XPL Solitario Resources Corp

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2023

OR

For the transition period from_______to_______

Commission File Number. 001-39278

(303)  534-1030

(Registrant’s telephone number, including area code)

 _________________________________________________________________

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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 every Interactive Data File required to be submitted 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 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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

There were 79,086,358 shares of $0.01 par value common stock outstanding as of November 7, 2023.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

SOLITARIO RESOURCES CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

See Notes to Unaudited Condensed Consolidated Financial Statements

SOLITARIO RESOURCES CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See Notes to Unaudited Condensed Consolidated Financial Statements

SOLITARIO RESOURCES CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See Notes to Unaudited Condensed Consolidated Financial Statements

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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, 2022 and 2021, and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Solitario’s 2022 Annual Report. 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, 2023, 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 in the United States on our own at the Golden Crest Project 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 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, 2023, 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.

The extent to which our business, including our exploration and other activities and the market for our securities, may be impacted by public health threats, rising geopolitical tension, general economic uncertainty and market volatility will depend on future developments, which are highly uncertain and cannot be predicted at this time. Please see Item 1A, “Risk Factors,” in our 2022 Annual Report.

(b) Results of Operations

Comparison of the three months ended September 30, 2023 to the three months ended September 30, 2022

We had a net loss of $1,292,000 or $0.02 per basic and diluted share for the three months ended September 30, 2023 compared to a net loss of $1,057,000 or $0.02 per basic and diluted share for the three months ended September 30, 2022. As explained in more detail below, the primary reasons for the increase in our net loss in the three months ended September 30, 2023 compared to the net loss during the three months ended September 30, 2022 were (i) an increase in exploration expense to $918,000 in the three months ended September 30, 2023 compared to exploration expense of $655,000 during the three months ended September 30, 2022; (ii) an increase in the unrealized loss on marketable equity securities to $141,000 during the three months ended September 30, 2023 compared to an unrealized gain on marketable equity securities of $13,000 during the three months ended September 30, 2022; and (iii) recording of other income of $20,000 during the three months ended September 30, 2022, with no similar item during the three months ended September 30, 2023. Partially offsetting these items which increased the loss during the 2023 period, compared to the three months ended September 30, 2023 were (i) a reduction in general and administrative costs to $282,000 during the three months ended September 30, 2023 compared to general and administrative costs of $435,000 during the three months ended September 30, 2022; (ii) an increase in interest and dividend income to $35,000 during the three months ended September 30, 2023 compared to interest and dividend income of $29,000 during the three months ended September 30, 2022; (iii) the recording of a gain on derivative instruments of $7,000 during the three months ended September 30, 2023 with no similar item during the three months ended September 30, 2022; and (iv) an unrealized gain on short-term investments of $14,000 during the three months ended September 30, 2023 compared to a loss of $22,000 during the three months ended September 30, 2022. Each of the major components of these items is discussed in more detail below.

Our net exploration expense increased to $918,000 during the three months ended September 30, 2023 compared to exploration expense of $655,000 during the three months ended September 30, 2022 primarily as a result of the expensing of claim fees of $292,000 at our Golden Crest project during the three months ended September 30, 2023, compared to $40,000 during the three months ended September 30, 2022, when Solitario was staking and filing initial claim fees at Golden Crest, which are capitalized during the first year of claim payments. Solitario expenses lease and claim costs for all years, after the initial claim or lease payments are made. See Note 2, “Mineral Properties,” to the unaudited financial statements above. In addition, we conducted an increased surface exploration and analysis program at our Golden Crest project which represented approximately $439,000 of exploration expense during the three months ended September 30, 2023 compared to exploration expenditures of $354,000 at Golden Crest during the three months ended September 30, 2022. Partially offsetting these increases in exploration expenditures during the three months ended September 30, 2023 were (i) a later start of work at the Lik Project by our joint venture partner, Teck, as Lik exploration was $139,000 during the three months ended September 30, 2023 compared to $221,000 of exploration expenditures at Lik during the three months ended September 30, 2022; and (ii) a reduction in reconnaissance exploration during the three months ended September 30, 2023 to $48,000 compared to reconnaissance exploration of $80,000 during the three months ended September 30, 2022. During the three and nine months ended September 30, 2023, 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-based personnel spent a portion of their time on Golden Crest and reconnaissance exploration activities described above and related matters. We have budgeted approximately $2,000,000 for the full-year exploration expenditure for 2023, which includes approximately $1,426,000 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 2023 to be above the exploration expenditures for full-year 2022.

Exploration expense (in thousands) by project consisted of the following:

General and administrative costs, excluding stock option compensation costs, discussed below, were $224,000 during the three months ended September 30, 2023 compared to $190,000 during the three months ended September 30, 2022. The major components of our general and administrative costs were (i) salaries and benefit expense of $108,000 during the three months ended September 30, 2023 compared to salary and benefit costs of $88,000 during the three months ended September 30, 2022; (ii) legal and accounting expenditures of $47,000 in the three months ended September 30, 2023 compared to $50,000 in the three months ended September 30, 2022; (iii) office rent and expenses of $35,000 during the three months ended September 30, 2023, compared to $29,000 during the three months ended September 30, 2022; and (iv) travel and shareholder relation costs of $34,000 during the three months ended September 30, 2023 compared to $23,000 during the three months ended September 30, 2022. We anticipate the full-year general and administrative costs will be comparable for 2023 and 2022.

We recorded $58,000 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, 2023 compared to $245,000 of stock option compensation expense during the three months ended September 30, 2022. These non-cash charges related to the expense for vesting on stock options outstanding during the three months ended September 30, 2023 and 2022. 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, 2023 was as a result of the grant of 2,360,000 options in the third quarter of 2022, which included the expensing of the initial vesting of 25% of the grant date fair value of the option grant of $876,000 or $218,000 during the three months ended September 30, 2022, with no similar grant of options during the three months ended September 30, 2023. See Note 10, “Employee Stock Compensation Plans,” above, for additional information on our stock option expense.

We recorded a non-cash unrealized loss on marketable equity securities of $141,000 during the three months ended September 30, 2023 compared to an unrealized gain on marketable equity securities of $13,000 during the three months ended September 30, 2022. The non-cash unrealized loss during the three months ended September 30, 2023 was primarily related to (i) a decrease in the value of our 7,750,000 shares of Vendetta common stock, which decreased to a fair value of $172,000 at September 30, 2023 from a fair value of $234,000 at June 30, 2023 or a decrease of $62,000 based on quoted market prices; (ii) a decrease in the value of our 134,055 shares of Vox Royalty Corp. (“Vox”) common stock to $271,000 at September 30, 2023 compared to a value of $324,000 at June 30, 2023 or a decrease of $54,000 based on quoted market prices and (iii) a decrease in the value of our holdings of 100,000 shares of Kinross common stock to $456,000 at September 30, 2023 compared to a value of $477,000 at June 30, 2023 or a decrease of $21,000 based on quoted market prices. 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. The changes in the prices of our marketable equity securities are based on quoted market prices over which we have no control. See Liquidity and Capital Resources below for a discussion of our marketable equity securities.

We recorded interest and dividend income of $35,000 during the three months ended September 30, 2023 compared to interest income of $29,000 during the three months ended September 30, 2022. This increase was primarily due to an increase in interest income on our short-term investments, including our invested balance in a money market account at a brokerage firm. This increase was primarily the result of the completion of the $2,500,000 Newmont private placement discussed above in Note 11, “Shareholders’ Equity.” In addition, the average interest rate on our short-term investments was higher during the three months ended September 30, 2023 compared to the three months ended September 30, 2022. We anticipate our interest and dividend income will be higher for the full year of 2023 compared to 2022 as a result of the private placement to Newmont, the $4,747,500 private placement completed subsequent to September 30, 2023 and the higher interest rates currently being paid on short-term investments during 2023 compared to 2022. We expect to utilize a portion of our short-term investments including proceeds from maturing USTS to fund our exploration and general and administrative expenditures.

We recorded a non-cash unrealized gain on our short-term investments of $14,000 during the three months ended September 30, 2023 compared to an unrealized loss on our short-term investments of $22,000 during the three months ended September 30, 2022 primarily due to the maturing of our USTS, which are marked-to-market and prior reductions in the quoted fair value of our existing USTS that were purchased at lower yield to maturities than current market values were reversed as the USTS matured and approached face value. 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.

During the three months ended September 30, 2023, we recorded a non-cash gain on derivative instruments of $7,000 related to certain Kinross calls we sold during 2023, with no comparable amount during the three months ended September 30, 2022. See Note 6, “Derivative Instruments,” above for a discussion of our Kinross calls.

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 and nine months ended September 30, 2023 and 2022, we recorded no property impairments.

We recorded no income tax expense or benefit during the three and nine months ended September 30, 2023 or 2022 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 2023. 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, 2023 to the nine months ended September 30, 2022

We had a net loss of $2,712,000 or $0.04 per basic and diluted share for the nine months ended September 30, 2023 compared to a net loss of $3,262,000 or $0.05 per basic and diluted share for the nine months ended September 30, 2022. As explained in more detail below, the primary reasons for the decrease in our net loss were (i) a decrease in exploration expense to $1,748,000 during the nine months ended September 30, 2023 compared to exploration expense of $1,832,000 during the nine months ended September 30, 2022; (ii) a decrease in general and administrative expenses to $1,073,000 during the nine months ended September 30, 2023 compared to general and administrative expenses of $1,099,000 during the nine months ended September 30, 2022; (iii) a gain on derivative instruments of $30,000 during the nine months ended September 30, 2023 compared to a loss on derivative instruments of $4,000 during the nine months ended September 30, 2022; (iv) a realized loss of $159,000 on the sale of marketable equity securities during the nine months ended September 30, 2022, with no comparable sales of marketable equity securities during the nine months ended September 30, 2023; (v) an unrealized gain on short-term investments of $49,000 during the nine months ended September 30, 2023 compared to an unrealized loss on short-term investments of $120,000 during the nine months ended September 30, 2022; and (vi) an unrealized loss of $39,000 on marketable equity securities during the nine months ended September 30, 2023 compared to an unrealized loss on marketable equity securities of $142,000 during the nine months ended September 30, 2022. Partially offsetting these reductions in the loss for the nine month period ended September 30, 2023 compared to the nine month period ended September 30, 2022 were (i) a decrease in interest and dividend income to $88,000 during the nine months ended September 30, 2023 compared to interest income of $97,000 during the nine months ended September 30, 2022; and (ii) other income of $20,000 during the nine months ended September 30, 2022 with no similar amount during the nine months ended September 30, 2023. The significant changes for these items are discussed in more detail below.

Our net exploration expense decreased to $1,748,000 during the nine months ended September 30, 2023 compared to $1,832,000 during the nine months ended September 30, 2022. The primary reasons for the decrease were that the exploration expenditures at our Lik project in Alaska were $172,000 during the nine months ended September 30, 2023 compared to exploration expenditures 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, while the drilling program for 2023 was delayed until the fourth quarter of 2023; and (ii) our reconnaissance exploration expenditures dropped to $118,000 during the nine months ended September 30, 2023 compared to $254,000 during the nine months ended September 30, 2022. Partially offsetting this decrease in exploration expenditures during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was an increase in our expenditures at the Golden Crest project to $1,458,000 during the nine months ended September 30, 2023 compared to Golden Crest exploration expenditures of $909,000 during the nine months ended September 30, 2022, as a result of an increase in claim filing expenditures and additional permitting work and soil and rock sampling during 2023 compared to 2022.

General and administrative costs, excluding stock option compensation costs discussed below, were $889,000 during the nine months ended September 30, 2023 compared to $828,000 during the nine months ended September 30, 2022. The major components of the costs were (i) salary and benefit expense during the nine months ended September 30, 2023 of $371,000 compared to salary and benefit expense of $307,000 during the nine months ended September 30, 2022, with these increases as a result of increased personnel and salaries in 2023; (ii) legal and accounting expenditures of $193,000 during the nine months ended September 30, 2023, compared to $247,000 during the nine months ended September 30, 2022; (iii) office and other costs of $108,000 during the nine months ended September 30, 2023 compared to $84,000 during the nine months ended September 30, 2022; and (iv) travel and shareholder relation costs of $217,000 during the nine months ended September 30, 2023 compared to $190,000 during the nine months ended September 30, 2022.

During the nine months ended September 30, 2023 and 2022, Solitario recorded $184,000 and $271,000, respectively, of stock option expense for the amortization of unvested grant date fair value with a credit to additional paid-in capital. The decrease during the nine months ended September 30, 2023 was primarily related to the addition of 2,360,000 options granted during the third quarter of 2022 with a grant date fair value of $876,000, which increased the amortization of unvested options grant date fair value during the nine months ended September 30, 2022, related to the 25% of grant date fair value was expensed in the three months ended September 30, 2022, with no similar grant of options during the nine months ended September 30, 2023.

We recorded an unrealized loss on marketable equity securities of $39,000 during the nine months ended September 30, 2023 compared to an unrealized loss on marketable equity securities of $142,000 during the nine months ended September 30, 2022. The non-cash unrealized gain during the nine months ended September 30, 2023 was primarily related to (i) a decrease in the fair value of our holdings of 7,750,000 shares of Vendetta common stock to $172,000 at September 30, 2022 compared to a fair value of $229,000 at December 31, 2022, based on quoted market prices; and (ii) a decrease in the fair value of our holdings of 134,055 shares of Vox to $271,000 at September 30, 2022 compared to a fair value of $311,000 at December 31, 2022 based on quoted market prices. Partially offsetting these decreases in value during the nine months ended September 30, 2023 was an increase in the fair value of our holdings of 100,000 shares of Kinross common stock at September 30, 2023 to $456,000 compared to a fair value of $409,000 at December 31, 2022, based on quoted market prices. 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. 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 2023.

We recorded interest and dividend income of $88,000 during the nine months ended September 30, 2023 compared to interest and dividend income of $97,000 during the nine months ended September 30, 2022. The reduction in interest income was primarily related to a reduction in our average outstanding balance of short-term investment during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, which was partially offset by an increase in the average interest rate and income earned on our short-term investments during the nine months ended September 30, 2023 compared to the average interest rate during the nine months ended September 30, 2022. We anticipate our interest income will increase in 2023 compared to 2022 as a result of the sale of common stock in private placements in the third and fourth quarters of 2023, as discussed in Note 11, “Shareholders’ Equity,” above. We anticipate we will use a portion 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 gain on our short-term investments of $49,000 during the nine months ended September 30, 2023 compared to an unrealized loss on our short-term investments of $120,000 during the nine months ended September 30, 2022. The unrealized gain during 2023 was primarily due to certain of our USTS increasing in value as they approached maturity. Our USTS are recorded at fair values which may be above or below the face value of the USTS depending on the current interest rates that may be below or above the stated interest rate on a USTS. These non-cash changes in the mark-to-market amount for these securities does not affect the yield-to-maturity rates of our USTS at the time the USTS were acquired to the extent the USTS are held to maturity.

We did not sell any marketable equity securities during the nine months ended September 30, 2023. 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. 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, 2023, we recorded a non-cash gain on derivative instruments of $30,000 related to certain Kinross calls we sold during the nine months ended September 30, 2023. During the nine months ended September 30, 2022, we recorded a non-cash loss of $4,000 on certain warrants related to our holdings of Vendetta common stock.

(c) Liquidity and Capital Resources

Cash and Short-term Investments

As of September 30, 2023, we have $4,132,000 in cash and short-term investments. As of September 30, 2023, we have $1,391,000 of our current assets in USTS with maturities of 30 days to 5 months. In addition, we have $2,573,000 invested in a money market account with a brokerage firm. The USTS 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 2023. 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, 2023, we own 7,750,000 shares of Vendetta common stock, 100,000 shares of Kinross common stock, 134,055 shares of Vox common stock and 200,000 shares of Highlander Silver Corp. common stock. At September 30, 2023, the Vendetta shares are recorded at their fair value of $172,000, the Kinross shares are recorded at their fair value of $456,000; the Vox shares are recorded at their fair value of $271,000 and the Highlander Silver Corp. shares are recorded at their fair value of $11,000. We did not sell any of our marketable equity securities during the nine months ended September 30, 2023. 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 2023 depending on cash needs and market conditions.

Working Capital

We had working capital of $4,952,000 at September 30, 2023 compared to working capital of $4,991,000 as of December 31, 2022. Our working capital at September 30, 2023 consists primarily of our cash and cash equivalents, our investment in short-term investments, discussed above, our investment in marketable equity securities of $910,000, and other current assets of $237,000, less our accounts payable of $295,000 and other current liabilities of $32,000. As of September 30, 2023, 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, 2023 and December 31, 2022, there were options outstanding from the 2013 Plan to acquire 5,195,000 and 5,390,000 shares, respectively, of Solitario common stock. The outstanding options have exercise prices between $0.60 per share and $0.20 per share. During the nine months ended September 30, 2023, options for 195,000 shares were exercised with exercise prices between $0.28 and $0.31 per share for proceeds of $59,000. 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. We do not anticipate the exercise of options to be a significant source of cash flow during the remainder of 2023.

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. There were no sales of shares of common stock under the ATM program during the nine months ended September 30, 2023. 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. Solitario may sell additional shares under the ATM program during the remainder of 2023 if market conditions warrant such sales.

(d) Cash Flows

Net cash used in operations during the nine months ended September 30, 2023 increased to $2,684,000 compared to $1,948,000 of net cash used in operations for the nine months ended September 30, 2022 primarily as a result of (i) the pre-payment of $350,000 during the second quarter of 2023 to our joint venture partner Teck for an advance on the planned 2023 exploration program at the Lik project in Alaska, of which $193,000 remained in pre-paid expense at September 30, 2023 and is included in the changes in prepaid expenses and other current assets as a use of cash; (ii) an increase in non-stock option general and administrative expense to $889,000 during the nine months ended September 30, 2023 compared to $828,000 during the nine months ended September 30, 2022, discussed above; (iii) a reduction in the provision of cash from changes in other prepaid expenses and other current assets to a use of cash of $199,000 during the nine months ended September 30, 2023 compared to a provision of cash from changes in prepaid expenses and other current assets of $266,000 during the nine months ended September 30, 2022; and (iv) the provision of cash of $34,000 from an increase in accounts payable and other current liabilities during the nine months ended September 30, 2023 compared to the provision of cash of $299,000 from an increased in accounts payable and other current liabilities during the nine months ended September 30, 2022 as a result of increased exploration activity at our Golden Crest project during the nine months ended September 30, 2022. These uses of cash were partially offset by (i) a decrease in exploration expense to $1,748,000 during the nine months ended September 30, 2023 compared to exploration expense of $1,832,000 during the nine months ended September 30, 2023; and (ii) a reduction in interest and dividend income to $88,000 during the nine months ended September 30, 2023 compared to interest and dividend income of $97,000 during the nine months ended September 30, 2022. Based upon projected expenditures in our 2023 budget, we anticipate continued use of funds from operations through the remainder of 2023, 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, 2023, we provided $36,000 of cash from the net sale of short-term investments compared to the provision of $69,000 in cash during the nine months ended September 30, 2022 from the net sales of short-term investments. The change during 2023 was primarily due to the offsetting effects of our cash exploration and general and administrative expenditures and the provision of cash from the sale of securities in the private placement to Newmont, discussed above in Note 11, “Shareholders’ Equity.” During the nine months ended September 30, 2023, we acquired equipment and other assets used in our exploration activities of $12,000 compared to $49,000 of equipment acquired during the nine months ended September 30, 2022. We received cash proceeds of $31,000 from the sale of Kinross calls during the nine months ended September 30, 2023 with no similar sales during the nine months ended September 30, 2022. During the nine months ended September 30, 2022, we sold certain marketable equity securities for proceeds of $53,000, with no similar sales during the nine months ended September 30, 2023. We also used $386,000 of our cash to acquire additional mineral claims at our Golden Crest project during the nine months ended September 30, 2022 with no similar mineral property additions during the nine months ended September 30, 2023. We may sell a portion of our marketable equity securities during the remainder of 2023; however, we do not anticipate the sale of marketable equity securities will be a significant source of cash during the remainder of 2023. 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 2023. Any potential mineral property acquisition or strategic corporate investment during the remainder of 2023, 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, 2023, we received net proceeds of $2,422,000 from a private placement to Newmont, discussed above. During the nine months ended September 30, 2022, we received net proceeds of $2,023,000 from the issuance of common stock under the ATM Program, discussed above. In addition, during the nine months ended September 30, 2023 and 2022 we received $59,000 and $20,000, respectively, from the issuance of common stock from the exercise of stock options, discussed above in Note 10, “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 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, 2023 and December 31, 2022, 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, 2023. As of September 30, 2023, there have been no material 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 2022 Annual Report.

(h) Discontinued Projects

We did not record any mineral property write-downs during the three and nine months ended September 30, 2023 and 2022.

(i) Significant Accounting Policies and Critical Accounting Estimates

See Note 1 to the consolidated Financial Statements included in our Annual Report 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, 2023.

(j) Related Party Transactions

As of September 30, 2023, and for the three and nine months ended September 30, 2023, we have no related party transactions or balances.

(k) Recent Accounting Pronouncements

No recent accounting pronouncements are applicable to Solitario at this time..

(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 the risk factors included under the heading “Risk Factors” in Item 1A of our 2022 Annual Report to which there have been no material changes. 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.

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 September 30, 2023, 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 September 30, 2023.

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 September 30, 2023 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 September 30, 2023, 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, 2022.

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

Any unregistered sales of equity securities effected during the quarter ended September 30, 2023 were previously reported on a Current Report on Form 8-K.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

During the quarter ended September 30, 2023, none of the Company’s directors or officers adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408(a) of Regulation S-K

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 RESOURCES CORP.

EXHIBIT INDEX