XPL Solitario Resources Corp

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2024

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 81,438,418 shares of $0.01 par value common stock outstanding as of July 29, 2024.

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, 2023 and 2022, and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Solitario’s 2023 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 June 30, 2024, 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.  In addition, during 2024 we added the Cat Creek Project in Colorado, which has not been explored to the degree of any of our three core assets, described above.  We are conducting exploration activities in the United States on our own at the Golden Crest and Cat Creek Projects 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 June 30, 2024, 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, Golden Crest and Cat Creek 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 Part I, 1A, “Risk Factors,” in our 2023 Annual Report.

 (b) Results of Operations

Comparison of the three months ended June 30, 2024 to the three months ended June 30, 2023

We had a net loss of $762,000 or $0.01 per basic and diluted share for the three months ended June 30, 2024 compared to a net loss of $1,040,000 or $0.02 per basic and diluted share for the three months ended June 30, 2023.  As explained in more detail below, the primary reasons for the decrease in our net loss in the three months ended June 30, 2024 compared to the net loss during the three months ended June 30, 2023 were (i) an unrealized gain on marketable equity securities of $248,000 during the three months ended June 30, 2024 compared to an unrealized loss on marketable equity securities of $227,000 during the three months ended June 30, 2023; (ii) interest income of $106,000 during the three months ended June 30, 2024 compared to interest income of $26,000 during the three months ended June 30, 2023; (iii) a decrease in exploration expense to $487,000 during the three months ended June 30, 2024 compared to exploration expense of $555,000 in the three months ended June 30, 2023; and (iv) a gain on sale of marketable equity securities of $54,000 during the three months ended June 30, 2024 with no similar gain during the three months ended June 30, 2023.  Partially offsetting these increases in income were (i)  an increase in general and administrative expense to $656,000 during the three months ended June 30, 2024 compared to general and administrative expense of $315,000 during the three months ended June 30, 2023; and (ii) a loss on derivative instruments of $21,000 during the three months ended June 30, 2024 compared to a gain on derivative instruments of $23,000 during the three months ended June 30, 2023.  Each of the major components of these items is discussed in more detail below.

Our net exploration expense decreased to $487,000 during the three months ended June 30, 2024 compared to exploration expense of $555,000 during the three months ended June 30, 2023 primarily as a result of (i) a decrease in exploration expense at our Golden Crest Project to $450,000 during the three months ended June 30, 2024 compared to $486,000 during the three months ended June 30, 2023 as a result of reduced permitting and geologic surface work during the three months ended June 30, 2024 compared to the  three months ended June 30, 2023; (ii) a later start of work at our Lik Project by our joint venture partner, Teck, as Lik exploration expense was $16,000 during the three months ended June 30, 2024 compared to $28,000 of exploration expenditures at Lik during the three months ended June 30, 2023; and (iii) a reduction in reconnaissance exploration during the three months ended June 30, 2024 to $8,000 compared to reconnaissance exploration of $41,000 during the three months ended June 30, 2023.  Partially offsetting these decreases in exploration expense was initial work at our new Cat Creek Project of $13,000 during the three months ended June 30, 2024, with no similar work during the three months ended June 30, 2023.  With the receipt of drilling permits at our Golden Crest Project during the second quarter of 2024, we anticipate beginning drilling at Golden Crest during the third quarter of 2024 and expect a significant increase in exploration expense related to that planned drilling during the remainder of 2024.  During the three and six months ended June 30, 2024 we had four 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 the Golden Crest Project and reconnaissance exploration activities described above and related matters.  We have budgeted approximately $3,900,000 for the full-year exploration expenditure for 2024, which includes approximately $1,700,000 for drilling at the Golden Crest Project.  We expect our full-year exploration expenditures for 2024 to be above our exploration expenditures for 2023.

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

General and administrative costs, excluding stock option compensation costs, discussed below, were $301,000 during the three months ended June 30, 2024 compared to $257,000 during the three months ended June 30, 2023.  The major components of our general and administrative costs were (i) salaries and benefit expense of $83,000 during the three months ended June 30, 2024 compared to salary and benefit costs of $103,000 during the three months ended June 30, 2023 as a result of a reduction in administrative staff costs; (ii) legal and accounting expenditures of $60,000 in the three months ended June 30, 2024 compared to $66,000 in the three months ended June 30, 2023; (iii) office rent and expenses of $33,000 during the three months ended June 30, 2024 compared to $23,000 during the three months ended June 30, 2023; and (iv) travel and shareholder relation costs of $125,000 during the three months ended June 30, 2024 compared to $65,000 during the three months ended June 30, 2023.  We anticipate the full-year general and administrative costs will be comparable for 2024 and 2023.  

We recorded $356,000 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 June 30, 2024 compared to $59,000 of stock option compensation expense during the three months ended June 30, 2023.  These non-cash charges related to the expense for vesting on stock options outstanding during the three months ended June 30, 2024 and 2023.  The primary reason for the increase in stock option compensation expense during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was as a result of the grant of 2,125,000 options in the second quarter of 2024, which included amortization of 25%, or $280,000 on the grant date of the total grant date fair value of $1,120,000.  The remaining expense related to the amortization of grant date fair values of outstanding unvested options for the three months ended June 30, 2024 and 2023 was comparable.  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 $248,000 during the three months ended June 30, 2024 compared to an unrealized loss on marketable equity securities of $227,000 during the three months ended June 30, 2023.  The non-cash unrealized gain during the three months ended June 30, 2024 was primarily related to (i) an increase in the fair value of our 100,000 shares of Kinross common stock to $832,000 at June 30, 2024 from a fair value of $613,000 at March 31, 2024 or an increase of $219,000, based on quoted market prices; and (ii) an increase in the fair value of our 134,055 shares of Vox Royalty Corp. (“Vox”) common stock to $371,000 at June 30, 2024 from a fair value of $280,000 at March 31, 2024 or an increase of $91,000 based on quoted market prices.  These increases were partially offset by a decrease in the fair value of our 7,750,000 shares of Vendetta Mining Corp. (“Vendetta”) common stock to $85,000 at June 30, 2024 compared to a fair value of $115,000 at March 31, 2024 or a decrease of $30,000 based on quoted market prices.  In addition, during the three months ended June 30, 2024, we transferred $32,000 of prior unrecognized gain on the sale of our 100,000 common shares of Highlander common stock to realized gain on the sale of marketable equity securities, discussed below.  The non-cash unrealized loss during the three months ended June 30, 2023 was primarily related to (i) a decrease in the fair value of our 7,750,000 shares of Vendetta common stock to  $234,000 at June 30, 2023 from a fair value of $372,000 at March 31, 2023 or a decrease of $138,000, based on quoted market prices; and (ii) a decrease in the fair value of our 134,055 shares of Vox common stock to $325,000 at June 30, 2023 compared to a value of $412,000 at March 31, 2023 or a decrease of $88,000 based on quoted market prices.  

During the three months ended June 30, 2024, we sold our 100,000 shares of Highlander common shares for proceeds of $54,000 and recorded a gain on sale of marketable equity securities of $54,000.  We did not sell any of our marketable equity securities during the three or six months ended June 30, 2023.  See Note 3 “Marketable Equity Securities” to the condensed consolidated financial statements.

We recorded interest and dividend income of $106,000 during the three months ended June 30, 2024 compared to interest income of $26,000 during the three months ended June 30, 2023.  This increase was primarily due to an increase in our funds held in our money market account during the three months ended June 30, 2024 compared to the funds held in our money market account during the three months ended June 30, 2023.  In addition, the average interest rate paid on our funds held in our money market account during the three months ended June 30, 2024 was higher than the interest rates paid during the three months ended June 30, 2023.  Our dividend income in the three and six months ended June 30, 2024 of $3,000 and $6,000 was comparable to the same periods of 2023.  We anticipate interest income will decrease during the remainder of 2024 from the amounts recorded through the six months ended June 30, 2024 as we expect to utilize the funds in the money market account 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 June 30, 2023 primarily due to the maturing of our USTS, which are marked-to-market and a reversal of prior reductions in the quoted fair value of our existing USTS that were purchased at lower yield-to-maturities than current market values, as the USTS matured and approached face value.  We held no USTS during the three months ended June 30, 2024 and accordingly there were no similar changes in the marked-to-market values during the three months ended June 30, 2024.  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 at the time we acquire these short-term investments, to the extent we hold the investments to maturity.  

During the three months ended June 30, 2024, we recorded a non-cash loss on derivative instruments of $21,000 related to certain Kinross calls we sold during the three months ended June 30, 2024, compared to a gain on derivative instruments of $23,000 during the three months ended June 30, 2023 related to our holdings of Kinross calls which expired unexercised in August 2023.  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 six months ended June 30, 2024 and 2023, we recorded no property impairments.    

We recorded no income tax expense or benefit during the three and six months ended June 30, 2024 or 2023 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 2024.  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 six months ended June 30, 2024 to the six months ended June 30, 2023

We had a net loss of $1,492,000 or $0.02 per basic and diluted share for the six months ended June 30, 2024 compared to a net loss of $1,420,000 or $0.02 per basic and diluted share for the six months ended June 30, 2023.  As explained in more detail below, the primary reasons for the increase in our net loss were (i) an increase in exploration expense to $841,000 during the six months ended June 30, 2024 compared to exploration expense of $830,000 during the six months ended June 30, 2023; (ii) an increase in general and administrative expense to $1,128,000 during the six months ended June 30, 2024 compared to general and administrative expense of $791,000 during the six months ended June 30, 2023; and (iii) the recording of a loss on derivative instruments of $21,000 during the six months ended June 30, 2024 compared to a gain on derivative instruments of $23,000 during the six months ended June 30, 2023.   Partially offsetting these increases in the net loss during the six months ended June 30, 2024 compared to the net loss during the six months ended June 30, 2023 were (i) a realized gain of $54,000 on the sale of marketable equity securities during the six months ended June 30, 2024, with no comparable sales of marketable equity securities during the six months ended June 30, 2023; (ii); an unrealized gain of $256,000 on marketable equity securities during the six months ended June 30, 2024 compared to an unrealized gain on marketable equity securities of $102,000 during the six months ended June 30, 2023; and (iii) an increase in interest and dividend income to $201,000 during the six months ended June 30, 2024 compared to interest income of $53,000 during the six months ended June 30, 2023. The significant changes for these items are discussed in more detail below.

Our net exploration expense increased to $841,000 during the six months ended June 30, 2024 compared to $830,000 during the six months ended June 30, 2023.  The primary reasons for the increase were (i) the exploration expenditures at our Golden Crest Project increased to $785,000 during the six months ended June 30, 2024 compared to $727,000 during the six months ended June 30, 2023; and (ii) we initiated exploration activities at our new Cat Creek Project in Colorado with $13,000 in exploration expenditures during the six months ended June 30, 2024, with no similar expenditures during the six months ended June 30, 2023.  Partially offsetting these increases in exploration expenditures were (i) a reduction in the expenditures at our Lik Project in Alaska to $24,000 during the six months ended June 30, 2024 compared to exploration expenditures of $33,000 during the six months ended June 30, 2023 and (ii) a reduction in reconnaissance exploration expenditures to $19,000 during the six months ended June 30, 2024 compared to reconnaissance exploration expenditures of $70,000 during the six months ended June 30, 2023.  We anticipate a significant increase in exploration expenditures at our Golden Crest Project in the second half of 2024 primarily due to planned drilling on the project as discussed above.  

General and administrative costs, excluding stock option compensation costs discussed below, were $713,000 during the six months ended June 30, 2024 compared to $665,000 during the six months ended June 30, 2023.  The major components of the costs were (i) salary and benefit expense during the six months ended June 30, 2024 of $214,000 compared to salary and benefit expense of $263,000 during the six months ended June 30, 2023 as a result of salary reductions during 2024; (ii) legal and accounting expenditures of $129,000 during the six months ended June 30, 2024, compared to $146,000 during the six months ended June 30, 2023; (iii) office and other costs of $57,000 during the six months ended June 30, 2024 compared to $52,000 during the six months ended June 30, 2023; and (iv) travel and shareholder relation costs of $313,000 during the six months ended June 30, 2024 compared to $204,000 during the six months ended June 30, 2023.      

During the six months ended June 30, 2024 and 2023, Solitario recorded $415,000 and $126,000, 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 six months ended June 30, 2024 was primarily related to the grant of options for 2,125,000 shares of our common stock during June of 2024, which resulted in the amortization of $280,000 of grant date fair value on the date of grant of those options, as discuss above.      

We recorded an unrealized gain on marketable equity securities of $256,000 during the six months ended June 30, 2024 compared to an unrealized gain on marketable equity securities of $102,000 during the six months ended June 30, 2023. The non-cash unrealized gain during the six months ended June 30, 2024 was primarily related to (i) an increase in the fair value of our holdings of 100,000 shares of Kinross common stock at June 30, 2024 to $832,000 compared to a fair value of $605,000 at December 31, 2023, or an increase of $227,000 based on quoted market prices; (ii) an increase in the fair value of our holdings of 134,055 shares of Vox common stock to $371,000 at June 30, 2024 compared to a fair value of $276,000 at December 31, 2023, or an increase of $95,000 based on quoted market prices; and (iii) an increase of $21,000 in the fair value of our holdings of 100,000 shares of Highlander common stock from the fair value at December 31, 2023  to the date of the sale of our holdings.  These unrealized increases in the value of our marketable equity securities were partially offset by (i) a decrease in the value of our holdings of Vendetta common stock to $85,000 at June 30, 2024 compared to a fair value of $118,000 at December 31, 2023 or a decrease of $33,000 based on quoted market prices; and (ii) the transfer of $54,000 of unrealized gain to realized gain on the sale of our 100,000 shares of Highlander common shares upon the sale of those shares during the six months ended June 30, 2024.  The non-cash unrealized gain during the six months ended June 30, 2023 was primarily related to (i) an increase in the fair value of our holdings of 7,750,000 shares of Vendetta common stock to $234,000 at June 30, 2023 compared to a fair value of $229,000 at December 31, 2022, based on quoted market prices; (ii) an increase in the fair value of our holdings of 100,000 shares of Kinross common stock at June 30, 2023 to $477,000 compared to a fair value of $409,000 at December 31, 2022, based on quoted market prices; and (iii) an increase in the fair value of our holdings of 134,055 shares of Vox common stock to $325,000 at June 30, 2023 compared to a fair value of $311,000 at December 31, 2022 based on quoted market prices.    

We recorded interest and dividend income of $201,000 during the six months ended June 30, 2024 compared to interest and dividend income of $53,000 during the six months ended June 30, 2023.  The increase in interest income was primarily related to an increase in our average outstanding balance of money market holdings during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 as well as an increase in the average interest rate and income earned on our money market account during the six months ended June 30, 2024 compared to the average interest rate and income earned during the six months ended June 30, 2023.  We anticipate our interest income will decrease during the remainder of 2024 compared to the first six months of 2024 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 gain on our short-term investments of $35,000 during the six months ended June 30, 2023 primarily due to certain of our USTS increasing in value as they approached maturity, which were previously recorded at a mark-to-market amount that was below their face value as a result of then-current interest rates being higher than the yield-to-maturity rates of our USTS at the time the USTS were acquired.  We did not hold significant investments of USTS during 2024 and did not have a non-cash unrealized gain or loss during the six months ended June 30, 2024.

During the six months ended June 30, 2024, we sold 100,000 shares of our holdings of Highlander common stock for proceeds of $54,000 and recorded a gain on sale of marketable equity securities of $54,000.  We did not sell any marketable equity securities during the six months ended June 30, 2023.  See Note 3 “Marketable Equity Securities” to the condensed consolidated financial statements for a discussion of the sale of marketable equity securities.

During the six months ended June 30, 2024, we recorded a non-cash loss on derivative instruments of $21,000 related to certain Kinross calls we sold during the three months ended June 30, 2024 as a result of the increase in the underlying value of our holdings of Kinross common stock, discussed above.  These calls have a strike price of $9.00 per share and expire in November 2024.  During the six months ended June 30, 2023, we recorded a non-cash gain on derivative instruments of $23,000 related to certain Kinross calls we sold during the three months ended June 30, 2023. 

(c) Liquidity and Capital Resources

Cash and Short-term Investments

As of June 30, 2024, we have $8,224,000 in cash and short-term investments.  The bulk of this, $8,048,000, is held in a money market account at a brokerage firm.  We anticipate we will continue to invest our cash and short-term investments in the money market account for that portion not used for exploration expenditures, operating costs or mineral property acquisitions during the remainder of 2024.  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 June 30, 2024 we own 7,750,000 shares of Vendetta common stock, 100,000 shares of Kinross common stock, and 134,055 shares of Vox common stock.  At June 30, 2024, the Vendetta shares are recorded at their fair value of $85,000, the Kinross shares are recorded at their fair value of $832,000; and the Vox shares are recorded at their fair value of $371,000.  We sold all of our holdings of Highlander common stock during the six months ended June 30, 2024 for proceeds of $54,000, as discussed above.  We did not sell any of our marketable equity securities during the six months ended June 30, 2023.  See Note 3 “Marketable Equity Securities” to the condensed consolidated financial statements.  We anticipate we may sell some portion of our holdings of marketable equity securities during the remainder of 2024 depending on cash needs and market conditions.

Working Capital

We had working capital of $9,307,000 at June 30, 2024 compared to working capital of $9,309,000 as of December 31, 2023.  Our working capital at June 30, 2024 consists primarily of our cash and short-term investments, discussed above, our investment in marketable equity securities of $1,288,000, and other current assets of $147,000, less our accounts payable of $251,000 and other current liabilities of $101,000.  As of June 30, 2024, 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 the 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

2013 Plan

As of June 30, 2024 and December 31, 2023, there were options outstanding to acquire 3,728,500 and 3,778,500 shares of our common stock under the 2013 Plan.  The outstanding options have exercise prices between $0.69 per share and $0.20 per share.  During the six months ended June 30, 2024, options for 50,000 shares were exercised with an exercise price of $0.28 per share for proceeds of $14,000.  During the six months ended June 30, 2023, options for 50,000 shares were exercised with an exercise price of $0.28 per share for proceeds of $14,000. 

2023 Plan

As of June 30, 2024 and December 31, 2023, there were options outstanding to acquire 2,175,000 and 50,000 shares of our common stock under the 2023 Plan.  The outstanding options at June 30, 2024 have exercise prices between $0.85 per share and $0.51 per share.  No options have been exercised under the 2023 Plan during the six months ended June 30, 2024 or 2023. 

We do not anticipate the exercise of options to be a significant source of cash flow during the remainder of 2024.

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 $10.0 million.  During the six months ended June 30, 2024, we sold an aggregate of 1,802,060 shares of common stock under the ATM Agreement at an average price of $0.70 per share for net proceeds of $1,218,000, after commissions and sale expenses.  There were no sales of shares of common stock under the ATM Program during the six months ended June 30, 2023. We may sell additional shares under the ATM Program during the remainder of 2024 if market conditions warrant such sales.    

(d) Cash Flows  

Net cash used in operations during the six months ended June 30, 2024 decreased to $1,570,000 compared to $1,765,000 of net cash used in operations for the six months ended June 30, 2023 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 planned 2023 exploration program at the Lik project in Alaska, of which $332,000 remained in pre-paid expense at June 30, 2023 and is included in the changes in prepaid expenses and other current assets as a use of cash, with no similar item during the six months ended June 30, 2024; and (ii) an increase in the use of cash from changes in other prepaid expenses and other current assets of $36,000 to a total change to a use of $364,000 during the six months ended June 30, 2024 compared to the use of cash of $328,000 during the six months ended June 30, 2023.  Partially offsetting this decrease in the use of cash during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was (i) the provision of cash of $126,000 from an increase in accounts payable and other current liabilities during the six months ended June 30, 2024 compared to a use of cash of $15,000 from an increased in accounts payable and other current liabilities during the six months ended June 30, 2023, primarily as a result of the timing of payments in accounts payable at June 30, 2024 compared to June 30, 2023; (ii) an increase in non-stock option general and administrative expense to $713,000 during the six months ended June 30, 2024 compared to $665,000 during the six months ended June 30, 2023, discussed above; and (iii) an increase in exploration expense to $841,000 during the six months ended June 30, 2024 compared to exploration expenses of $830,000 during the six months ended June 30, 2023;.  Based upon projected expenditures in our 2024 budget, we anticipate continued use of funds from operations through the remainder of 2024, primarily for drilling expenditures and other exploration related to our Golden Crest and Lik Projects in the second half of 2024.  See “Results of Operations” discussed above for further explanation of some of these variances.

During the six months ended June 30, 2024, we provided $388,000 of cash from the sale of short-term investments compared to the provision of $1,909,000 in cash during the six months ended June 30, 2023 from the net investment in short-term investments.  During the six months ended June 30, 2024, we purchased a certificate of deposit for $100,000 that is restricted for reclamation in the event of any un-reclaimed areas of our planned drilling at Golden Crest.  This certificate of deposit is shown separately on our balance sheet as restricted cash at June 30, 2024.  There was no similar restricted cash item at December 31, 2023.  During the six months ended June 30, 2024, we acquired equipment and other assets used in our exploration activities of $12,000 compared to $9,000 of equipment acquired during the six months ended June 30, 2023.  We received cash proceeds of $39,000 from the sale of Kinross calls during the six months ended June 30, 2024 compared to cash proceeds of $31,000 during the six months ended June 30, 2023.  During the six months ended June 30, 2024 we sold marketable equity securities for proceeds of $54,000, with no similar sales during the six months ended June 30, 2023.  We also used $43,000 of our cash to acquire additional mineral claims, at our Golden Crest Project, and $12,000 for initial acquisition costs of our new Cat Creek Project during the six months ended June 30, 2024 with no similar mineral property additions during the six months ended June 30, 2023.  We may sell a portion of our marketable equity securities during the remainder of 2024; however, we do not anticipate the sale of marketable equity securities will be a significant source of cash during the remainder of 2024.  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 2024.  Any potential mineral property acquisition or strategic corporate investment during the remainder of 2024, 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 six months ended June 30, 2024, we received net cash of $1,218,000 from the issuance of common stock under the ATM Program, discussed above.  In addition, during the six months ended June 30, 2024 and 2023 we received $14,000 during both periods 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 (“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 June 30, 2024 and December 31, 2023. 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 June 30, 2024.  As of June 30, 2024, 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 2023 Annual Report.

(h) Discontinued Projects

We did not record any mineral property write-downs during the three and six months ended June 30, 2024 and 2023.

(i) Significant Accounting Policies and Critical Accounting Estimates

See Note 1 to the condensed 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 six months ended June 30, 2024.

(j) Related Party Transactions

As of June 30, 2024, and for the three and six months ended June 30, 2024, we have no related party transactions or balances.  

(k) Recent Accounting Pronouncements

See Note 1, “Business and Significant Accounting Policies,” to the unaudited condensed consolidated financial statements under Recent Accounting Pronouncements” above for a discussion of recent accounting pronouncements.

(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 Part I, Item 1A of our 2023 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 June 30, 2024, 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 June 30, 2024.

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 June 30, 2024 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 June 30, 2024, there were no material changes to the Risk Factors associated with our business disclosed in Part I, Item 1A of our 2023 Annual Report.

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

There were no unregistered sales of equity securities effected during the quarter ended June 30, 2024.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

During the quarter ended June 30, 2024, 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