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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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FORM 10-Q

(MARK ONE)

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FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023.

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OR

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FOR THE TRANSITION PERIOD FROM                 TO                 

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COMMISSION FILE NUMBER 1-13627

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GOLDEN MINERALS COMPANY

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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(303) 839-5060

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

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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). Yes ☒ No ☐

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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.

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐    No ☒

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At November 9, 2023, 14,084,680 shares of common stock, $0.01 par value per share, were issued and outstanding.

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GOLDEN MINERALS COMPANY

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2023

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INDEX

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PART I. FINANCIAL INFORMATION

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GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in United States dollars)

(Unaudited)

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(1) Reflects the one-for-25 reverse stock split that became effective June 9, 2023. Refer to Note 1, “Basis of Preparation of Financial Statements and Nature of Operations.”

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The accompanying notes form an integral part of these interim condensed consolidated financial statements.

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GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in United States dollars)

(Unaudited)

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(1) Reflects the one-for-25 reverse stock split that became effective June 9, 2023. Refer to Note 1, “Basis of Preparation of Financial Statements and Nature of Operations.”

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(2) Potentially dilutive shares have not been included for loss periods because to do so would be anti-dilutive. Potentially dilutive shares at September 30, 2023, consist of 408,545 equivalent shares related to stock compensation and 1,819,742 equivalent shares related to warrants outstanding. Potentially dilutive shares at September 30, 2022, consist of 440,209 equivalent shares related to stock compensation and 392,154 equivalent shares related to warrants outstanding. See Note 16 for a discussion of stock-based compensation and warrants.

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The accompanying notes form an integral part of these interim condensed consolidated financial statements.

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GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in United States dollars)

(Unaudited)

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See Note 19 for supplemental cash flow information.

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The accompanying notes form an integral part of these interim condensed consolidated financial statements.

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GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in United States dollars)

(Unaudited)

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(1) Reflects the one-for-25 reverse stock split that became effective June 9, 2023. Refer to Note 1, “Basis of Preparation of Financial Statements and Nature of Operations.”

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The accompanying notes form an integral part of these interim condensed consolidated financial statements.

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GOLDEN MINERALS COMPANY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

(Unaudited)

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Golden Minerals Company (the “Company”, “we” “our” or “us”), a Delaware corporation, has prepared these unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). The interim condensed consolidated financial statements do not include all disclosures required by GAAP for annual financial statements, but in the opinion of management, include all adjustments necessary for a fair presentation. Certain prior period amounts may have been reclassified to conform to current classifications. Interim results are not necessarily indicative of results for a full year; accordingly, these interim condensed consolidated financial statements should be read in conjunction with the annual financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and filed with the SEC on March 22, 2023 (the “2022 Annual Report”).

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The Company is a mining company, holding a 100% interest in the Rodeo property in Durango State, Mexico (the “Rodeo Property”), a 100% interest in the Velardeña and Chicago precious metals mining properties and associated oxide and sulfide processing plants in the state of Durango, Mexico (the “Velardeña Properties”), a 100% interest in the El Quevar advanced exploration property in the province of Salta, Argentina, which is subject to the terms of the “Earn-in Agreement” (see Note 9), and a diversified portfolio of precious metals and other mineral exploration properties located primarily in or near historical precious metals producing regions of Mexico, Argentina and Nevada. The Rodeo Property, the Velardeña Properties, the Yoquivo property and the El Quevar advanced exploration property are the Company’s only material properties.

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We concluded mining operations at the Rodeo Property in June 2023, and we are engaged in planning for a restart of the Velardeña mine. We continue to evaluate and search for mining opportunities in North America (including Mexico) with near-term prospects of mining, and particularly for properties within reasonable haulage distances of our Velardeña Properties. We are also focused on advancing our Yoquivo exploration property in Mexico, and through the Earn-In Agreement with Barrick, our El Quevar advanced exploration property in Argentina. We are holding an additional portfolio of approximately 12 properties, located in Mexico, Nevada and Argentina for sale or advancement when possible.

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The Company is considered an exploration stage issuer under the criteria set forth by the SEC under Subpart 1300 of Regulation S-K (“S-K 1300”) as the Company has not yet demonstrated the existence of mineral reserves at any of the Company’s properties. As a result, and in accordance with GAAP for exploration stage companies, all expenditures for exploration and evaluation of the Company’s properties are expensed as incurred. As such, the Company’s financial statements may not be comparable to the financial statements of mining companies that have proven and probable mineral reserves. Such companies would typically capitalize certain development costs including infrastructure development and mining activities to access the ore. The capitalized costs would be amortized on a units-of-production basis as reserves are mined. The amortized costs are typically allocated to inventory and eventually to cost of sales as the inventories are sold. As the Company does not have proven and probable mineral reserves, substantially all expenditures at the Company’s Rodeo Property and the Velardeña Properties for mine construction activity, as well as operating costs associated with the mill facilities, and for items that do not have a readily identifiable market value apart from the mineralized material, have been expensed as incurred. Such costs are charged to cost of metals sold or project expense during the period depending on the nature of the costs. Certain costs may be reflected in inventories prior to the sale of the product. The Company cannot be certain that any deposits at any of its properties will ever be confirmed or converted into S-K 1300 compliant “reserves.”

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Reverse Stock Split

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On May 26, 2023, the Company’s Board of Directors approved a reverse stock split (the “Reverse Stock Split”) of the Company’s common stock, par value $0.01 per share, at a ratio of one-for-25 shares and a reduction in the total number of authorized shares of common stock of the Company from 350,000,000 shares to 28,000,000 shares (the “Authorized Shares Reduction”), each effective as of June 9, 2023. To effect the Reverse Stock Split and the Authorized Shares Reduction, the Company filed an amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware on May 30, 2023.

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As a result of the Reverse Stock Split, each 25 shares of common stock of the Company then-issued and outstanding automatically combined into one new share of common stock, with no change in par value per share. No fractional shares of common stock were issued as a result of the Reverse Stock Split. Any fractional shares resulting from the Reverse Stock Split were rounded up to the nearest whole share of common stock. The common stock of the Company commenced trading on a split-adjusted basis at the open of trading on June 9, 2023.

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In addition, proportionate adjustments were made to the number of shares issuable upon the exercise or vesting of all outstanding warrants and restricted stock units, resulting in a proportional decrease in the number of shares of common stock reserved for issuance upon exercise or vesting of such warrants and restricted stock units and the number of shares of common stock then reserved for issuance under the Company’s equity compensation plans, including the Company’s 2023 Equity Incentive Plan, which was reduced proportionately.

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Accordingly, all share and per share data (including share and per share information related to share-based compensation and outstanding warrants), number of shares outstanding and other common stock equivalents for the periods presented in the accompanying interim condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the Reverse Stock Split.

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We do not currently have sufficient resources to meet our expected cash needs during the twelve months ended September 30, 2024. At September 30, 2023, we had current assets of approximately $5.9 million, including cash and cash equivalents of approximately $1.6 million. On the same date, we had accounts payable and other current liabilities of approximately $5.6 million. Because we have ceased mining at the Rodeo mine, our only near-term opportunity to generate cash flow from mining to support continued operations is the Velardeña mine.

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We will require further sources of capital. In order to commence and maintain production at Velardeña, we expect that we will need approximately $3.0 to $3.5 million in capital inflows over the first five months of production. In addition, in order to satisfy the Company’s projected general, administrative, exploration and other expenses through September 30, 2024, we will need approximately $4.0 to $5.0 million in additional capital inflows. Assuming that we are successful in restarting production and that we meet our production objectives at the Velardeña Properties, cash flow from Velardeña is expected to be positive by the end of the second quarter of 2024. These additional capital inflows may take the form of asset sales (such as the one described below), equity financing activities (including the November 2023 Offering described below see Note 20 and Note 23), debt financing, production-based financing (such as streaming or royalty financing), collection of our outstanding VAT receivable, or otherwise.  

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We have previously announced the execution of a non-binding letter of intent for the sale of our Santa Maria property for a total consideration consisting of (i) initial cash proceeds of $1.5 million (plus an additional $0.24 million in VAT payment that we would retain) and (ii) a 1.5% net smelter return royalty on the Santa Maria concession up to a cap of $1.0 million (which may be purchased by the potential buyer from us for $0.5 million at any time prior to the commencement of commercial production on the Santa Maria property). If that transaction is consummated, the funds would likely be received in November 2023 or later.

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We have also held discussions with various financing parties with regard to equity and/or debt financing as well as streaming or royalty arrangements involving future production at Velardeña.

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As of September 30, 2023, we had value-added-tax (“VAT”) receivable in Mexico of approximately $3.1 million. Although we believe it is likely we will receive some material portion of this receivable early in the first quarter of 2024, there is no certainty as to the timing and amount of such payment.

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The interim condensed consolidated financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the normal course of business. However, as noted above, our continuing long-term operations will be dependent upon our ability to secure sufficient funding to generate future profitable operations. The underlying value and recoverability of the amounts shown as property, plant and equipment in our interim condensed consolidated financial statements are dependent on our ability to continue to generate positive cash flows from operations and to continue to fund general administrative, and exploration activities that would lead to additional profitable mining and processing activities or to generate proceeds from the disposition of property, plant and equipment.

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The ability of the Company to maintain a positive cash balance for a period of twelve months beyond the filing date of this Quarterly Report on Form 10-Q is dependent upon its ability to generate sufficient cash flow from operations, collect VAT accounts receivable from the Mexican government, reduce expenses, sell non-core assets, and raise sufficient funds through equity or external sources. These material uncertainties cast significant doubt on the Company’s ability to continue as a going concern. Therefore, the Company cannot conclude that substantial doubt does not exist as to the Company’s ability to continue as a going concern for the twelve months following the filing date of this Quarterly Report on Form 10-Q. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or liabilities which might be necessary should the Company not continue as a going concern.

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The Company does not believe that any recently issued, but not yet effective accounting standards, when adopted, will have a material effect on the accompanying interim condensed consolidated financial statements.

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In the first quarter of 2022, the Company became aware that at December 31, 2021, it had failed to properly record a royalty tax payable in Mexico related to its Rodeo operations. The effect of correcting this error was to reduce beginning retained earnings by $93,000 at January 1, 2022, as reflected in the accompanying Condensed Consolidated Statements of Changes in Equity.

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The Company evaluated the materiality of the error described above from a qualitative and quantitative perspective. Based on such evaluation, the Company concluded that while the accumulation of the error was significant to the three months ended March 31, 2022, the correction would not be material to results of operations for the period ended December 31, 2021, nor did it have an effect on the trend of financial results, taking into account the requirements of SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”).

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Cash and Cash Equivalents

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Of the $1.6 million reported as “Cash and cash equivalents” on the Condensed Consolidated Balance Sheet at September 30, 2023, the Company had approximately $153,000 that was unavailable for use due to a court order freezing the bank accounts of one of the Company’s subsidiaries in Mexico related to a lawsuit, as further described in Note 20 and Note 23. The restrictions imposed on the subsidiary’s bank accounts did not impact the Company’s ability to operate the Rodeo mine, which is held through a different Mexico subsidiary, and does not impact the Company’s ability to continue with plans for a Velardeña mine restart or move forward with any of the Company’s other exploration programs in Mexico.

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The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

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Short-Term Investments

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Short-term investments include investments with maturities greater than three months, but not exceeding 12 months, or highly liquid investments with maturities greater than 12 months that the Company intends to liquidate during the next 12 months for working capital needs.

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The following tables summarize the Company’s short-term investments:

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Investment in Fabled

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The short-term investments at September 30, 2023, and December 31, 2022 consist of 200,000 common shares of Fabled Silver Gold Corp. (“Fabled”) and 20,000 common shares of Fabled Copper Corp. Fabled is a junior mining company that entered into an option agreement with the Company to acquire the Company’s option to earn a 100% interest in the Santa Maria mining claims located in Chihuahua, Mexico (see Note 9). The common shares were issued to the Company as partial consideration per the terms of the option agreement. The Fabled Copper Corp. shares were received in a spin-off of assets from Fabled that occurred on December 21, 2020, to which all existing shareholders of Fabled were entitled.

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Long-Term Investments

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Investments in equity securities are generally measured at fair value. Gains and losses for equity securities resulting from changes in fair value are recognized in current earnings. If an equity security does not have a readily determinable fair value, the Company may elect to measure the security at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer. At the end of each reporting period, the Company reassesses whether an equity investment security without a readily determinable fair value qualifies to be measured at cost less impairment, considers whether impairment indicators exist to evaluate if an equity investment security is impaired and, if so, records an impairment loss.

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Investment in Golden Gryphon Explorations Inc.

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Long-term investments at September 30, 2023 consist of approximately 1,650,880 shares of Golden Gryphon Explorations Inc. (“GGE”). In 2019, the Company entered into an earn-in agreement with GGE for the Sand Canyon project located in northwestern Nevada. In August 2022, pursuant to the second amendment to the earn-in agreement by which the earn-in period was extended an additional year, the Company purchased approximately 1,500,000 shares of GGE’s common stock for an aggregate purchase price of $225,000. On August 29, 2023, the Company purchased an additional 150,880 shares of GGE’s common stock for an aggregate purchase price of $40,000.

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For a description of the earn-in agreement with GGE, see “Exploration Properties—Sand Canyon” in our 2022 Annual Report.

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The GGE investment is accounted for at cost less impairment pursuant to ASC topic 321 as there is no ready market for the shares and it is recorded as non-current investments on the Condensed Consolidated Balance Sheets. The Company concluded it was impractical to estimate fair value due to the absence of a public market for the stock. The Company identified no events or changes in circumstances that might have had a significant adverse effect on the carrying value of the investment and have therefore not recorded any impairment against the asset.

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Credit Risk

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The Company invests substantially all of its excess cash with high credit-quality financial institutions or in U.S. government or debt securities. Credit risk is the risk that a third party might fail to fulfill its performance obligations under the terms of a financial instrument. For cash and equivalents and investments, credit risk represents the carrying amount on the balance sheet. The Company mitigates credit risk for cash and equivalents and investments by placing its funds and investments with high credit-quality financial institutions, limiting the amount of exposure to each of the financial institutions, monitoring the financial condition of the financial institutions and investing only in government and corporate securities rated “investment grade” or better. The Company invests with financial institutions that maintain a net worth of no less than $1 billion and are members in good standing with the Securities Investor Protection Corporation.

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Prepaid expenses and other current assets consist of the following:

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The current portion of deferred offering costs is associated with the ATM Agreement (see Note 16).

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Recoupable deposits and other at September 30, 2023 and December 31, 2022 includes a receivable from Barrick for reimbursement of costs of approximately $95,000 and $196,000, respectively, related to the Earn-in Agreement (see Note 9).

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Inventories at the Velardeña Properties were as follows:

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Doré and in-process inventories, recorded at book value, include approximately $2,000 and $28,000 of capitalized depreciation and amortization at September 30, 2023 and December 31, 2022, respectively. Doré inventory at September 30, 2023 consists of 21 payable ounces of gold and 58 payable ounces of silver. Doré inventory at December 31, 2022 consists of 157 payable ounces of gold and 652 payable ounces of silver.

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The materials and supplies inventories are primarily related to the Velardeña operation and are reduced by a $0.3 million obsolescence reserve at September 30, 2023 and December 31, 2022.

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At September 30, 2023, the Company recorded a net VAT paid in Mexico of $3.1 million related to the Velardeña Properties and the Rodeo operation, as a recoverable asset, which appears in “Value added tax receivable, net” on the Condensed Consolidated Balance Sheets. Mexico law allows for certain VAT payments to be recovered through ongoing applications for refunds. The Company expects that the current amounts receivable will be recovered within a one-year period. At September 30, 2023, the Company recorded approximately $1.2 million of VAT payable as a reduction to the VAT receivable in Mexico.

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At December 31, 2022, the Company had recorded approximately $1.5 million of VAT receivable.

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The Company has also paid VAT in other countries, primarily related to exploration projects, which has been charged to expense as incurred because of the uncertainty of recoverability.

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The components of property, plant and equipment are as follows:

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For the nine months ended September 30, 2023 and 2022, the Company recognized approximately $380,000 and $241,000, respectively, of depreciation and amortization expense.

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For the three months ended September 30, 2023 and 2022, the Company recognized approximately $148,000 and $89,000, respectively, of depreciation and amortization expense.

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El Quevar Earn-In Agreement

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On April 9, 2020, we entered into an earn-in agreement with Barrick (the “Earn-In Agreement”), pursuant to which Barrick has acquired an option to earn a 70% interest in the Company’s El Quevar project located in the Salta Province of Argentina. As of December 31, 2021, Barrick had met the $1 million in work expenditures that would permit them to withdraw from the Earn-in Agreement. At September 30, 2023, Barrick has continued with exploration activities at El Quevar, per the terms of the Earn-in Agreement.

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Sale of Santa Maria Property

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On December 4, 2020, the Company and Fabled entered into an option agreement (the “Option Agreement”) under which Fabled would have acquired a 100% interest in the Santa Maria property by paying $4.5 million in cash over a period of several years. The Company recorded a $1.5 million payment it received from Fabled in December 2021 to “Deferred revenue” on the Condensed Consolidated Balance Sheets and amortized the amount to income over a one-year period. Upon receipt of each cash payment, the agreement imposed a performance obligation on the Company to provide Fabled an exclusive right to the Santa Maria Properties to conduct exploration and mining activities during the period from receipt of the payment until the due date of the next required payment. Accordingly, the Company has determined that its performance obligation for each option payment received is satisfied over time. The remaining unamortized balance of deferred revenue at September 30, 2023, and December 31, 2022, is zero.

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On December 19, 2022, the Option Agreement was amended to reschedule the remaining $2.0 million payment into eight quarterly payments of $250,000 from January 31, 2023 through September 30, 2024. Fabled failed to make the payment due on January 31, 2023. In February 2023, the Company issued a notice of default under the Option Agreement to Fabled and the property has reverted to the Company as allowed under the terms of the Agreement. The carrying value of Santa Maria as of September 30, 2023, and December 31, 2022, is zero.

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Other long-term assets consist of right of use assets and at September 30, 2023 include approximately $141,000 related to certain office leases. The right of use assets at December 31, 2022 include approximately $263,000 related to certain office leases and $70,000 related to a mining equipment lease at our Rodeo Property.

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In December 2020, the Company’s wholly owned subsidiary, Minera de Cordilleras S. de R.L. de C.V., entered into an agreement with Triturados del Guadiana, S.A. de C.V. (“Trigusa”), whereby Trigusa has carried out mining activities at the Rodeo Property. Per the terms of the mining agreement, Trigusa provided services for the 27-month period beginning in December 2020 and ending on March 31, 2023. The Company determined that the mining agreement contained an embedded lease, relating to the mining equipment provided by Trigusa, per the guidance of ASU 2016-02 and Topic 842. The Company did not elect the practical expedient permitting the combination of lease and non-lease components of the mining agreement. The Company recorded a right of use asset and a lease liability of approximately $420,000 based on the net present value of the future lease payments discounted at 7.0%, which represented the Company’s incremental borrowing rate at that time. In March 2023, the mining agreement with Trigusa was extended to July 31, 2023. On May 1, 2023, the Company provided Trigusa with a notice of contract termination, subject to a 15-day notice period. Trigusa agreed to continue to provide loading services for low grade material.  On August 16, 2023, Trigusa stopped hauling material to Plant 2 and demobilized their equipment.

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Lease liabilities are included in “Other liabilities,” short term and long term (see Note 13), in the Company’s Condensed Consolidated Balance Sheets at September 30, 2023 and December 31, 2022.

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The Company’s accounts payable and other accrued liabilities consist of the following:

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September 30, 2023

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Accounts payable and accruals at September 30, 2023, are primarily related to amounts due to contractors and suppliers in the amounts of $2.2 million related to the Company’s Velardeña Properties and the Rodeo Property and $1.2 million related to corporate administrative and exploration activities.

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Accrued employee compensation and benefits at September 30, 2023, consist of $0.4 million of accrued vacation payable and $1.2 million related to withholding taxes and benefits payable. Included in the $1.6 million of accrued employee compensation and benefits is $1.4 million related to activities at the Velardeña Properties and the Rodeo Property.

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December 31, 2022

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Accounts payable and accruals at December 31, 2022, are primarily related to amounts due to contractors and suppliers in the amounts of $1.8 million related to the Company’s Velardeña Properties and the Rodeo Property and $0.4 million related to corporate administrative and exploration activities.

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Accrued employee compensation and benefits at December 31, 2022, consist of $0.4 million of accrued vacation payable and $1.1 million related to withholding taxes and benefits payable. Included in the $1.5 million of accrued employee compensation and benefits is $1.2 million related to activities at the Velardeña Properties and the Rodeo Property.

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In 2012, the Company retained the services of a mining engineering firm to prepare a detailed closure plan for reclamation activity at the Velardeña Properties. The plan was completed during the second quarter of 2012 and indicated that the Company had an asset retirement obligation (“ARO”) and offsetting asset retirement cost (“ARC”) of approximately $1.9 million. The original ARC had been fully amortized or written off by the end of December 31, 2015. The ARO has been adjusted since 2012 for changes in assumptions related to inflation factors and the timing of future expenditures used in the determination of future cash flows, which previously contemplated that reclamation activities could begin as early as 2023 following the completion of mining at the Rodeo Property.

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In the fourth quarter of 2021, due to the operating success at Rodeo and the potential of a restart of operations at the Velardeña mine based on recent technical studies at the time and an updated preliminary economic assessment (“PEA”) that would further delay the start of any reclamation activity, the Company retained the services of an environmental consultant to review the closure plan to determine the appropriateness of the scope and cost estimates used in the calculation of the ARO. The consultant confirmed the adequacy of the scope of the closure plan and provided certain adjustments to cost estimates. In addition, the timing for the incurrence of reclamation activity was extended approximately seven years to 2030 to take into account the likelihood of a restart of operations at the Velardeña mine that would further delay the start of any reclamation activity.

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In late 2022, the Company determined that the restart of the Velardeña Properties would be deferred one year, which would in turn defer the beginning of the reclamation activity assumption by one year to 2031.

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The Company will continue to accrue additional estimated ARO amounts based on the closure plan and as activities requiring future reclamation and remediation occur.

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The following table presents the asset retirement and reclamation liabilities as of September 30, 2023 and December 31, 2022:

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Current asset retirement and reclamation liabilities is included in “Other Current Liabilities” (see Note 13).

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The following table presents the changes in the Company’s asset retirement and reclamation liabilities for the nine months ended September 30, 2023 and 2022:

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The change in estimate of the ARO recorded is due to a combination of changes in assumptions related to the timing of future expenditures, the change in inflation assumptions, and the change in the discount rate.

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Other Current Liabilities

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The following table sets forth the Company’s other current liabilities:

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The premium financing at September 30, 2023 and December 31, 2022, consists of the remaining balance, plus accrued interest, related to premiums payable for the Company’s directors and officers insurance and general liability insurance. In November 2022, the Company financed approximately $445,000 of its directors and officers insurance premium which is payable in eleven equal payments at an interest rate of 7.0% per annum. In May 2023, the Company financed approximately $147,000 of its general liability insurance premium which is payable in eleven equal payments at an interest rate of 8.3% per annum.

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The office lease liability is related to lease liabilities for office space at the Company’s principal headquarters in Golden, Colorado and in Mexico and Argentina (see Note 10).

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The mining equipment lease liability is related to equipment used by the contract miner at our Rodeo Property (see Note 10).

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The litigation contingency accrual is related to the Unifin lawsuit (see Note 20 and Note 23).

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The current asset retirement and reclamation liabilities is related to the ARO (see Note 12).

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Other Long-Term Liabilities

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Other long-term liabilities of approximately $40,000 for the period ended September 30, 2023, are primarily related to lease liabilities for office space at the Company’s principal headquarters in Golden, Colorado and in Mexico and Argentina (see Note 10).

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Other long-term liabilities of approximately $122,000 for the period ended December 31, 2022, are primarily related to lease liabilities for office space at the Company’s principal headquarters in Golden, Colorado and in Mexico and Argentina (see Note 10).

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Financial assets and liabilities and nonfinancial assets and liabilities are measured at fair value on a recurring basis under a framework of a fair value hierarchy which prioritizes the inputs into valuation techniques used to measure fair value into three broad levels. This hierarchy gives the highest priority to quoted prices (unadjusted) in active markets and the lowest priority to unobservable inputs. Further, financial assets and liabilities should be classified by level in their entirety based upon the lowest level of input that was significant to the fair value measurement. The three levels of the fair value hierarchy per ASC Topic 820 are as follows:

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Level 1: Unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date.

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Level 2: Quoted prices in inactive markets for identical assets or liabilities, quoted prices for similar assets or liabilities in active markets, or other observable inputs either directly related to the asset or liability or derived principally from corroborated observable market data.

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Level 3: Unobservable inputs due to the fact that there is little or no market activity. This entails using assumptions in models which estimate what market participants would use in pricing the asset or liability.

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The following table summarizes the Company’s financial assets and liabilities measured on a recurring basis at fair value by respective level of the fair value hierarchy:

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The Company’s cash equivalents, comprised principally of U.S. treasury securities, are classified within Level 1 of the fair value hierarchy.

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The Company’s short-term investments consist of 200,000 shares of common stock of Fabled and 20,000 shares of Fabled Copper Corp. and are classified within Level 1 of the fair value hierarchy (see Note 5).

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At September 30, 2023 and December 31, 2022, the Company did not have any financial assets or liabilities classified within Level 2 or Level 3 of the fair value hierarchy.

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Non-recurring Fair Value Measurements

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The Company recorded a change in estimate to its ARO as of September 30, 2023, of approximately $23,000 (see Note 12), reflecting a change in the fair value of the ARO primarily as the result of changes in assumptions related to the amount and timing of future expenditures used in the determination of future cash flows, following the guidance of ASC Topic 410. The fair value analysis was performed internally by the Company. The valuation falls within Level 3 of the fair value hierarchy.

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No other non-recurring fair value adjustments to liabilities or long-lived assets were recorded during the nine months ended September 30, 2023 and 2022.

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The Company accounts for income taxes in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”), on a tax jurisdictional basis. In accordance with ASC 740, the interim provision for taxes was calculated by using the estimated annual effective tax rate applied to the year-to-date income or losses on a jurisdictional basis. Although the Company has generated ordinary losses on a year-to-date basis, the Company has projected taxable income by year end in certain tax jurisdictions, for which an annual effective tax rate has been calculated. For the nine months ended September 30, 2023, the Company recognized less than $1,000 of income tax expense.

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In accordance with ASC 740, the Company presents deferred tax assets net of its deferred tax liabilities on a tax jurisdictional basis on its Condensed Consolidated Balance Sheets. As of September 30, 2023 and December 31, 2022, the Company had no deferred tax assets and no deferred tax liability on the Condensed Consolidated Balance Sheets due to a valuation allowance offsetting the net deferred tax assets of the Company.

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The Company, a Delaware corporation, and its subsidiaries file tax returns in the United States and in various foreign jurisdictions. The tax rules and regulations in these countries are highly complex and subject to interpretation.

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The Company’s income tax returns are subject to examination by the relevant taxing authorities and in connection with such examinations, disputes can arise with the taxing authorities over the interpretation or application of certain tax rules within the country involved. In accordance with ASC 740, the Company identifies and evaluates uncertain tax positions, and recognizes the impact of uncertain tax positions for which there is less than a more-likely-than-not probability of the position being upheld upon review by the relevant taxing authority. Such positions are deemed to be “unrecognized tax benefits” which require additional disclosure and recognition of a liability within the financial statements. The Company had no unrecognized tax benefits at September 30, 2023 or December 31, 2022.

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On May 26, 2023, the Company’s Board of Directors approved a reverse stock split of the common stock, par value $0.01 per share, of the Company at a ratio of one-for-25 shares and a reduction in the total number of authorized shares of common stock of the Company from 350,000,000 shares to 28,000,000 shares, each effective on June 9, 2023. Accordingly, all common stock, equity award, warrant, and per share amounts have been adjusted to reflect the reverse stock split for all prior periods presented. For additional information related to the reverse stock split, see Note 1, “Basis of Preparation of Financial Statements and Nature of Operations.”

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June 2023 Offering and Private Placement Transaction

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On June 26, 2023, the Company entered into a Securities Purchase Agreement with certain institutional investors  providing for the issuance and sale by the Company in a registered direct offering (the “June 2023 Offering”) of an aggregate of 790,000 shares of the Company’s common stock at a purchase price of $1.45 per share and pre-funded warrants exercisable for up to 637,587 shares of the Company’s common stock (the “Pre-Funded Warrants”) at a purchase price of $1.4499 per June 2023 Pre-Funded Warrant.

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The June 2023 Pre-Funded Warrants were sold, in lieu of shares of the Company’s common stock, to such institutional investors whose purchase of shares of Company’s common stock in the June 2023 Offering would otherwise result in such institutional investors, together with their respective affiliates and certain related parties, beneficially owning more than 9.99% of the Company’s outstanding common stock immediately following the consummation of the June 2023 Offering. Each June 2023 Pre-Funded Warrant represents the right to purchase one share of the Company’s common stock at an exercise price of $0.0001 per share. The June 2023 Pre-Funded Warrants were exercisable immediately and could be exercised at any time until the June 2023 Pre-Funded Warrants are exercised in full. During the quarter ended September 30, 2023, all of the 637,587 June 2023 Pre-Funded Warrants were exercised for net proceeds of $63.76.

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In a concurrent private placement (the “June 2023 Private Placement” and, together with the June 2023 Offering, the “June 2023 Transactions”), the Company agreed to issue warrants to purchase up to 1,427,587 shares of The Company’s common stock at an exercise price of $1.90 (the “June 2023  Warrants”). Each June 2023 Warrant is exercisable six months from the date of issuance and has a term expiring five years after such initial exercise date. The aggregate gross proceeds from the June 2023 Transactions were approximately $2.1 million, before deducting fees and offering expenses.

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The net proceeds of the June 2023 Offering were recorded in equity and appear as a separate line item in the Condensed Consolidated Statements of Changes in Equity. Total costs for the June 2023 Offering were approximately $215,000, including listing fees, legal and other costs, and the placement agent fee of 6% of aggregate gross proceeds. All such costs were recorded as a reduction to “Additional paid in capital” on the Condensed Consolidated Balance Sheets.

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At-the-Market Offering Agreement

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In December 2016, the Company entered into an at-the-market offering agreement (as amended from time to time, the “ATM Agreement”) with H. C. Wainwright & Co., LLC (“Wainwright”), under which the Company may, from time to time, issue and sell shares of the Company’s common stock through Wainwright as sales manager in an at-the-market offering under a prospectus supplement for aggregate sales proceeds of up to $5.0 million (the “ATM Program”) or a maximum of 10 million shares. On September 29, 2017, the Company entered into an amendment to the ATM Agreement with Wainwright to reflect a new Registration Statement on Form S-3 (File No. 333-220461) under which shares of the Company’s common stock may be sold under the ATM Program. On November 23, 2018, the Company entered into a second amendment of the ATM Agreement extending the agreement until the earlier of December 20, 2020, or the date that the ATM Agreement is terminated in accordance with the terms therein.

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On December 11, 2020, the Company entered into a third amendment of the ATM Agreement further extending the agreement so that it will remain in full force and effect until such time as the ATM Agreement is terminated in accordance with certain other terms therein or upon mutual agreement by the parties, and to reflect a new Registration Statement on Form S-3 (No. 333-249218). On March 29, 2023, the Company filed a Prospectus Supplement increasing the total amount available to be sold under the ATM to $10.0 million in addition to the amounts previously sold. On June 28, 2023, the Company filed another Prospectus Supplement decreasing the total amount available to be sold under the ATM to $3.0 million, not including the amounts previously sold.

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Under the ATM, the common stock is distributed at the market prices prevailing at the time of sale. As a result, prices of the common stock sold under the ATM Program may vary between purchasers and during the period of distribution. Further, on March 29, 2023, the Company entered into a fourth amendment of the ATM Agreement which provides that Wainwright will be entitled to compensation for its services at a commission rate of up to 3.0% of the gross sales price per share of common stock sold under the ATM Agreement.

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During the nine months ended September 30, 2023, the Company sold an aggregate of 308,930 shares of common stock under the ATM Program at an average price of $6.19 per share of common stock for net proceeds, after commissions and fees, of approximately $1,839,000. Approximately $45,000 of deferred ATM Program costs were amortized during the nine months ended September 30, 2023. The remaining balance of the deferred ATM Program costs, recorded in “Prepaid expenses and other assets” on the Condensed Consolidated Balance Sheet (see Note 6), is zero at September 30, 2023.

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During the nine months ended September 30, 2022, the Company did not sell shares of common stock under the ATM Program. At September 30, 2022, there was a remaining balance of $70,000 of deferred ATM Program costs, recorded in “Prepaid expenses and other assets” on the Condensed Consolidated Balance Sheets.

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As of September 30, 2023, there was approximately $3.0 million remaining available for issuance under the ATM Program based on a prospectus supplement filed with SEC on June 28, 2023. On October 1, 2023, the 2020 Registration Statement on Form S-3 expired.

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Equity Incentive Plans

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Under the Company’s Amended and Restated 2009 Equity Incentive Plan (the “2009 Plan”) awards of the Company’s common stock may be made to officers, directors, employees, consultants and agents of the Company and its subsidiaries.

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On May 26, 2023, the stockholders of the Company voted to approve the Company’s 2023 Equity Incentive Plan (the “2023 Plan”) to replace the 2009 Plan. Under the 2023 Plan, awards of the Company’s common stock may be made to officers, directors, employees, consultants and agents of the Company and its subsidiaries. The 2023 Plan provides for, among other things, (i) a reserve of 360,000 shares (on a reverse stock split-adjusted basis) of common stock of the Company that may be issued pursuant to awards under the 2023 Plan and (ii) a term that expires on February 23, 2033. Permitted awards under the 2023 Plan include options, stock appreciation rights, restricted stock, restricted stock units, performance stock units, and other cash and stock-based awards. The principal terms of the 2023 Plan are described in the Company’s definitive proxy statement for the Annual Meeting of the Company’s stockholders, filed with the SEC on April 6, 2023. The Company recognizes stock-based compensation costs using a graded vesting attribution method whereby costs are recognized over the requisite service period for each separately vesting portion of the award.

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Following the adoption of the 2023 Plan, no further awards may be made under the 2009 Plan.

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Restricted Stock Grants

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The following table summarizes the status and activity of the Company’s restricted stock grants at September 30, 2023, and the changes during the nine months then ended:

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As of September 30, 2023, no restricted stock grants had been made under the 2023 Plan.

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For the nine months ended September 30, 2023 and 2022, the Company recognized approximately $76,000 and $163,000, respectively, of stock compensation expense related to the restricted stock grants.

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For the three months ended September 30, 2023 and 2022, the Company recognized approximately $20,000 and $37,000, respectively, of stock compensation expense related to the restricted stock grants.

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Restricted Stock Units

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The 2009 Plan permitted the Company to issue Restricted Stock Units (“RSUs”), which entitle each recipient to receive one unrestricted share of common stock upon termination of the recipient’s employment or board service. Also, pursuant to the 2009 Plan, the Company’s Board of Directors adopted the Non-Employee Director’s Deferred Compensation and Equity Award Plan (the “Deferred Compensation Plan”). Pursuant to the Deferred Compensation Plan, non-employee directors, and employees as allowed by the 2009 Plan, receive a portion of their compensation in the form of RSUs issued under the 2009 Plan. The RSUs generally vest on the first anniversary of the grant.

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The 2023 Plan permits the Company to issue RSUs, which entitle each recipient to receive one unrestricted share of common stock upon termination of the recipient’s employment or board service.

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The following table summarizes the status and activity of the Company’s RSUs at September 30, 2023, and the changes during the nine months then ended:

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During the nine months ended September 30, 2023, the Company granted 40,000 RSUs to an officer of the Company under the 2023 Plan.

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For the nine months ended September 30, 2023 and 2022, the Company recognized approximately $270,000 and $244,000, respectively, of stock compensation expense related to the RSUs.

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For the three months ended September 30, 2023 and 2022, the Company recognized approximately $58,000 and $73,000, respectively, of stock compensation expense related to the RSUs.

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Key Employee Long-Term Incentive Plan

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The Company’s 2013 Key Employee Long-Term Incentive Plan (the “KELTIP”) provided for the grant of units (“KELTIP Units”) to certain officers and key employees of the Company, which units will, once vested, entitle such officers and employees to receive an amount, in cash or in Company common stock (such method of settlement at the sole discretion of the Board of Directors) issued pursuant to the 2009 Plan, measured generally by the price of the Company’s common stock on the settlement date. KELTIP Units are not an actual equity interest in the Company and are solely unfunded and unsecured obligations of the Company that are not transferable and do not provide the holder with any stockholder rights. Payment of the settlement amount of vested KELTIP Units is deferred generally until the earlier of a change of control of the Company or the date the grantee ceases to serve as an officer or employee of the Company.

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The Company intends to settle all the KELTIP Units in common stock of the Company, an option that the Board of Directors holds in its sole discretion so long as sufficient shares remain available under the 2009 Plan. As a result, all outstanding KELTIP Units are recorded in equity at September 30, 2023 and December 31, 2022.

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For the three months ended September 30, 2023, the Company recognized approximately $14,000 of stock compensation expense related to the KELTIP grants. For the nine months ended September 30, 2023, the Company recognized approximately $21,000 of stock compensation income related to the grants due to KELTIP Units being forfeited upon departure of an officer of the Company. There were 168,000 and 188,000 KELTIP Units outstanding at September 30, 2023 and December 31, 2022, respectively. However, under the 2023 Plan the Company discontinued the KELTIP and will no longer issue KELTIP Units.

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For the three and nine months ended September 30, 2022, the Company recognized approximately $39,000 and $136,000, respectively, of stock compensation expense related to the KELTIP units.

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Common Stock Warrants

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The following table summarizes the status of the Company’s common stock warrants at December 31, 2022, and September 30, 2023, and the changes during the nine months then ended:

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The warrants relate to prior registered offerings and private placements of the Company’s stock.

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All outstanding warrants are recorded in equity at September 30, 2023 and December 31, 2022, following the guidance established by ASC Topic 815-40. The Company’s warrants allow for potential settlement in cash if certain extraordinary events are effected by the Company, including a 50% or greater change of control in the Company’s common stock. Since those events have been deemed to be within the Company’s control, the Company continues to apply equity treatment for these warrants.

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Revenue from Gold and Silver in Doré

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During the nine months ended September 30, 2023, the Company recorded revenue of approximately $9.7 million and related costs of approximately $11.0 million related to gold and silver contained in doré bars related to the Rodeo operation. The gold and silver contained in the doré bars were sold to one customer, a metals refinery located in the United States. Under the terms of the Company’s agreement with its customer, title passes and revenue is recognized by the Company when the contractual performance obligations of the parties are completed, generally at the time a provisional or final payment is made. A provisional payment for approximately 95% of the contained gold and silver is made generally within 10-12 days after the product is shipped and customary sales documents are completed. A final payment is made within approximately 30 days following the date of shipment when final assays and refinery charges are agreed upon by the parties. A price for the gold and silver sold is set, based on current market prices, at the time a provisional or final payment is made. Refining and transport costs, deducted from the final payments made, are treated as third-party agent costs incurred by the Company in performing its obligations under the agreement with its customer after the transfer of control on provisional sales and are therefore netted against revenue on an accrual basis.

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During the nine months ended September 30, 2022, the Company sold gold and silver contained in doré bars related to the Rodeo operation and recorded revenue of approximately $18.7 million and related costs of approximately $13.3 million. Costs related to the sale of metal products include direct and indirect costs incurred to mine, process and market the products.

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Revenue from Concentrate Sales

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In April 2023, the Company began to sell three different concentrates containing various amounts of gold, silver, lead and zinc produced from material processed from the Velardeña mine which had been stockpiled from test mining performed in 2022 as part of the studies undertaken in connection with the potential restart of the Velardeña Properties. During the nine months ended September 30, 2023, the Company recorded revenue of $1.5 million from the combined sales of these concentrates and related costs of $0.2 million. The concentrate was sold to one customer, a metal trader in Mexico. Under the terms of the Company’s agreement with its customer, title passes and revenue is recognized by the Company when the contractual performance obligations of the parties are completed, generally at the time a provisional or final payment is made. A provisional payment for approximately 90% of the contained gold, silver, lead and zinc is made generally within 10-12 days after the product is shipped and customary sales documents are completed. A final payment is made within approximately 60 days following the date of shipment when final assays and refinery charges are agreed upon by the parties. A price for the gold and silver sold is set, based on average market prices, one month following the delivery of concentrate to the buyer. Refining and transport costs, deducted from the final payments made, are treated as third-party agent costs incurred by the Company in performing its obligations under the agreement with its customer after the transfer of control on provisional sales and are therefore netted against revenue on an accrual basis.

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There were no concentrate sales during the nine months ended September 30, 2022.

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Revenue from Slag Sales

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During the nine months ended September 30, 2023, the Company recorded revenue of $0.5 million and related costs of zero related to the gold and silver contained in the slag from the Rodeo Property. The slag was sold to one customer, a metals refinery located in the United States. Under the terms of the Company’s agreement with its customer, title passes and revenue is recognized by the Company when the contractual performance obligations of the parties are completed which occurs at the time a final payment is made. Final payment is made 30 working days after the settlement of assays for 95% of the contained gold and 90% of the contained silver. The price for the gold and silver sold is set on the first trading day following the day of the settlement assay. Refining costs are deducted from the final payments made, are treated as third-party agent costs incurred by the Company in performing its obligations under the agreement with its customer and are therefore netted against revenue.

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There were no slag sales during the nine months ended September 30, 2022.

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For the three and nine months ended September 30, 2023 and 2022, the Company recognized a nominal amount of Interest and other income (expense), net.

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The following table reconciles net loss for the period to cash used in operations:

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