UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 (Mark One)

[X]☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended      SeptemberJune 30, 20162017      

OR

[  ]☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  

For the transition period from               to              

Commission File Number.   001-39278

SOLITARIO EXPLORATION & ROYALTYZINC CORP.

(Exact name of registrant as specified in its charter)

(formerly Solitario Exploration & Royalty Corp.)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every

Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting 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 38,745,18958,443,072 shares of $0.01 par value common stock outstanding as of November 4, 2016.July 27, 2017.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1.Financial Statements

SOLITARIO EXPLORATION & ROYALTYZINC CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

See Notes to Unaudited Condensed Consolidated Financial Statements

SOLITARIO EXPLORATION & ROYALTYZINC CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See Notes to Unaudited Condensed Consolidated Financial Statements

SOLITARIO ZINC CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

See Notes to Unaudited Condensed Consolidated Financial Statements

SOLITARIO EXPLORATION & ROYALTYZINC CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)CASH FLOWS

(Unaudited)

See Notes to Unaudited Condensed Consolidated Financial Statements

SOLITARIO EXPLORATION & ROYALTY CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See Notes to Unaudited Condensed Consolidated Financial Statements

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.       Business and Significant Accounting Policies

Recent developments

SalePurchase of Mt. Hamilton LLCZazu

On August 25, 2015Subsequent to June 30, 2017, on July 12, 2017, Solitario Exploration & RoyaltyZinc Corp. (“Solitario” or the “Company”), along with DHI Minerals (U.S.) Ltd. completed the acquisition of Zazu Metals Corp. (“DHI”), sold their combined interests in the Mt. Hamilton gold project (“Mt. Hamilton”) to Waterton Nevada Splitter, LLC (“Waterton”), for total cash proceeds of US$30 million (the “Transaction”)Zazu) pursuant to a definitive arrangement agreement entered intobetween Solitario and Zazu (the "Arrangement Agreement") whereby Solitario agreed to acquire all of the issued and outstanding common shares of Zazu (the "Zazu Shares") by way of a statutory plan of arrangement (the "Arrangement") under theCanada Business Corporations Act (the “Acquisition”). The Arrangement was approved by the Ontario (Canada) Superior Court of Justice on July 7, 2017. Per the Arrangement, Solitario issued 19,788,183 shares of its common stock on July 12, 2017 in exchange for all of the issued and outstanding Zazu Shares, which represented 0.3572 shares of Solitario common stock for each outstanding Zazu Share. Solitario granted stock options to acquire an aggregate of 1,782,428 shares of Solitario common stock to Zazu option holders the (“Replacement Options”) in connection with the Acquisition. The issuance of the shares of Solitario common stock as consideration for the Acquisition was approved at the 2017 annual meeting of Solitario shareholders held on June 10, 2015. Solitario sold its 80% interest in Mt. Hamilton LLC (“MH-LLC”29, 2017 (the “Annual Meeting”), a limited liability company which held 100%with 98.27% of the Mt. Hamilton project assets, and DHI sold its 20% interest in MH-LLC. DHI is a wholly-owned subsidiarySolitario shareholders who voted voting “for” the issuance of Ely Gold and Minerals, Inc. (“Ely”). Solitario received gross cash proceeds of US$24 million and Ely received gross cash proceeds of US$6 million. Solitario’s costs and fees relatedthe shares pursuant to the Transaction, including broker fees and professional service fees, were $439,000.Arrangement Agreement. The Transaction was structured as the sale of Solitario’s and DHI’s combined membership interests in MH-LLC.

Duringtotal purchase price will be recorded during the three and nine months endedmonth periods ending September 30, 2015 virtually all of the costs associated with MH-LLC2017 and the assets sold were directly relatedis estimated to the development of Mt. Hamilton, which were capitalized to mineral property. Accordingly, separate presentation of discontinued operations would not have resulted in any material change to the results presented in the unaudited consolidated statementsbe approximately $13.9 million. Results of operations for the three and nine months ended September 30, 2015.

See Note 1, “Business and Summary of Significant Accounting Policies, to the annual financial statementsZazu will be included in Solitario’s condensed consolidated financial statements from the date of acquisition.

Name Change to Solitario Zinc Corp.

Solitario shareholders voted at the Annual ReportMeeting in favor of an amendment to Solitario’s Articles of Incorporation to change Solitario’s name to “Solitario Zinc Corp.” from “Solitario Exploration & Royalty Corp.” The name change was subject to the completion of the Acquisition and became effective on Form 10-K forJuly 17, 2017. Subsequent to the year ended December 31, 2015 filedAcquisition, Solitario’s mineral property assets are its 39% ownership in the Bongará zinc deposit in Peru and its 50% ownership interest in the Lik zinc deposit (acquired in the Acquisition). Solitario believes the name “Solitario Zinc Corp” reflects the increased focus of the Company on zinc-related assets.

Convertible Debenture Financing

On April 26, 2017, concurrent with the United States Securities and Exchange Commission (the “SEC”) for a more complete discussionsigning of the saleArrangement Agreement, Solitario provided Zazu interim debt financing through a secured convertible debenture issued by Zazu in the principal amount of Solitario’sUS$1.5 million (the "Debenture"). The Debenture was secured by way of a general security and pledge agreement on Zazu’s assets and bore interest at a rate of 5% per annum. The Debenture was convertible, at the option of Solitario into Zazu Shares at a price of US$0.22 per Zazu Share. At June 30, 2017, the Debenture, including accrued interest of $13,000, was recorded as a current receivable due from Zazu. Subsequent to June 30, 2017, upon completion of the Acquisition, the Debenture was eliminated in MH-LLC.consolidation.

Business and company formation

Solitario is an exploration stage company at September 30, 2016 under Industry Guide 7, as issued by the SEC. Solitario was incorporated in the state of Colorado on November 15, 1984 aswith a wholly-owned subsidiary of Crown Resources Corporation ("Crown"). In July 1994, Solitario became a publicly traded companyfocus on the Toronto Stock Exchange throughacquisition of precious and base metal properties with exploration potential and the development or purchase of royalty interests. Upon the completion of the Acquisition, Solitario intends to shift its initial public offering.focus more toward the acquisition and exploration of zinc-related exploration mineral properties. However, Solitario has been actively involved inintends to continue to evaluate for acquisition other mineral exploration since 1993. Solitario’s primary business is to acquireproperties and hold a portfolio of mineral exploration properties and other related assets for future sale, or joint venture or to create a royalty prior to the establishment of proven and probable reserves. Although Solitario’s primary focus is formineral properties may be developed in the furtherance offuture by Solitario, through a joint venture or by a third party, Solitario has never developed a mineral property. In addition to focusing on its explorationcurrent assets and the evaluation of mineral properties for acquisition or purchase of royalty interests, Solitario also expects to continue to evaluate potential strategic corporate transactions for the acquisition of additionalnew precious and base metal properties and assets with exploration potential and the development or purchasebusiness combinations it believes to be favorable to Solitario.

Solitario has recorded revenue in the past from the sale of mineral properties, including the sale of its interest in Mount Hamilton LLC (“MH-LLC”), the owner of the Mount Hamilton project during 2015, joint venture property payments and the sale of a royalty on its former Mt. Hamilton property. RevenuesProceeds from the sale or joint venture of Solitario’s properties, although potentially significant, when they occur, have not historically been a consistent annual source of cash or revenue and would only occur, in the future, if at all, on an infrequent basis.basis in the future.

Solitario currently considers its carried interest in the Bongará project and its interest in the Lik project, acquired in the Acquisition, to be its core mineral property assets. Solitario’s joint venture partner is expected to continue the development and furtherance of the Bongará asset and Solitario will monitor progress at Bongará. Solitario is currently evaluating the exploration and development plans for the Lik project.

As of June 30, 2017, Solitario has significant balances of cash and short-term investments that Solitario anticipates using, in part, to further the development of the Lik project and to potentially acquire additional mineral property assets. The fluctuations in precious metal and other commodity prices has contributed 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 accompanying interim condensed consolidated financial statements of Solitario for the three and ninesix months ended SeptemberJune 30, 20162017 are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America. They do not include all disclosures required by generally accepted accounting principles for annual financial statements, but in the opinion of management, include all adjustments, consisting only of normal recurring items, necessary for a fair presentation. Interim results are not necessarily indicative of results, which may be achieved in the future or for the full year ending December 31, 2016.2017.

These financial statements should be read in conjunction with the financial statements and notes thereto which are included in Solitario’s Annual Report on Form 10-K for the year ended December 31, 2015.2016. The accounting policies set forth in those annual financial statements are the same as the accounting policies utilized in the preparation of these financial statements, except as modified for appropriate interim financial statement presentation.

Financial reporting

The condensed consolidated financial statements include the accounts of Solitario and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("generally accepted accounting principles"), and are expressed in USU.S dollars.

Revenue recognition

Solitario records delay rental payments as revenue in the period received. Any payments received for the sale of property interests are recorded as a reduction of the related property's capitalized cost. Proceeds which exceed the capitalized cost of the property without reserves are recognized as revenue. Payments received on the sale of properties with reserves are recognized as revenue to the extent the proceeds exceed the proportionate basis in the assets sold.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Some of the more significant estimates included in the preparation of Solitario's financial statements pertain to: (i) the fairSolitario’s carrying value of Solitario’s short-term investments; (ii) the recoverability of mineral properties related to its mineral exploration properties and their future exploration potential; (iii) the fair value of Solitario's stock option grants to employees; (iii)(iv) the fair valueability of Solitario to realize its deferred tax assets; (v) Solitario's investment in marketable equity securities; and (iv)(vi) the fair value of the Vendetta Mining CorpCorp. (“Vendetta”) warrants Solitario owns.

In performing its activities, Solitario has incurred certain costs for mineral properties. The recovery of these costs is ultimately dependent upon the sale of mineral property interests or the development of economically recoverable ore reserves and the ability of Solitario to obtain the necessary permits and financing to successfully place the properties into production, and upon future profitable operations, none of which is assured.

Cash equivalents

Cash equivalents include investments in highly liquid money-market securities with original maturities of three months or less when purchased. Solitario has concentrationsAs of June 30, 2017, a portion of Solitario’s cash at September 30, 2016 depositedand cash equivalents are held in banks and brokerage accounts of $192,000and foreign banks, which are not covered under the federal deposit insuranceFederal Deposit Insurance Corporation (“FDIC”) rules for the United States. At SeptemberJune 30, 20162017, Solitario holds short-term investments in United States Treasury securities (“USTS”) of $7,006,000.$9,733,000.

Short-term investments

As of June 30, 2017, Solitario has $9,733,000 of its current assets in USTS with maturities of 30 days to 16 months. The USTS are recorded at their fair value, based upon quoted market prices. As of June 30, 2017, we have $2,999,000 in separate bank certificates of deposit (“CDs”) each with a maximum value of $250,000, and each of which are covered by FDIC insurance to the full face value of the CDs. At June 30, 2017, the CDs have maturities of between 30 days and 15 months. Solitario’s short-term investments are recorded at their fair value, based upon quoted market prices. The short-term investments are highly liquid and may be sold in their entirety at any time at their quoted market price and are classified as a current asset.

Mineral properties

Solitario expenses all exploration costs incurred on its mineral properties prior to the establishment of proven and probable reserves through the completion of a feasibility study. Initial acquisition costs of Solitario’s mineral properties are capitalized. Solitario began capitalizingcapitalizes all of its development expenditures on Mt. Hamilton,its projects, subsequent to the completion of a feasibility study in 2012 through the date of the Transaction.study. Solitario regularly performs evaluations of its investment in mineral properties to assess the recoverability and/or the residual value of its 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 established guidelines based upon undiscounted future net cash flows from the asset or upon the determination that certain exploration properties do not have sufficient potential for economic mineralization.

Derivative instruments

Solitario accounts for its derivative instruments in accordance with ASC 815, "Accounting for Derivative Instruments and Hedging Activities."Activities" (“ASC 815”). Solitario acquired its investment in Vendetta units, including the Vendetta Warrants during 2016. Solitario has classified the Vendetta Warrants as derivative instruments under ASC 815 and recorded the Vendetta Warrants (as defined below in Note 4) at their fair value as other assets on the consolidated balance sheet. Changes in fair value of the Vendetta Warrants are recognized in the statement of operations in the period of change as gain or loss on derivative instruments. Solitario has entered into covered calls from time to time on its investment in Kinross Gold Corporation (“Kinross”) marketable equity securities. Solitario has not designated its covered calls as hedging instruments and any changes in the fair value of the covered calls and theits Vendetta Warrants (defined below) are recognized in the statement of operations in the period of the change.change as gain or loss on derivative instruments.

Fair value

FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”) establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. For certain of Solitario's financial instruments, including cash and cash equivalents and accounts payable, the carrying amounts approximate fair value due to their short-term maturities. Solitario's short-term investments in USTS and CDs, its marketable equity securities and any covered call options against those marketable equity securities are carried at their estimated fair value based on quoted market prices. See Note 7, “Fair Value” below.Solitario’s investment in the Vendetta Warrants is carried at fair value as determined by a Black-Scholes model.

Marketable equity securities

Solitario's investments in marketable equity securities are classified as available-for-sale and are carried at fair value, which is based upon quoted prices of the securities owned. Solitario records investments in marketable equity securities as available-for-sale for investments in publicly traded marketable equity securities for which it does not exercise significant control and where Solitario has no representation on the Boardboard of Directorsdirectors of those companies and exercises no control over the management of those companies. The cost of marketable equity securities sold is determined by the specific identification method. Changes in fair valuesvalue are recorded in accumulated other comprehensive income within shareholders' equity, unless a decline in fair value is considered other than temporary, in which case the decline is recognized as a loss in the consolidated statements of operations.

Foreign exchange

The United States dollar is the functional currency for all of Solitario's foreign subsidiaries. Although Solitario's South American exploration activities outside of the United States for the threeduring 2017 and nine months ended September 30, 2016 have been conducted primarily in Peru, and Mexico, a portion of the payments under the land, leasehold and exploration agreements of Solitario are denominated in United States dollars. ForeignRealized foreign currency gains and losses are included in the results of operations in the period in which they occur.

Income taxes

Solitario accounts for income taxes in accordance with ASC 740, “Accounting for Income Taxes” (“ASC 740”). Under ASC 740, income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related to certain income and expenses recognized in different periods for financial and income tax reporting purposes. Deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses and tax credits that are available to offset future taxable income and income taxes, respectively. A valuation allowance is provided if it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Accounting for uncertainty in income taxes

ASC 740 clarifies the accounting for uncertainty in income taxes recognized in a company's financial statements. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. ASC 740 provides that a company's tax position will be considered settled if the taxing authority has completed its examination, the company does not plan to appeal, and it is remote that the taxing authority would reexamine the tax position in the future. These provisions of ASC 740 had no effect on Solitario's financial position or results of operations. See Note 8, “Income Taxes” below.

Earnings per share

The calculation of basic and diluted incomeearnings (loss) per share is based on the weighted average number of shares of common stock outstanding during the three and ninesix months ended SeptemberJune 30, 20162017 and 2015. There were no potentially dilutive shares outstanding as of September 30, 2016 as the RMB Warrants (defined below) expired in August 2016 and all previously outstanding stock options had either expired or were cancelled as of September 30, 2016. Potentially dilutive shares related to outstanding common stock options of 3,748,000390,000 for the three and ninesix months ended SeptemberJune 30, 2015 and the warrants issued to RMB Australia Holdings in connection with a 2012 financing (the “RMB Warrants,” which were exercisable to acquire 1,624,748 shares of common stock) for the three and nine months ended September 30, 20152016 were excluded from the calculation of diluted incomeearnings (loss) per share because the effects were anti-dilutive. There were no similar potentially dilutive securities outstanding during the three and six months ended June 30, 2017.

Employee stock compensation and incentive plans

Solitario classifies all of its stock options as equity options in accordance with the provisions of ASC 718, “Compensation – Stock Compensation.” During the three months ended September 30, 2016, Solitario cancelled all of its remaining outstanding options and had no outstanding stock options as of September 30, 2016.

Recent accounting pronouncements

In March 2016,May 2014, the FinancialFASB issued Accounting Standards Board (the “FASB”Update ("ASU") issued Accounting Standard Update (“ASU”) No. 2016-19, Compensation-Stock Compensation2014-09,Revenue from Contracts with Customers (Topic 718)606, (“ASU 2016-19”No. 2014-09”), as partwhich amended the existing accounting standards for revenue recognition. ASU No. 2014-09 establishes principles for recognizing revenue upon the transfer of its simplification initiative, which affects all entitiespromised goods or services to customers, in an amount that issue share-based payment awards to their employees.reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017. The amendments may be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective). Solitario will adopt ASU 2014-09 in this update cover such areas as the recognitionfirst quarter of excess tax benefits2018 and deficiencies,apply the classification of those excess tax benefitsfull retrospective approach and does not expect the impact on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold for income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows. ASU 2016-19 is effective for fiscal year ending March 2018 using either the prospective, retrospective or modified retrospective transition method, depending on the area covered by ASU 2016-19.

its consolidated financial statements to be material.

In December 2015,February 2016, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes2016-02, “Leases” (“ASU 2015-17”No. 2016-02”). ASU 2015-17 simplifies, which will require lessees to recognize a right-of-use asset and a lease liability for all leases that are not short-term in nature. For a lessor, the presentation of deferred income taxes by requiring that deferred tax liabilities and assetsaccounting applied is also largely unchanged from previous guidance. The new rules will be classified as noncurrent in a classified statement of financial position.ASU 2015-17 is effective for fiscal years, and interim periods withinSolitario in the year, beginning after December 15, 2016. The standard may be applied either retrospectively or on a prospective basis to all deferred tax assets and liabilities. Thefirst quarter of 2019. Solitario does not anticipate early adoption. Solitario does not expect the adoption of ASU No. 2015-17 did2016-02 to materially change its current accounting methods and therefore it does not expect the adoption to have a material impact on its consolidated financial position or results of operations.

In January 2016, the FASB issued ASU No 2016-01, Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825) (“ASU No. 2016-01”). ASU No. 2016-01 revises the classification and measurement of investment in certain equity investments and the presentation of certain fair value changes for certain financial statementsliabilities measured at fair value. ASU No. 2016-01 requires the change in fair value of many equity investments to be recognized in net income. ASU No. 2016-01 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. Solitario will adopt ASU No. 2016-01 in the first quarter of 2018. Adoption of ASU No. 2016-01 may result in a cumulative effect adjustment to the consolidated statement of equity retained earnings as of September 30, 2016 or for the threebeginning of the year of adoption. Solitario is evaluating the new guidance and nine months ended September 30, 2016.has not determined the impact of ASU No. 2016-01 on its consolidated financial statements.

2.        Mineral Property

The following table details Solitario’s investment in Mineral Property:

All exploration costs on our other exploration properties, none of which have proven and probable reserves, including any additional costs incurred for subsequent lease payments or exploration activities related to our projects are expensed as incurred. During the nine months ended September 30, 2016, Solitario acquired certain net smelter royalties on non-producing exploration leases in Montana previously owned by Atna Resources, Ltd. for $40,000.

Discontinued projects

Solitario dropped its royalty interests in the Aconchi and Norcan exploration properties in Mexico during the six months ended June 30, 2017, however, there were no capitalized mineral property costs related to these royalties and Solitario did not record any mineral property write-downs during the three and six months ended June 30, 2017. During the ninethree and six months ended SeptemberJune 30, 2016, Solitario closed its exploration office in Mexico. Solitario sold its Norcan and Aconchi exploration projects in Mexico for a retained a 1% royalty on both the Norcan and Aconchi properties. Solitario recorded a mineral property write-down of $10,000 related to the Norcan and Aconchi properties during the ninethree and six months ended SeptemberJune 30, 2016. In addition, Solitario recorded a loss on other assets in Mexico of $14,000 related to the exit from its exploration activities in Mexico during the ninethree and six months ended SeptemberJune 30, 2016.

Solitario did not record any mineral property write-downs during the three and nine months ended September 30, 2015.

Capitalization of Mt. Hamilton cost during 2015

On February 22, 2012, Solitario earned an 80% interest in MH-LLC as a result of the completion of a feasibility study on Mt. Hamilton prepared by SRK Consulting (US), Inc. of Lakewood, Colorado (“SRK”). In October 2014, SRK, on behalf of Solitario completed an updated feasibility study on Mt. Hamilton. Solitario sold its interest in Mt. Hamilton on August 25, 2015 through the Transaction. Capitalization of costs for the three and nine months ended September 30, 2015, prior to the Transaction, is detailed in the following table

Exploration expense

The following items comprised exploration expense:

3.        Marketable Equity Securities

Solitario's investments in marketable equity securities are classified as available-for-sale and are carried at fair value, which is based upon quoted prices of the securities owned. The cost of marketable equity securities sold is determined by the specific identification method. Changes in market value are recorded in accumulated other comprehensive income or loss within shareholders' equity, unless a decline in market value is considered other than temporary, in which case the decline is recognized as a loss in the consolidated statement of operations.

The following tables summarize Solitario’s marketable equity securities and accumulated other comprehensive income related to its marketable equity securities:

The following table represents changes in marketable equity securities.

4.        Other Assets

The following items comprised other assets:

During the ninesix months ended SeptemberJune 30, 2016 Solitario purchased 7,240,000 units of Vendetta for aggregate consideration of $289,000. Each unit included one common share of Vendetta and one purchase warrant which allows the holder to purchase one share of Vendetta common stock at a price of Cdn$0.10 per share for a period of two years (the “Vendetta Warrants”). As of SeptemberJune 30, 2016,2017, the commonVendetta shares of Vendetta are carried at their fair value and included in marketable equity securities;securities, see Note 3, “Marketable Equity Securities,” above. The Vendetta Warrants are carried at their fair value, based upon a Black-Scholes valuation model.

5.        Derivative Instruments

Vendetta Warrants

During the three and ninesix months ended SeptemberJune 30, 2017, Solitario exercised 2,240,000 of its Vendetta Warrants and received 2,240,000 Vendetta common shares, by paying $167,000 (Cdn$224,000) to Vendetta. As a result, as of June 30, 2017, Solitario owns 5,000,000 Vendetta Warrants, which are carried at fair value, based upon a Black-Scholes model. During the three and six months ended June 30, 2017, Solitario recorded a gain on derivative instruments of $99,000 and $247,000, related to the Vendetta Warrants. During the three and six months ended June 30, 2016, Solitario recorded a gain on derivative instruments of $91,000 and $306,000, respectively,$215,000 related to the Vendetta Warrants, see Note 6, “Derivative Instruments,” below.

5.       Short-term Debt

RMB Facility Agreement

On August 10, 2012, Solitario entered into a Facility Agreement and borrowed $5,000,000 from RMB Australia Holdings, Limited (the “RMB Loan”). In connection with the Facility Agreement, Solitario recorded a warrant discount related to the RMB Warrants issued in connection with the RMB Loan. Solitario also recorded deferred offering costs related to the RMB Loan. The warrant discount and deferred offering costs were amortized on a straight-line basis to interest cost over 36 months, the term of the Facility Agreement. The RMB Loan amounts bore interest at the 90-day LIBOR rate plus 5%, payable in arrears on the last day of each quarterly interest period. The RMB Loan was repaid on August 25, 2015, in connection with the Transaction. Solitario had no balance due on the RMB Loan as of December 31, 2015 or September 30, 2016.

Solitario recorded the following interest cost during the three and nine months ended September 30, 2015 related to the RMB Loan:

During the three and nine months ended September 30, 2015 to the date of the Transaction, Solitario capitalized all of its interest expense to mineral property. See Note 2, “Mineral Property,” above.

6.        Derivative InstrumentsWarrants.

RMB Warrants

The warrants originally issued by Solitario in 2012 to RMB Warrants, whichAustralia Holdings Limited (the “RMB Warrants”) entitled the holder to purchase a total of 1,624,748 shares of Solitario common stock,stock. The RMB Warrants had an exercise price of $1.54 per share and expired worthless on August 21, 2016. Solitario no longer has any liability related to the RMB Warrants as of September 30, 2016. Solitario recorded a $4,000 liability for the RMB Warrants as of December 31, 2015 for the fair value of the RMB Warrants based upon a Black-Scholes model. Solitario recorded a gain on derivative instrumentsthe RMB Warrants of $4,000 for$3,000 during the ninethree and six months ended SeptemberJune 30, 2016 related to the expiration of the RMB Warrants.2016.

Covered Call Options

From time to time Solitario has sold covered call options against its holdings of Kinross Gold Corporation (“Kinross”).Kinross. The business purpose of selling covered calls is to provide additional liquidity on a limited portion of shares of Kinross that Solitario may sell in the near term, which is generally defined as less than one year. Solitario has not designated its covered calls as hedging instruments and records gains or loss on the covered call in the period of the change. As of September 30, 2016, Solitario had written two covered calls, one covering 50,000 shares, expiring January 20, 2017, with an exercise price of $4.00 per share and another covering 50,000 shares, expiring January 20, 2017 with an exercise price of $4.50 per share. Solitario has recorded a liability of $56,000 for the fair value of its Kinross covered call as of September 30, 2016, based on quoted market prices.

Solitario recorded the following gain (loss) on derivative instruments:

The following table provides the location and amount of the fair values of Solitario's derivative instruments presented in the consolidated balance sheets as of June 30, 2017 and December 31, 2016:

7.6.        Fair Value

For certain of Solitario’s financial instruments, including cash and cash equivalents, short-term investments and payables, the carrying amounts approximate fair value due to their short term maturities. Solitario’s marketable equity securities are carried at their estimated fair value primarily based on quoted market prices. The Vendetta Warrants are carried at their estimated fair value at SeptemberJune 30, 20162017 of $412,000;$673,000; based upon a Black-Scholes valuation model, see Note 4, “Other Assets,” above. The RMB Warrants are carried at their estimated fair value based on a Black-Scholes option pricing model, see Note 5, “Derivative Instruments,” above.

Solitario accounts for its financial instruments under ASC 820. ASC 820 establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820 also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. During the three and ninesix months ended SeptemberJune 30, 20162017 there were no reclassifications in financial assets or liabilities between Level 1, 2 or 3 categories.

The following is a listing of Solitario’s financial assets and liabilities required to be measured at fair value on a recurring basis and where they are classified within the hierarchy as of SeptemberJune 30, 2016:2017:

The following is a listing of Solitario’s financial assets and liabilities required to be measured at fair value on a recurring basis and where they are classified within the hierarchy as of December 31, 2015:2016:

7.        Income Taxes

Solitario accounts for income taxes in accordance with ASC 740. Under ASC 740, income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related to certain income and expenses recognized in different periods for financial and income tax reporting purposes. Deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses and tax credits that are available to offset future taxable income and income taxes, respectively. A valuation allowance is provided if it is more likely than not that some portion or all of the deferred tax assets will not be realized.

At SeptemberJune 30, 20162017 and December 31, 2015,2016, Solitario has recorded no net deferred tax assets. A valuation allowance, which fully offsets the net deferred tax assets, has been recorded because it is more likely than not that the Company will not realize some portion or all of its deferred tax assets.  SolitarioThe Company continually assesses both positive and negative evidence to determine whether it is more likely than not that the deferred tax assets can be realized prior to their expiration.

During the three and ninesix months ended SeptemberJune 30, 2016, Solitario recorded deferred tax benefits of $27,000 and $264,000, respectively,$89,000 in the statement of operations and recorded a deferred tax expense of the same amountsamount to other comprehensive income related to unrealized gains on marketable equity securities. During the three and ninesix months ended SeptemberJune 30, 2015, income taxes have been allocated between discontinued2016, Solitario recorded deferred tax benefits of $175,000 and $237,000, respectively, in the statement of operations and continuing operations in accordance with ASC No. 740 “Income Taxes” (“ASC 740”), which resulted in an incomerecorded a deferred tax expense for continuing operations forof the three and nine months ended September 30, 2015 of $997,000.same amount to other comprehensive income related to unrealized gains on marketable equity securities.

9.8.       Employee Stock Compensation Plans

On August 24, 2016, the holders of options to acquire Solitario common stock voluntarily surrendered for cancellation all options previously granted to such persons pursuant to the 2013 Solitario Exploration and Royalty Corp Omnibus Stock and Incentive Plan (the “2013 Plan”) and the 2006 Stock Option Incentive Plan (the “2006 Plan”). Solitario cancelled the options upon surrender. As a result, there arehad no outstanding options under either the 2006 Plan or the 2013 Plan as of September 30, 2016.

Historically, stock optionequity awards at the time of grant had a five year term and vested 25% on date of grant and 25% on each of the next three anniversary dates.June 30, 2017 or December 31, 2016. Solitario recognizes stock option compensation expense on the date of grant for 25% of the grant date fair value, and subsequently, based upon a straight line amortization of the unvested grant date fair value of each of its outstanding options. During the three and ninesix months ended SeptemberJune 30, 2016, Solitario recorded $939,000$29,000 and $970,000, respectively, of stock option expense for the amortization, through the date of cancellation of previously outstanding options, of grant date fair value with a credit to additional paid-in-capital, including $721,000 of unamortized grant date fair value as of the date of cancellation of options during the three and nine months ended September 30, 2016, discussed below. During the three and nine months ended September 30, 2015, Solitario recorded $157,000 and $470,000,$31,000, respectively, of stock option expense for the amortization of grant date fair value with a credit to additional paid-in-capital. Solitario recorded no stock option expense during the three and six months ended June 30, 2017.

The 2006 Plan

On June 27, 2006, Solitario’s shareholders approved the 2006 Plan. Under the terms ofStock Option Incentive Plan (the “2006 Plan”). On June 27, 2016, the 2006 Plan an aggregateterminated and as of 2,800,000 shares were initially reserved for the award of options. As of June 26, 2016, in accordance with the terms of the 2006 Plan,that date no additional awardsoptions may be madegranted pursuant to the 2006 Plan. As of September 30, 2016 there are no outstanding stock options under the 2006 Plan.

During the ninethree and six months ended SeptemberJune 30, 2016, Solitario granted options to acquire 350,000 shares of common stock under the 2006 Plan. By their initial terms the options had a five-year term, vested 25% on the date of grant and thereafter were to vest 25% on each of the next three anniversary dates of the date of grant, and had a grant date fair value based upon a Black-Scholes model with a 63% expected volatility, and 1% risk-free interest rate. These options were subsequently surrendered by the holders and cancelled on August 24, 2016. As a result of the cancellation Solitario recognized $84,000 of unamortized grant date fair value as of the date of the cancellation under the 2006 Plan. No options were granted during the three and nine months ended September 30, 2015. No options were exercised during the three and ninesix months ended SeptemberJune 30, 2017 and 2016 or 2015 under the 2006 Plan.

The 2013 Plan

On June 18, 2013 Solitario’s shareholders approved the 2013 Plan.Solitario Exploration & Royalty Corp. Omnibus Stock and Incentive Plan (the “2013 Plan”). On June 29, 2017, Solitario shareholders approved an amendment to the 2013 Plan, which increased the number of shares available of common stock for issuance under the 2013 Plan from 1,750,000 to 5,750,000. Under the terms of the 2013 Plan, an aggregatethe Board of 1,750,000 shares are currently reserved forDirectors may grant awards to directors, officers, employees and consultants. Such awards may take the form of stock options, stock appreciation rights, restricted stock, and restricted stock units.

On July 28, 2016, The terms and conditions of the awards are pursuant to the 2013 Plan and are granted by the Board of Directors granted 1,699,000 stock options under the 2013 Plan. These options were subsequently surrenderedor a committee appointed by the holders and cancelled on August 24, 2016. As a resultBoard of the cancellation, Solitario recognized $637,000 of unamortized grant date fair value as of the date of the cancellation under the 2013 Plan. As of September 30, 2016 thereDirectors. There were no outstanding stock optionsgrants or other awards under the 2013 Plan. There were noor exercises of options or awards under the 2013 Plan during the three and ninesix months ended SeptemberJune 30, 20162017 and 2015. There were no stock awards or option grants under the 2013 Plan during the three and nine months ended September 30, 2015.2016.

10.9.        Shareholders’ Equity and Accumulated Other Comprehensive Income

Share Repurchase Program

On October 28, 2015, Solitario’s Board of Directors approved a share repurchase program that authorizesinitially authorized Solitario to purchase up to two million shares of its outstanding common stock through December 31, 2016. During 2016, Solitario’s Board of Directors extended the expiration date of the share repurchase program through December 31, 2017. During the three and ninesix months ended SeptemberJune 30, 2016,2017, Solitario purchased 18,00030,300 and 424,00038,700 shares of Solitario common stock, respectively, for an aggregate purchase price of $13,000$22,000 and $214,000,$28,000, respectively. During the three and six months ended June 30, 2016, Solitario purchased 232,000 and 406,000 shares of Solitario common stock, respectively, for an aggregate purchase price of $118,000 and $201,000, respectively. As of SeptemberJune 30, 2016,2017, Solitario has purchased a total of 569,000659,300 shares for an aggregate purchase price of $281,000$343,000 under the share repurchase program since its inception.

10.       Subsequent Events

As further described in Note 1 under the heading “Recent developments”, effective on July 12, 2017 the Acquisition closed and Solitario acquired Zazu through the Arrangement. At closing, Solitario issued 19,788,183 shares of common stock and granted the Replacement Options. The total purchase price will be recorded during the three and nine month periods ending September 30, 2017 and is estimated to be approximately $13.9 million. Results of operations for Zazu will be included in Solitario’s consolidated financial statements from the date of acquisition. In connection with the closing of the Arrangement, the Debenture was eliminated in consolidation.

Additionally, in connection with the closing the Acquisition Solitario amended its Articles of Incorporation to change its name to “Solitario Zinc Corp.”, and an amendment to the 2013 Plan became effective, which among other things, increased the number of shares of Solitario common stock reserved under the 2013 Plan to 5,750,000 shares.

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, 20152016 and 2014,2015, and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Solitario’s Annual Report on Form 10-K for the year ended December 31, 2015.2016. 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) Recent Developments

As further described in Note 1 “Business and Significant Accounting Policies” and Note 10 “Subsequent Events” above, subsequent to June 30, 2017, on July 12, 2017 we completed the acquisition of Zazu pursuant to the Arrangement Agreementand acquired all of the Zazu Shares by way of the Arrangement. As a result of the Acquisition Zazu became a wholly-owned subsidiary of Solitario. At closing, we issued 19,788,183 shares of common stock for all of the issued and outstandingZazu Shares. We also grantedtheReplacement Options in connection with the Acquisition. The total purchase pricefor the Acquisitionwill be recorded during the three and nine months ending September 30,2017,and is estimated to be approximately $13.9 million. Results of operations for Zazu will be included in our consolidated financial statements from the date of acquisition.

Effective July 17, 2017 an amendment to our Articles of Incorporation became effective that served to change our name to “Solitario Zinc Corp.” from “Solitario Exploration & Royalty Corp.” Subsequent to the Acquisition, our major assets are the 39% interest in the Bongará zinc deposit in Peru and the 50% ownership interest in the Lik zinc deposit (acquired in the Acquisition). We believe the name “Solitario Zinc Corp.” reflects the increased focus of the Company on zinc-related assets.

On April 26, 2017, concurrent with the signing of the Arrangement Agreement, we provided Zazu interim debt financing throughthe Debenture. At June 30, 2017, the Debenture, including accrued interest of $13,000, was recorded as a current receivable due from Zazu. Subsequent to June 30, 2017, upon completion of the Acquisition, the Debenture was eliminated in consolidation.

(b) Business Overview and Summary

We are an exploration stage company with a focus onof the acquisition of precious and base metal properties with exploration potential and the development or purchase of royalty interests. PriorUpon the completion of the Acquisition, we intend to shift our focus more toward the saleacquisition and exploration of Mt. Hamilton (discussed below), our primary focus was on the development of Mt. Hamilton, wherezinc-related exploration mineral properties. However, we had an 80% interest in Mt. Hamilton through MH-LLC. Our current focus iswill continue to acquireevaluate other mineral properties for acquisition and hold a portfolio of mineral exploration properties and assets for future sale, joint venture or 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 assets and the evaluation of mineral properties for acquisition or purchase of royalty interests, we also evaluate potential strategic corporate transactions for the acquisition of new precious and base metal properties and assets with exploration potential or business combinations we determine to be favorable to us.

We have recorded revenue in the past from the sale of mineral properties, including the sale of MH-LLC during 2015, joint venture property payments and the sale of a royalty on our former Mt. Hamilton property. The revenue from the sale of MH-LLC is included in gain on sale of discontinued operations. RevenuesProceeds from the sale or joint venture of our other properties, although significant, have not historically been a significantconsistent annual source of cash or revenue and would occur, if at all, on an infrequent basis in the future.

We currently consider our carried interest in our Bongará project in Peru and our recently acquired Lik project in Alaska to be our core mineral property asset.assets. We expect our joint venture partner will continue the development and furtherance of the Bongará asset and we will monitor progress at Bongará. We are currently evaluating potential exploration and development plans for the Lik project.

As of SeptemberJune 30, 20162017, we have significant balances of cash and short-term investments that we anticipate using, to, in part, to further the development of the Lik project and to potentially acquire additional mineral property assets. The fluctuations in precious metal and other commodity prices has contributed 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. Wehave, and expect to, focus on evaluating and potentiallyacquiring one or moreadditionalassets if we believe it will enhance shareholder value. During the three and nine months ended September 30, 2016, we acquired certain net smelter royalties on non-producing exploration leases in Montana previously owned by Atna Resources, Ltd.

(b) Sale of Mt. Hamilton LLC

Sale of Mt. Hamilton LLC

On August 25, 2015 we, along with DHI, sold our combined interests in Mt. Hamilton to Waterton, for total cash proceeds of US$30 million. We sold our 80% interest in MH-LLC and received gross cash proceeds of US$24 million and DHI received gross cash proceeds of US$6 million. Solitario’s costs and fees related to the Transaction, including broker fees and professional service fees, were $439,000. The Transaction was structured as the sale of Solitario’s and DHI’s combined membership interests in MH-LLC.

During the three and nine months ended September 30, 2015 virtually all of the costs associated with MH-LLC and the assets sold were directly related to the development of Mt. Hamilton, which were capitalized to mineral property during all periods. Accordingly, separate presentation of discontinued operations would not have resulted in any material change to our results presented in the consolidated statements of operations for the three and nine months ended September 30, 2015.

See Note 1, “Business and Summary of Significant Accounting Policies,” to the annual financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC for a more complete discussion of the sale of Solitario’s interest in MH-LLC.

(c) Results of Operations

Comparison of the quarter ended SeptemberJune 30, 20162017 to the quarter ended SeptemberJune 30, 20152016

We had a net loss of $1,119,000$517,000, or approximately $0.03$0.01 per basic and diluted share for the three months ended SeptemberJune 30, 20162017 compared to a net incomeloss of $9,950,000$162,000 or approximately $0.25$0.00 per basic and diluted share for the three months ended SeptemberJune 30, 2015.2016. As explained in more detail below, the primary reason for the change from net income to aincrease in the net loss in the three months ended SeptemberJune 30, 20162017 compared to the net incomeloss in the three months ended SeptemberJune 30, 20152016 was (i) the sale of our interestan increase in MH-LLC for gross cash proceeds of $24,000,000general and administrative costs to $560,000 during the three months ended SeptemberJune 30, 2015, without a comparable sale in 2016; an increase in non-cash stock option compensation expense, included in2017 compared to general and administrative expenses to $939,000 including expenses related to the cancellationcosts of options of $721,000$256,000 during the three months ended SeptemberJune 30, 2016, comparedprimarily related to non-cash stock option compensation expenselegal and due diligence costs related to the Acquisition; (ii) no gain on sales of 156,000marketable equity securities during the three months ended SeptemberJune 30, 2015; and (iii) an increase in exploration expense2017 compared to $132,000a gain of $30,000 during the three months ended SeptemberJune 30, 2016 compared2016; (iii) a reduction in the gain on derivative instruments to exploration expense of $16,000$113,000 during the three months ended SeptemberJune 30, 2015.2017 compared to a gain of $133,000 during the three months ended June 30, 2016 and (iv) a reduction in the income tax benefit to $89,000 during the three months ended June 30, 2017, compared with an income tax benefit of $175,000 during the three months ended June 30, 2016. These were partially offset by (i) a gain on sales of marketable equity securities of $10,000decrease in exploration expense to $188,000 during the three months ended SeptemberJune 30, 20162017 compared to a loss on saleexploration expense of marketable equity securities of $1,333,000$220,000 during the three months ended SeptemberJune 30, 2015;2016; (ii) a decreasean increase in non-stock option general and administrative costsinterest income to $274,000$30,000 during the three months ended SeptemberJune 30, 20162017 compared to non-stock option general and administrative costs of $325,000 during the three months ended September 30, 2015; (iii) a gain of $163,000 on derivative instruments during the three months ended September 30, 2016 compared to a gaininterest income of $1,000 during the three months ended SeptemberJune 30, 2015; (iv) interest income2016; and (iii) a loss on other assets of $27,000$14,000 and property abandonment expense of $10,000 related to the closure of our exploration office in Mexico during the three months ended SeptemberJune 30, 2016, compared to interest income of $3,000with no similar item during the three months ended SeptemberJune 30, 2015; and (v) the recording of an income tax benefit of $27,000 during the three months ended September 30, 2016, compared to an income tax expense of $997,000 during the three months ended September 30, 2015.2017. The significant changes for these items are discussed in more detail below.

On August 25, 2015 we, along with DHI, sold our combined interests in the Mt. Hamilton project for total cash proceeds of US$30 million in the Transaction. We sold our 80% interest in MH-LLC and DHI sold its 20% interest in MH-LLC. DHI is a wholly-owned subsidiary of Ely. We received gross cash proceeds of US$24 million and Ely received gross cash proceeds of US$6 million.          Our costs and fees relatednet exploration expense decreased to the Transaction, including broker fees and professional service fees, were $439,000. The gain on sale of MH-LLC as of September 30, 2015 is shown in discontinued operations as follows:

Income taxes have been allocated between discontinued operations and continuing operations in accordance with ASC No. 740 “Income Taxes” (“ASC 740”), which resulted in an income tax expense for continuing operations for the three and nine months ended September 30, 2015 of $997,000. During the three months ended September 30, 2016 our net operating loss carry-forwards exceed our unrealized gains on marketable equity securities and we are in a net tax asset position and we provide a valuation allowance for all deferred taxes payable. However, we recorded a deferred tax benefit in the statement of operations for the amount of the deferred taxes recorded in other comprehensive income of $27,000$188,000 during the three months ended SeptemberJune 30, 2016. As a result of our exploration activities and other tax deductible expenses, we anticipate we will not have currently payable income taxes during 2016. In addition2017 compared 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.

          Our net exploration expense increased to $132,000of $220,000 during the three months ended SeptemberJune 30, 2016 compared to exploration expense2016. We were working on a preliminary economic study of $16,000our Bongará project during the three months ended SeptemberJune 30, 2015. We increased2017, which is being one-half funded by our joint venture partner Compania Minera Milpo S.A.A. (“Milpo”); however, as a result of our focus on the Acquisition during much of the three months ended June 30, 2017 our reconnaissance exploration activities during the 2016 period primarily related to the shift in focus from Mt. Hamilton to the evaluation of mineral properties for acquisition as discussed above. Thesewas reduced, resulting in an overall decline in total exploration expense. The reconnaissance activities were focused on the evaluation of exploration properties and /or companies for potential acquisitionsacquisition or other strategic transactions. In addition we increased our reconnaissance exploration activities in Peru forDuring the same purpose. During three months ended SeptemberJune 30, 2016 we2017we had one contract geologist in Peru, however, our Denver personnel are spendingspent the majority of their time on exploration activities described above in this paragraph. We anticipate we will continue with our current exploration activities, and expect our exploration activities related to the extent we acquire new exploration projects or assetsrecently acquired interest in the Lik project to expand those activities further and as a result expectincrease our full-year exploration expenditures for 20162017, which are expected to exceed the expenditures for full-year 2015.of 2016.

Exploration expense (in thousands) by project for the three and ninesix months ended SeptemberJune 30, 20162017 and 20152016 consisted of the following:

General and administrative costs, excluding stock option compensation costs discussed below, were $274,000$560,000 during the three months ended SeptemberJune 30, 20162017 compared to $325,000$227,000 during the three months ended SeptemberJune 30, 2015.2016. The major components of these costs were related to (i) salaries and benefit expense during the three months ended SeptemberJune 30, 20162017 of $150,000$157,000 compared to salaries and benefits expense of $236,000$161,000 in the same period of 2015;2016; (ii) legal and accounting expenditures of $68,000$304,000 in the three months ended SeptemberJune 30, 20162017 compared to $1,000$11,000 in the three months ended SeptemberJune 30, 2015,2016, which during the 20152017 period the majority of the expenses wereincluded additional costs and fees related to the Transaction, resulting in the lower cost for continuing operations;Acquisition; (iii) office rent and expenses of $23,000$17,000 during the three months ended SeptemberJune 30, 20162017 compared to $24,000$20,000 during the three months ended September 30, 20152016 and (iv) travel and shareholder relation costs of $32,000$64,000 during the three months ended SeptemberJune 30, 20162017 compared to $63,000$35,000 during 2016. We anticipate additional general and administrative costs will be incurred during the three monthsquarter ended September 30, 2015. We anticipate2017 related to the non-stock option compensationAcquisition and that general and administrative costs will be incurred at a comparablelower rate for the remainder of 2017 subsequent to the Acquisition compared to the rate infor the three months ended SeptemberJune 30, 2016 for the remainder of 2016.2017.

WeSolitario recorded stock option expense for the amortization of unvested grant date fair value with a credit to additional paid-in-capital of $218,000$29,000 during the three months ended SeptemberJune 30, 2016 compared $156,000with no comparable expense during the three months ended SeptemberJune 30, 2015.2017. During the three months ended SeptemberJune 30, 2016, the holders ofSolitario granted 350,000 options, to acquire our common stock voluntarily surrendered for cancellation all options previously granted to such persons and we cancelled the options upon surrender. Upon cancellation we recorded an additional $721,000 of non-cash stock option compensation expense for the unamortized grant date fair value as ofwhich vested 25% on the date of cancellation. As of September 30, 2016 there are no outstanding options under either the 2006 Plan or the 2013 Plan,grant, as further described in Note 9, “Employee Stock Compensation Plans,” above. There were no option grants, or any options outstanding during the three and six months ended June 30, 2017.

During the three months ended SeptemberJune 30, 2016 we sold marketable equity securities for proceeds of $16,000$40,000 and recorded a gain on the sales of $10,000, compared to$30,000. There were no sales of marketable equity security sales for proceeds of $519,000 and a recorded gain on the sales of $364,000 for the three months ended September 30, 2015. During the three months ended September 30, 2015 we sold 160,000 shares of Kinross for net proceeds of $290,000 and recorded a gain on sale of $178,000.

During the three months ended September 30, 2015 we transferred all 15,732,274 shares of Ely common stock we previously held in exchange for cancellation of certain payment obligations related to MH-LLC, and the Ely Consent. We recorded a loss on sale of marketable equity securities of $1,511,000 during the three months ended SeptemberJune 30, 2015 on the transfer of these Ely shares.2017. During 2015,2017, the sales of marketable equity securities wereare not anticipated to be a significant source of our cash needs prior to the Transaction, which was not the case during 2016. Weneeds; however we anticipate we will continue to sell some of our holdings of marketable equity securities during the remainder of 20162017 related to our overall cash management strategy.

As a result of the purchase of the Vendetta units, we adjust the fair value of the Vendetta Warrants at each balance sheet date, based upon a Black-Scholes model. During the three months ended SeptemberJune 30, 20162017 we recorded a gain on derivative instruments of $91,000$99,000 related to the Vendetta Warrants, with no similar item incompared to a gain on derivative instruments related to the Vendetta Warrants of $215,000 during the three months ended SeptemberJune 30, 2015.2016. During the three months ended SeptemberJune 30, 20162017 we recorded a gain on derivative instruments of $14,000 related to ourKinross calls compared to a loss on derivative instruments related to Kinross calls of $72,000 compared to a gain on derivative instruments during 2015 of $1,000. Given that the current price of Kinross has been in excess of the exercise price as of September 30, 2016, our covered calls may be called during the remainder of 2016. We may also exchange the existing Kinross calls for new calls with an extend price and or increased exercise price during the remainder of 2016 as market conditions warrant.

Comparison of the nine months ended September 30, 2016 to the nine months ended September 30, 2015

We had a net loss of $1,770,000 or $0.05 per basic and diluted shared for the nine months ended September 30, 2016 compared to net income of $9,359,000 or $0.24 per basic and diluted share for the nine months ended September 30, 2015. As explained in more detail above, the primary reasons for the change from net income to a net loss in the nine months ended September 30, 2016 compared to the net income in the nine months ended September 30, 2015 was the sale of our interest in MH-LLC for cash of $24,000,000$82,000 during the three months ended SeptemberJune 30, 2015, without a comparable sale in 2016. In addition, as explained in more detail below, our loss for the 2016 period was as a result of (i) an increase in our exploration expense to $474,000 during the nine months ended September 30, 2016 compared to exploration expensequoted price of $48,000 during the nine months ended September 30, 2015; (ii) an increase in non-cash stock option compensation expense, included in general and administrative expenses to $970,000 including expenses related to the cancellation of options of $721,000 during the nine months ended September 30, 2016 compared to non-cash stock option compensation expense of 470,000 during the nine months ended September 30, 2015; (iii) during the nine months ended September 30, 2016 we recorded a property abandonment and impairment loss of $10,000 and a loss on sale of assets of $14,000, both related to our decision to close our Mexican exploration office, discussed above, with no similar item during the nine months ended September 30, 2015; and (iii) a decrease in the gain on warrant liability to $4,000 during the nine months ended September 30, 2016 compared to a gain of $49,000 during the nine months ended September 30, 2015. These causes of our net loss during 2016 period were partially offset by (i) a reduction in our non-stock option general and administrative costs to $941,000 during the nine months ended September 30, 2016 compared to general and administrative costs of $1,043,000 during the nine months ended September 30, 2015; (ii) we recorded interest income of $40,000 during the nine months ended September 30, 2016 compared to $4,000 of interest income during the nine months ended September 30, 2015; (iii) we recorded an income tax benefit of $264,000 for the nine months ended September 30, 2016, compared to an income tax expense of $997,000 during the nine months ended September 30, 2015; (iv) we recorded a gain on sale of marketable equity securities of $40,000 during the nine months ended September 30, 2016 compared to a loss on sale of marketable equity securities of $969,000 during the nine months ended September 30, 2015; and (v) a gain on derivative instruments of $295,000 during the nine months ended September 30, 2016 compared to a gain on derivative instruments of $84,000 recorded in the nine months ended September 30, 2015.

Our net exploration expense increased to $474,000 during the nine months ended September 30, 2016 compared to $48,000 in the comparable period of 2015. See the discussion of the comparison of the three months ended September 30, 2016 compared to the three months ended September 30, 2015 above. During the nine months ended September 30, 2015, prior to the Transaction, we capitalized $1,382,000 of development costs related to Mt. Hamilton.

General and administrative costs, excluding stock option compensation costs discussed below, were $941,000 during the nine months ended September 30, 2016 compared to $1,043,000 in the same period of 2015. The major components of the costs were (i) salaries and benefit expense during the nine months ended September 30, 2016 of $631,000 compared to salaries and benefit expense of $657,000 in the same period of 2015; (ii) legal and accounting expenditures of $90,000 in the nine months ended September 30, 2016 compared to $137,000 in the same period of 2015; (iii) other costs of $66,000 during the nine months ended September 30, 2016 compared to $74,000 in the same period of 2015; and (iv) travel and shareholder relation costs of $154,000 during the nine months ended September 30, 2016 compared to $176,000 in the same period of 2015.

During the nine months ended September 30, 2016, we recorded $970,000 of non-cash stock option expense with a credit to additional paid-in capital for the amortization of unvested grant date fair value, including $721,000 of non-cash stock option expense of unamortized grant date fair value upon the cancellation of options, compared to $470,000 of non-cash stock option expense during the nine months ended September 30, 2015. See Note 9, “Employee Stock Compensation Plans,” above for a further discussion of our stock option activity during the nine months ended September 30, 2016.

As discussed above, during the nine months ended September 30, 2015 we transferred all 15,732,274underlying shares of ElyKinross common stock we previously held in exchange for cancellationduring that quarter. We anticipate continuing to write calls against our shares of certain payment obligations related to MH-LLC, and the Ely Consent. We recorded a loss on sale of marketable equity securities of $1,511,000 during the nine months ended September 30, 2015 on the transfer of these Ely shares, which accounted for the bulk of the loss during 2015, which was partially offset by a gain on the sale of Kinross common stock during the nine months ended September 30, 2015remainder of $542,000. During the nine months ended September 30, 2016, we sold $56,000 of marketable equity securities and recorded a gain on sale of $40,000 on the sale of these securities.

As a result of the classification of the RMB Warrants2017 as a liability in accordance with ASC 815-40, “Derivatives and Hedging, Contracts in Entity’s Own Equity,” we adjusted the fair value of the warrants at each balance sheet date, with changes in value recorded in other income/expense in the statement of operations based upon a Black-Scholes model. The RMB Warrants expired on August 21, 2016 and have no remaining value. During the nine months ended September 30, 2016 we recorded a gain of $4,000 related to the RMB warrants as a result of the expiration of the RMB Warrants, compared to a gain of $49,000 during the nine months ended September 30, 2015 for the change in fair values discussed above.market conditions warrant.

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 early stage mineral property and its related value for future sale, joint venture or development by us or others. During the ninethree and six months ended SeptemberJune 30, 2016 we recorded a loss on other assets of $14,000 and property abandonment expense of $10,000 related to the closure of our exploration office in Mexico. During the ninethree and six months ended SeptemberJune 30, 20152017 we recorded a gain of $7,000 on the disposal of other assets andhad no mineral property impairments.

As discussed above under the comparision of the three months ended SeptemberAt June 30, 2017 and June 30, 2016 compared to the three months ended September 30, 2015,our net operating loss carry-forwards exceed our unrealized gains on marketable equity securities and we are in a net tax asset position and we provide a valuation allowance for all deferred taxes payable. However we recorded a deferred tax benefit in the statement of operations for the amount of the deferred taxes recorded in other comprehensive income of $264,000$89,000 and $175,000, respectively, during the ninethree months ended SeptemberJune 30, 2017 and 2016. As a result of our exploration activities and other tax deductible expenses, we anticipate we will not have currently payable income taxes during 2017. 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, 2017 to the six months ended June 30, 2016

We had a net loss of $530,000 or $0.01 per basic and diluted shared for the six months ended June 30, 2017 compared to a net loss of $651,000 or $0.02 per basic and diluted share for the six months ended June 30, 2016. As explained in more detail below, the primary reasons for the decrease in our net loss were (i) an increase in interest income to $76,000 during the six months ended June 30, 2017 compared to interest income of $13,000 during the six months ended June 30, 2016; (ii) an increase in the gain on sale of marketable equity securities to $221,000 during the six months ended June 30, 2017 compared to a gain on sale of marketable equity securities of $30,000 in the six months ended June 30, 2016; (iii) a decrease in our exploration expense to $339,000 during the six months ended June 30, 2017 compared to exploration expense of $342,000 during the six months ended June 30, 2016; (iv) property abandonment and impairment loss of $10,000 and loss on sale of assets of $14,000 related to our decision to close our Mexican exploration office, discussed above, during the six months ended June 30, 2016, with no similar item during the six months ended June 30, 2017; and (v) a gain on derivative instruments of $285,000 during the six months ended June 30, 2017 compared to a gain on derivative instruments of $132,000 recorded in the six months ended June 30, 2016. These causes of the decrease in our net loss were partially offset by (i) an increase in our general and administrative costs to $860,000 during the six months ended June 30, 2017 compared to general and administrative costs of $698,000 during the six months ended June 30, 2017; and (ii) a reduction in our income tax benefit to $89,000 during the six months ended June 30, 2017 compared to an income tax benefit of $237,000 for the six months ended June 30, 2016. The significant changes for these items are discussed in more detail below.

Our net exploration expense decreased to $339,000 during the six months ended June 30, 2017 compared to $342,000 in the comparable period of 2016. During the six months ended June 30, 2017 we initiated the PEA on our Bongará project, and reduced our reconnaissance activities as discussed above in the comparison of the three months ended June 30, 2017 compared to the six months ended June 30, 2016.

General and administrative costs, excluding stock option compensation costs discussed below, were $860,000 during the six months ended June 30, 2017 compared to $667,000 during the six months ended June 30, 2016. The major components of the costs were (i) salaries and benefit expense during the six months ended June 30, 2017 of $316,000 compared to salaries and benefit expense of $481,000 in the same period of 2016, which included bonus payments of $152,000 during 2016, with no comparable bonus payment item during 2017; (ii) legal and accounting expenditures of $334,000 in the six months ended June 30, 2017, which were in large part related to the Acquisition during 2017, compared to $22,000 in the same period of 2016; (iii) other costs of $74,000 during the six months ended June 30, 2017, which included $27,000 for director and officer insurance, compared to $42,000 in the same period of 2016; and (iv) travel and shareholder relation costs of $136,000 during the six months ended June 30, 2017 compared to $122,000 in the same period of 2016. During the six months ended June 30, 2016, Solitario recorded $31,000 of stock option expense for the amortization of unvested grant date fair value with a credit to additional paid-in capital, with no stock option expense during the six months ended June 30, 2017, as discussed above.

During the six months ended June 30, 2017, Solitario sold 1,480,000 common shares of Vendetta for proceeds of $259,000, and recorded a gain on the sale of marketable equity securities of $221,000. There were no sales of marketable equity securities during the six months ended June 30, 2016. We do not anticipate the sale of marketable equity securities will be a significant source of net income during the remainder of 2017.

During the six months ended June 30, 2017 we recorded a gain on derivative instruments of $247,000 related to the Vendetta Warrants, compared to a gain on derivative instruments related to the Vendetta Warrants of $215,000 during the six months ended June 30, 2016. During the six months ended June 30, 2017, we recorded a gain on derivative instruments of $38,000 related to Kinross calls compared to a loss on derivative instruments related to Kinross calls of $83,000 during the six months ended June 30, 2016.

We recorded a deferred tax benefit in the statement of operations for the amount of the deferred taxes recorded in other comprehensive income of $89,000 and $237,000, respectively, during the six months ended June 30, 2017 and 2016. See the discussion above regarding the comparison of the deferred tax expense for continuing operations of $997,000recorded during the ninethree months ended SeptemberJune 30, 2015 as a result2016 compared to the three months ended June 30, 2017.

(d) Liquidity and Capital Resources

Cash and Short-term Investments

As of SeptemberJune 30, 20162017, we have $307,000$12,732,000 in cash. cash and short-term investments. As of June 30, 2017, we have invested $9,733,000 in USTS with maturities of 15 days to 18 months. The USTS are recorded at their fair value, based upon quoted market prices. As of June 30, 2017, we have invested $2,999,000 in separate CDs with maximum values of $250,000, each of which is covered by FDIC insurance to the full face value of the CDs. At June 30, 2017, the CDs have maturities of between 30 days and 12 months. The CDs are recorded at their fair value, based upon quoted market prices. We anticipate we will roll over that portion of our USTS and CDs not used for operating costs or mineral property acquisitions as they become due during the remainder of 2017.

We intend to utilize a portion of thisour cash and short-term investments in our exploration activities and the potential acquisition of mineral properties and other assets over the next several years. We may also expect to use a portion of thisour cash to repurchase shares of our common stock pursuant to the terms of a stock buy-back program announced on October 28, 2015.2015, and discussed above in Note 9, “Shareholders’ Equity and Accumulated Other Comprehensive Income” to the unaudited condensed consolidated financial statements. The stock buy-back program may be terminated at any time and does not require Solitario to purchase a minimum number of shares.

Loan to Zazu

On April 26, 2017, concurrent with the signing of the Arrangement Agreement, we provided Zazu interim debt financing in the principal amount of US$1.5 million through the issuance of the "Debenture. The Debenture was secured by way of a general security and pledge agreement on Zazu assets and bore interest at a rate of 5% per annum. The Debenture was convertible, at our option into Zazu Shares at a price of US$0.22 per Zazu Share. At June 30, 2017, the Debenture, including accrued interest of $13,000, was recorded as a current receivable due from Zazu. Subsequent to June 30, 2017, upon completion of the Acquisition, the Debenture was eliminated in consolidation.

Short-term Investments

As of September 30, 2016, we have $7,006,000 of our current assetsInvestment in United States Treasury securities (“USTS”) with maturities of 15 days to one year. The USTS are recorded at their fair value, based upon quoted market prices. The USTS are highly liquid and may be sold in their entirety at any time at their quoted market price and are classified as a current asset. We anticipate we will roll over that portion of our USTS not used for operating costs or mineral property acquisitions as they mature during the remainder of 2016.

As of September 30, 2016, we have $8,500,000 in separate bank certificates of deposit (“CDs”) each with a maximum value of $250,000, each of which is covered by Federal Deposit Insurance Corporation insurance to the full face value of the CDs. At September 30, 2016, the CDs have maturities of between 15 days and two years. The CDs are recorded at their fair value, based upon quoted market prices. The CDs are highly liquid and may be sold in their entirety at any time at their quoted market price and are classified as a current asset. We anticipate we will roll over that portion of our CDs not used for operating costs or mineral property acquisitions as they mature during the remainder of 2016.

Marketable Equity Securities

Our marketable equity securities are classified as available-for-sale and are carried at fair value, which is based upon market quotes of the underlying securities. We owned 100,000 shares of Kinross common stock at SeptemberJune 30, 2016.2017. The Kinross shares are recorded at their fair value of $421,000$407,000 at SeptemberJune 30, 2016. During the nine months ended September 30,2017. On May 2, 2016 we purchased 7,240,000 units of Vendetta for an aggregate purchase price of $289,000. Each unit consists of one common share of Vendetta common stock and one Vendetta Warrant. AsWarrant for the purchase of Septemberone common share of Vendetta at Cdn$0.10 per share for a period of two years. During the six months ended June 30, 20162017, we have recorded our investment in thesold 1,480,000 common shares of Vendetta for proceeds of $259,000, and recorded a gain on the sale of marketable equity securities of $221,000. During the six months ended June 30, 2017 we exercised 2,240,000 of our Vendetta Warrants and received 2,240,000 Vendetta common shares, by paying $167,000 (Cdn$224,000) to Vendetta. The cost of the shares received from the exercise of the Vendetta Warrants was recorded based upon the total of the (i) exercise price of the Vendetta Warrants exercised, $167,000, and (ii) the fair value of the Vendetta Warrants on the date of exercise, which equaled their intrinsic value, $309,000, for a total value of $476,000. As of June 30, 2017, we own 8,000,000 common shares of Vendetta, which are carried at their fair market value of $664,000$1,597,000 based upon quoted market prices.prices, with any unrealized gain or loss included in other comprehensive income. In addition we own other marketable equity securities with a fair value of $13,000 as of SeptemberJune 30, 2016 based upon quoted market prices. Changes in the fair value of marketable equity securities are2017. We recorded as gains and losses in other comprehensive income in shareholders’ equity. During the nine months ended September 30, 2016 we recorded a net gain on marketable equity securities in other comprehensive income of $449,000, which was net of deferred taxes of $264,000.$151,000 during the six months ended June 30, 2017.

Working Capital

We had working capital of $16,812,000$16,328,000 at SeptemberJune 30, 20162017 compared to working capital of $17,811,000$16,671,000 as of December 31, 2015.2016. Our working capital at SeptemberJune 30, 20162017 consists primarily of our cash and cash equivalents, our investment in USTS and CDs, discussed above, and our investment in marketable equity securities of $1,098,000,$2,017,000, the Zazu receivable, less our accounts payable of $140,000 and the fair value of our Kinross calls, discussed above, of $56,000.$243,000. As of SeptemberJune 30, 2016,2017, our cash balances along with our short-term investments and marketable equity securities are adequate to fund our expected expenditures over the next year.

The nature of the mineral exploration business requires significant sources of capital to fund exploration, development and operation of mining projects. We expect we will need additional capital if we decide to develop or operate any of our current exploration projects or any projects or assets we may acquire. We anticipate we would finance any such development through the use of our cash reserves, short-term investments, joint ventures, issuance of debt or equity, or the sale of other exploration projects or assets.

Stock-Based Compensation Plans

During the ninesix months ended SeptemberJune 30, 2016 the holders of2017 no options to acquire our common stock voluntarily surrendered for cancellation all options previouslywere granted to such persons pursuant toor exercised from the 2013 Plan and we have no options outstanding as of June 30, 2017. During the 2006 Plan.three and six months ended June 30, 2016, Solitario cancelled thegranted options upon surrender. As a result, there are no outstanding optionsto acquire 350,000 shares of common stock under either the 2006 Plan, orand we recorded $31,000 of stock option expense, with a credit to additional paid-in-capital during the 2013 Plan. See Note 9, “Employee Stock Compensation Plans,” above for a discussion ofsix months ended June 30, 2016. These options were subsequently surrendered by the activity in our 2013 Planholders and our 2006 Plan duringcancelled on August 24, 2016. We do not anticipate the exercise of options during the remainder of 2016 will be a significant source of cash.cash during the remainder of 2017.

Vendetta Warrants

During the six months ended June 30, 2017, we exercised 2,240,000 of our Vendetta Warrants and received 2,240,000 Vendetta common shares, by paying $167,000 (Cdn$224,000) to Vendetta. As a result, as of June 30, 2017, we owned 5,000,000 Vendetta Warrants, which are carried at fair value, based upon a Black-Scholes model. During the six months ended March 31, 2017, we recorded a gain on derivative instruments of $247,000 related to the Vendetta Warrants

Share Repurchase Program

On October 28, 2015, our Board of Directors approved a share repurchase program that authorizesauthorized us to purchase up to two million shares of our outstanding common stock through December 31, 2016. During 2016, our Board of Directors extended the term of the share repurchase program until December 31, 2017. All shares purchased have been cancelled and reduced the number of shares of outstanding common stock. The amount and timing of any shares purchased has been, and will be, determined by our management and the purchases will be effected in the open market or in privately negotiated transactions based upon market conditions and other factors, including price, regulatory requirements and capital availability and in compliance with applicable state and federal securities laws. Purchases may also be made in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange“1934 Act”). The repurchase program does not require the purchase of any minimum number of shares of common stock by the Company, and may be suspended, modified or discontinued at any time without prior notice. No purchases will be made outside of the United States, including on the Toronto Stock Exchange. PaymentPayments for shares of common stock repurchased under the program will behave been funded using the Company’s working capital. As of SeptemberJune 30, 2016,2017, since the inception of the share repurchase program, we have purchased a total of 569,000659,300 shares for an aggregate purchase price of $281,000 under the share repurchase program$343,000 and these shares are no longer included in our issued and outstanding shares. We anticipate we will continue to purchase a limited number of shares under the share repurchase plan during the remainder 2017 as determined by management.

(e) Cash Flows

Net cash used in continuing operations during the ninesix months ended SeptemberJune 30, 20162017 increased to $1,436,000$1,053,000 compared to $1,253,000$1,000,000 for the ninesix months ended SeptemberJune 30, 20152016 primarily as a result of the increase in exploration expenses, which was partially offset by a decrease in non-stock option general and administrative expenses, which included increased legal and other Acquisition-related expenses during 2017 compared to the ninesame period of 2016. We anticipate significant additional costs related to the Acquisition to be incurred in the three months ended September 30, 2016 compared2017, including payment of investment bank fees and other costs, which will be included in the same periodstatement of 2015. In addition weoperations to increase our cash used approximately $190,000 from discontinuedin operations during the nine months ended September 30, 2016, which was related to our Mt. Hamilton project prior to the Transaction. Based upon projected expenditures in our 2016 budget, we anticipate continued use of funds from operations through the remainder of 2016.2017. See “Results of Operations” discussed above for further explanation of some of these variances.

We used $15,761,000received $1,131,000 in cash from investing activities from continuing operations during the nine months ended September 30, 2016 compared to the provision of $24,894,000 of cash from investing activities during the ninesix months ended SeptemberJune 30, 2015.2017 primarily from the sale of $2,496,000 of short-term investments of USTS and CD’s. The primarysale of these short-term investments was anticipated pursuant to our corporate budgets and plans for 2017 and we anticipate we will continue to use short-term investments to fund our operations for the remainder of 2017. In addition we used $1,500,000 of cash to extend the loan evidenced by the Debenture, discussed above, under “Liquidity and Capital Resources.” We used $16,266,000 in cash from investing activities during the six months ended June 30, 2016 was for the net purchase of $7,018,000$7,510,000 of CDs and $8,500,000$8,505,000 of USTS, discussed above under “Short-term Investments” in “Liquidity and Capital Resources.” In addition, during the nine months ended September 30, 2016, we used $289,000 for the purchase of units of Vendetta, discussed above under “Liquidity and Capital Resources,” and we used $40,000 for the purchase of royalties on certain non-producing mineral leases in the state of Montana, previously owned by Atna Resources Ltd. We received $56,000$259,000 from the sale of marketable equity securities during the ninesix months ended SeptemberJune 30, 20162017, from the sale of Vendetta common shares, discussed above, compared to $809,000$40,000 from the sale of marketable equity securities during the ninesix months ended SeptemberJune 30, 2015, when we were utilizing the funds from the sale of marketable equity securities as a significant source of operating funds prior2016. In addition to an increase in cash used for costs related to the Transaction. The receipt of $24,000,000 from the sale of MH-LLCAcquisition, discussed above, we may also use additional cash for potential exploration and evaluation activities related to our recently acquired interest in the Transaction accounted for the majority of the funds received from investing activities during the nine months ended September 30, 2015. The net cash used in financing activities from discontinued operations of $1,059,000 was primarilyLik project. These expenditures have not been determined and we may incur additional costs related to capitalized development costs during the nine months ended September 30, 2015, prior to the Transaction. We do not anticipate significant additional uses of cash during the remainder of 2016 from investing activities, pending thepotential acquisition or purchase of any additional exploration projects which if they occur,we anticipate would be funded by the use of funds from the sale of our short-term investments.

We used $214,000$28,000 for the purchase of our common stock during the ninesix months ended SeptemberJune 30, 2017 compared to the use of $201,000 during the six months ended June 30, 2016, as discussed above discussed above under “Share Repurchase Program” in “Liquidity and Capital Resources.” During the nine months ended September 30, 2015 we used $5,000,000 of the funds from the Transaction to repay our RMB Loan. We anticipate we maythe use of funds for additional purchases of our common stock during the remainder of 2016, however,2017. However, this is not expected to be a significant use of funds and the will be limited to the maximum number of shares, pursuant to the share repurchase program.

(f) Off-balance sheet arrangements

As of SeptemberJune 30, 20162017 and December 31, 20152016 we have no off-balance sheet obligations.

(g) Development Activities, Exploration Activities, Environmental Compliance and Contractual Obligations

As a result of the Transactionsale of our interest in MH-LLC during 2015, as of June 30, 2017 we arewere no longer involved in any development activities, nor do we have any contractual obligations related to the development of Mt. Hamiltonany of our projects as of SeptemberJune 30, 2016. There2017. As of June 30, 2017, there have been no changes to our exploration activities, environmental compliance or other contractual obligations from those disclosed in our Management’s Discussion and Analysis included in our Annual Report on Form 10-K for the year ended December 31, 2015.

2016. We are currently evaluating our contractual obligations related to the Acquisition and the Lik project, however, we do not anticipate a significant increase in contractual obligations, or environmental compliance costs as a result of the Acquisition.

(h) Discontinued Projects

We dropped our royalty interests in the Aconchi and Norcan exploration properties in Mexico during the six months ended June 30, 2017. There was no capitalized mineral property interest in either royalty of the interests and we did not record any mineral property write-downs during the six months ended June 30, 2017. During the ninesix months ended SeptemberJune 30, 2016, we closed our exploration office in Mexico. We sold our Norcan and Aconchi exploration projects in Mexico for a retained a 1% royalty on both the Norcan and Aconchi properties. We recorded a mineral property write-down of $10,000 related to the Norcan and Aconchi properties during the ninesix months ended SeptemberJune 30, 2016. In addition, we recorded a loss on other assets in Mexico of $14,000 related to the exit from our exploration activities in Mexico during the ninesix months ended SeptemberJune 30, 2016.

We did not record any mineral property write-downs during the three and nine months ended September 30, 2015.

(i) Critical Accounting Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 1 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2015,2016, describe the significant accounting estimates and policies used in preparation of our consolidated financial statements. Actual results in these areas could differ from management’s estimates. During the three and ninesix months ended SeptemberJune 30, 2016,2017, we have not adopted any additional accounting policies.

(j) Related Party Transactions

As of SeptemberJune 30, 2016,2017, and for the three and ninesix months ended SeptemberJune 30, 2016,2017, we have no related party transactions or balances.

(k) Recent Accounting Pronouncements

During the nine months ended September 30, 2016, we adopted ASU No. 2015-17. See Note 1, “Business and Summary of Significant Accounting Policies,” above.to the unaudited condensed consolidated financial statements underRecent Accounting Pronouncements” above for a discussion of our significant accounting policies.

(l) Forward Looking Statements

This Form 10-Q contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Exchange1934 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 under the heading "Risk Factors" included in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2015.2016. 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 Exchange1934 Act, as of SeptemberJune 30, 2016,2017, 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 SeptemberJune 30, 2016.2017.