exploration expenditures during the nine months ended September 30, 2021.  These increases in exploration expense were partially offset by (i) a reduction in our exploration expenditures at Florida Canyon where all expenditures during the nine months ended September 30, 2022 were conducted and paid by our joint venture partner, Nexa compared our expenditures of $64,000 during the nine months ended September 30, 2021, when we were preparing an analysis of the Florida Canyon deposit for future drilling or expansion; and (ii) expenditures of $24,000 at the Gold Coin project during the nine months ended September 30, 2021, which we abandoned during 2021 and there were no similar expenditures during the nine months ended September 30, 2022.     

General and administrative costs, excluding stock option compensation costs discussed below, were $828,000 during the nine months ended September 30, 2022 compared to $639,000 during the nine months ended September 30, 2021.  The major components of the costs were (i) salary and benefit expense during the nine months ended September 30, 2022 of $307,000 compared to salary and benefit expense of $203,000 during the nine months ended September 30, 2021, with these increases as a result of increased personnel and salaries in 2022; (ii) legal and accounting expenditures of $247,000 during the nine months ended September 30, 2022, compared to $151,000 during the nine months ended September 30, 2021; (iii) office and other costs of $84,000 during the nine months ended September 30, 2022 compared to $76,000 during the nine months ended September 30, 2021; and (iv) travel and shareholder relation costs of $190,000 during the nine months ended September 30, 2022 compared to $209,000 during the nine months ended September 30, 2021.      

During the nine months ended September 30, 2022 and 2021, Solitario recorded $271,000 and $104,000, respectively, of stock option expense for the amortization of unvested grant date fair value with a credit to additional paid-in capital.  The increase during the nine months ended September 30, 2022 was primarily related the grant of 2,360,000 options during the nine months ended September 30, 2022 with a grant date fair value of $876,000, discussed above.  During the nine months ended September 30, 2022 we recognized 25% of the grant date fair value, or $214,000 on the date of grant, discussed above.  The were no similar large grants of options during the nine months ended September 30, 2021.     

We recorded an unrealized loss on marketable equity securities of $142,000 during the nine months ended September 30, 2022 compared to an unrealized loss on marketable equity securities of $220,000 during the nine months ended September 30, 2021. The non-cash unrealized loss during the nine months ended September 30, 2022 was primarily related to (i) a decrease in the fair value of our holdings of 8,000,000 shares of Vendetta common stock to $291,000 at September 30, 2022 compared to a fair value of $303,000 at December 31, 2021, based on quoted market prices; (ii) a decrease in the fair value of our holdings of 100,000 shares of Kinross common stock to $376,000 at September 30, 2022 compared to a fair value of $581,000 at December 31, 2021, based on quoted market prices; and (iii) a decrease in the fair value of our holdings of 134,055 shares of Vox common stock to $285,000 at September 30, 2022 compared to a fair value of $370,000 at December 31, 2021 based on quoted market prices, which were partially offset by the recognition of $159,000 of previously recorded unrecognized loss on marketable equity securities upon the sale of 1,000,000 shares of Vendetta common stock during the nine months ended September 30, 2022.  The non-cash unrealized loss during the nine months ended September 30, 2021 was primarily related to (i) a decrease in the value of our holdings of 10,040,000 shares of Vendetta common stock which decreased in fair value to $357,000 at September 30, 2021 compared to a fair value of $479,000 at December 31, 2020, based on quoted market prices; and (ii) a decrease in the fair value of our holdings of 100,000 shares of Kinross common stock to a fair value of $536,000 compared to a fair value of $734,000 at December 31, 2020, based on quoted market prices.  We may reduce our holdings of marketable equity securities depending on cash needs and market conditions, which may reduce the volatility of the changes in unrealized gains and losses in marketable equity securities during the remainder of 2022. 

We recorded interest income of $97,000 during the nine months ended September 30, 2022 compared to interest income of $100,000 during the nine months ended September 30, 2021.  The comparable interest amounts were related to a decrease in the average outstanding balance of USTS and CDs during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.  This decrease in the average outstanding balance was offset by an increase in the average interest rate earned on our short-term investments during the nine months ended September 30, 2022 compared to the nine months ended September 30, 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 $120,000 during the nine months ended September 30, 2022 compared to an unrealized loss on our short-term investments of $77,000 during the nine months ended September 30, 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.

During the nine months ended September 30, 2022, we sold 1,000,000 shares of our holdings of Vendetta common stock for proceeds of $53,000 and recorded a loss on sale of marketable equity securities of $159,000.  During the nine months ended September 30, 2021, we sold (i) 1,510,000 shares of Vendetta common stock for proceeds of $69,000 and recorded a loss on sale of $91,000; (ii) 430,000 shares of TNR Gold Corp. common stock for proceeds of $26,000 and recorded a gain on sale of $19,000; and (iii) 3,200 shares of Vox common stock for proceeds of $9,000 and recorded a gain on sale of $2,000.  See Note 3 “Marketable Equity Securities” to the condensed consolidated financial statements for a discussion of the sale of marketable equity securities.

During the nine months ended September 30, 2022 we recorded a non-cash loss of $4,000 on our Vendetta Warrants.  During the nine months ended September 30, 2021 we recorded a non-cash loss of $41,000 on our Vendetta Warrants, which was partially offset by a gain on derivative instruments of $7,000 during the nine months ended September 30, 2021 related to certain Kinross covered calls. 

(c) Liquidity and Capital Resources

Cash and Short-term Investments

As of September 30, 2022, we have $5,142,000 in cash and short-term investments.  As of September 30, 2022, we have $4,650,000 of our current assets in USTS with maturities of 15 days to 15 months.  In addition, we have one CD with a face value of $250,000 that matures in three months and is carried at its quoted market value of $248,000.  The USTS and CD 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.  We intend to utilize a portion of our cash and short-term investments in our exploration activities and the potential acquisition of mineral assets over the next several years.  

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 September 30, 2022 we own 8,000,000 shares of Vendetta common stock, 100,000 shares of Kinross common stock, 134,055 shares of Vox common stock and 200,000 shares of Highland common stock.  At September 30, 2022, the Vendetta shares are recorded at their fair value of $291,000, the Kinross shares are recorded at their fair value of $376,000; and the Vox shares are recorded at their fair value of $285,000.  The Highland shares are have a restrictive legend, are not currently tradeable, and no value has been assigned to the Highland shares we own as of September 30, 2022.  During the nine months ended September 30, 2022 we sold 1,000,000 shares of Vendetta common stock, as discussed above.  See Note 3 “Marketable Equity Securities” in the condensed consolidated financial statements.  We anticipate we may sell some portion of our holdings of marketable equity securities during the remainder of 2022 depending on cash needs and market conditions.    

Working Capital

We had working capital of $5,523,000 at September 30, 2022 compared to working capital of $6,883,000 as of December 31, 2021.  Our working capital at September 30, 2022 consists primarily of our cash and cash equivalents, our investment in USTS and CD, discussed above, our investment in marketable equity securities of $953,000, and other current assets of $37,000, less our accounts payable of $567,000 and other current liabilities of $42,000.  As of September 30, 2022, 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 our interests in other exploration projects or assets.

Stock-Based Compensation Plans

As of September 30, 2022, and December 31, 2021 there were options outstanding to acquire 5,431,250 and 5,513,000 shares, respectively, of Solitario common stock.  The outstanding options at September 30, 2022 have exercise prices between $0.60 per share and $0.20 per share.  During the nine months ended September 30, 2022, options for 81,750 shares were exercised with an average exercise price of $0.25 per share for proceeds of $20,000.  During the nine months ended September 30, 2021, options for 185,000 shares were exercised with an average exercise price of $0.45 per share for proceeds of $83,000.  We do not anticipate the exercise of options to be a significant source of cash flow during the remainder of 2022.

At the Market Offering Agreement

On February 2, 2021, we entered into the ATM Agreement with Wainwright, under which we may, from time to time, issue and sell shares of our 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 nine months ended September 30, 2022, we sold an aggregate of 2,650,724 shares of common stock under the ATM Program at an average price of $0.76 per share of common stock for net proceeds after commissions and expenses of approximately $2,023,000.  During the nine months ended September 30, 2021, we sold an aggregate of 340,400 shares of common stock under the ATM Program at an average price of $0.82 per share of common stock for net proceeds after commissions and expenses of approximately $137,000.  During the nine months ended September 30, 2021, Solitario recorded $144,000 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 nine months ended September 30, 2022 increased to $1,948,000 compared to $1,723,000 of net cash used in operations for the nine months ended September 30, 2021 primarily as a result of (i) an increase in exploration expense to $1,832,000 during the nine months ended September 30, 2022 compared to exploration expense of $826,000 during the nine months ended September 30, 2021; and (ii) an increase in non-stock option general and administrative expense to $828,000 during the nine months ended September 30, 2022 compared to $639,000 during the nine months ended September 30, 2021, discussed above.  These uses of cash were partially offset by (i) the provision of cash from a reduction in prepaid expenses and other assets of $266,000, which was primarily due to the use of a prepaid balance of $221,000 due from Teck at December 31, 2021 during the nine months ended September 30, 2022 compared to the use of cash from an increase in prepaid expenses and other assets of $381,000 during the nine months ended September 30, 2021; and (ii) the provision of cash of $299,000 from an increase in accounts payable and other current liabilities as a result of increased exploration activity at the Golden Crest and Lik project for expenses not yet paid during the nine months ended September 30, 2022 compared to the use of cash of $30,000 from an the paydown of accounts payable and other current liabilities during the nine months ended September 30, 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 nine months ended September 30, 2022, we used $313,000 in cash from investing activities compared to $1,452,000 of cash provided from investing activities during the nine months ended September 30, 2021.  The primary use of cash during the nine months ended September 30, 2022 was $386,000 to acquire additional mineral claims at our Golden Crest project during the nine months ended September 30, 2022, compared to the use of cash of $458,000 during the nine months ended September 30, 2021 when we acquired our initial block of mineral claims at the Golden Crest project, discussed above in Note 2, “Mineral Properties.”  We acquired other assets of $49,000 and $39,000, respectively, during the nine months ended September 30, 2022 and 2021.   In addition, during the nine months ended September 30, 2022 and 2021 we sold marketable equity securities for proceeds of $53,000 and $104,000, respectively, as discussed above in Note 3, “Marketable Equity Securities.”  During the nine months ended September 30, 2022 and 2021, we also received $69,000 and $1,837,000, respectively, from the net sale of short-term investments to fund our exploration and other activities. We anticipate 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.  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.  Any potential mineral property acquisition or strategic corporate investment during the remainder of 2022, discussed above, could involve a significant change in our cash provided or used for investing activities, depending on the structure of any potential transaction.

During the nine months ended September 30, 2022, and 2021 we received net cash of $2,023,000 and $137,000, respectively, from the issuance of common stock under the ATM Program, discussed above.  In addition, during the nine months ended September 30, 2022 and 2021 we received $20,000 and $83,000, 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”) 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”) 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 September 30, 2022 and December 31, 2021 we had 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 September 30, 2022.  As of September 30, 2022, there have been no changes to our contractual obligations for exploration activities, environmental compliance or other 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 and nine months ended September 30, 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 and nine months ended September 30, 2022.

(j) Related Party Transactions

As of September 30, 2022, and for the three and nine months ended September 30, 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.

(l) 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 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:

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.