IncomeLossFromContinuingOperations

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 ~~SEPTEMBER 30, 2017.~~MARCH 31, 2020.


~~[ ]~~☐	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 1-13627

GOLDEN MINERALS COMPANY

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


DELAWARE		26-4413382

(STATE OR OTHER JURISDICTION OF		(I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)		IDENTIFICATION NO.)


350 INDIANA STREET, SUITE ~~800~~650
GOLDEN, COLORADO		80401

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)		(ZIP CODE)

(303) 839-5060

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS: YES ☒ NO ☐

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): YES ☒ NO ☐

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A LARGE ACCELERATED FILER, AN ACCELERATED FILER, A NON-ACCELERATED FILER, A SMALLER REPORTING COMPANY OR AN EMERGING GROWTH COMPANY. SEE DEFINITION OF “LARGE ACCELERATED FILER”, “ACCELERATED FILER”, “SMALLER REPORTING COMPANY”, AND “EMERGING GROWTH COMPANY” IN RULE 12B-2 OF THE EXCHANGE ACT.:


~~LARGE ACCELERATED FILER ☐~~Securities registered pursuant to Section 12(b) of the Act:		~~ACCELERATED FILER ☐~~
~~NON-ACCELERATED FILER ☐~~Tile of each class	Trading Symbol	~~SMALLER REPORTING COMPANY~~ Name of each exchange on which registered
Common Stock, $0.01 par value	AUMN	NYSE American

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	~~EMERGING GROWTH COMPANY~~ Smaller reporting company ☒
Emerging growth company ☐

IF AN EMERGING GROWTH COMPANY, INDICATE BY CHECK MARK IF THE REGISTRANT HAS ELECTED NOT TO USE THE EXTENDED TRANSITION PERIOD FOR COMPLYING WITH ANY NEW OR REVISED FINANCIAL ACCOUNTING STANDARDS PROVIDED PURSUANT TO SECTION 13(A) OF THE EXCHANGE ACT.If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

~~INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (AS DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT): YES~~ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ NO No ☒

INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND REPORTS REQUIRED TO BE FILED BY SECTIONS 12, 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN CONFIRMED BY A COURT: YES ☒ NO ☐

~~AT NOVEMBER 7, 2017, 92,005,448 SHARES OF COMMON STOCK,~~At May 5, 2020, 128,176,938 shares of common stock, $0.01 ~~PAR VALUE PER SHARE, WERE ISSUED AND OUTSTANDING~~par value per share, were issued and outstanding.

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GOLDEN MINERALS COMPANY

FORM 10-Q

QUARTER ENDED ~~SEPTEMBER 30, 2017~~March 31, 2020

INDEX~~INDEX~~

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in United States dollars)

(Unaudited)

September 30,

December 31,

2017

2016

(in thousands, except share data)

Assets

Current assets

Cash and cash equivalents (Note 4)

$
4,966

$
2,588

Short-term investments (Note 4)

242

334

Trade receivables

391

380

Inventories, net (Note 6)

267

245

Value added tax receivable, net (Note 7)

1

5

Related party receivable (Note 21)

—

643

Prepaid expenses and other assets (Note 5)

466

578

Total current assets

6,333

4,773

Property, plant and equipment, net (Note 8)

8,569

9,235

Total assets

$
14,902

$
14,008

Liabilities and Equity

Current liabilities

Accounts payable and other accrued liabilities (Note 9)

$
1,348

$
1,224

Deferred revenue (Note 15)

293

—

Other current liabilities

9

24

Total current liabilities

1,650

1,248

Asset retirement and reclamation liabilities (Note 10)

2,449

2,434

Deferred revenue (Note 15)

674

—

Warrant liability - related party (Note 12)

—

976

Warrant liability (Note 12)

—

922

Other long term liabilities

51

66

Total liabilities

4,824

5,646

Commitments and contingencies (Note 19)

Equity (Note 14)

Common stock, $.01 par value, 200,000,000 and 100,000,000 shares authorized; 92,005,448 and 89,020,041 shares issued and outstanding, respectively

919

889

Additional paid in capital

516,237

495,455

Accumulated deficit

(507,041)

(488,037)

Accumulated other comprehensive (loss) income

(37)

55

Shareholders' equity

10,078

8,362

Total liabilities and equity

$
14,902

$
14,008


	March 31,		December 31,
	2020		2019
	(in thousands, except share data)
Assets
Current assets
Cash and cash equivalents (Note 6)	$	2,212	$	4,593
Lease receivables		311		448
Inventories, net (Note 9)		178		231
Derivative at fair value (Note 8)		39		254
Prepaid expenses and other assets (Note 7)		754		669
Total current assets		3,494		6,195
Property, plant and equipment, net (Note 11)		5,835		6,031
Other long term assets (Note 12)		906		1,131
Total assets	$	10,235	$	13,357

Liabilities and Equity
Current liabilities
Accounts payable and other accrued liabilities (Note 13)	$	1,559	$	2,127
Deferred revenue, current (Note 20)		354		472
Debt - related party (Note 14)		1,000		—
Other current liabilities (Note 15)		1,150		1,824
Total current liabilities		4,063		4,423
Asset retirement and reclamation liabilities (Note 16)		2,979		2,839
Other long term liabilities (Note 15)		437		494
Total liabilities		7,479		7,756

Commitments and contingencies (Note 23)

Equity (Note 19)
Common stock, $.01 par value, 200,000,000 shares authorized; 108,457,731 and 106,734,279 shares issued and outstanding respectively		1,084		1,067
Additional paid in capital		521,788		521,314
Accumulated deficit		(520,116)		(516,780)
Shareholders' equity		2,756		5,601
Total liabilities and equity	$	10,235	$	13,357

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

Table of Contents

GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ~~AND COMPREHENSIVE LOSS~~

(Expressed in United States dollars)

(Unaudited)


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2017		2016		2017		2016		2020		2019
	(in thousands except per share data)				(in thousands, except per share data)				(in thousands except per share data)
Revenue:
Oxide plant lease (Note 15)	$	1,771	$	1,729	$	5,107	$	4,768
Oxide plant lease (Note 20)									$	1,196	$	1,932
Total revenue		1,771		1,729		5,107		4,768		1,196		1,932
Costs and expenses:
Oxide plant lease costs (Note 15)		(619)		(549)		(1,704)		(1,478)
Oxide plant lease costs (Note 20)										(564)		(597)
Exploration expense		(977)		(927)		(1,968)		(2,865)		(1,631)		(855)
El Quevar project (expense) income		(183)		65		(524)		(308)
Velardeña shutdown and care and maintenance costs		(379)		(456)		(1,098)		(1,589)
El Quevar project expense										(248)		(315)
Velardeña care and maintenance costs										(463)		(517)
Administrative expense		(694)		(897)		(2,592)		(3,141)		(1,163)		(1,074)
Stock based compensation		7		(95)		(300)		(666)		(52)		(564)
Reclamation expense		(49)		(47)		(146)		(144)		(59)		(59)
Other operating income, net (Notes 7 and 8)		951		1,281		1,813		1,558
Other operating income, net										4		108
Depreciation and amortization		(138)		(346)		(456)		(1,317)		(279)		(274)
Total costs and expenses		(2,081)		(1,971)		(6,975)		(9,950)		(4,455)		(4,147)
Loss from operations		(310)		(242)		(1,868)		(5,182)		(3,259)		(2,215)
Other income and (expense):
Interest expense (Note 11)		—		—		—		(515)
Interest and other income (Note 16)		15		10		37		12
Warrant derivative loss (Notes 3 and 17)		—		(545)		—		(2,821)
Derivative loss (Note 17)		—		—		—		(778)
Loss on debt extinguishment (Note 11)		—		—		—		(1,653)
Other expense:
Interest and other expense, net (Note 21)										(27)		(98)
Loss on foreign currency		(23)		(21)		(20)		(63)		(50)		(38)
Total other income (expense)		(8)		(556)		17		(5,818)
Total other loss										(77)		(136)
Loss from operations before income taxes		(318)		(798)		(1,851)		(11,000)		(3,336)		(2,351)
Income tax benefit		—		—		—		26
Income taxes (Note 18)										—		—
Net loss	$	(318)	$	(798)	$	(1,851)	$	(10,974)	$	(3,336)	$	(2,351)
Comprehensive loss, net of tax:
Unrealized (loss) gain on securities		11		107		(92)		278
Comprehensive loss	$	(307)	$	(691)	$	(1,943)	$	(10,696)
Net loss per common share — basic
Loss	$	(0.00)	$	(0.01)	$	(0.02)	$	(0.14)	$	(0.03)	$	(0.02)
Weighted average Common Stock outstanding - basic (1)		91,097,279		88,878,371		90,028,480		78,080,858		107,247,298		95,755,304

(1)Potentially dilutive shares for loss periods have not been included because to do so would be anti-dilutive.

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

Table of Contents

GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in United States dollars)

(Unaudited)


	Nine Months Ended				Three Months Ended
	September 30,				March 31,
	2017		2016		2020		2019
	(in thousands)				(in thousands)
Cash flows from operating activities:
Net cash provided by (used in) operating activities (Note 18)	$	22	$	(5,123)
Net cash used in operating activities (Note 22)					$	(3,819)	$	(1,407)
Cash flows from investing activities:
Proceeds from sale of assets		750		898		—		39
Capitalized costs and acquisitions of property, plant and equipment		(5)		(36)
Net cash from investing activities	$	745	$	862
Acquisitions of property, plant and equipment						(1)		(25)
Net cash provided by (used in) investing activities					$	(1)	$	14
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs		1,611		3,599		439		337
Proceeds from related party loan						1,000		—
Net cash from financing activities	$	1,611	$	3,599	$	1,439	$	337
Net increase (decrease) in cash and cash equivalents		2,378		(662)
Net decrease in cash and cash equivalents						(2,381)		(1,056)
Cash and cash equivalents, beginning of period		2,588		4,077		4,593		3,293
Cash and cash equivalents, end of period	$	4,966	$	3,415	$	2,212	$	2,237

See Note 1822 for supplemental cash flow information.

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

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GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in United States dollars)

(Unaudited)

Accumulated

Additional

Other

Common Stock

Paid-in

Accumulated

Comprehensive

Total

Shares

Amount

Capital

Deficit

Income (loss)

Equity

(in thousands except share data)

Balance, December 31, 2015

53,335,333

$
534

$
484,742

$
(477,378)

$
(127)

$
7,771

Stock compensation accrued and shares issued for vested stock awards

317,968

2

250

—

—

252

Shares issued on conversion of Sentient Note (Note 11)

27,366,740

273

6,944

—

—

7,217

Registered offering common stock, net and warrants (Note 14)

8,000,000

80

3,519

—

—

3,599

Unrealized gain on marketable equity securities, net of tax

—

—

—

—

182

182

Net loss

—

—

—

(10,659)

—

(10,659)

Balance, December 31, 2016

89,020,041

$
889

$
495,455

$
(488,037)

$
55

$
8,362

Cumulative adjustment related to change in accounting principle (Note 3)

—

—

19,046

(17,148)

—

1,898

Adjusted balance at January 1, 2017

89,020,041

$
889

$
514,501

$
(505,185)

$
55

$
10,260

Stock compensation accrued and shares issued for vested stock awards

150,000

1

149

—

—

150

Shares issued under the at-the-market offering agreement, net (Note 14)

1,024,392

11

671

—

—

682

Consideration shares sold to Hecla, net (Note 15)

1,811,015

18

911

—

—

929

Deemed dividend on warrants (Note 3)

—

—

5

(5)

—

—

Unrealized loss on marketable equity securities, net of tax

—

—

—

—

(92)

(92)

Net loss

—

—

—

(1,851)

—

(1,851)

Balance, September 30, 2017

92,005,448

$
919

$
516,237

$
(507,041)

$
(37)

$
10,078




				Additional
	Common Stock			Paid-in		Accumulated		Total
	Shares	Amount		Capital		Deficit		Equity
	(in thousands except share data)
Balance, December 31, 2018	95,620,796	$	955	$	517,806	$	(511,124)	$	7,637
Stock compensation accrued (Note 19)	—		—		337		—		337
Modification of previously awarded KELTIP Units (Note 19)	—		—		583		—		583
Shares issued under the at-the-market offering agreement, net (Note 19)	33,995		1		11		—		12
Shares issued under the Lincoln Park commitment purchase agreement, net (Note 19)	1,213,642		12		313		—		325
Net loss	—		—		—		(2,351)		(2,351)
Balance, March 31, 2019	96,868,433	$	968	$	519,050	$	(513,475)	$	6,543
Adjustment related to correction of immaterial error (Note 3)	—		—		—		(267)		(267)
Adjusted Balance, March 31, 2019	96,868,433		968		519,050		(513,742)		6,276

Balance, December 31, 2019	106,734,279	$	1,067	$	521,314	$	(516,780)	$	5,601
Stock compensation accrued (Note 19)	—		—		52		—		52
Shares issued under the at-the-market offering agreement, net (Note 19)	823,452		8		215		—		223
Shares issued under the Lincoln Park commitment purchase agreement, net (Note 19)	900,000		9		207		—		216
Net loss	—		—		—		(3,336)		(3,336)
Balance, March 31, 2020	108,457,731	$	1,084	$	521,788	$	(520,116)	$	2,756

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

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GOLDEN MINERALS COMPANY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in United States dollars)

(Unaudited)

1. Basis of Preparation of Financial Statements and Nature of Operations

Golden Minerals Company (the “Company”), a Delaware corporation, has prepared these unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). The interim condensed consolidated financial statements do not include all disclosures required by GAAP for annual financial statements, but in the opinion of management, include all adjustments necessary for a fair presentation. Interim results are not necessarily indicative of results for a full year; accordingly, these interim financial statements should be read in conjunction with the annual financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2019 and filed with the SEC on February ~~28, 2017.~~27, 2020.

The Company is a mining company, holding a 100% interest in the Velardeña and Chicago precious metals mining properties and associated oxide and sulfide processing plants in the state of Durango, Mexico (the “Velardeña Properties”). , a 100% interest in the El Quevar advanced exploration silver property in the province of Salta, Argentina (subject to the terms of the recently announced earn-in agreement (the “Earn-in Agreement”) pursuant to which Barrick Gold Corporation (“Barrick”) has the option to earn a 70% interest in the El Quevar project), and a diversified portfolio of precious metals and other mineral exploration properties located primarily in or near historical precious metals producing regions of Mexico, Nevada and Argentina. The Velardeña Properties and the El Quevar advanced exploration property are the Company’s only material properties.

The Company remains focused on evaluating and searching for mining opportunities in North America (including Mexico) with near term prospects of mining, and particularly for properties within reasonable haulage distances of our processing plants at the Velardeña Properties. The Company is also focused on advancing our El Quevar exploration property in Argentina through the Earn-in Agreement with Barrick and on advancing selected properties in our portfolio of approximately 12 properties, located in Mexico, Nevada and Argentina. The Company is also reviewing strategic opportunities, focusing primarily on development or operating properties in North America, including Mexico.

During November 2015 the Company suspended mining and sulfide processing activities at its Velardeña Properties in order to conserve the asset until the Company is able to develop mining and processing plans that at then current prices for silver and gold indicate a sustainable positive operating margin (defined as revenues less costs of sales) or the Company is able to locate, acquire and develop alternative mineral sources that could be economically mined and transported to the Velardeña Properties for processing. The Company has placed the mine and sulfide processing plant on care and maintenance to enable a re-start of either the mine or mill when mining and processing plans and metals prices support a cash positive outlook. The Company incurred approximately $2.0 million in related shutdown costs for employee severance, net working capital obligations, and other shutdown expenditures during the year ended December 31, 2016 and $1.1 million in care and maintenance costs for the nine months ended September 30, 2017. The Company expects to incur approximately $0.4 million in quarterly care and maintenance costs while mining and processing remain suspended.

~~The Company has retained~~maintains a core group of employees at the Velardeña Properties, most of whom have been assigned to operate and provide administrative support for the oxide plant, which is leased to a ~~third party and not affected by the shutdown. The oxide plant began processing material for the third party in mid-December 2015, and the~~subsidiary of Hecla Mining Company expects to receive net cash flow under the lease of approximately $4.6 million in 2017. During March 2017, the third party exercised its right to extend the lease through December 31, 2018. On August 2, 2017, the Company granted the third party an option to extend the lease for an additional period of up to two years ending no later than December 31, 2020 in exchange for a $1.0 million cash payment and the purchase of $1.0 million, or approximately 1.8 million shares of the Company’s common stock, issued at par at a price of $0.55 per share, based on an undiscounted 30-day volume weighted average stock price(“Hecla”) (see Note ~~14)~~20). The ~~retained~~ employees at the Velardeña Properties also include an exploration group and an operations and administrative group ~~led by a newly appointed general manager of Mexico operations~~ to continue to advance the Company’s plans in Mexico, oversee corporate compliance activities, and to maintain and safeguard the ~~longer term~~longer-term value of the Velardeña Properties ~~and other Mexican~~ assets.

The Company remains focused on evaluating and searching for mining opportunities in North America (including Mexico) with near term prospects of mining, and particularly for properties within reasonable haulage distances of our ~~Velardeña Properties.~~ The Company is also reviewing strategic opportunities, focusing primarily on development or operating properties in North America, including Mexico. We are also focused on evaluation activities at our El Quevar exploration property in Argentina, and are continuing our exploration efforts on selected properties in our portfolio of approximately [10] exploration properties located primarily in Mexico.

The Company is considered an exploration stage company under ~~the~~SEC criteria ~~set forth by the SEC as the Company~~since it has not yet demonstrated the existence of proven or probable mineral reserves, as defined by SEC Industry Guide 7, at ~~the Velardeña Properties, or~~ any of its properties. Until such time, if ever, that the Company demonstrates the existence of proven or probable reserves pursuant to SEC Industry Guide 7, we expect to remain as an exploration stage company.

2. Liquidity

At March 31, 2020, the Company’s ~~other properties. As a result,~~aggregate cash and in accordance with GAAP for exploration stage companies, all expenditures for exploration and evaluation of the Company’s properties are expensed as incurred. As such the Company’s financial statements may not be comparablecash equivalents totaled $2.2 million, compared to the ~~financial statements of mining companies that do have proven~~$4.6 million in similar assets held at December 31, 2019. The March 31, 2020 balance is due in part from the following expenditures and ~~probable mineral reserves. Such companies would typically capitalize certain development costs including infrastructure development and mining activities to access~~cash inflows for the ~~ore. The capitalized costs would be amortized on a units-of-production basis as reserves are mined. The amortized costs are typically allocated to inventory and eventually to cost of sales as~~three months ended March 31, 2020. Expenditures totaled $4.4 million from the ~~inventories are sold. As the Company does not have proven and probable reserves, substantially all~~following:

$1.6 million in exploration expenditures, including work at Rodeo, Sand Canyon and other properties;

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$0.5 million in care and maintenance costs at the Velardeña Properties;

$0.2 million in exploration and evaluation activities, care and maintenance and property holding costs at the El Quevar project;

$1.2 million in general and administrative expenses; and

$0.3 million in Canadian income tax payments (Note 18), $0.4 million related to the remittance of value added taxes in Mexico collected in the fourth quarter 2019, and $0.2 million related to a working capital increase primarily from a reduction of accounts payable and other accrued liabilities.

The foregoing expenditures were offset by cash inflows of $2.0 million from the following:

$1.0 million in an unsecured loan received from a related party (Note 14);

$0.6 million of net operating margin received pursuant to the oxide plant lease (defined as oxide plant lease revenue less oxide plant lease costs); and

$0.4 million, net of commitment fees and other offering related costs, from the LPC Program and the ATM Program (both as described in Note 19).

In addition to the $2.2 million cash balance at March 31, 2020, in April 2020, the Company entered into the Earn-In Agreement with Barrick and received $0.9 million, net of transaction costs, related to a private placement transaction whereby Barrick received approximately 4.7 million shares of the Company’s ~~Velardeña Properties for mine construction activity, as well as costs associated with~~common stock (as further described in Note 26). Also in April 2020, the ~~mill facilities,~~Company closed on an equity offering and ~~for items that do not have a readily identifiable market value apart~~private placement (as further described in Note 26), which resulted in the receipt of approximately $2.8 million in proceeds, net of transaction costs. The Company also expects to receive an additional approximately $2.1 million in net operating margin from the ~~mineralized material, have been expensed as incurred. Such costs are charged~~lease of the oxide plant through the end of 2020, although the actual net operating margin received from the oxide plant may be negatively impacted if interruptions due to ~~cost of metals sold or project expense~~COVID-19 persist longer than currently anticipated. The Company’s budgeted expenditures, totaling approximately $9.0 million, during the ~~period depending~~next twelve months ending March 31, 2021 are as follows:

Approximately $2.2 million on evaluation activities, exploration and property holding costs related to the Company’s portfolio of exploration properties located in Mexico, Nevada and Argentina, including costs at Rodeo, El Quevar, Sand Canyon, Yoquivo and other properties;

Approximately $1.5 million at the Velardeña Properties for care and maintenance;

$1.0 million related to the repayment of a related party loan (Note 14);

Approximately $0.7 million for repayment of the Autlán deposit according to the terms of the Agreement (as described in Note 15);

Approximately $3.1 million on general and administrative costs; and

Approximately $0.5 million related to a decrease in accounts payable and other accrued liabilities.

The Company’s currently budgeted expenditures of approximately $9.0 million are greater than the ~~nature~~cash resources of approximately $8.0 million that are expected to be available during the period. Therefore, during the remainder of 2020 and through March 31, 2021, the Company will take appropriate actions, which may include sales of certain of the ~~costs. Certain of the costs may be reflected in inventories prior~~Company’s exploration assets, reductions to the ~~sale~~Company’s currently budgeted level of spending, and/or raising additional equity capital through sales under the ~~product.~~ ATM Program, the LPC Program or otherwise. There are currently 8.1 million shares and 12.2 million shares remaining available for issuance under the ATM Program and LPC Program, respectively.

The ~~term “mineralized material” as used herein, although permissible under SEC Industry Guide 7, does not indicate “reserves” by SEC standards. The~~actual amount of cash expenditures that the Company ~~cannot be certain that any deposits~~incurs during the twelve-month period ending March 31, 2021 may vary significantly from the amounts specified above and will depend on a number of factors, including variations from anticipated care and maintenance costs at the Velardeña Properties ~~or any~~and costs for continued exploration, project assessment, and development at the Company’s other exploration ~~property will ever be confirmed~~properties. Likewise, the actual amount of cash receipts

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that the Company receives during the period may vary significantly from the amounts specified above due to, among other things, a decrease in the quantity of material processed under the oxide plant lease or ~~converted into SEC Industry Guide 7 compliant “reserves.”~~an unexpected early termination of the oxide plant lease by the lessee. If cash expenditures are greater than anticipated or if cash receipts are less than anticipated, the Company would need to take more aggressive actions to maintain sufficient cash balances over the next twelve months.

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

There can be no assurance that the Company will be successful in generating future profitable operations or securing additional funding in the future on terms acceptable to the Company or at all. The Company believes the cash on hand, the continuing cash flow from the lease of the oxide plant, use of the ATM Program and the LPC Program, and the potential for additional asset dispositions make it probable that the Company will have sufficient cash to meet its financial obligations and continue its business strategy beyond one year from the filing of its condensed consolidated financial statements for the period ended March 31, 2020.

3.Correction of Immaterial Error – Income Taxes

In the third quarter 2019, the Company became aware that it had failed to timely file withholding tax returns and pay taxes that were due at the end of 2017 and 2018 relating to return of capital distributions made to the Company by one of the Company’s wholly-owned subsidiaries (see Note 18). The effect of correcting this error was to reduce beginning retained earnings by $267,000 with $154,000 and $113,000 accruing to 2018 and 2019, respectively. The $267,000 adjustment to retained earnings is reflected in the accompanying Condensed Consolidated Statements of Changes in Equity.

The Company evaluated the materiality of the error described above from a qualitative and quantitative perspective. Based on such evaluation, the Company concluded that the correction would not be material to any individual prior period, nor did it have an effect on the trend of financial results, taking into account the requirements of the SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in 2019 Financial Statements (“SAB 108”).

4. New Accounting Pronouncements

~~In July 2017,~~During the ~~FASB issued~~first quarter 2020 the Company adopted ASU ~~2017-11,~~ “~~Earnings Per Share~~No. 2016-13, “Financial Instruments - Credit Losses (Topic ~~260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815)~~326): ~~(Part 1) Accounting for Certain~~Measurement of Credit Losses on Financial ~~Instruments with Down Round Features, (Part II) Replacement~~Instruments” (“ASU 2016-13”). ASU 2016-13 modifies the impairment model to utilize an expected loss methodology in place of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Non public Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception” (“ASU 2017-11”). Part I relates to the accounting for certain financial instruments with down round features in Subtopic 815-40,currently used incurred loss methodology, which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting. Down round features are features of certain equity-linked instruments (or embedded features) thatwill result in the ~~strike price being reduced based~~more timely recognition of losses. As the Company’s principle credit risk is related to its Lease Receivables the adoption of this update did not result in a material impact on the ~~pricing~~Company’s consolidated financial position or results of ~~future equity offerings. An entity still is required to determine whether instruments would be classified as equity under~~operations.

During the guidance in Subtopic 815-40 in determining whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities. Forfirst quarter 2019 the Company ASU 2017-11 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted, including in an interim period. The Company early adopted ~~ASU 2017-11 during the interim period ended September 30, 2017 (see Note 3).~~

~~In February 2016, the FASB issued~~ ASU 2016-02, “Leases” (“ASU 2016-02”) and ASU No. 2018-11 “Leases (Topic 842)” (“ASU 2018-11”), which ~~will~~ require lessees to recognize a right-of-use asset and a lease liability for all leases ~~that are not short-term~~with terms greater than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in ~~nature.~~the income statement. For a lessor, the accounting applied is ~~also~~ largely unchanged from previous guidance. The ~~new rules will be effective for the~~ Company currently leases administrative offices in the ~~first quarter of 2019. The Company does not anticipate early adoption. The Company does not expect the adoption of ASU 2016-02 to materially change the amounts related to leases~~U.S. and in several foreign locations under lease agreements that are currently recorded as none of its operating leases are material and therefore the Company 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, “Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”), which amended its standards related to the accounting of certain financial instruments. This amendment addresses certain aspects of recognition, measurement, presentation and disclosure. Specifically, available for sale investments will not run through other comprehensive income. The new rules will become effective for annual and interim periods beginning after December 15, 2017. Early adoption is not permitted. The Company is in the process of evaluating the impact the amendment will have on its consolidated financial position and results of operations.

In May 2014, FASB and the International Accounting Standards Board issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In addition, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing and uncertainty of revenue that is recognized and the related cash flows. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017; early adoption is not permitted. ASU 2014-09 was originally effective December 15, 2016 but ASU 2015-14 deferred the effective date bytypically exceed one year. As the Company’s current accounting practices per the guidance of ASU 2014-09 are comparable to the requirements of ASU 2014-09, the Company does not expect the adoption of this update to result in a material impact on its consolidated financial position or results of operations.

~~3.Change in Accounting Principle~~

~~In July 2017, the FASB issued ASU 2017-11,~~ “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part 1) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of

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Certain Non public Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception” (“ASU 2017-11”). Part I relates to the accounting for certain financial instruments with down round features in Subtopic 815-40, which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced based on the pricing of future equity offerings. An entity still is required to determine whether instruments would be classified in equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities. In the case where the exception from derivative accounting does not apply, warrants must be accounted for as a liability and recorded at fair value at the date of grant and re-valued at the end of each reporting period.

The September 2012 and 2014 warrants (see Note 14) include anti-dilution provisions characterized as down round features and have previously been accounted for as liabilities, with the fair value of the warrant liabilities remeasured at each reporting date and the change in liabilities recorded as other non-operating income or loss. The ~~Company had recorded a “Warrant liability” of $1.9 million and a warrant derivative gain of $17.1 million in its “Accumulated deficit” as reported in its Condensed Consolidated Balance Sheets for the year ended December 31, 2016 relating to the September 2012 and 2014 warrants.~~The Company had recorded a warrant liability of $1.5 million as of June 30, 2017 and reported a warrant derivative gain of $0.4 million for the six months ended June 30, 2017 relating to the September 2012 and 2014 warrants.

In addition, for freestanding equity-classified financial instruments, ASU 2017-11 also requires entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Certain equity transactions following the issuance of the September 2012 and 2014 warrants have triggered anti-dilution clauses in the warrant agreements resulting in additional warrant shares and a reduction to the original strike price of the warrants. ASU 2017-11 prescribes a method to measure the value of a deemed dividend related to a triggering event by computing the difference in fair value between two instruments that have terms consistent with the actual instrument but that do not have a down round feature, where the number of warrant shares and strike price of one instrument corresponds to the actual instrument before the triggering event and the number of warrant shares and strike price of the other instrument corresponds to the actual instrument immediately after the triggering event. Following ASU 2017-11, for periods ending on or prior to December 31, 2016 the Company would have reduced its “~~Accumulated deficit~~” as reported on its Condensed Consolidated Balance Sheets by approximately $0.3 million related to prior triggering events. During the nine month period ending September 30, 2017 the Company would have reduced its accumulated deficit by approximately $5,000 related to triggering events.

~~Except for the down round features in the September 2012 and 2014 warrants, the warrants would have been~~ ~~classified in equity under the guidance in Subtopic 815-40 and therefore qualify for the scope exception in ASU 2017-11~~. ~~As permitted, the~~ Company has elected ~~to adopt~~ the ~~accounting principles prescribed by~~modified retrospective method of adopting ASU ~~2017-11 for the interim period ended September 30, 2017~~ and has recorded a cumulative-effect adjustment stemming from a change in accounting principle in its financial statements for the three and nine months ended September 30, 2017 measured retrospectively to the beginning of 2017. The cumulative effect adjustment appears at the beginning of 2017 in the Company’s Condensed Consolidated Statement of Changes in Equity. The results of operations for the Company for the three and nine months ended September 30, 2017 reflect application of the change in accounting principle from the beginning of 2017.2016-02 (see Note 5).

~~The following table details the impact stemming from the cumulative effect of the change in accounting principle on the Company’s Consolidated Balance Sheets as of the beginning of 2017.~~

Reported after


As Previously


Cumulative

the Effect of a Change in

Reported

Effect Adjustment

Accounting Principle
Balance Sheet Accounts Impacted by

December 31,

at the Beginning

at the Beginning
September 2012 and 2014 Warrants

2016

of 2017

of 2017

(in thousands)
Warrant Liability - Related Party

$
976

$
(976)

$
—
Warrant Liability

922

(922)

—
Additional Paid-in Capital

495,455

19,046

514,501
Accumulated Deficit

(488,037)

(17,148)

(505,185)

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~~As noted above,~~5. Change in Accounting Principle

Leases

Effective January 1, 2019 the Company ~~had previously reported~~adopted ASU 2016-02 and ASU 2018-11, which requires lessees to recognize a ~~warrant derivative gain~~right-of-use asset and a lease liability for all leases with terms greater than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of ~~$0.4 million during~~expense recognition in the ~~six month period ending June 30, 2017. Because~~income statement. For a lessor, the accounting applied is largely unchanged from previous guidance. The Company currently leases administrative offices in the U.S. and in several foreign locations under lease agreements that typically exceed one year. The Company has elected the modified retrospective method of adopting ASU 2016-02 per Topic 842. The Company has elected to apply several practical expedients available under the application of ASU 2016-02 and ASU 2018-11, which allowed the Company ~~has retroactively applied~~to forego reassessing the ~~change~~classification of existing or expiring leases, evaluating whether any existing or expiring contracts contain leases or reassessing previously recorded indirect costs. The Company did not elect the practical expedient permitting the combination of lease and non lease components of the contract. The adoption of ASU 2016-02 and ASU 2018-11 at January 1, 2019 resulted in ~~accounting principle discussed above~~only a negligible difference to amounts already recorded by the Company in its Consolidated Balance Sheets as of December 31, 2018, and as a result the Company did not record an adjustment to the beginning balance of ~~2017,~~retained earnings at January 1, 2019, as required under the modified retrospective method.

The Company took possession of new office space and began a new long-term lease for its principal headquarters office with an effective commencement date of June 1, 2019. The new office lease will expire five years and eight full calendar months following the commencement date. There are no options to extend the lease beyond the stated term. The Company recorded a right of use asset of approximately $465,000 and a lease liability of approximately $450,000 in the second quarter of 2019 based on the net present value of the future lease payments discounted at 9.5%, which represents the Company’s incremental borrowing rate for purposes of applying the guidance of Topic 842. As required, the Company ~~is no longer reporting warrant derivative gains or losses~~will recognize a single lease cost on a straight-line basis.

The Company also has long-term office leases in Mexico and Argentina that expired in 2019 and recorded a combined lease liability of approximately $45,000 and combined right of use asset of approximately $45,000 relating to both of those leases at January 1, 2019. In November 2019, the Company renewed its Mexican office lease for four years and recorded a right of use asset and lease liability of approximately $174,000. In December 2019, the Company also renewed its Argentina office lease for two years and recorded a right of use asset and lease liability of approximately $18,000.

The Company has included its right of use assets for the ~~September 2012~~office leases described above in “Other long-term assets” (Note 12) and ~~2014 warrants beginning~~its office lease liabilities in ~~2017. Amounts reported~~“Other liabilities”, short term and long term (Note 15), in the Company’s Consolidated Balance Sheets for the periods ~~ending on or prior to~~ended March 31, 2020 and December 31, ~~2016 have not been adjusted.~~2019.

4.6. Cash and Cash Equivalents and Short-term Investments

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Short-term investments include investments with maturities greater than three months, but not exceeding 12 months, or highly liquid investments with maturities greater than 12 months that the Company intends to liquidate during the next 12 months for working capital needs.

The Company determines the appropriate classification of its investments in equity securities at the time of acquisition and re-evaluates those classifications at each balance sheet date. Available for sale investments are marked to market at each reporting period with changes in fair value recorded as a component of other comprehensive income (loss). If declines in fair value are deemed other than temporary, a charge is made to net income (loss) for the period.

~~The following tables summarize the Company’s short-term investments at September 30, 2017 and December 31, 2016:~~

Estimated

Carrying

September 30, 2017

Cost

Fair Value

Value

(in thousands)

Investments:

Short-term:

Available for sale common stock

$
275

$
242

$
242

December 31, 2016

Investments:

Short-term:

Available for sale common stock

$
275

$
334

$
334

The available for sale common stock consists of 7,500,000 common shares, approximately 10% of the outstanding common shares, of Golden Tag Resources, Ltd. (“Golden Tag”), a junior mining company that was a joint venture partner in the Company’s previously owned San Diego exploration property in Mexico. The Company acquired the shares during 2015 and 2016 in transactions involving the sale of its remaining 50% interest in the San Diego property to Golden Tag.

Credit Risk

The Company invests substantially all of its excess cash with high credit-quality financial institutions or in U.S. government or debt securities. Credit risk is the risk that a third party might fail to fulfill its performance obligations under the terms of a financial instrument. For cash and equivalents and investments, credit risk represents the carrying amount on the balance sheet. The Company mitigates credit risk for cash and equivalents and investments by placing its funds and investments with high credit-quality financial institutions, limiting the amount of exposure to each of the financial institutions, monitoring the financial condition of the financial institutions and investing only in government and corporate securities rated “investment grade” or better. The Company invests with financial institutions that maintain a net worth of not less than $1 billion and are members in good standing of the Securities Investor Protection Corporation.

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5.7. Prepaid Expenses and Other Assets

Prepaid expenses and other current assets at March 31, 2020 and December 31, 2019 consist of the following:


	September 30,		December 31,		March 31,		December 31,
	2017			2016	2020		2019
	(in thousands)				(in thousands)
Prepaid insurance	$	168	$	296	$	417	$	494
Deferred offering costs		137		153		129		—
Recoupable deposits and other		161		129		208		175
	$	466	$	578	$	754	$	669

The deferred offering costs are ~~related to~~associated with the ATM ~~Program discussed in detail in~~Agreement (see Note ~~14.~~19).

6.8. Derivative at Fair Value

On December 3, 2019 the Company entered into an amendment to the plant lease agreement with Hecla, reducing the variable per tonne fee contained in the lease agreement from $22.00 to $11.00. Under certain silver price and delivered ore head grade limits, as fully discussed in Note 20, the variable per tonne fee could be increased back to the previous $22.00 per tonne. Pursuant to ASC Topics 815-Derivatives and Hedging (“ASC 815”) and 842-Leases (“ASC 842”), arrangements with variable lease payments must be evaluated to assess whether they contain embedded derivatives. If embedded derivatives are not “clearly and closely related” to the lease contract, they must be bifurcated and accounted for separately from the host contract. The Company determined that the potential for the Company to receive an additional $11.00 variable per tonne fee if certain conditions relating to the silver price and delivered ore head grades are met does not qualify for the “clearly and closely related” exception, and as a result, the potential additional $11.00 variable per tonne fee constitutes a derivative that must be valued and accounted for apart from the host lease contract. Per the guidance of ASC 842, the Company has determined that the amendment to the lease agreement constituted a modification that must be accounted for as a new lease commencing on December 2, 2019, the date the amendment was agreed upon by both parties and expiring on December 31, 2020. The Company is treating the fair value of the derivative received at the time of the modification to the lease agreement as an upfront lease payment that will be amortized over the remaining life of the lease on a straight line basis (see Note 17 for a discussion of the valuation method used to compute the fair value of the derivative). At March 31, 2020 and December 31, 2019, the Company had recorded a “Derivativeat fair value” asset of approximately $39,000 and approximately $254,000, respectively. At March 31, 2020 and December 31, 2019, the Company had also recorded “Deferred Revenue” of approximately $135,000 and $180,000 on the related to the amended lease agreement. At March 31, 2020 the Company recognized a reduction to “Revenue - plant lease” on the Company’s Condensed Consolidated Statements of Operations and a decrease to the derivative of approximately $215,000 related to the change in the fair value of the derivative between the December 31, 2019 and March 31, 2020. During the first quarter 2020, the Company also recognized approximately $45,000 “Revenue - plant lease” on the Company’s Condensed Consolidated Statements of Operations related to the amortization of the deferred revenue.

9. Inventories, net

Inventories at the Velardeña Properties at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 consist of the following:

September 30,

December 31,

2017

2016

(in thousands)

Material and supplies

$
267

$
245

$
267

$
245


	March 31,		December 31,
	2020		2019
	(in thousands)
Material and supplies	$	178	$	231
	$	178	$	231

The material and supplies inventory at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 is reduced by a $0.2 million obsolescence ~~charge reflected in shutdown and care and maintenance costs.~~allowance.

10. Value ~~Added Tax Receivable, Net~~added tax receivable, net

The Company has recorded value added tax (“VAT”) paid in Mexico and related to the Velardeña Properties as a recoverable asset. Mexico law allows for certain VAT payments to be recovered through ongoing applications for refunds.

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At ~~September 30, 2017,~~March 31, 2020, the Company has also recorded approximately ~~$10,000~~$35,000 of VAT receivable as a reduction to VAT payable in Mexico, which appears in “Accounts payable and other accrued liabilities” on the Condensed Consolidated Balance Sheets.

During the third quarter 2017, the Company received refunds of approximately $1.1 million from the government of Argentina for VAT paid in that country during 2012 and 2013. Because of uncertainties relating to collectability of the taxes the Company had recorded a full valuation allowance against the VAT receivable at the time the taxes were paid. The Company reported the $1.1 million of VAT refunds received during the nine months ended September 30, 2017 in ~~“Other operating income”~~ on the Condensed Consolidated Statements of Operations and Comprehensive Loss. The Company has remaining Argentina VAT refund claims totaling $0.2 million. The Company cannot predict if or when it will receive these VAT refunds and accordingly has recorded a full valuation allowance for these pending VAT refund claims.

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

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8.11. Property, Plant and Equipment, Net

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


	September 30,		December 31,		March 31,		December 31,
	2017		2016		2020		2019
	(in thousands)				(in thousands)
Mineral properties	$	9,352	$	9,352	$	9,353	$	9,353
Exploration properties		2,518		2,518		2,518		2,518
Royalty properties		200		200		200		200
Buildings		4,221		4,386		3,755		3,755
Mining equipment and machinery		15,996		16,351		16,049		16,049
Other furniture and equipment		957		952		885		884
Asset retirement cost		865		992		948		866
		34,109		34,751		33,708		33,625
Less: Accumulated depreciation and amortization		(25,540)		(25,516)		(27,873)		(27,594)
	$	8,569	$	9,235	$	5,835	$	6,031

Equipment Related to the Oxide Plant Lease

Certain assets of the Company are related to the lease of the Velardeña oxide plant to Hecla (see Note 1). The net book value of the equipment involved in the lease was approximately $0.5 million for both the three months ended March 31, 2020 and the year ended December 31, 2019.

12.Other Long-Term Assets

Other long-term assets at March 31, 2020 and December 31, 2019 consist of the following:


	March 31,		December 31,
	2020		2019
	(in thousands)
Deferred offering costs	$	350	$	511
Right of use assets		556		620
	$	906	$	1,131

The ~~asset retirement cost (“ARC”) is all~~deferred offering costs are associated with the LPC Program (see Note 19). The right of use assets are related to the Company’s Velardeña Properties. The amounts for ARC have been fully depreciated as of September 30, 2017 and December 31, 2016. The decrease in the ARC during the period is related to an adjustment to the asset retirement obligation (“ARO”), as discussed below incertain office leases (see Note ~~10.~~5).

In August 2016, the Company sold certain mining equipment consisting of two haul trucks, two scoop trams and a compressor to Minera Indé, an indirect subsidiary of Sentient, for $687,000 (see Note 21). The equipment sold was excess equipment held at the Company’s Velardeña Properties that the Company did not expect to use. The Company received $69,000 or 10% of the sales price at the closing of the sale, with the remaining $618,000 plus interest on the unpaid balance at an annual rate of 10% due in February 2017. The Company and Minera Indé amended the original equipment sale on March 31, 2017 to include the sale of an additional piece of excess equipment for $185,000 and extend the time for payment relating to the original equipment sale. Upon execution of the amendment the Company received an additional payment of $100,000. The remaining principal and interest balance, plus additional interest on the unpaid balance at an annual rate of 10%, was amended to be due in August 2017. The Company recorded a gain of $105,000 on the sale of the additional equipment, included in “~~Other operating income~~” in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Loss, equal to the gross proceeds less the remaining basis in the equipment. On May 2, 2017, the Company received approximately $750,000 from Minera Indé as payment in full for the remaining balance due related to the equipment sale, including interest through that date.

In the third quarter 2016, the Company, through its wholly owned Mexican subsidiary, entered into an earn-in agreement with a 100% owned Mexican subsidiary of Electrum Global Holdings, L.P., a privately owned company (together “Electrum”), related to the Company’s Celaya exploration property in Mexico. The Company received an upfront payment of $0.2 million and Electrum agreed to incur exploration expenditures totaling at least $0.5 million in the first year of the agreement, reduced by certain costs Electrum previously incurred on the property since December 2015 in its ongoing surface exploration program. Electrum, at its option, can elect to acquire an undivided 60% interest in a joint venture company to be formed to hold the Celaya project after incurring exploration expenditures totaling $2.5 million during the first three years of the agreement. Electrum would serve as manager of the joint venture. If the Company elects not to contribute to additional exploration or development expenditures after the initial earn-in period, Electrum, at its option, would have the right to earn an additional 20% interest in the Celaya project, for a total interest of 80%, by incurring an additional $2.5 million of exploration or development expenditures over a second three-year period. Following the second earn-in period the Company would have the right to maintain its 20% interest or its interest ultimately could be converted into a 10% net profits interest.

In April 2016, the Company entered into an option agreement under which Santacruz Silver Mining Ltd. (“Santacruz”) may acquire the Company’s interest in certain nonstrategic mineral claims located in the Zacatecas Mining District, Zacatecas, Mexico (the “Zacatecas Properties”) for a series of payments totaling $1.5 million. Santacruz paid the Company $0.2 million on signing the agreement, and additional payments of $0.2 million in October 2016, $0.3 million in May 2017 and one half of the October 2017 installment of $0.3 million. To maintain its option and acquire the Zacatecas Properties, Santacruz must pay the Company the remaining one half of $0.3 million already due in October 2017 and the final amount of $0.5 million due in April 2018. Santacruz was not able to make the full October 2017 payment as scheduled and the Company has granted Santacruz an extension of time to make the payment. Santacruz has the right to terminate the option

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~~agreement at any time, and the agreement could be terminated, at the Company’s option, if Santacruz fails to make subsequent payments when due.~~

9. 13. Accounts Payable and Other Accrued Liabilities

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


	September 30,		December 31,		March 31,		December 31,
	2017		2016		2020		2019
	(in thousands)				(in thousands)
Accounts payable and accruals	$	273	$	344	$	981	$	710
Accrued employee compensation and benefits		1,075		880		578		724
Value added tax payable						—		401
Income taxes payable						—		292
	$	1,348	$	1,224	$	1,559	$	2,127

~~September 30, 2017~~March 31, 2020

Accounts payable and accruals at September 30, 2017 consist primarily of $0.1 million due to contractors and suppliers and $0.2 million related to the Company’s Velardeña Properties and corporate administrative activities, respectively. In the case of the Velardeña Properties, amounts due also include a VAT payable of less than $0.1 million that is not an offset to the VAT receivable.

Accrued employee compensation and benefits at September 30, 2017 consist of $0.3 million of accrued vacation payable and $0.8 million related to withholding taxes and benefits payable, of which $0.3 million is related to activities at the Velardeña Properties, and $0.5 million is related to the KELTIP (see Note 14).

~~December~~March 31, ~~2016~~

~~Accounts payable and accruals at December 31, 2016~~2020 are primarily related to amounts due to contractors and suppliers in the amounts of ~~$0.1 million and $0.2~~$0.4 million related to the Company’s Velardeña Properties and $0.6 million related to exploration and corporate administrative activities.

Accrued employee compensation and benefits at March 31, 2020 consist of $0.2 million of accrued vacation payable and $0.4 million related to withholding taxes and benefits payable. Included in the $0.6 million of accrued employee compensation and benefits is $0.4 million related to activities ~~respectively. In the case of~~at the Velardeña ~~Properties, approximately $0.1 million is~~Properties.

December 31, 2019

Accounts payable and accruals at December 31, 2019 are primarily related to amounts due to contractors and suppliers in the amounts of $0.3 million related to the Company’s Velardeña ~~net VAT payable.~~Properties and $0.3 million related to corporate administrative and exploration activities.

Accrued employee compensation and benefits at December 31, ~~2016~~2019 consist of ~~$0.3~~$0.2 million of accrued vacation payable and ~~$0.6~~$0.5 million related to withholding taxes and benefits ~~payable,~~payable. Included in the $0.7 million of ~~which $0.2~~accrued employee compensation and benefits is $0.5 million is related to activities at the Velardeña Properties.

The VAT payable is primarily related to VAT collected on the sale of the Mogotes and Pistachon properties in Mexico in December 2019, with such amount being remitted to the Mexican government in January 2020. The Company has recorded VAT paid in Mexico and related to the Velardeña Properties as a recoverable asset. At December 31, 2019, the Company recorded approximately $73,000 of VAT receivable as a reduction to VAT payable presented in the table above. The VAT was paid during the first quarter 2020.

The income taxes payable are related to certain Canadian taxes due on capital distributions the Company received from its Canadian subsidiary (see Note 18). The taxes were paid in February 2020.

14. Debt – Related Party

On March 30, 2020, in response to potential economic and market uncertainties caused by the COVID-19 pandemic, the Company entered into a Short-Term Loan Agreement (the “Loan Agreement”) with Sentient Global Resources Fund IV , L.P., a Cayman Islands exempted limited partnership (“Sentient”), pursuant to which Sentient granted to the Company an unsecured loan in an amount equal to $1,000,000 (the “Sentient Loan”). Sentient is a private equity fund, and together with certain other Sentient equity funds, Sentient is the Company’s largest stockholder, holding in the aggregate approximately 32% of the Company’s outstanding common stock. The Sentient Loan bears interest at a rate of 10% per annum and the loan is due in full, together with accrued interest and any other amount outstanding under the Loan Agreement, on December 31, 2020. The Loan Agreement contains customary representations, warranties, and other provisions. The loan Agreement does not contain any prepayment penalties.

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15. Other Liabilities

Other Current Liabilities

The following table sets forth the Company’s other current liabilities at March 31, 2020 and December 31, 2019:


	March 31,		December 31,
	2020		2019
	(in thousands)
Autlán refundable deposit	$	740	$	1,251
Premium financing		298		455
Office lease liability		112		118
	$	1,150	$	1,824

The Autlán refundable deposit is the remaining principal plus interest liability related to the deposit received for the proposed sale of our Velardeña Properties and ~~$0.3~~other mineral concessions to Autlán in 2019. On September 11, 2019, the Company announced that Autlán exercised its right to terminate the agreement for the purchase of the properties. As a result of termination of the agreement, the Company is required to repay the original $1.5 million deposit amount by making monthly payments of $257,000, commencing on December 9, 2019, until the deposit amount is repaid with interest at approximately 11% per annum. Through March 31, 2020 the Company paid Autlán approximately $0.8 million against the original $1.5 million deposit, including interest of approximately $32,000, leaving a balance due at March 31, 2020 of approximately $0.7 million, including accrued interest. The Company recorded approximately $23,000 of interest expense for the three months ended March 31, 2020 related to the Autlán refundable deposit. On April 7, 2020, the Company and Autlán agreed to reduce the monthly payments to $81,000 and the interest rate applicable to the unpaid repayment amount will be increased from 11% per annum to 12% per annum, effective on April 9, 2020. The remaining balance is now due in full by December 2020.

The premium financing consists of the remaining balance, plus accrued interest, related to premiums payable for the Company’s directors and officers insurance and general liability insurance. In June 2019, the Company financed $151,000 of its premium for general liability insurance. The premium is payable in twelve equal payments at an interest rate of 5.74% per annum. At March 31, 2020, the remaining balance, plus accrued interest, was approximately $13,000. In December 2019 the Company financed $482,000 of its premium for directors and officers insurance. The premium is payable in twelve equal payments at an interest rate of 5.74% per annum. At March 31, 2020 the remaining balance, plus accrued interest, was approximately $285,000.

The office lease liability is related to lease liabilities for office space at the ~~KELTIP~~Company’s principal headquarters in Golden, Colorado and in Mexico and Argentina (see Note ~~14)~~5).

Other Long-Term Liabilities

Other long-term liabilities of $0.4 million and $0.5 million for the periods ended March 31, 2020 and December 31, 2019, respectively, are primarily related to a lease liability for office space at the Company’s principal headquarters in Golden (see Note 5).

~~10.~~

16. Asset Retirement Obligation and Reclamation Liabilities

The Company retained the services of a mining engineering firm to prepare a detailed closure plan for the Velardeña Properties. The plan was completed during the second quarter 2012 and indicated that the Company had an ARO and offsetting ARC of approximately $1.9 ~~million.~~million at that time.

The Company will continue to accrue additional estimated ARO amounts based on an asset retirement plan as activities requiring future reclamation and remediation occur. During the first ~~nine~~three months of ~~2017,~~2020, the Company recognized approximately ~~$146,000~~$59,000 of accretion ~~expense and approximately $4,000 of amortization expense related to the ARC.~~expense.

13 14

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The following table summarizes activity in the Velardeña Properties ARO:


	Nine Months Ended				Three Months Ended
	September 30,				March 31,
	2017		2016		2020		2019
	(in thousands)				(in thousands)
Beginning balance	$	2,380	$	2,480	$	2,825	$	2,660

Changes in estimates, and other		(128)		(293)		82		(60)
Accretion expense		146		144		59		55
Ending balance	$	2,398	$	2,331	$	2,966	$	2,655

The ~~decreases~~change in estimates of the ARO recorded during ~~the 2017~~2020 and ~~2016 periods~~2019 are primarily the result of changes in assumptions related to inflation factors ~~and the timing of future expenditures~~ used in the determination of future cash flows.

The ARO set forth on the accompanying Condensed Consolidated Balance Sheets at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 includes ~~approximately $0.1 million~~a nominal amount of reclamation ~~liabilities~~liability related to activities at the El Quevar project in Argentina.

~~11. Convertible Note Payable – Related Party, Net~~

In October 2015, the Company borrowed $5.0 million from The Sentient Group, LLC (“Sentient”), the Company’s largest stockholder, pursuant to the terms of a Senior Secured Convertible Note the (“Sentient Note”) and a related loan agreement (the “Sentient Loan”), with principal and accrued interest due on October 27, 2016. In January 2016, upon approval by the Company’s stockholders, the Sentient Note became convertible, solely at Sentient's option, into shares of the Company's common stock at a price equal to the lowest of: 1) $0.289, 90 percent of the 15-day volume weighted average price ("VWAP") for the period immediately preceding the loan closing date, 2) 90 percent of the 15-day VWAP for the period immediately preceding the loan conversion date, or 3) an anti-dilution adjusted price based on the lowest price for which the Company has sold its stock following the loan closing date. The loan provided for interest at a rate of 9% per annum, compounded monthly.

On February 11, 2016, Sentient converted approximately $3.9 million of principal and $0.1 million of accrued interest (representing the total amount of accrued interest at the conversion date) on the Sentient Note into 23,355,000 shares of the Company's common stock at an exercise price of approximately $0.172 per share, equal to 90% of the 15-day VWAP immediately preceding the conversion date. On June 10, 2016, Sentient converted the remaining approximately $1.1 million of principal and approximately $34,000 of accrued interest (representing the total amount of accrued interest at the conversion date) into 4,011,740 shares of the Company's common stock at an exercise price of approximately $0.289 per share, equal to 90% of the 15‐~~day VWAP immediately preceding the loan’s original issue date.~~

The beneficial conversion feature of the Sentient Note represented an embedded derivative as defined by ASC 815 "Derivatives and Hedging" ("ASC 815"). ASC 815 provides that a derivative instrument's fair value must be bifurcated from the note and separately recorded on the Company's Consolidated Balance Sheet. The Company used a third party consultant to value the embedded derivative in the Sentient Note employing a Monte Carlo type probability analysis, which falls within Level 3 of the fair value hierarchy (see Note 12). For purposes of valuing the embedded derivative as of the Sentient Loan closing date, at December 31, 2015, at February 11, 2016 (first partial conversion date), and at March 31, 2016, the valuation model took into account, among other items: 1) the probability of successfully achieving stockholder approval of the Sentient Note’s conversion feature, 2) future variations in the Company’s stock price, and 3) the probability of entering into an equity transaction prior to the Sentient Loan maturity date that would lower the conversion price. It was determined that the embedded derivative had a fair value of approximately $1.1 million at October 27, 2015, the date the Company entered into the Sentient Loan. Subsequent mark-to-market changes in the value of the derivative were recorded as income or loss in the Consolidated Statements of Operations and Comprehensive Loss. The Sentient Note was recorded net of the bifurcated embedded derivative at October 27, 2015 with the $1.1 million difference between the face value and the recorded value of the Note representing a loan discount that was amortized to interest expense over the life of the loan using the interest rate method.

The Company incurred approximately $0.3 million in legal and other costs associated with the Sentient Loan. Per the guidance of ASU 2015-03 the loan costs were presented as a reduction to the note payable on the accompanying

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~~Consolidated Balance Sheets and were amortized to interest expense over the life of the Sentient note using the interest rate method.~~

~~The Company adjusted the recorded value of the Sentient Loan at the first partial conversion date and at March 31, 2016 to reflect the amortization of the loan discount and loan costs, shown as “Interest expense~~” in the Consolidated Statements of Operations and Comprehensive Loss. For the nine months ended September 30, 2016, the Company recorded a total noncash loss on debt extinguishment of $1.7 million reflecting the difference between the value of the shares issued to Sentient as a result of the February 11, 2016 conversion and the recorded value of the Sentient Loan, including related loan costs, loan discount and embedded derivative eliminated at the conversion date. The Company marked-to-market the embedded derivative at the February 11, 2016 conversion date and recorded a total derivative loss of $0.8 million for nine months ended September 30, 2016 in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

~~At June 10, 2016, the Sentient Note had been fully converted and the Company had no outstanding debt at September 30, 2017 or December 31, 2016.~~

~~12.~~17. Fair Value Measurements

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

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

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

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

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The following table summarizes the Company’s financial assets and liabilities at fair value on a recurring basis at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, by respective level of the fair value hierarchy:

Level 1

Level 2

Level 3

Total

(in thousands)

At September 30, 2017

Assets:

Cash and cash equivalents

$
4,966

$
—

$
—

$
4,966

Trade accounts receivable

387

—

—

387

Trade accounts receivable - related party

4

—

—

4

Short-term investments

242

—

—

242

$
5,599

$
—

$
—

$
5,599

At December 31, 2016

Assets:

Cash and cash equivalents

$
2,588

$
—

$
—

$
2,588

Trade accounts receivable

380

—

—

380

Trade accounts receivable - related party

643

—

—

643

Short-term investments

334

—

—

334

$
3,945

$
—

$
—

$
3,945

Liabilities:

Warrant liability - related party

$
—

$
—

$
976

$
976

Warrant liability

—

—

922

922

$
—

$
—

$
1,898

$
1,898


	Level 1		Level 2		Level 3		Total
	(in thousands)
At March 31, 2020
Assets:
Cash and cash equivalents	$	2,212	$	—	$	—	$	2,212
Derivative at fair value		—		—		39		39
	$	2,212	$	—	$	39	$	2,251

At December 31, 2019
Assets:
Cash and cash equivalents	$	4,593	$	—	$	—	$	4,593
Derivative at fair value		—		—		254		254
	$	4,593	$	—	$	254	$	4,847

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

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The ~~Company’s trade accounts receivable are classified within Level 1 of~~“Derivative at Fair Value” asset on the ~~fair value hierarchy and are~~Consolidated Balance Sheets is related to the ~~lease of~~amendment to the ~~oxide plant, valued per the terms of the lease rates per the~~Hecla plant lease agreement ~~and to~~(see Note 20). The Company has determined that the ~~sale~~portion of ~~mining equipment,~~the variable lease payment that is based on the ~~terms~~average price of silver and the ~~sales agreement.~~

~~The Company’s short-term investments consist~~average grade of ~~the available for sale common stock in Golden Tag and are classified within Level 1 of the fair value hierarchy~~material processed during a given month represents an embedded derivative (see Note ~~4).~~

At December 31, 2016, the Company recorded a liability for warrants to acquire the Company’s stock as a result of anti-dilution clauses in the warrant agreements that could result in a resetting of the warrant exercise price in the event the Company were to issue additional shares of its common stock in a future transaction at a price lower than the current exercise price of the warrants (see Note 14)8). The Company ~~assessed~~assesses the fair value of ~~its warrant liability~~the derivative at the end of each reporting period, with changes in the value recorded as an increase or decrease to “~~Warrant derivative (loss) gain~~Oxide Plant Revenue” ” on the Company’s ~~Condensed~~ Consolidated Statements of ~~Operations~~Operations. The derivative asset was recorded at fair value as of December 2, 2019, the effective date of the lease amendment, and ~~Comprehensive Loss.~~at December 31, 2019, based primarily on a valuation performed by a third-party expert using a Monte Carlo simulation and an option pricing model to calculate the potential discounted cash flow from the derivative based on the probability that the price of silver will have an average price for any given month during 2020 that equals or exceeds $20.00 per ounce or a grade processed equal to or exceeding 1,000 grams per tonne combined with a risk adjusted estimate of material to be processed. The valuation falls within Level 3 of the fair value hierarchy. The valuation policies ~~were~~are approved by the Chief Financial Officer who ~~reviewed~~reviews and ~~approved~~approves the inputs used in the fair value calculations and the changes in fair value measurements from period to period for reasonableness. Fair value measurements are discussed with the Company’s Chief Executive Officer, as deemed appropriate. The ~~warrant liability was recorded at fair value as~~valuation model primarily takes into consideration the potential discounted cash flow from the derivative based on the probability that the price of silver will have an average price for any given month during 2020 that equals or exceeds $20.00 per ounce or a grade processed equal to or exceeding 1,000 grams per tonne combined with a risk adjusted estimate of material to be processed.

At March 31, 2020 and December 31, ~~2016, based primarily on a valuation performed by a third party expert using a Monte Carlo simulation, which falls~~2019, the Company did not have any financial assets or liabilities classified within Level 32 of the fair value hierarchy. The valuation model took into account the probability that the Company could issue additional shares in a future transaction at a lower price than the current exercise price of the warrants. The Company did not have a warrant liability at September 30, 2017 as the result of a change in accounting principal during the period as discussed in Note 3.

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~~In addition to the warrant exercise prices (see Note 14) other significant inputs to the warrant valuation model at December 31, 2016 included the following:~~

December 31,

2016

Company's ending stock price

$
0.58

Company's stock volatility

110%

Applicable risk free interest rate

1.39%

~~At September 30, 2017, the remaining warrants are recorded as equity as the result of a change in accounting principal fully detailed in Note 3.~~

Non-recurring Fair Value Measurements

There were no non-recurring fair value measurements at March 31, 2020 or December 31, ~~2016 or September 30, 2017.~~2019.

~~13.~~18. Income Taxes

The Company accounts for income taxes in accordance with the provisions of ASC 740, “Income Taxes” (“ASC 740”), on a tax jurisdictional basis. For the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and March 31, 2019 the Company did not ~~recognize~~recognized any income tax ~~benefit or~~ expense. For the nine months ended September 30, 2016 the Company recorded a nominal income tax benefit related to the partial removal of a valuation allowance on net operating losses resulting from an unrealized gain on held for sale investments reported in other comprehensive income in the Condensed Consolidated Statements of Operations and Comprehensive Loss and treated as a source of taxable income. The Company operates in jurisdictions that have generated ordinary losses on a year-to-date basis. However, the Company is unable to recognize a benefit for those losses, except as described in this paragraph, thus an estimated effective tax rate has not been used to report the year-to-date results.

In accordance with ASC 740, the Company presents deferred tax assets net of its deferred tax liabilities on a tax jurisdictional basis on its Condensed Consolidated Balance Sheets. As of ~~September 30, 2017~~March 31, 2020 and as of December 31, ~~2016,~~2019, the Company had no net deferred tax assets or net deferred tax liabilities reported on its balance sheet.

In the third quarter 2019, the Company became aware that it had failed to timely file withholding tax returns and pay taxes that were due relating to return of capital distributions made to the Company by ECU Silver Mining Inc. (the Company’s wholly-owned Canadian subsidiary) at the end of 2017 and 2018. The capital distributions constituted dividends under Canadian tax law, subject to a 5% withholding tax. The Canadian withholding taxes, which constituted taxes on income for the months of December 2017 and December 2018, totaled approximately $284,000, including an estimate of interest due of approximately $20,000 on the late filing. The Company has treated the income tax expense related to this liability as the correction of an accounting error and has adjusted the beginning balance of retained earnings (Note 3). In February 2020 the Company applied to enter into the Canadian Revenue Agency’s Voluntary Disclosure Program, whereby the Company paid the taxes and the estimated interest due and requested abatement of any penalties or additional interest that may apply. If the Canada Revenue Agency denies the Company’s request for abatement, additional interest and penalties could be assessed.

The Company, a Delaware corporation, and its subsidiaries file tax returns in the United States and in various foreign jurisdictions. The tax rules and regulations in these countries are highly complex and subject to interpretation. The Company’s income tax returns are subject to examination by the relevant taxing authorities and in connection with such examinations, disputes can arise with the taxing authorities over the interpretation or application of certain tax rules within the country involved. In accordance with ASC 740, the Company identifies and evaluates uncertain tax positions, and recognizes the impact of uncertain tax positions for which there is less than a more-likely-than-not probability of the position being upheld upon review by the relevant taxing authority. Such positions are deemed to be “unrecognized tax

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benefits” which require additional disclosure and recognition of a liability within the financial statements. The Company had no unrecognized tax benefits at ~~September 30, 2017~~March 31, 2020 or December 31, ~~2016.~~2019.

19. Equity

Registered direct offering

On July 17, 2019, the Company entered into an agreement with certain institutional investors providing for the issuance and sale of 8,653,846 shares of the Company’s common stock at a price of $0.26 per share, and in a concurrent private placement transaction, the issuance of 8,653,846 Series A warrants to purchase up to 8,653,846 shares of the Company’s common stock at an exercise price of $0.35 per share, for aggregate gross proceeds of $2.25 million (the “Offering”). Each Series A warrant became exercisable on January 17, 2020 and will expire on January 17, 2025, five years from the initial exercise date. Each of the investors in the Offering held warrants that were issued by the Company in May 2016 and were exercisable until November 2021 at an exercise price of $0.75 per share. In connection with the Offering, the Company also agreed to exchange, on a one-for-one basis, the May 2016 warrants for Series B warrants to purchase 4,500,000 shares of common stock at an exercise price of $0.35 per share. Each Series B warrant became exercisable on January 17, 2020 and will expire on May 20, 2022 but are otherwise subject to the same terms and conditions as the Series A warrants.

The net proceeds of the Offering were recorded in equity and appear as a separate line item in the Condensed Consolidated Statements of Changes in Equity. Total costs for the Offering were approximately $0.3 million, including the placement agent fee of six percent of aggregate gross proceeds, listing fees and legal and other costs. Such costs were recorded as a reduction to “Additional paid in capital” on the Condensed Consolidated Balance Sheets. Using the Black Scholes model, the fair value of the Series A warrants issued was approximately $2.1 million and the incremental fair value of the Series B warrants, when compared to the warrants that they replaced, was approximately $0.3 million. The Black Scholes inputs for the Series A warrants included the closing stock price on July 16, 2019 (the day preceding the date the Company entered into the agreement to issue the shares) of $0.33, the exercise price and exercise period of the warrants, the Company’s applicable volatility rate for the period of the Series A warrants of 95%, and the applicable risk-free rate of 1.9%. The Black Scholes inputs for the Series B warrants included the closing stock price on July 16, 2019 of $0.33, the exercise price and exercise period of the warrants, the Company’s applicable volatility rate for the period of the Series B warrants of 88%, and the applicable risk-free rate of 1.9%.

Commitment purchase agreement

On May 9, 2018, the Company entered into a commitment purchase agreement (the “Commitment Purchase Agreement”) with LPC, pursuant to which the Company, at its sole discretion, has the right to sell up to $10.0 million of the Company’s common stock to LPC, subject to certain limitations and conditions contained in the Commitment Purchase Agreement (the “LPC Program”). The Company closed on the Commitment Purchase Agreement in July 2018.

Subject to the terms of the Commitment Purchase Agreement, the Company will control the timing and amount of any future sale of the Company’s common stock to LPC. LPC has no right to require any sales by the Company under the Commitment Purchase Agreement but is obligated to make purchases at the Company’s sole direction, as governed by such agreement. There are no upper limits to the price LPC may be obligated to pay to purchase common stock from the Company and the purchase price of the shares will be based on the prevailing market prices of the Company’s shares at the time of each sale to LPC. LPC has agreed not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company’s shares of common stock. The Company has the right to terminate the Commitment Purchase Agreement at any time, at its discretion, without any cost or penalty.

During the three months ended March 31, 2020 the Company sold 900,000 shares of common stock to LPC under the Commitment Purchase Agreement at an average sales price per share of approximately $0.27, resulting in net proceeds of approximately $216,000. In addition, approximately $24,000 of Commitment Purchase Agreement costs were amortized, resulting in a remaining balance of $353,000 of deferred LPC Program costs, recorded in “Other long-term assets” on the Condensed Consolidated Balance Sheets as of March 31, 2020.

During the three months ended March 31, 2019 the Company sold 1,213,642 shares of common stock to LPC under the Commitment Purchase Agreement at an average sales price per share of approximately $0.30, resulting in net proceeds

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~~14. Equity~~

~~Consideration Shares~~

~~On August 2, 2017, the Company granted Hecla an option to extend the oxide plant lease for an additional period~~ of ~~up to two years (see Note 15). As partial consideration for the option Hecla purchased $1.0 million, or~~ approximately ~~1.8~~$360,000. In addition, approximately $35,000 of Commitment Purchase Agreement costs were amortized. There are currently12.2 million shares of the Company’s common stock (the “Consideration Shares”), issued at par at a price of $0.55 per share, based on an undiscounted 30-day volume weighted average stock price. The Consideration Shares were offered and sold without registrationremaining available for issuance under the Securities Act of 1933, as amended (the “Act”) in reliance on the exemptions provided by Section 4(a)(2) of the Act and/or Regulation D promulgated thereunder. Under the terms of the Option Agreement (defined herein), the Company agreed to register with the SEC the resale of the Consideration Shares. A resale registration statement with the SEC became effective in September 2017. The $1.0 million received for the Consideration Shares, net of $71,000 in legal and stock exchange issuance fees, has been recorded as equity in the Condensed Consolidated Balance Sheets for the quarter ended September 30, 2017.LPC Program.

At the Market Offering Agreement

In December 2016, the Company entered into an at-the-market offering agreement (as amended from time to time, the “ATM Agreement”) with H. C. Wainwright & Co., LLC (“Wainwright”), under which the Company may, from time to time, issue and sell shares of the Company’s common stock through Wainwright as sales manager in an at-the-market offering under a prospectus supplement for aggregate sales proceeds of up to $5.0 million (the “ATM Program”) or a maximum of 10 million shares. On ~~September 29, 2017,~~November 23, 2018 the Company entered into ana second amendment ~~to the~~of the ATM Agreement ~~with Wainwright to reflect a new registration statement on Form S-3 (File No. 333-220461) under which shares of~~extending the ~~Company’s common stock may be sold under the ATM Program. The ATM Agreement will remain in full force and effect~~agreement until the earlier of December ~~31, 2018,~~20, 2020, or the date that the ATM Agreement is terminated in accordance with the terms therein. ~~Offers or sales of common shares under the ATM Program will be made only in the United States and no offers or sales of common shares under the ATM Agreement will be made in Canada.~~ The common stock will be distributed at the market prices prevailing at the time of sale. As a result, prices of the common stock sold under the ATM Program may vary as between purchasers and during the period of distribution. The ATM Agreement provides that Wainwright will be entitled to compensation for its services at a commission rate of 2.0% of the gross sales price per share of common stock sold. The Company reimbursed certain legal expenses of Wainwright totaling $50,000 and incurred additional accounting, legal, and regulatory costs of approximately $109,000 in connection with establishing the ATM Program. Such costs have been deferred and will be amortized to equity as sales are completed under the ATM Program. At September 30, 2017, the unamortized costs appear on the accompanying Consolidated Balance Sheets as “~~Prepaid expense and other assets.”~~

During the ~~nine~~first three months ~~ended September 30, 2017~~of 2020, the Company sold an aggregate of ~~approximately 1,024,000~~823,452 shares of common ~~shares~~stock under the ATM ~~Program~~Agreement at an average price of ~~$0.70~~$0.28 per share of common ~~share~~stock for ~~gross~~net proceeds of approximately ~~$720,000. The Company paid cash commissions and other nominal transaction fees to Wainwright totaling~~$223,000. In addition, approximately ~~$16,000 or 2.2% of the gross proceeds and amortized approximately $23,000~~$8,000 of deferred ~~accounting, legal and regulatory~~ATM Program costs were amortized, resulting in a ~~net amount~~remaining balance of ~~approximately $682,000 that has been~~$129,000 of deferred ATM Program costs, recorded ~~as equity~~ in “Prepaid expenses and other assets” on the Condensed Consolidated Balance ~~Sheets.~~ Sheets as of March 31, 2020.

During the ~~nine~~first three months ~~ended September 30, 2017~~of 2019, the Company ~~also incurred approximately $15,000 in additional accounting, legal, and regulatory costs associated with~~sold an aggregate of 33,995 shares of common stock under the ATM ~~Program that were included in “General and administrative costs” in~~Agreement at an average price of $0.34 per share of common stock for total proceeds of approximately $11,000. There are currently 8.1 million shares remaining available for issuance under the ~~Condensed Consolidated Statement of Operations and Comprehensive Loss.~~ATM Program.

Equity Incentive Plans

Under the Company’s Amended and Restated 2009 Equity Incentive Plan (the “Equity Plan”) awards of the Company’s common stock may be made to officers, directors, employees, consultants and agents of the Company and its subsidiaries. The Company recognizes stock-based compensation costs using a graded vesting attribution method whereby costs are recognized over the requisite service period for each separately vesting portion of the award.

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The following table summarizes the status of the Company’s restricted stock grants issued under the Equity Plan at ~~September 30, 2017~~March 31, 2020 and the changes during the ~~nine~~three months then ended:


		Weighted			Weighted
		Average Grant			Average Grant
		Date Fair			Date Fair
	Number of	Value Per		Number of	Value Per
Restricted Stock Grants	Shares	Share		Shares	Share
Outstanding at December 31, 2016	100,000	$	0.63
Outstanding at December 31, 2019				318,003	$	0.45
Granted during the period	150,000		0.57	—		—
Restrictions lifted during the period	(50,000)		0.57	—		—
Forfeited during the period	—		—	—		—
Outstanding at September 30, 2017	200,000	$	0.60
Outstanding March 31, 2020				318,003	$	0.45

During the period a 150,000 share restricted stock grant was made to a new employee with 50,000 shares vesting immediately and the remaining shares vesting at 50,000 shares on each of the first and second anniversaries of the grant. For the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 the Company recognized approximately ~~$56,000~~$17,000 of compensation expense related to the restricted stock grants. The Company expects to recognize additional compensation expense related to these awards of approximately ~~$92,000~~$45,000 over the next ~~thirty-five~~15 months.

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The following table summarizes the status of the Company’s stock option grants issued under the Equity Plan at ~~September 30, 2017~~March 31, 2020 and the changes during the ~~nine~~three months then ended:


		Weighted			Weighted
		Average			Average
		Exercise			Exercise
	Number of	Price Per		Number of	Price Per
Equity Plan Options	Shares	Share		Shares	Share
Outstanding at December 31, 2016	95,810	$	8.02
Outstanding at December 31, 2019				30,310	$	8.06
Granted during the period	—		—	—		—
Forfeited or expired during period	(55,500)		8.00	—	$	—
Exercised during period	—		—	—		—
Outstanding at September 30, 2017	40,310	$	8.05
Outstanding March 31, 2020				30,310	$	8.06
Exercisable at end of period	40,310	$	8.05	30,310	$	8.06
Granted and vested	40,310	$	8.05	30,310	$	8.06

Also, pursuant to the Equity Plan, the Company’s Board of Directors adopted the Non-Employee Director’s Deferred Compensation and Equity Award Plan (the “Deferred Compensation Plan”). Pursuant to the Deferred Compensation Plan the non-employee directors receive a portion of their compensation in the form of Restricted Stock Units (“RSUs”) issued under the Equity Plan. The RSUs generally vest on the first anniversary of the grant and each vested RSU entitles the director to receive one unrestricted share of common stock upon the termination of the director’s board service.

The following table summarizes the status of the RSU grants issued under the Deferred Compensation Plan at ~~September 30, 2017~~March 31, 2020 and the changes during the ~~nine~~three months then ended:


		Weighted			Weighted
		Average Grant			Average Grant
		Date Fair			Date Fair
	Number of	Value Per		Number of	Value Per
Restricted��Stock Units	Shares	Share
Outstanding at December 31, 2016	1,607,317	$	1.28
Restricted Stock Units				Shares	Share
Outstanding at December 31, 2019				2,830,038	$	0.78
Granted during the period	280,000		0.48	—		—
Restrictions lifted during the period	—		—	—		—
Forfeited during the period	—		—	—		—
Outstanding at September 30, 2017	1,887,317	$	1.16
Outstanding March 31, 2020				2,830,038	$	0.78

For the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 the Company recognized approximately ~~$93,000~~$35,000 of compensation expense related to the RSU grants. The Company expects to recognize additional compensation expense related to the RSU grants of approximately ~~$88,000~~$21,000 over the next 8three months.

~~Table of Contents~~

Key Employee Long-Term Incentive Plan

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

~~Accounts payable and other accrued liabilities” in the Condensed Consolidated Balance Sheets.~~ On ~~May 23, 2017 and May 19, 2016,~~February 26, 2019, the Company awarded ~~435,000 and 585,000~~a total of 705,000 KELTIP Units ~~respectively,~~ to two officers of the Company. Due to the Company’s desire to preserve its limited current cash reserves for funding expenditures related to its portfolio of exploration projects, the Company ~~and~~determined it no longer had the current intent to settle any of its outstanding KELTIP Units in cash. The Company now intends to settle all of the KELTIP Units, including those previously issued, in common stock of the Company, an option that the Board of Directors holds in its sole discretion so long as sufficient shares remain available under the Equity Plan. As a result, the Company recorded approximately ~~$0.2 million and $0.3 million respectively,~~$254,000 of compensation expense, included in “Stock based compensation” in the Condensed Consolidated Statement of Operations ~~and Comprehensive Loss. The~~for the KELTIP Units ~~are marked to market~~awarded on February 26, 2019 with a similar amount recorded as “Additional Paid-in Capital” in the Condensed

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Consolidated Statements of Changes in Equity. The Company has treated the previously awarded KELTIP Units as effectively modified at February 26, 2019. The Company marked-to-market the ~~end~~prior KELTIP Units as of ~~each reporting period~~that date and recorded approximately $227,000 of additional compensation expense, included in “Stock based compensation” in the Condensed Consolidated Statement of Operations and recorded approximately $583,000 as “Additional Paid-in Capital” in the Condensed Consolidated Statements of Changes in Equity, an amount representing the sum of the compensation expense recorded on February 26, 2019 and the liability for the ~~nine months ended September 30, 2017 the Company recognized an approximately $59,000 reduction to compensation expense. There were 1,020,000 and 585,000~~ KELTIP Units ~~outstanding at September 30, 2017 and~~recorded at December 31, ~~2016, respectively.~~2018. All KELTIP Units were recorded in equity at March 31, 2019.

The Company did not award any KELTIP Units during the three months ended March 31, 2020. At March 31, 2020 and December 31,2019, there were 2,325,000 KELTIP Units outstanding.

Common stock warrants

The following table summarizes the status of the Company’s common stock warrants at ~~September 30, 2017~~March 31, 2020 and the changes during the ~~nine~~three months then ended:


		Weighted			Weighted
	Number of	Average Exercise		Number of	Average Exercise
	Underlying	Price Per		Underlying	Price Per
Common Stock Warrants	Shares	Share		Shares	Share
Outstanding at December 31, 2016	17,578,950	$	2.17
Granted during period	—		—
Outstanding at December 31, 2019				14,653,846	$	0.80
Granted during the period				—		—
Dilution adjustment	157,302			—		—
Expired during period	(6,258,080)		4.62	—		—
Exercised during period	—			—		—
Outstanding at September 30, 2017	11,478,172	$	0.81
Outstanding March 31, 2020				14,653,846	$	0.80

The warrants relate to prior and current registered offerings and private placements of the Company’s stock. In September 2012, the Company closed on a registered offering and concurrent private placement with Sentient in which it sold units, consisting of one share of common stock and a five-year warrant to acquire one half of a share of common stock at an exercise price of $8.42 per share. A total of 3,431,649 warrant shares were issued and became exercisable on March 20, 2013 and expired on September 19, 2017, five years from the date of issuance.

In September 2014, the Company closed on a registered public offering and concurrent private placement with Sentient in which it sold units, consisting of one share of common stock and a five-year warrant to acquire one half of a share of common stock at an exercise price of $1.21 per share. A total of 4,746,000 warrant shares were issued that became exercisable on March 11, 2015 and will expire on September 10, 2019, five years from the date of issuance.

In May 2016, the Company issued 8.0 million registered shares of common stock at a purchase price of $0.50 per share in a registered direct offering ~~(the “Offering”)~~ resulting in gross proceeds of $4.0 million. In connection with the ~~Offering,~~offering, each investor received an unregistered warrant to purchase ~~three~~‐~~quarters~~three-quarters of a share of common stock for each share of common stock purchased. The resulting 6,000,000 warrant shares have an exercise price of $0.75 per share, became exercisable on November 7, 2016 and ~~will expire on~~were exercisable until November 6, 2021, five years from the initial exercise date. In connection with the July 2019 registered direct offering discussed above, the Company agreed to exchange, on a one-for-one basis, 4,500,000 of the May 2016 warrants for Series B warrants to purchase 4,500,000 shares of common stock at an exercise price of $0.35 per share. Each Series B warrant is exercisable six months from the date of issuance and has a term expiring in May 2022.

~~The warrants issued in September 2012 and September 2014 were recorded as a liability~~As discussed above, on the balance sheet at December 31, 2016, as a result of anti-dilution clauses in the warrant agreements that could result in a resetting of the warrant exercise price and the number of warrant shares outstanding in the eventJuly 10, 2019, the Company ~~were to issue additional~~issued 8,653,846 registered shares of ~~its~~ common stock in a ~~future transaction at~~registered direct offering. In connection with the offering, each investor received an ~~offering price lower than~~unregistered Series A warrant to purchase a share of common stock for each share of common stock purchased. Each Series A warrant is exercisable six months from the ~~current exercise price~~date of ~~the warrants. The May 2016 warrants are not subject to anti-dilution~~issuance and ~~the~~has a term expiring in January 2025.

All outstanding warrants are recorded ~~as equity.~~

~~Table of Contents~~

in equity at March 31, 2020 and December 31, 2019.

Pursuant to the anti-dilution clauses in the September 2012 and 2014 warrant agreements, the exercise price of the warrants had been adjusted downward as a result of the subsequent issuance of the Company’s common stock in separate transactions, including the September 2014 registered public offering and private placement, the conversion of the Sentient Note, the May 2016 Offering and private placement, the ATM Program and the Hecla Share Issuance (defined herein)20. As a result of these transactions, the number of shares of common stock issuable upon exercise of the September 2012 warrants, prior to their expiration on September 19, 2017, had increased from the original 3,431,649 shares to 6,258,080 shares (2,826,431 share increase) and the exercise price has been reduced from the original $8.42 per share to $4.62 per share. The number of shares of common stock issuable upon exercise of the September 2014 warrants has increased from the original 4,746,000 shares to 5,478,172 shares (732,172 share increase) and the exercise price has been reduced from the original $1.21 per share to $0.87 per share.

At December 31, 2016, the total liability recorded for the 2012 and 2014 warrants was approximately $1.9 million, consisting of approximately $1.8 million for the 2014 warrants and $0.1 million for the 2012 warrants. The Company did not have a warrant liability at September 30, 2017 as the result of a change in accounting principal during the period as discussed in Note 3.

~~15.~~ Revenue, Deferred Revenue and Related Costs

Oxide Plant Lease and Oxide Plant Lease Costs

For the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 the Company recorded revenue of approximately ~~$5.1~~$1.2 million and related costs of approximately ~~$1.7~~$0.6 million associated with the lease of the Velardeña Properties oxide plant. The Company recognizes oxide plant lease fees and reimbursements for labor, utility and other costs as “Revenue: Oxide plant lease” in the Condensed Consolidated Statements of Operations ~~and Comprehensive Loss~~ following the guidance of ASC ~~605 regarding "income statement characterization of reimbursements received for "out-of-pocket" expenses incurred" and "reporting revenue gross as a principal versus net as an agent".~~842. ASC ~~605~~842 supports recording as gross revenue ~~fees received for~~ the reimbursement of expenses incurred directly by the Company in performing its obligations under the lease in situations where the ~~recipient is~~entity has control over the ~~primary obligor and has certain discretion in the incurrence of the reimbursable expense.~~specific goods or services transferred to a customer as a principal versus as an agent. The actual costs incurred for reimbursed direct labor and utility costs are reported as “Oxide plant lease costs” in the Condensed Consolidated Statements of ~~Operations and Comprehensive Loss.~~Operations. The Company recognizes lease fees during the period the fees are earned per the terms of the lease.

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On August 2, 2017, the Company granted Hecla an option to extend the oxide plant lease for an additional period of up to two years ending no later than December 31, 2020 (the “Extension Period”) in exchange for a $1.0 million upfront cash payment and the purchase of $1.0 million, or approximately 1.8 million shares, of the Company’s common stock, issued at par at a price of $0.55 per share, based on an undiscounted 30-day volume weighted average stock ~~price (see Note 14).~~price. The option and lease extension were memorialized in (i) an Option Agreement dated August 2, 2017 among the Company and Hecla Mining Company (the “Option Agreement”), and (ii) a Second Amendment to Master Agreement and Lease Agreement dated August 2, 2017 among Minera William S.A. de C.V., an indirect subsidiary of the Company, and Minera Hecla S.A. de C.V., an indirect subsidiary of Hecla Mining Company (the “Second Amendment”). Under the Second Amendment, Hecla ~~must exercise the~~had an option to extend the lease to December 31, 2020 by exercising the option no later than October 3, 2018. On October 1, 2018 Hecla exercised the Second Amendment option and extended the lease to December 31, 2020. All of the fixed fees and throughput related charges remain the same as under the original lease. Similar volume limitations apply to any required future tailings expansions, which Hecla will fund, leaving unused at the end of the lease term an agreed amount of capacity in the expanded tailings facility. Pursuant to the Second Amendment, Hecla ~~will have~~has the right to terminate the lease during the Extension Period for any reason with 120 days’ notice.

The Company will recognize the $1.0 million of income from granting the option over the expected life of the lease from August 2, 2017 through December 31, 2020 on a straight-line basis, including such income in “Revenue: Oxide plant lease” in the Condensed Consolidated Statements of Operations. During the three months ended March 31, 2020 the Company recognized approximately $0.1 million of amortized income related to the upfront cash payment. As of March 31, 2020, the unamortized portion of the lease option totaled approximately $0.2 million, recorded as short term “Deferred revenue” on the Condensed Consolidated Balance Sheets.

On December 2, 2019 the Company and Hecla entered into a Third Amendment to the Master Agreement and Lease Agreement dated August 2, 2017. Under the terms of the Third Amendment, the Company has agreed to reduce the per tonne fee payable by Hecla for the duration of the lease term, commencing on January 1, 2020 from $22.00 per tonne to $11.00 per tonne. However, the Company will receive $22.00 per tonne processed during any month in which one of the following conditions occur: (1) the Comex daily silver spot closing average price for such month is equal to or greater than $20.00 per ounce, or (2) the mill head grade average from the metallurgical balance for such month is equal to or greater than 1,000 grams per ton equivalent silver head grade. If either of the conditions are met in any month, Hecla will pay the $22.00 fee on all amounts processed in the oxide plant during such month. The reduced fee only applies to the tonnage-based payments under the Lease Agreement; the monthly lease payment of $125,000 per month is not affected by the Third Amendment. Under the terms of the Lease Agreement, Hecla had the right to terminate the Lease Agreement at any time upon 120 days written notice. The Third Amendment extended the advance notice required to 150 days. Moreover, the lease permits Hecla to terminate the lease upon ten days notice if Hecla is unable to use the plant due to a government ordered shutdown for a period of more than 90 continuous days.

The Company has determined that the ability to receive the higher $22.00 per tonne fee, as described above, creates a derivative asset. The Company treated the derivative asset as an upfront lease payment that will be amortized over the remaining life of the lease and also ~~have~~recorded deferred revenue equal to the value of the derivative asset, as more fully described in Note 8. The amortization of the upfront lease payment and the increase in the derivative asset at December 31, 2019 were recorded as an increase of approximately $74,000 to “Revenue: Oxide plant lease” in the Consolidated Statements of Operations for the period ended December 31, 2019. For the three month period ended March 31, 2020 the amortization of the upfront lease payment and the decrease in the derivative asset (Note 8) were recorded as a net decrease of approximately $170,000 to “Revenue: Oxide plant lease” in the Consolidated Statements of Operations for the period ended December 31, 2019

Hecla has a one-time right of first refusal to continue to lease the plant following a termination notice through December 31, 2020 if the Company decides to use the oxide plant for its own purposes before December 31, 2020.

The Company expects to recognize the $1.0 million of income from granting the option over the expected life of the lease from August 2, 2017 through December 31, 2020 on a straight-line basis, including such income in “~~Other operating income~~” in the Condensed Consolidated Statements of Operations and Comprehensive Loss. As of September 30, 2017 the unamortized portion of the lease option totaled approximately $1.0 million recorded as short and long term “~~Deferred revenue~~” on the Condensed Consolidated Balance Sheets. The $1.0 million received for the Consideration Shares, net of $71,000 in legal and stock exchange issuance fees, has been recorded as equity in the Condensed Consolidated Balance Sheets for the quarter ended September 30, 2017.

~~Table of Contents~~

For the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2019 the Company recorded revenue of approximately ~~$4.8~~$1.9 million and related costs of approximately ~~$1.5~~$0.6 million associated with the lease of the Velardeña Properties oxide plant.

~~16. Interest and Other Income~~

~~For~~ During the ~~nine~~three months ended ~~September 30, 2017 and 2016~~March 31, 2019 the Company ~~had only a nominal amount of interest and other income. The 2017 amount is primarily related to interest on amounts receivable from the sale of mining equipment as discussed in Note 8.~~

~~17. Derivative Loss~~

~~During the nine months ended September 30, 2016 the Company recorded~~also recognized approximately ~~$2.8~~$0.1 million of warrant derivative loss related to an increase in the fair value of the liability recorded for warrants to acquire the Company’s common stock. The warrant liability at December 31, 2016 was recorded at fair value based primarily on a valuation performed by a third-party expert using a Monte Carlo simulation which falls within Level 3 of the fair value hierarchy (see Note 12). The third party valuation model takes into account the probability that the Company could issue additional shares in a future transaction at a lower price than the current exercise price of the warrants. Significant inputs to the third party valuation model included prices for the warrants disclosed above, the probability of an additional issuance of the Company’s common stock at a lower price than the current warrant exercise price and the inputs in the table below for the respective periods. The Company did not have a warrant liability at September 30, 2017 as the result of a change in accounting principal during the period as discussed in Note 3.

~~During the nine months ended September 30, 2016 the Company recorded approximately $0.8 million of derivative loss related to an increase in the fair value of the derivative liability~~amortized income related to the Sentient Loan (see Note 11). The derivative liability was recorded at fair value at September 30, 2016 based primarily on a valuation performed by a third party expert using a Monte Carlo simulation, which falls within Level 3 of the fair value hierarchy (see Note 12). Significant inputs to the valuation model included: 1) future variations in the Company’s stock price, and 2) the probability of entering into an equity transaction prior to the loan maturity date that would lower the conversion price. At September 30, 2017 and December 31, 2016, the Sentient Loan had been fully converted.upfront cash payment from Hecla, as discussed above.

22 21

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~~18.~~21. Interest and Other Expense, Net

For the three months ended March 31, 2020 the Company recognized a nominal amount of Interest and Other Expense primarily related to amounts payable to Autlán (see Note 15).

For the three months ended March 31, 2019 the Company recognized approximately $0.1 million of Interest and Other Expense primarily related to the mark-to-market of Golden Tag shares held by the Company at that time. All the Golden Tag shares were sold during the third quarter 2019.

22. Supplemental Cash Flow Information

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

Nine Months Ended September 30,

2017

2016

(in thousands)

Cash flows from operating activities:

Net loss

$
(1,851)

$
(10,974)

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization and depreciation

456

1,317

Accretion of asset retirement obligation

146

143

Write off of loss contingency, net

—

(212)

Asset write off

—

24

Gain on reduction of asset retirement obligation

(56)

—

Gain on sale of assets

(605)

(1,522)

Amortization of deferred loan costs

—

57

Warrant liability fair market adjustment

—

2,821

Derivative liability fair market adjustment

—

778

Accretion of loan discount

—

372

Loss on debt extinguishment

—

1,653

Deferred income taxes

—

(26)

Stock compensation

299

666

Changes in operating assets and liabilities:

Decrease in trade accounts receivable

607

41

Decrease in prepaid expenses and other assets

137

150

(Increase) decrease in inventories

(22)

66

(Increase) decrease in value added tax recoverable, net

(3)

347

Increase in accrued interest payable net of amounts capitalized

—

86

Increase (decrease) in deferred revenue

967

(500)

Decrease in reclamation liability

(4)

(8)

Decrease in accounts payable and accrued liabilities

(34)

(389)

Decrease in deferred leasehold payments

(15)

(13)

Net cash provided by (used in) operating activities

$
22

$
(5,123)


	Three Months Ended March 31,
	2020		2019
	(in thousands)
Cash flows from operating activities:
Net loss	$	(3,336)	$	(2,351)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		279		274
Accretion of asset retirement obligation		59		55
Decrease in derivative at fair value		215		—
Loss (gain) on trading securities		—		106
Asset write off		—		16
Gain on reduction of asset retirement obligation		—		(39)
Stock compensation		52		564
Changes in operating assets and liabilities from continuing operations:
Decrease (increase) in lease receivable		138		(8)
(Increase) decrease in prepaid expenses and other assets		43		(62)
(Increase) decrease in inventories		53		(2)
Increase in value added tax recoverable, net		—		(5)
Increase in other long term assets		96		—
Decrease in reclamation liability		(1)		(63)
(Decrease) increase in accounts payable and accrued liabilities		(568)		191
Decrease in deferred revenue		(118)		(73)
Decrease in other current liabilities		(675)		(10)
Decrease in other long term liabilities		(56)		—
Net cash used in operating activities	$	(3,819)	$	(1,407)

The following table sets forth supplemental cash flow information and non-cash transactions:


	Three Months Ended March 31,
	2020		2019
	(in thousands)
Supplemental disclosure:
Interest paid	$	26	$	—
Income taxes paid	$	284	$	—

Supplemental disclosure of non-cash transactions:
Deferred equity offering costs amortized	$	32	$	34

~~19.~~23. Commitments and Contingencies

At ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, the Company had no gain or loss contingencies. The Company has certain purchase and lease commitments as set forth in the Company’s Form 10-K for the year ended December 31, ~~2016.~~2019.

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~~20.~~24. Segment Information

The Company’s sole activity is the mining, construction and exploration of mineral properties containing precious metals. The Company’s reportable segments are based upon the Company’s revenue producing activities and cash consuming activities. The Company reports two segments, one for its Velardeña Properties in Mexico and the other comprised of non-revenue producing activities including exploration, construction and general and administrative activities. Intercompany revenue and expense amounts have been eliminated within each segment in order to report on the basis that management uses internally for evaluating segment performance.

~~Table of Contents~~

The financial information relating to the Company’s segments is as follows:

Exploration, El

Costs

Depreciation,

Quevar, Velardeña

Three Months Ended

Applicable

Depletion and

and Administrative

Pre-Tax (gain)

Capital

September 30, 2017

Revenue

to Sales

Amortization

Expense

loss

Total Assets

Expenditures

Velardeña Properties

$
1,771

$
619

$
53

$
623

$
(2,016)

$
3

Corporate, Exploration & Other

—

—

85

1,609

2,334

2

$
1,771

$
619

$
138

$
2,232

$
318

$
5

Nine Months Ended

September 30, 2017

Velardeña Properties

$
5,107

$
1,704

$
179

$
1,361

$
(3,667)

$
6,573

$
3

Corporate, Exploration & Other

—

—

277

4,820

5,518

8,329

2

$
5,107

$
1,704

$
456

$
6,181

$
1,851

$
14,902

$
5

Three Months Ended

September 30, 2016

Velardeña Properties

$
1,729

$
549

$
249

$
509

$
(1,563)

$
15

Corporate, Exploration & Other

—

—

97

1,706

2,361

—

$
1,729

$
549

$
346

$
2,215

$
798

$
15

Nine Months Ended

September 30, 2016

Velardeña Properties

$
4,768

$
1,478

$
982

$
2,100

$
(1,319)

$
8,370

$
35

Corporate, Exploration & Other

—

—

335

5,803

12,319

6,647

1

$
4,768

$
1,478

$
1,317

$
7,903

$
11,000

$
15,017

$
36



							Exploration, El
			Costs		Depreciation,		Quevar, Velardeña
Three Months Ended			Applicable		Depletion and		and Administrative		Pre-Tax (gain)				Capital
March 31, 2020	Revenue		to Sales		Amortization		Expense		loss		Total Assets		Expenditures
Velardeña Properties	$	1,196	$	564	$	204	$	657	$	371	$	4,663	$	1
Corporate, Exploration and Other		—		—		75		2,848		2,965		5,572		—
	$	1,196	$	564	$	279	$	3,505	$	3,336	$	10,235	$	1

Three Months Ended
March 31, 2019
Velardeña Properties	$	1,932	$	597	$	202	$	634	$	(316)	$	5,641	$	—
Corporate, Exploration and Other		—		—		72		2,126		2,667		5,647		25
	$	1,932	$	597	$	274	$	2,760	$	2,351	$	11,288	$	25

~~21.~~25. Related Party Transactions

The following sets forth information regarding transactions between the Company (and its subsidiaries) and its officers, directors and significant stockholders.

~~Sale of Equipment:~~

In August 2016, the Company sold certain mining equipment to Minera Indé, an indirect subsidiary of Sentient, for $687,000 (see Note 8), in a transaction approved by the Company’s Audit Committee and Board of Directors. At September 30, 2017 Sentient holds approximately 45% of the Company’s 92.0 million shares of issued and outstanding common stock. The equipment sold was excess equipment held at the Company’s Velardeña Properties that the Company did not expect to use. The Company used a third party consultant with experience in the used mining equipment market in Mexico to determine a fair value. The Company believes the price paid was at least equal to the fair market value of the equipment had it been sold through auction or in the open market. The Company received 10% of the sales price at the closing of the sale in August 2016, with the remainder, plus interest on the unpaid balance at an annual rate of 10%, due in February 2017.

With the approval of a Special Committee of the Company’s Board of Directors, the Company and Minera Indé amended the original equipment sale on March 31, 2017 to include the sale of an additional piece of excess equipment for $185,000 and extend the time for payment relating to the original equipment sale. Upon execution of the amendment the Company received an additional payment of $100,000. The remaining principal and interest balance, plus additional interest on the unpaid balance at an annual rate of 10%, was amended to be due in August 2017. The Company recorded a gain of $105,000 on the sale of the additional equipment, included in “~~Other operating income~~” in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Loss, equal to the gross proceeds less the remaining basis in the equipment. On May 2, 2017, the Company received approximately $750,000 from Minera Indé as payment in full for the remaining balance due related to the equipment sale, including interest through that date.

Administrative Services:

Beginning in August 2016, the Company began providing limited accounting and other administrative services to Minera Indé, an indirect subsidiary of Sentient. At March 31, 2020, Sentient, through the Sentient executive funds, holds approximately 38% of the Company’s 108.5 million shares of issued and outstanding common stock. The services are provided locally in Mexico by the administrative staff atin the Company’s ~~Velardeña Properties.~~Mexico office. The Company charges Minera Indé $15,000 per month for the services, which provides reimbursement to the Company for its costs incurred plus a small profit margin. Amounts received under the arrangement reduce costs incurred for ~~the care and maintenance of the Velardeña Properties and allows the Company to~~

~~Table of Contents~~

~~maintain a larger more experienced staff at the Velardeña Properties to support the oxide plant lease and potential future mining or processing activities.~~exploration. The Company’s Board of Directors and Audit Committee approved the agreement. For the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and 2019 the Company charged Minera Indé approximately ~~$135,000~~$45,000 for services, offsetting costs that are recorded in “~~Velardeña shutdown and care and maintenance~~Exploration expense” in the Condensed Consolidated Statements of ~~Operations and Comprehensive Loss.~~Operations.

Debt – Related Party

On March 30, 2020, the Company entered into a short-term loan agreement with Sentient whereby the Company received an unsecured loan in the amount of $1,000,000. The Sentient Loan bears interest at a rate of 10% per annum and the loan is due in full, together with accrued interest and any other amount outstanding under the loan agreement, on December 31, 2020. See Note 14 for a full description of the loan.

26. Subsequent Events

COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of the respiratory disease caused by the new coronavirus as “pandemic”. As of the date of issuance of the condensed consolidated financial statements, the Company’s financial condition has not been significantly impacted, however, the Company continues to monitor the situation. No impairments were recorded as of the condensed consolidated balance sheet date, however, due to uncertainty surrounding the situation, management’s judgment regarding this could change in the future. In addition,

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while the Company’s results of operation, cash flows, and financial condition could be negatively impacted, the extent of the impact cannot be reasonably estimated at this time.

Earn in Agreement

On April 9, 2020, the Company and several of its directly and indirectly wholly-owned subsidiaries entered into an Earn-In Agreement (the “Earn-In Agreement”) with Barrick, pursuant to which Barrick has acquired an option (the “Option”) to earn a 70% interest in the Company’s El Quevar project located in the Salta Province of Argentina. In connection with the Earn-In Agreement, the Company and Barrick also entered into a subscription agreement dated as of April 9, 2020 pursuant to which Barrick agreed to purchase approximately 4.7 million shares of the Company’s common stock at a purchase price of $0.21 per share in a private placement transaction for gross proceeds of $1.0 million. See “2020 Highlights – El Quevar” below for more information regarding the Earn-In Agreement.

Offering and private placement transaction

On April 20, 2020, the Company entered into a securities purchase agreement with certain institutional investors providing for the issuance and sale of 15,000,000 shares of the Company’s common stock at a price of $0.20 per share, and in a concurrent private placement transaction, the issuance of an aggregate of 11,250,000 warrants, ultimately consisting of 7,500,000 series A warrants and 3,750,000 series B warrants (collectively, the “Warrants”), to purchase up to 11,250,000 shares of our common stock at an exercise price of $0.30 per share, for aggregate gross proceeds of $3.0 million (the “Offering”). Each Warrant is exercisable six months from the date of issuance and has a term expiring five years after such initial exercise date. Total costs for the Offering were approximately $250,000, including the placement agent fee of six percent of the aggregate gross proceeds, except, however, that a reduced fee was accepted with respect to one investor. The securities purchase agreement contains customary representations, warranties and covenants, in addition to granting the investors the right to collectively participate in up to 50% of any future offerings of securities by the Company on the same terms as other investors, other than certain “exempt issuances” and “permitted sales” as defined therein, until the first anniversary of the closing date of the Offering. Under the terms of the Offering, the Company is precluded from selling any more of its equity in a similar transaction, including use of the LPC Program and the ATM Program, for a period of 90 days following the Offering.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Our Company

We were incorporated in Delaware in March 2009 under the Delaware General Corporation Law. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, our principal source of revenue was from the lease of our oxide ~~plant.~~plant located near Velardeña, Durango, Mexico. We incurred net operating losses for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016.~~2019.

~~The Company remains~~We remain focused on evaluating and searching for mining opportunities in North America (including Mexico) with near term prospects of mining, and particularly for properties within reasonable haulage distances of our Velardeña Properties. ~~The Company is~~We are also focused on advancing our El Quevar exploration property in Argentina through the Earn-In Agreement with Barrick and on advancing selected properties in our portfolio of approximately 12 properties, located in Mexico, Nevada and Argentina. We are also reviewing strategic opportunities, focusing primarily on development or operating properties in North America, including Mexico. We are also focused on evaluation activities at our El Quevar exploration property in Argentina, and are continuing our exploration efforts on selected properties in our portfolio of approximately [10] exploration properties located primarily in Mexico.

This discussion should be read in conjunction with Management’s Discussion and Analysis included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2019, filed with the SEC on February ~~28, 2017.~~27, 2020.

2020 Highlights

COVID-19 uncertainties

We have undertaken several initiatives in response to COVID-19 related economic and financial market uncertainties.

We are following World Health Organization protocols and local government rules and recommendations at all of our projects and corporate offices. Office employees are working remotely wherever possible. In compliance with the recent

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directive of the Mexican Federal Government to suspend all non-essential activities, including mining, until May 18, 2020 in response to the COVID-19 pandemic, we suspended mining activities at our Velardeña Properties (Durango State, Mexico). Work was conducted jointly with Hecla Mining Company to shut down the oxide mill that Hecla presently leases from us. Hecla will, per the terms of the existing lease agreement, continue to pay the fixed monthly fee of $125,000 during a temporary shutdown, as well as pay for certain shutdown-related costs. During the period of suspension, we will not receive the variable component of revenue that is tied to tonnes of ore milled per month.

On March 30, 2020, we entered into the Sentient Loan, whereby Sentient granted us an unsecured loan in an amount equal to $1,000,000. Sentient is our largest stockholder, holding in the aggregate approximately 32% of our outstanding common stock. The Sentient Loan bears interest at a rate of 10% per annum and is due in full, together with accrued interest and any other amount outstanding under the loan agreement, on December 31, 2020. The Loan Agreement contains customary representations, warranties, and other provisions.

We also reached an agreement with Autlán to extend the time to repay the remaining US$729,000 related to the $1.5 million refundable deposit received for the ~~Nine Months Ended September 30, 2017~~proposed sale of our Velardeña Properties and other assets in June 2019. Through March 31, 2020, we paid Autlán approximately $0.8 million against the original $1.5 million deposit plus interest, leaving a balance due at March 31, 2020 of approximately $0.7 million, including accrued interest. On April 7, 2020, Autlán agreed to reduce the monthly payments to $81,000 and the interest rate applicable to the unpaid repayment amount will be increased from 11% per annum to 12% per annum, effective on April 9, 2020. The remaining balance is now due in full by December 2020.

Velardeña Oxide Plant Lease Agreement

~~In July 2015,~~During the three months ended March 31, 2020, Hecla processed approximately 32,000 tonnes of material through the oxide plant, resulting in total revenues to us of approximately $1.2 million, comprised of approximately $0.6 million for direct plant charges and fixed fees and approximately $0.6 million for other net reimbursable costs related to the services we ~~leased~~provide under the lease. Hecla is responsible for the ongoing operation and maintenance of the oxide plant. The $0.6 million of reimbursable costs are also reported as plant lease costs, resulting in net operating margin of approximately $0.6 million for the three months ended March 31, 2020.

On October 1, 2018, Hecla exercised its option, pursuant to an agreement entered into with us in August 2017, to extend the lease of our Velardeña oxide plant ~~to a wholly-owned subsidiary~~until December 31, 2020. On December 2, 2019 we entered into an additional amendment of ~~Hecla Mining Company for an initial term of 18 months beginning July 1, 2015.~~ ~~The~~the lease agreement ~~containedseveral lease extension options, and in~~with Hecla to reduce the ~~third quarter 2016,~~per tonne fee payable by Hecla for the ~~lease was extended through June2017. The 2016 extension included an agreement under which Hecla would construct, at its cost,certain tailings expansion facilities to accommodate Hecla's increased use of tailings capacity~~ ~~in excess of an agreed amount, while preserving flexibility for future tailings expansions.~~ ~~The tailings expansionwork began in early 2017 and is now completed.~~ ~~The parties agreed that Hecla would either leave unused at the end~~duration of the lease term, ~~an agreed amount~~commencing on January 1, 2020, from $22.00 per tonne to $11.00 per tonne, however, the per tonne fee reverts back to $22 per tonne for any month in which either of ~~capacity~~the following conditions are met: (1) the Comex daily silver spot closing average price for such month is $20.00 per ounce or greater, or (2) the mill head grade average from the metallurgical balance for such month is 1,000 grams per ton equivalent silver head grade or greater. If either condition is met in any month, Hecla will pay the higher fee of $22.00 per tonne on all amounts processed in the ~~expanded tailings facility, or construct an additional expansion at its cost. In connection with their agreement regarding tailings impoundment expansions,~~oxide plant during such month. The reduced fee only applies to the ~~parties agreed that Hecla had the right to extend~~tonnage-based payments under the lease agreement; the monthly lease payment of $125,000 per month is not affected by the amendment. The latest amendment also extended the notice period for ~~an additional 18 months following June 30, 2017, or until December 31, 2018. On March 24, 2017, Hecla exercised its right to extend the lease until December 31, 2018.~~

On August 2, 2017, we granted Hecla an option to extend the lease for an additional period of up to two years ending no later than December 31, 2020 (the “Extension Period”) in exchange for a $1.0 million cash payment and the purchase of $1.0 million, or approximately 1.8 million shares, of the Company’s common stock issued at par at a price of $0.55 per share (the “Hecla Share Issuance”), based on an undiscounted 30-day volume weighted average stock price. Hecla must exercise the option to extend the lease no later than October 3, 2018. All of the fixed fees and throughput related charges remain the same as under the original lease. Similar volume limitations apply to any required future tailings expansions, which Hecla will fund, leaving unused at the end of the lease term an agreed amount of capacity in the expanded tailings facility. Hecla will have theHecla’s right to terminate the lease ~~during the Extension Period~~ for any reason ~~with~~from 120 ~~days’ notice.~~days notice to 150 days. Hecla ~~will also have~~has a one-time right of first refusal to continue to lease the plant following a termination notice through December 31, 2020 if we decide to use the oxide plant for our own purposes before December 31, 2020.

We expect Hecla ~~is responsible for ongoing operation and maintenance of the oxide plant. During the nine months ended September 30, 2017, Hecla processed approximately 101,000 tonnes of~~to continue to process material through the oxide plant, resulting in total revenues to us of approximately $5.1 million, comprised of approximately $2.2 million for direct plant charges plus fixed fees and other net reimbursable costs totaling approximately $2.9 million. We incurred costs of approximately $1.7 million related to the services we provide under the lease and reported a net operating margin of approximately $3.4 million during the first nine months of 2017. Hecla has been processing material nearslightly below the intended approximately 400 tonnes per day rate during ~~2017. At this rate, we expect~~2020, which would generate a net ~~cash payments~~operating margin to us, net of reimbursable costs, ~~should total~~of approximately ~~$0.4~~$0.6 million to $0.8 million per ~~month, including variable and fixed fees, or nearly $4.5 million annually.~~

~~Santa Maria~~

Since 2015, we have completed test mining and processing of 7,500 tons from the Santa Maria mine west of Hildalgo de Parral, Chihuahua, with average grades 338 gpt silver and 0.7 gpt gold. In March 2017, a preliminary economic

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assessment (“PEA”) was completed on our behalf by the engineering firm Tetra Tech, prepared pursuant to Canadian National Instrument 43-101, based on an updated estimate of mineralized material. The PEA presented a base case assessment of developing Santa Maria’s mineral deposit. The PEA contemplates a 38-month underground mining operation at a mining rate of 200 tonnes per day using a combination of cut and fill and other mining techniques, and custom milling at a local third-party flotation mill. Based on the assumptions in the PEA, we believe there may be potential to develop a small mining operation at Santa Maria.

~~In August 2017, we~~ ~~acquired three additional claims~~ that cover the eastward extension of the Santa Maria vein. The new claims provide a 600 meter potential extension to the strike length of the vein system and add substantial downdip expansion potential. ~~In August 2017, we also commenced a new drill program targeting extensions of the vein deposit described in the PEA and recent estimate of mineralized material~~ ~~with the goal of expanding the existing estimate of mineralized material to improve the overall economics reported in the PEA.~~ ~~Nine~~ holes and approximately 1,900 meters have been drilled to date with mineralized intercepts revealed in completed assay results from the first six holes. A total of twelve holes are planned for the drill program and assay results from the remaining six holes already drilled or planned are expected to be available in the fourth quarter 2017.

~~We have~~quarter. However, because Hecla has the right to ~~acquire~~terminate the ~~Santa Maria property under two separate option agreements representing the total concessions~~lease with 150 days notice, there is no assurance that ~~comprise the property for additional payments of $1.4 million, payable~~these amounts will continue through April 2022. The first option agreement, covering concessions acquired in August 2014, requires an additional approximately $0.7 million be paid to acquire a 100% interest in the concessions related to that option by continuing to make minimum payments of $0.1 in 2018 and $0.2 in each of the years 2019 through 2021.2020. In addition, ~~until~~ the ~~total due under the first option agreement has been paid, the property owners have the right to 50% of any~~actual net ~~profits from mining activities~~operating margin received from the ~~concessions related~~oxide plant may be negatively impacted if interruptions due to COVID-19 persist longer than currently anticipated. Moreover, the ~~option, after reimbursement~~lease permits Hecla to terminate the lease upon ten days notice if Hecla is unable to use the plant due to a government ordered shutdown for a period of all costs incurred by us since April 2015, to the extent that such net profit payments exceed the minimum payments. The second option agreement, covering concessions recently acquired in August 2017, requires an additional approximately $0.7 million be paid to acquire a 100% interest in the concessions related to that option by making additional payments of $0.1 million in 2018 and $0.2 million in each of the years 2019 through 2021.more than 90 continuous days.

El Quevar

~~In September 2017,~~

On April 9, 2020, we~~received~~ entered into the Earn-In Agreement with Barrick, pursuant to which Barrick has acquired an option to earn a ~~permit to dewater~~70% interest in the ~~underground mine workings at our~~Company’s El Quevar ~~silver~~ project located in the Salta ~~Argentina, to evaluate the possibility~~Province of exploration drilling from underground in conjunction with a current project to re-model the existing silver materialized material at the Yaxtché deposit. Based on the previous mineralized material results and using a higher cutoff grade for silver, we are evaluating the potential to define a smaller but higher grade silver material in the core of the previously defined Yaxtché deposit that could be amenable to potentially profitable underground mining and flotation processing.

To date, the Company has received US$1.1 million in refunds of previous valued added tax (“VAT”) payments made in Argentina during 2012 and 2013. The refunds, available through certain provisions in the Argentina Mining Investment Law, have been pending for several years, but were only recently approved for payment by the Argentine tax authority. The added cash allows the Company more flexibility in advancing its exploration projects, particularly at El Quevar.

We continue to hold our El Quevar property on care and maintenance while we conduct the evaluation activities discussed above and remain open to finding a partner to contribute to the funding of further exploration.

~~Rodeo~~

~~During 2016, we completed a 2,080-meter core drilling program at the Rodeo property, approximately 80kilometers west of the Velardeña Properties in Durango Mexico. The results from the program revealed a gold andsilver bearing epithermal vein and breccia system with encouraging gold and silver values over an approximate 50 to70 meter true width. The system is exposed at the top of a northwesterly striking ridge and dips steeply to thenortheast over about one kilometer of strike length. During January 2017, the engineering firm of Tetra Techcompleted an estimate of mineralized material at the Rodeo deposit, prepared pursuant to Canadian NationalInstrument 43-101. We believe this material, as currently identified, could provide additional mined material for ourVelardeña oxide mill following the completion of the Hecla lease, currently set to expire December 31, 2020.~~Argentina.

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~~We have received confirmation of good gold and silver metallurgical recoveries for milled material in initial test work. Bottle roll cyanide leach testing~~Pursuant to the terms of the ~~high-grade samples resulted~~Earn-In Agreement, in ~~gold extractions~~order to earn an undivided 70% interest in the El Quevar project, Barrick must: (A) incur a total of 80$10 million in work expenditures over a total of eight years ($0.5 million per year in years one and two, $1.0 million per year in years three, four and five, and $2.0 million per year in years six, seven and eight); (B) deliver to ~~86 percent. The gold extraction is size dependent with~~ the ~~lowest extraction at~~Company a ~~grind~~National Instrument 43-101 compliant pre-feasibility study pursuant to the parameters set forth in the Earn-In Agreement; and (C) deliver a written notice to exercise the Option to us within the term of ~~100 mesh and~~ the ~~highest extraction at a grind of 200 mesh. Silver extractions ranged from 72 to 76 percent for all tests. The gold and silver readily leached~~Earn-In Agreement. Barrick may withdraw from the ~~samples within 24 hours. Reagent consumption averaged 1.7 kilograms per metric tonne (“kg/mt”) for sodium cyanide~~Earn-In Agreement at any time after spending a minimum of $1.0 million in work expenditures and ~~9.8 kg/mt for lime. Test work also indicates that the material is not suitable for gold and silver recovery by heap leaching.~~upon providing us with 30 days’ notice.

~~In 2017,~~We will form a new entity (“NewCo”) that will hold the El Quevar properties. Upon satisfaction of the earn-in conditions and exercise of the Option, NewCo will be 70% owned by Barrick and 30% owned by us. Funding of NewCo will be based on Barrick’s and our respective ownership and industry standard dilution mechanisms will apply in the case of funding shortfalls by either shareholder.

During the earn-in period, in addition to the exploration spending, Barrick will fund the holding costs of the property, which will qualify as work expenditures. Barrick will reimburse us for expenses related to maintaining the exploration camp which will initially be run by us under a service agreement, which will also qualify as work expenditures.

Rodeo PEA

Rodeo, an open pit gold project within a 1,900-hectare claim located about 80 kilometers west of Velardeña, represents a source of mineralized material that may be processed at Velardeña’s oxide mill once our lease of that mill to Hecla Mining Co. concludes. Hecla currently has the right to use the mill through December 2020.

On April 15, 2020, we announced positive results from a Preliminary Economic Assessment (PEA) for the Rodeo project. The preliminary mine plan included in the PEA contemplates an open pit mining operation with material transported to our facility at the Velardeña property for processing. Daily throughput is estimated to be approximately 480 tonnes per day and estimated mine life is approximately nine quarters (2.25 years). We are planning for mining excavation to be completed using a regional contractor. We intend to provide overall project management and engineering, which includes in-pit technicians that will determine whether material is suitable for process or placement on the waste dump. Our assay lab, located in Velardeña, Durango will be used for the project’s assaying requirements. Our oxide plant at Velardeña, which will be used to process the mined material from Rodeo, is a typical agitated leach plant that can handle up to 550-tpd of throughput. The plant is equipped with a modern doré refinery, and the attached tailings facility recently underwent a major expansion.

We have already begun the process of obtaining the required mining and environmental permits for an open pit mining operation, a process that could take up to one year. We plan to ~~continue~~initiate a small drilling program at Rodeo to ~~evaluate~~provide greater resource definition for a mine plan and to provide samples for additional metallurgical testing. Pending successful procurement of all the ~~economics of mining the deposit using open pit techniques and processing the material at~~necessary permits to operate, production from Rodeo could begin shortly after our ~~Velardeña oxide plant following the termination of the~~ lease of the ~~plant~~Velardeña oxide mill to ~~Minera Hecla.~~Hecla concludes.

~~Celaya Farm-out~~Velardeña PEA

In August 2016, our wholly owned Mexican subsidiary entered into an earn-in agreement with a 100% owned Mexican subsidiary of Electrum Global Holdings, L.P., a privately owned company (together “Electrum”), related to our Celaya exploration property in Mexico. We received an upfront payment of $0.2 million and Electrum agreed to incur exploration expenditures totaling at least $0.5 million within the first year of the agreement, reduced by certain costs Electrum previously incurred on the property since December 2015 in its ongoing surface exploration program. Electrum, at its option, can elect to acquire an undivided 60% interest in a joint venture company to be formed to hold the Celaya project after incurring exploration expenditures totaling $2.5 million during the first three years of the agreement. Electrum would serve as manager of the joint venture. If we elect not to contribute to additional exploration or development expenditures after the initial earn-in period, Electrum, at its option, would have the right to earn an additional 20% interest in the Celaya project, for a total interest of 80%, by incurring an additional $2.5 million of exploration or development expenditures over a second three-year period. Following the second earn-in period we would have the right to maintain our 20% interest or our interest ultimately could be converted into a 10% net profits interest.

Electrum Global Holdings’ Mexican subsidiary, Minera Adularia, has completed 5,600 meters of drilling on the property in seven drill holes in their ongoing drill program. Results to date show intercepts of epithermal quartz vein mineralization with grades for gold, silver, lead and zinc that warrant further drill testing. In three of the seven holes, intercepts of quartz vein material carry gold and silver grades that are within the range of economic interest, if sufficient volumes can be found in a configuration amenable to exploitation.

~~Mogotes~~

~~In September 2017, we began a 1,500 meter drill program on our Mogotes property on the El Mogote claim located 7 kilometers southeast of the town of~~The Velardeña ~~Durango, Mexico. The drill program is planned to test an area of silicification and breccias hosted~~Properties contain two underground mines that were last operated in ~~andesitic volcanic rocks. The altered area is exposed over a strike length of 1.5 kilometers and a width of about 500 meters. The breccias are interpreted to be~~late 2015, at which point mining activities were suspended when a combination of ~~fault breccias~~low metals prices, mining dilution and ~~hydrothermal breccias associated with strong silicification controlled~~metallurgical challenges rendered operations unprofitable. We elected to preserve the asset for future use, and since that time we have evaluated and tested various mining methods and processing alternatives that could enable sustainable profitable operations.

The recent rise in ~~part by a northwest striking southwest dipping normal fault that juxtaposes Tertiary volcanics west~~precious metals prices, the advancement of alternative processing technologies in the industry, and the results of our testing activities prompted us to pursue the preparation of an updated preliminary economic assessment (PEA). On April 2, 2020 we announced positive results from the updated PEA. The updated PEA was prepared to incorporate new and updated elements of the ~~fault against Cretaceous limestone east~~project database, mine plan and processing plan, most notably the inclusion of ~~the fault. The altered area has a strong geochemical signature of widespread anomalously high arsenic and antimony with erratic values~~bio-oxidation treatment of gold upconcentrates. In late 2019, we obtained successful results from testing Velardeña gold concentrate material using Finnish firm Outotec’s “BIOX” process, a unique and sustainable technology that was developed to ~~1.8 ppm~~pre-treat refractory ores and concentrates ahead of conventional cyanide leaching. The gold in these types of mineralized materials, such as those found at Velardeña, is encapsulated in pyrite and arsenopyrite which prevents the gold from ~~surface rock samples.~~

~~We plan~~being successfully cyanide leached. BIOX utilizes bacteria to ~~drill at least seven holes totaling 1,700 meters in this initial test~~oxidize these sulfide minerals, thereby exposing the gold for subsequent cyanide leaching and increasing overall gold recoveries. The 2019 BIOX testing of the Mogotes East target. Five holes totaling 1,500 meters have already been drilled with assay results pending. The Company is targeting veins and breccias that may be associated with the exposed hydrothermal alteration and anomalous geochemistry, and expects to encounter sulfide mineralization at depths of less than 200 meters below surface.

~~The Mogotes property was purchased from Silver Standard Resources in 2015 and is wholly owned by one of Golden Minerals’ Mexican subsidiaries, subject to~~ Velardeña ~~2 percent Net Smelter Return royalty to Silver Standard and a pre-existing finder’s fee agreement (2 percent of direct exploration and development expenditures, capped at $365,000).~~

~~Other Exploration~~

In October 2017 we acquired the right to purchase claims covering the Yoquivo District, Ocampo Municipality, Chihuahua through an option agreement. The Yoquivo District is a past producing, bonanza grade epithermal vein gold and silver district located 35 kilometers southeast of the Ocampo Mining District. We have the right to purchase six claims totaling 1,906 hectares for payment of $0.5 million over four years plus outstanding claim taxes totaling approximatelymaterial

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~~$0.1 million.~~ achieved gold recoveries of 92% from the pyrite-arsenopyrite concentrate, compared to sub-30% gold recoveries realized when the Velardeña Properties last operated in 2015. In the coming months, we plan to continue to optimize the mine plan and processing details in preparation for future test-mining and processing in advance of establishing a definite schedule for restarting commercial production at the Velardeña mines and the installation of the bio-oxidation circuit. No ~~cash payments to~~development decision has been made regarding a potential restart of the ~~owner are due until~~Velardeña mines.

Sand Canyon

During the second ~~anniversary of the agreement. The owner retains a two percent net smelter return royalty capped at $2.0 million.~~

~~In April 2016,~~quarter 2019 we entered into an earn-in agreement with Golden Gryphon Explorations for the Sand Canyon project located in northwestern Nevada, where surface work has identified a large system of epithermal veins with potential for gold and silver deposits. We hold an option ~~agreement under which Santacruz Silver Mining Ltd. may acquire our~~to earn a 60% interest in ~~certain nonstrategic mineral claims located in~~ the ~~Zacatecas Mining District, Zacatecas, Mexico for a series of payments totaling $1.5 million. Santacruz paid the Company $0.2 million on signing the agreement and additional payments of $0.2~~Sand Canyon project by spending $2.5 million in October 2016, $0.3 million in May 2017 and one half of the October 2017 installment of $0.3 million. To maintain its option and acquire the Zacatecas Properties, Santacruz is required to pay the remaining one half of $0.3 million already due in October 2017 and the final amountexploration expenses over four years, with guaranteed minimum expenditures of $0.5 million ~~due~~ in ~~April 2018. Santacruz~~year one. To continue to earn interest in the project, we must spend at least $0.75 million in each of years two and three and $0.5 million in year four, and drill at least 5,000 feet of core or 10,000 feet of reverse circulation or a combination of the two, by the end of the second year. We paid $25,000 cash and $50,000 in reimbursed exploration expenditures to acquire the option and will make staged payments of a total additional $135,000 ($35,000 in 2020, $50,000 in 2021 and $50,000 in 2022) over the next three anniversaries of the agreement.

We completed surface exploration activities on the project in late 2019, including mapping and geochemical sampling to identify drill targets. Based on this work and after securing drill permits, we initiated a drill program in the first quarter 2020. In March we completed the initial drill program of approximately 1800 meters in 4 diamond drill holes. The drill holes were placed to target surface geochemical and geophysical anomalies associated with epithermal veining observed in outcrops. Drill samples have been submitted for assay and results are pending. In the first year of exploration at Sand Canyon, Golden spent $1.6 million toward the $2.5 million earn-in requirement, fulfilling the first and second year minimum expenditures and the minimum drill commitment.

Yoquivo

The Yoquivo property was ~~not able~~acquired in 2017 and with the recent additional acquisition of a claim internal to ~~make~~ the ~~full~~exterior boundary the project consists of 1,975 hectares in 7 claims that cover an epithermal vein district hosted in Tertiary andesitic volcanic rocks that is exposed in an erosional window through Oligocene rhyolite on the eastern margin of the Sierra Madre Occidental of northern Mexico. The property is 200 km SW of Chihuahua city in the state of Chihuahua, Mexico. Recent surface rock sampling has demonstrated gold and silver values of potential economic interest in several of the veins in the district. We have an option to purchase the six concessions that comprise the Yoquivo property for payments totaling $0.75 million over four years subject to a 2% to 3% NSR royalty on production, capped at $2.8 million.

In October ~~2017 payment as scheduled ad~~2018 we announced high-grade silver-gold assays from the Yoquivo project. Multiple silver-gold bearing epithermal veins were mapped and sampled, with the two most important veins being the San Francisco and Pertenencia veins. A new vein, the La Nina vein, was discovered in the northwest of the property where it splits off from the main San Francisco vein. Two other veins, the Esperanza and El Dolar veins have been identified and sampled. Based on sampling and mapping we have ~~granted Santacruz~~identified the most attractive targets on the property and have permits in hand to initiate the drill program. Subject to the availability of capital, we intend to begin a drill program in 2021 to test the most promising portions of the veins.

Offering and private placement transaction

On April 20, 2020, we entered into a securities purchase agreement with certain institutional investors providing for the issuance and sale of 15,000,000 shares of our common stock at a price of $0.20 per share, and in a concurrent private placement transaction, the issuance of 11,250,000 warrants, ultimately consisting of 7,500,000 series A warrants and 3,750,000 series B warrants, to purchase up to 11,250,000 shares of our common stock at an ~~extension~~exercise price of ~~time~~$0.30 per share, for aggregate gross proceeds of $3.0 million. The securities purchase agreement contains customary representations, warranties and covenants, in addition to ~~make~~granting the ~~payment. Santacruz has~~investors the right to ~~terminate~~collectively participate in up to 50% of any future offerings of securities by the ~~option agreement at any time,~~Company on the same terms as other investors, other than certain “exempt issuances” and “permitted sales” as defined therein, until the ~~agreement could be terminated, at our option, if Santacruz fails to make subsequent payments when due.~~first anniversary of the closing date of the Offering.

~~Sale~~Each Warrant is exercisable six months from the date of ~~Mining Equipment~~issuance and has a term expiring five years after such initial exercise date. The Warrants contain so-called full-ratchet anti-dilution provisions which may be triggered upon any future

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issuance by the Company of shares of its common stock or common stock equivalents at a per share price below the then-exercise price of the Warrant, subject to certain exceptions; provided, however, that with respect to the Series B warrants, the adjusted exercise price will not be less than $0.26.

~~In August 2016, we sold certain mining equipment consisting~~Total costs for the Offering were approximately $250,000, including the placement agent fee of two haul trucks, two scoop trams and a compressor to Minera Indé, an indirect subsidiary of Sentient, a related party, for $687,000. The equipment sold was excess equipment held at our Velardeña Properties that we did not expect to use. We used a third party consultant with experience in the used mining equipment market in Mexico to determine a fair value. We believe the price paid was at least equal to the fair market valuesix percent of the ~~equipment had it been sold through auction~~aggregate gross proceeds, except, however, that a reduced fee was accepted with respect to one investor. In connection with the Offering, the Company, its directors, executive officers, and certain stockholders, subject to certain exceptions, may not to sell or intransfer any shares of common stock or securities convertible into, or exchangeable or exercisable for, the ~~open market. We received 10%~~Company’s shares of ~~the sales price at~~common stock during a period ending 90 days after the closing of the ~~sale in August, with~~Offering, without first obtaining the ~~additional 90%, plus interest on the unpaid balance at an annual rate of 10%, due in February 2017.~~

~~With the approval of a Special Committee~~written consent of the placement agent. This includes the Company’s Board of Directors, the Company and Minera Indé amended the original equipment sale on March 31, 2017 to include the sale of an additional piece of excess equipment for $185,000 and extend the time for payment relating to the original equipment sale. Upon executionuse of the ~~amendment,~~LPC Program and the Company received an additional payment of $100,000. The remaining principal and interest balance, plus additional interest on the unpaid balance at an annual rate of 10%, was amended to be due in August 2017. On May 2, 2017, we received approximately $750,000 from Minera Indé as payment in full for the remaining balance due related to the equipment sale, including interest through that date. ATM Program.

Financial Results of Operations

For the results of continuing operations discussed below, we compare the results from operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 to the results from operations for the three ~~and nine~~ months ended ~~September 30, 2016.~~March 31, 2019.

Three Months Ended ~~September 30, 2017~~March 31, 2020

Revenue from oxide plant lease. We recorded revenue of ~~$1.8~~$1.2 million and ~~$1.7~~$1.9 million during ~~the three months~~three-month periods ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, respectively, related to the lease of our Velardeña oxide plant to a third party. The decrease in revenue during 2020 is primarily related to a reduction in the per tonne processing fees during the period relating to an amendment of the Hecla lease as discussed in Note 20 in the accompanying financial statements.

Oxide plant lease costs. We recorded $0.6 million ~~and $0.5 million~~ of costs related to the oxide plant lease during each of the three-month periods ended ~~September 30, 2017~~March 31, 2020 and ~~2016, respectively.~~2019. The costs consist primarily of reimbursable labor and utility costs which for accounting purposes are also included in revenue from the oxide plant lease.

Exploration expense. Our exploration expense, including work at the ~~Santa Maria, Rodeo~~Sand Canyon and ~~Mogotes~~other properties, property holding costs and allocated administrative expenses, totaled ~~$1.0~~$1.6 million ~~for the three months ended September 30, 2017, as compared to~~and $0.9 million for the three months ended ~~September 30, 2016.~~March 31, 2020 and March 31, 2019, respectively. The increase in exploration expense for 2020 is primarily related to a drilling program at our Sand Canyon project in Nevada. Exploration expense for ~~both years~~2019 was incurred primarily in Mexico. ~~The higher exploration expenses in 2017 are primarily related to drilling activity and property acquisition payments occurring at the Santa Maria property, Mogotes and other properties.~~

Velardeña ~~shutdown and~~ care and maintenance costs. We recorded ~~$0.4 million and~~ $0.5 million for each of the three ~~months~~month periods ended ~~September 30, 2017~~March 31, 2020 and ~~2016, respectively,~~2019, for expenses related to ~~shut down and~~ care and maintenance at our Velardeña Properties as the result of the suspension of mining and processing activities in November 2015.

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El Quevar project expense. ~~During~~For the three months ended ~~September 30, 2017~~March 31, 2020 we incurred $0.2 million ~~primarily~~ related to holding and evaluation costs for the Yaxtché deposit at our El Quevar project in Argentina. ~~During~~For the three months ended ~~September 30, 2016~~March 31, 2019 we ~~recorded net negative expense of approximately $0.1~~incurred $0.3 million ~~primarily related to a reversal of an accrual for Argentina equity tax recorded during the 2015 period resulting from an audit of certain prior years.~~in expenditures.

Administrative expense. Administrative expenses totaled ~~$0.7~~$1.2 million for the three months ended ~~September 30, 2017 compared to $0.9 million for the three months ended September 30, 2016.~~March 31, 2020. Administrative expenses, including costs associated with being a public company, are incurred primarily by our corporate activities in support of the Velardeña Properties, El Quevar project and our exploration portfolio. The ~~$0.7~~$1.2 million of administrative expenses we incurred during the ~~third quarter 2017~~three months of 2020 is comprised of ~~$0.4~~$0.3 million of employee compensation and directors’ fees, ~~$0.1~~$0.5 million of professional fees and ~~$0.2~~$0.4 million of insurance, rents, travel expenses, utilities and other office costs. Administrative expenses totaled $1.1 million for the three months ended March 31, 2019. The ~~$0.9~~$1.1 million of administrative expenses we incurred during the ~~third quarter 2016~~three months of 2019 is comprised of ~~$0.4~~$0.3 million of employee compensation and directors’ fees, ~~$0.3~~$0.4 million of professional fees and ~~$0.2~~$0.4 million of insurance, rents, travel expenses, utilities and other office costs.

Stock based compensation. During the three months ended ~~September 30, 2017 and 2016~~March 31, 2020 we incurred ~~a nominal reduction to expense and~~ approximately ~~$0.5~~$0.1 million of expense ~~respectively,~~ related to ~~stock based~~stock-based compensation. During the three months ended March 31, 2019 we recorded approximately $0.6 million of stock-based compensation. Stock based compensation varies from period to period depending on the number and timing of shares granted, the type of grant, the market value of the shares on the date of grant and other variables. The ~~2017 and 2016 third quarter stock based~~2019 stock-based compensation ~~amounts include $0.1 million reduction to~~includes expense ~~and $0.4 million of expense, respectively,~~ related to KELTIP grants made to two officers ~~(see Note 14 to~~during the ~~consolidated financial statements filed as part~~period, no such grants were made during the 2020 period.

Table of ~~this Form 10-Q for a discussion of KELTIP grants). The 2017 reduction to expense resulted from marking-to-market the outstanding KELTIP grants.~~Contents

Reclamation and accretion expense. During each of the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 we incurred approximately ~~$49,000 and $47,000~~$59,000 of reclamation expense ~~respectively,~~ related to the accretion of an asset retirement obligation at the Velardeña Properties.

Other operating income, net. We recorded ~~$1.0 million and $1.3~~a nominal amount of other operating income for the three months ended March 31, 2020, related to the sale of an asset in Mexico. We recorded $0.1 million of other operating income for the three months ended ~~September 30, 2017~~March 31, 2019, related primarily to an adjustment to the estimated asset retirement obligation at our Velardeña Properties and 2016, respectively. The net amount for the 2017 period consists primarily of a refund of value added tax from Argentina (see Note 7). The net amount for the 2016 period consists primarily of net gains related to the sale of ~~certain assets and non-strategic exploration properties.~~surplus equipment in Argentina.

Depreciation, depletion and amortization. During each of the ~~three months~~three-month periods ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~March 31, 2019 we incurred depreciation, depletion and amortization expense of ~~$0.1 million and~~approximately $0.3 million, respectively. The decrease in depreciation, depletion and amortization expense during the 2017 period is primarily the result of certain equipment at our Velardeña Properties having been fully depreciated.million.

Interest and other ~~income.~~expense, net. We recorded a nominal amount of interest and other ~~income~~expense, net for the three months ended ~~September 30, 2017 and 2016 respectively,~~March 31, 2020, primarily related to ~~cash balances held in banks.~~

~~Warrant derivative (loss) gain.~~ ~~During~~a refundable deposit due to Autlán. We recorded $0.1 million of interest and other expense, net for the three months ended ~~September 30, 2016 we recorded a loss of approximately $0.5 million~~March 31, 2019, primarily related to ~~an increase in~~ the ~~fair value~~mark-to-market of ~~the liability recorded for warrants to acquire the Company’s~~certain common stock ~~(see Note 12 of our consolidated financial statements filed as part of this Form 10-Q). We did not record any warrant derivative gains or losses during 2017 following~~we owned in a change in accounting principle and the subsequent reclassification of the warrant liabilities to equity retroactively to the beginning of 2017 (see Note 3 to the consolidated financial statements filed as part of this Form 10-Q).junior mining company.

Gain (Loss) on foreign currency. We recorded a nominal foreign currency loss ~~and gain~~ for both the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016 respectively.~~March 31, 2019. Foreign currency gains and losses are primarily related to the effect of currency fluctuations on monetary assets net of liabilities held by our foreign subsidiaries that are denominated in currencies other than US dollars.

Income taxes. We recorded no income tax expense or benefit for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~September 30, 2016.~~

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~~Nine Months Ended September 30, 2017~~

~~Revenue from oxide plant lease.~~ ~~We recorded revenue of $5.1 million and $4.8 million during the nine months ended September 30, 2017 and 2016, respectively, related to the lease of our Velardeña oxide plant to a third party.~~

~~Oxide plant lease costs.~~ We recorded $1.7 million and $1.5 million of costs related to the oxide plant lease during the nine month periods ended September 30, 2017 and 2016, respectively. The costs consist primarily of reimbursable labor and utility costs which for accounting purposes are also included in revenue from the oxide plant lease.

~~Exploration Expense.~~ Our exploration expense, including work at the Santa Maria and Rodeo properties, property holding costs and allocated administrative expenses, totaled $2.0 million for the nine months ended September 30, 2017, as compared to $2.9 million for the nine months ended September 30, 2016. Exploration expense for both years was incurred primarily in Mexico. The higher exploration expenses in 2016 are primarily related to test mining activity occurring at the Santa Maria property in 2016 and drilling at the San Luis del Cordero property.

~~Velardeña shutdown and care and maintenance costs~~. We recorded $1.1 million and $1.6 million for the nine months ended September 30, 2017 and 2016, respectively, for expenses related to shut down and care and maintenance at our Velardeña Properties as the result of the suspension of mining and processing activities in November 2015. The 2016 expense included certain one-time repair and maintenance costs associated with the plant shut down.

~~El Quevar project expense.~~ During the nine months ended September 30, 2017 and 2016 we incurred $0.5 million and $0.3 million, respectively, primarily related to holding costs for the Yaxtché deposit at our El Quevar project in Argentina. The amount for the 2017 period is higher than the same period in 2016 due to an increase in evaluation activities at the El Quevar project, as discussed above.

~~Administrative expense.~~ Administrative expenses totaled $2.6 million for the nine months ended September 30, 2017 compared to $3.1 million for the nine months ended September 30, 2016. Administrative expenses, including costs associated with being a public company, are incurred primarily by our corporate activities in support of the Velardeña Properties, El Quevar project and our exploration portfolio. The $2.6 million of administrative expenses we incurred during the nine months ended September 30, 2017 is comprised of $1.1 million of employee compensation and directors’ fees, $0.7 million of professional fees and $0.8 million of insurance, rents, travel expenses, utilities and other office costs. The $3.1 million of administrative expenses we incurred during the nine months ended September 30, 2016 is comprised of $1.1 million of employee compensation and directors’ fees, $1.2 million of professional fees and $0.8 million of insurance, rents, travel expenses, utilities and other office costs.

~~Stock based compensation.~~ During the nine months ended September 30, 2017 we incurred $0.3 million of expense related to stock based compensation compared to $0.7 million for nine months ended September 30, 2016. Stock based compensation varies from period to period depending on the number and timing of shares granted, the type of grant, the market value of the shares on the date of grant and other variables. The 2017 and 2016 nine-month stock based compensation amounts include $0.2 million and $0.4 million, respectively, related to KELTIP grants made to two officers (see Note 14 to the consolidated financial statements filed as part of this Form 10-Q for a discussion of KELTIP grants).

~~Reclamation and accretion expense.~~ During each of the nine months ended September 30, 2017 and 2016 we incurred approximately $0.1 million of reclamation expense related to the accretion of an asset retirement obligation at the Velardeña Properties.

~~Other operating income, net.~~ We recorded $1.8 million and $1.6 million of other operating income for the nine months ended September 30, 2017 and 2016, respectively. The net amount for the 2017 period consists primarily of a refund of value added tax from Argentina (see Note 7 to the consolidated financial statements filed as part of this Form 10-Q), net gains related to the sale of equipment to Minera Indé, discussed above, a gain related to the reduction of the asset retirement obligation liability at our Velardeña Properties and the sale of certain assets and non-strategic exploration properties. The net amount for the 2016 period is primarily related to the sale of certain assets and non-strategic exploration properties.

~~Depreciation, depletion and amortization.~~ During the nine months ended September 30, 2017 we incurred depreciation, depletion and amortization expense of $0.5 million compared to $1.3 million for the nine months ended September 30, 2016. The decrease in depreciation, depletion and amortization expense during the 2017 period is primarily the result of certain equipment at our Velardeña Properties having been fully depreciated.

March 31,

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~~Interest and other income.~~ We recorded a nominal amount of interest and other income for the nine months ended September 30, 2017, including accrued interest related to the sale of equipment to Minera Indé, discussed above. During the nine months ended September 30, 2016 we recorded only a nominal amount of interest and other income primarily related to cash balances held in banks.

~~Warrant derivative (loss) gain.~~ During the nine months ended September 30, 2016 we recorded a loss of approximately $2.8 million related to an increase in the fair value of the liability recorded for warrants to acquire the Company’s common stock (see Note 12 of our consolidated financial statements filed as part of this Form 10-Q). We did not record any warrant derivative gains or losses during 2017 following a change in accounting principle and the subsequent reclassification of the warrant liabilities to equity retroactively to the beginning of 2017 (see Note 3 to the consolidated financial statements filed as part of this Form 10-Q).

~~Derivative loss.~~ For the nine months ended September 30, 2016 we recorded a $0.8 million loss related to the fair value adjustment to the beneficial conversion feature of the Sentient Note, which constitutes an imbedded derivative (see Note 12 of our consolidated financial statements filed as part of this Form 10-Q). There were no such amounts recorded for the nine months ended September 30, 2017 as the Sentient Note was fully converted and no longer outstanding as of September 30, 2016.

~~Loss on foreign currency.~~ We recorded a nominal foreign currency loss and a $0.1 million foreign currency loss for the nine months ended September 30, 2017 and 2016 respectively. Foreign currency gains and losses are primarily related to the effect of currency fluctuations on monetary assets net of liabilities held by our foreign subsidiaries that are denominated in currencies other than US dollars.

~~Income taxes.~~ We recorded no income tax expense or benefit for the nine months ended September 30, 2017. We recorded a nominal income tax benefit for the nine months ended September 30, 2016 related to mark-to-market held for sale investment gains recorded as other comprehensive income. 2019.

Liquidity, Capital Resources and Going Concern

At ~~September 30, 2017,~~March 31, 2020, our aggregate cash and cash equivalents totaled ~~$5.0~~$2.2 million, ~~$2.4 million greater than~~compared to the ~~$2.6~~$4.6 million in similar assets held at December 31, ~~2016.~~2019. The ~~net increase~~March 31, 2020 balance is due in part from the following expenditures and cash inflows for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2020. Expenditures totaled ~~$6.2~~$4.4 million from the following:

$~~2.0~~1.6 million in exploration expenditures, including work at ~~the Santa Maria, Mogotes~~Rodeo, Sand Canyon and ~~Rodeo~~other properties;

$~~1.1~~0.5 million in care and maintenance costs at the Velardeña Properties;

$~~0.5~~0.2 million in exploration and evaluation activities, care and maintenance and property holding costs at the El Quevar project;

$1.2 million in general and administrative expenses; and

$~~2.6~~0.3 million in ~~general~~Canadian income tax payments (Note 18), $0.4 million related to the remittance of value added taxes in Mexico collected in the fourth quarter 2019, and ~~administrative expenses.~~$0.2 million related to a working capital increase primarily from a reduction of accounts payable and other accrued liabilities.

The foregoing expenditures were offset by cash inflows of ~~$8.6~~$2.0 million from the following:

$~~3.4~~1.0 million in an unsecured loan received from a related party (Note 14);

$0.6 million of net operating margin received pursuant to the oxide plant lease (defined as oxide plant lease revenue less oxide plant lease costs);

~~$1.9 million from Hecla comprised of $1.0 million for an~~ option to extend the oxide plant lease for an additional period of up to two years and $1.0 million for the purchase 1.8 million shares of the Company’s common stock issued at a price of $0.55 per share, less $0.1 million in legal and stock exchange issuance costs;

~~$1.1 million~~ ~~in refunds of previous VAT payments made in Argentina during 2012 and 2013~~;

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~~$0.8 million from final payments related to the sale of excess mining equipment to Minera Indé;~~

~~$0.7 million of net proceeds received from the issuance of our common stock under the ATM Program;~~

~~$0.3 million from the farm out of certain nonstrategic mineral claims to Santacruz;~~

~~$0.2 million of net proceeds from the sale of other nonstrategic exploration properties and mining equipment;~~ and

$~~0.2~~0.4 million, net of commitment fees and other offering related costs, from ~~a decrease~~the LPC Program and the ATM Program (as described in ~~working capital.~~Note 19).

In addition to ~~our $5.0~~the $2.2 million cash balance at ~~September 30, 2017,~~March 31, 2020, in April 2020 we entered into an earn-in agreement with Barrick and received $0.9 million, net of transaction costs, related to a private placement transaction whereby Barrick

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received approximately 4.7 million shares of our common stock (see Note 26). Also, in April 2020, we closed on an equity offering and private placement (see Note 26), which resulted in the receipt of approximately $2.8 million in proceeds, net of transaction costs. We also expect to receive an additional approximately ~~$4.6~~$2.1 million in net operating margin from the lease of the oxide plant ~~and $0.8~~through the end of 2020. Our budgeted expenditures totaling approximately $9.0 million from the aforementioned exploration property farm out during the next twelve month period ending September 30, 2018. With the transactions referred to above and if no additional sales of common stock under the ATM Program occur, we project we would end 2017 with a cash balance of approximately $3.5 million and end September 30, 2018 with a cash balance of approximately $2.5 million based on the following forecasted expenditures during the next twelve months ending ~~September 30, 2018:~~March 31, 2021 are as follows:

Approximately ~~$2.0~~$2.2 million on evaluation activities, exploration ~~activities~~ and property holding costs related to our portfolio of exploration properties located ~~primarily~~ in Mexico, Nevada and Argentina, including ~~project assessment and evaluation~~ costs ~~relating to Santa Maria,~~at Rodeo, ~~Mogotes~~El Quevar, Sand Canyon, Yoquivo and other properties;

Approximately $1.5 million at the Velardeña Properties for care and maintenance;

$1.0 million related to the repayment of a related party loan (Note 14);

Approximately ~~$1.0~~$0.7 million atfor repayment of the ~~El Quevar project~~Autlán deposit according to ~~fund ongoing exploration~~the terms of the Agreement (as described in Note 15);

Approximately $3.1 million on general and ~~evaluation activities, care and maintenance and property holding~~administrative costs; and

Approximately ~~$3.4~~$0.5 million ~~on general~~related to a decrease in accounts payable and ~~administrative costs.~~other accrued liabilities.

Our currently budgeted expenditures of approximately $9.0 million are greater than the cash resources of $8.0 million that are expected to be available during the period. Therefore, during the remainder of 2020 and through March 31, 2021, we will take appropriate actions, which may include sales of certain of our exploration assets, reductions to our currently budgeted level of spending, and/or raising additional equity capital through sales under the ATM Program, the LPC Program or otherwise. There are currently 8.1 million shares and 12.2 million shares remaining available for issuance under the ATM Program and LPC Program, respectively.

The actual amount of cash ~~that we receive or the~~ expenditures that we incur during the ~~remainder of 2017 and the first three quarters of 2018 and the projected cash balances at December~~twelve-month period ending March 31, ~~2017 and September 30, 2018~~2021 may vary significantly from the amounts specified above and will depend on a number of factors, including variations from anticipated care and maintenance costs at the Velardeña Properties and costs for continued exploration, project assessment, and development at our other exploration properties, including ~~Santa Maria, Mogotes, Rodeo and~~ El Quevar. ~~Moreover, if revenues~~Likewise, the actual amount of cash receipts that we receive during the period may vary significantly from ~~our~~the amounts specified above due to, among other things, a decrease in the quantity of material processed under the oxide plant lease or ~~payments from~~an unexpected early termination of the ~~exploration farm out agreement~~oxide plant lease by the lessee. If cash expenditures are greater than anticipated or if cash receipts are less than anticipated, we ~~may reduce our planned expenditures accordingly.~~would need to take more aggressive actions to maintain sufficient cash balances over the next twelve months.

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

There can be no assurance that we will be successful in generating future profitable operations or securing additional funding in the future on terms acceptable to us or at all. We believe the cash on hand, the continuing cash flow from the lease of the oxide plant, use of the ATM Program and ~~prior~~the LPC Program, and the potential for additional asset dispositions make it probable that we will have sufficient cash to meet our financial obligations and continue our business strategy beyond one year from the filing of our consolidated financial statements for the period ended ~~September 30, 2017.~~ March 31, 2020.

Recent Accounting Pronouncements

~~In July 2017,~~During the ~~FASB issued~~first quarter 2020 we adopted ASU ~~2017-11,~~ “~~Earnings Per Share~~No. 2016-13, “Financial Instruments - Credit Losses (Topic ~~260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815)~~326): ~~(Part 1) Accounting for Certain~~Measurement of Credit Losses on Financial ~~Instruments with Down Round Features, (Part II) Replacement~~Instruments” (“ASU 2016-13”). ASU 2016-13 modifies the impairment model to utilize an expected loss methodology in place of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Non public Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception” (“ASU 2017-11”). Part I relates tocurrently used incurred loss methodology, which will result in the accounting for certain financial instruments with down round features in Subtopic 815-40, which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception

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~~from derivative accounting. Down round features are features~~more timely recognition of ~~certain equity-linked instruments (or embedded features) that~~losses. As our principle credit risk is related to its Lease Receivables the adoption of this update did not result in ~~the strike price being reduced based~~a material impact on the pricing of future equity offerings. An entity still is required to determine whether instruments would be classified as equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities. For us, ASU 2017-11 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted, including in an interim period. We early adopted ASU 2017-11 during the interim period ended September 30, 2017 (see Note 3 of our consolidated financial ~~statements filed as part~~position or results of ~~this Form 10-Q).~~operations.

~~In March 2016,~~During the ~~FASB issued~~first quarter 2019 we adopted ASU ~~2016-08,~~ “~~Revenue from Contracts with Customers~~2016-02, “Leases (Topic ~~606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)~~842)” (“ASU ~~2016-08”~~2016-02”)~~, which clarifies principal versus agent when another party, along with the entity, is involved in providing a good or service to a customer. Topic 606,~~

~~In February 2016, the FASB issued~~ and ASU ~~2016-02, “Leases”~~No. 2018-11 “Leases (Topic 842)” (“ASU ~~2016-02”~~2018-11”), which will require lessees to recognize a right-of-use asset and a lease liability for all leases ~~that are not short-term~~with terms greater than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in ~~nature.~~ the income statement. For a lessor, the accounting applied is ~~also~~ largely unchanged from previous guidance. ~~The new rules will be effective for us~~We currently lease administrative offices in the ~~first quarter of 2019. We do not anticipate early adoption. We do not expect the adoption of ASU 2016-02 to materially change the amounts related to leases~~U.S. and in several foreign locations under lease agreements that are currently recorded as none of its operating leases are material and therefore we do not expect the adoption to have a material impact on our consolidated financial position or results of operations.

In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”), which amended its standards related to the accounting of certain financial instruments. This amendment addresses certain aspects of recognition, measurement, presentation and disclosure. Specifically, available for sale investments will not run through other comprehensive income. The new rules will become effective for annual and interim periods beginning after December 15, 2017. Early adoption is not permitted. We are in the process of evaluating the impact the amendment will have on our consolidated financial position or results of operations.

In May 2014, FASB and the International Accounting Standards Board issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In addition, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing and uncertainty of revenue that is recognized and the related cash flows. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017; early adoption is not permitted. ASU 2014-09 was originally effective December 15, 2016 but ASU 2015-14 deferred the effective date bytypically exceed one year. As our current accounting practices per the guidance of ASU 2014-09 are comparable to the requirements of ASU 2014-09, we do not expect the adoption of this update to result in a material impact to our consolidated financial position or results of operations.

Forward-Looking Statements

Some information contained in or incorporated by reference into this Quarterly Report on Form 10-Q may contain forward-looking statements. These statements include comments relating to our plans, expectations and assumptions concerning the Velardeña oxide plant lease, including the expected term, anticipated revenues, and potential future tailings expansion; the El Quevar project, including assumptions and projections contained in the El Quevar PEA, the timing of results from the current drilling program and our plans regarding further advancement of the project; the Santa Maria property, includingthe ~~PEA results (including life of mine~~assumptions and ~~production expectations)~~projections contained in the updated Santa Maria PEA, and other expectations regarding the project; the Yoquivo project, including future drilling plans ~~timing~~and exploration activities; anticipated income from the use of ~~initial drill results, expansion potential for the existing deposit~~our ATM Program and ~~general cost expectations; the Rodeo property, including~~ ~~the Company's general evaluation plans and cost expectations~~; the Celaya property, including farm-out terms and possible future drill testing; the Mogotes property, including future drilling plans and evaluation activities; the El Quevar project, including timing and expectations of evaluation activities;LPC Program; our financial outlook for the remainder of ~~2017 and through the end of the third quarter 2018,~~2020, including anticipated income and ~~expenditures during those periods;~~expenditures; expected need for external financing and statements concerning our financial condition, business strategies and business and legal risks.

The use of any of the words “anticipate,” “continues,” “likely,” “estimate,” “expect,” “may,” “will,” “project,” “should,” “could,” “believe” and similar expressions are intended to identify uncertainties. We believe the expectations reflected in those forward-looking statements are reasonable. However, we cannot assure that these expectations will prove to be correct. Actual results could differ materially from those anticipated in these forward-looking statements as a result of the factors set forth below and other factors set forth in, or incorporated by reference into this report:

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Timing duration and overall impact of the COVID-19 pandemic;

Lower revenue than anticipated from the oxide lease, which could result from delays or problems at the third party’s mine or at the oxide plant (including but not limited to the temporary shutdown of mining activities in Mexico), permitting problems at the third party’s mine or the oxide plant, delays in constructing additional tailings capacity at the oxide plant, earlier than expected termination of the lease or other ~~causes~~;causes;

Timing and duration of the suspension of mining activities at the Velardeña Properties (including operations at the oxide plant lease) in compliance with the recent directive of the Mexican Federal Government due to the COVID-19 pandemic;

Higher than anticipated care and maintenance costs at the Velardeña Properties in Mexico or at El Quevar in ~~Argentina~~Argentina;

Failure to negotiate an extension of the option period related to the option agreement for the sale of our Santa Maria property and failure to receive the initial cash payment of $1.0 million upon exercise of that option;

~~Continued decreases or insufficient increases~~Risks related to the El Quevar project in ~~silver~~Argentina, including unfavorable results from our evaluation activities and ~~gold prices~~;whether the option with respect to the El Quevar project is exercised pursuant to the terms of the Earn-In Agreement;

Decreases or insufficient increases in silver and gold prices;

Whether we are able to raise the necessary capital required to continue our business on terms acceptable to us or at all, and the likely negative effect of continued low silver and gold prices or unfavorable exploration ~~results~~;results;

Unfavorable results from exploration at the Santa Maria, ~~Rodeo, Mogotes~~Yoquivo, Sand Canyon or other exploration properties and whether we will be able to advance these or other exploration properties;

~~Risks related to~~The Rodeo project, including assumptions and projections contained in the ~~El Quevar project in Argentina, including unfavorable results from~~Rodeo PEA (including life of mine and production expectations), and our ~~evaluation activities,~~plans regarding further advancement of the ~~feasibility and economic viability and unexpected costs of maintaining the project, and whether we will be able to find a joint venture partner to further advance the project~~;project;

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Variations in the nature, quality and quantity of any mineral deposits that are or may be located at the Velardeña Properties or ~~the Company’s~~our exploration properties, changes in interpretations of geological information, and unfavorable results of metallurgical and other ~~tests~~;tests;

Whether we will be able to mine and sell minerals successfully or profitably at any of our current properties at current or future silver and gold prices and achieve our objective of becoming a mid-tier mining ~~company~~; company;

Potential delays in our exploration activities or other activities to advance properties towards mining resulting from environmental consents or permitting delays or problems, accidents, problems with contractors, disputes under agreements related to exploration properties, unanticipated costs and other unexpected events;

Our ability to retain key management and mining personnel necessary to successfully operate and grow our business;

Economic and political events affecting the market prices for gold, silver, zinc, lead and other minerals that may be found on our exploration properties;

Political and economic instability in Mexico, Argentina, and other countries in which we conduct our business and future actions of any of these governments with respect to nationalization of natural resources or other changes in mining or taxation policies;

Volatility in the market price of our common stock; and

The factors discussed under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2016 and item 1A of this Report on Form 10-Q.~~2019.

Many of these factors are beyond our ability to control or predict. You should not unduly rely on these forward-looking statements. These statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we are not obligated to publicly release any revisions to these forward-looking statements to reflect future events or developments.

Cautionary Statement Regarding Mineralized Material

“Mineralized material” as used in this Quarterly Report on Form 10-Q, although permissible under the SEC Industry Guide 7, does not indicate “reserves” by SEC standards. We cannot be certain that any deposits at the El Quevar, the Velardeña Properties, the Santa Maria properties or the Rodeo ~~properties~~property or any deposits at our other exploration properties, will ever be confirmed or converted into SEC Industry Guide 7 compliant “reserves”. Investors are cautioned not to assume that all or any part of the disclosed mineralized material estimates will ever be confirmed or converted into reserves or that mineralized material can be economically or legally extracted.

~~Table~~In addition, in this quarterly report on Form 10-Q we also modify our estimates made in compliance with National Instrument 43-101 to conform to SEC Industry Guide 7 for reporting in the United States. Mineralized material is substantially equivalent to measured and indicated mineral resources (exclusive of ~~Contents~~reserves) as disclosed for reporting purposes in Canada, except that the SEC only permits issuers to report “mineralized material” in tonnage and average grade without reference to contained ounces.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We invest substantially all of our excess cash in U.S. government and debt securities rated “investment grade” or better. The rates received on such investments may fluctuate with changes in economic conditions. Based on the average cash and investment balances outstanding during the first ~~nine~~three months of ~~2017,~~2020, a 1% decrease in interest rates would have resulted in only a nominal reduction in interest income for the period.

Foreign Currency Exchange Risk

Although most of our expenditures are in U.S. dollars, certain purchases of labor, supplies and capital assets are denominated in other currencies, primarily in Mexico. As a result, currency exchange fluctuations may impact the costs of our exploration and mining activities. To reduce this risk, we maintain minimum cash balances in foreign currencies and complete most of our purchases in U.S. dollars.

Table of Contents

Commodity Price Risk

We are primarily engaged in the exploration and mining of properties containing gold, silver, zinc, lead and other minerals. As a result, decreases in the price of any of these metals have the potential to negatively impact our ability to establish reserves and mine on our properties. We currently hold no commodity derivative positions.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~September 30, 2017,~~March 31, 2020, (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

36 33

Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

~~The~~Other than the risk factors set forth below, the risk factors for the ~~quarter~~three months ended ~~September 30, 2017,~~March 31, 2020 are substantially the same as those set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019. These amended risk factors supplement, but do not replace those we have previously reported.

Our operations may be further disrupted, and our financial results may be adversely affected by the novel coronavirus (COVID-19) pandemic.

The December 2019 novel strain of coronavirus known as COVID-19, which was declared a pandemic by the World Health Organization in March 2020, poses a risk to our business and operations. If a significant portion of our workforce becomes unable to work or travel to our operations due to illness or state or federal government restrictions (including travel restrictions and “shelter-in-place” and similar orders restricting certain activities that may be issued or extended by authorities), we may be forced to reduce or suspend exploration activities and/or development projects which may impact liquidity and financial results. Furthermore, in compliance with the recent directive of the Mexican Federal Government to suspend all non-essential activities, including mining, until May 18, 2020 in response to the COVID-19 pandemic, we suspended mining activities at the Velardeña Properties in the State of Durango, Mexico, which includes operations at our oxide mill that we presently lease to Hecla. Per the terms of the existing lease agreement, Hecla will continue to pay the fixed monthly fee of $125,000 to us during a temporary shutdown, as well as pay for certain shutdown-related costs. During the period of suspension, we will not receive the variable component of revenue that is tied to tonnes of ore milled per month. Depending on the duration of the suspension of mining activities in Mexico, this may significantly lower the revenue previously anticipated from the oxide plant lease. Moreover, the lease permits Hecla to terminate the lease upon ten days notice if Hecla is unable to use the plant due to a government ordered shutdown for a period of more than 90 continuous days.

To the extent the COVID-19 pandemic adversely affects our business and financial results as discussed above, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section and those set forth under the caption “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2019, such as those relating to our operation and indebtedness and financing. Because of the highly uncertain and dynamic nature of events relating to the COVID-19 pandemic, it is not currently possible to estimate the impact of the pandemic on our business. However, these effects could have a material impact on our operations, and we will continue to monitor the COVID-19 situation closely.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

37 34

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Item 6. Exhibits



10.1	~~Option~~Earn-In Agreement ~~dated August 2, 2017~~ among Golden Minerals Company, ASM Services S.A.R.L., Silex Spain, S.L., Silex Argentina S.A. and ~~Hecla Mining Company. (1)~~Barrick Gold Corporation, dated April 9, 2020.*
10.2	~~Second Amendment to the Master~~Subscription Agreement by and ~~Lease Agreement~~between Golden Minerals Company and Barrick Gold Corporation, dated ~~August 2, 2017 among Minera William S.A. de C.V. and Minera Hecla S.A. de C.V. (1)~~April 9, 2020.*
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.*
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.*
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act).**
101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema Document*
101.CAL	XBRL Taxonomy Calculation Linkbase Document*
101.DEF	XBRL Taxonomy Definition Document*
101.LAB	XBRL Taxonomy Label Linkbase Document*
101.PRE	XBRL Taxonomy Presentation Linkbase Document*
* Filed herewith ** Furnished herewith ~~(1) Incorporated by reference to our Current Report on Form 8-K filed with the SEC on August 3, 2017.~~

38 35

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

GOLDEN MINERALS COMPANY


Date:	~~November~~May 7, ~~2017~~2020	By:	/s/ Warren M. Rehn
			Warren M. Rehn
			President and Chief Executive Officer


Date:	~~November~~May 7, ~~2017~~2020	By:	/s/ Robert P. Vogels
			Robert P. Vogels
			Senior Vice President and Chief Financial Officer

39 36


		PAGE

PART I – FINANCIAL INFORMATION
		3
ITEM 1.	FINANCIAL STATEMENTS (Unaudited)	3

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2624

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3632

ITEM 4.	CONTROLS AND PROCEDURES	3633

PART II – OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	3734

ITEM 1A.	RISK FACTORS	3734

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3734

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	3734

ITEM 4.	MINE SAFETY DISCLOSURES	3734

ITEM 5.	OTHER INFORMATION.	3734

ITEM 6.	EXHIBITS	3835


SIGNATURES		39


			36



								Accumulated
				Additional				Other
	Common Stock			Paid-in		Accumulated		Comprehensive		Total
	Shares	Amount		Capital		Deficit		Income (loss)		Equity
	(in thousands except share data)
Balance, December 31, 2015	53,335,333	$	534	$	484,742	$	(477,378)	$	(127)	$	7,771
Stock compensation accrued and shares issued for vested stock awards	317,968		2		250		—		—		252
Shares issued on conversion of Sentient Note (Note 11)	27,366,740		273		6,944		—		—		7,217
Registered offering common stock, net and warrants (Note 14)	8,000,000		80		3,519		—		—		3,599
Unrealized gain on marketable equity securities, net of tax	—		—		—		—		182		182
Net loss	—		—		—		(10,659)		—		(10,659)
Balance, December 31, 2016	89,020,041	$	889	$	495,455	$	(488,037)	$	55	$	8,362
Cumulative adjustment related to change in accounting principle (Note 3)	—		—		19,046		(17,148)		—		1,898
Adjusted balance at January 1, 2017	89,020,041	$	889	$	514,501	$	(505,185)	$	55	$	10,260
Stock compensation accrued and shares issued for vested stock awards	150,000		1		149		—		—		150
Shares issued under the at-the-market offering agreement, net (Note 14)	1,024,392		11		671		—		—		682
Consideration shares sold to Hecla, net (Note 15)	1,811,015		18		911		—		—		929
Deemed dividend on warrants (Note 3)	—		—		5		(5)		—		—
Unrealized loss on marketable equity securities, net of tax	—		—		—		—		(92)		(92)
Net loss	—		—		—		(1,851)		—		(1,851)
Balance, September 30, 2017	92,005,448	$	919	$	516,237	$	(507,041)	$	(37)	$	10,078


					Reported after
	As Previously			Cumulative	the Effect of a Change in
	Reported		Effect Adjustment		Accounting Principle
Balance Sheet Accounts Impacted by	December 31,		at the Beginning		at the Beginning
September 2012 and 2014 Warrants	2016		of 2017		of 2017
	(in thousands)
Warrant Liability - Related Party	$	976	$	(976)	$	—
Warrant Liability		922		(922)		—
Additional Paid-in Capital		495,455		19,046		514,501
Accumulated Deficit		(488,037)		(17,148)		(505,185)


			Estimated		Carrying
September 30, 2017	Cost		Fair Value		Value
		(in thousands)
Investments:
Short-term:
Available for sale common stock	$	275	$	242	$	242
December 31, 2016
Investments:
Short-term:
Available for sale common stock	$	275	$	334	$	334



	December 31,
	2016
Company's ending stock price	$	0.58
Company's stock volatility		110%
Applicable risk free interest rate		1.39%


	Nine Months Ended September 30,
	2017		2016
	(in thousands)
Cash flows from operating activities:
Net loss	$	(1,851)	$	(10,974)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and depreciation		456		1,317
Accretion of asset retirement obligation		146		143
Write off of loss contingency, net		—		(212)
Asset write off		—		24
Gain on reduction of asset retirement obligation		(56)		—
Gain on sale of assets		(605)		(1,522)
Amortization of deferred loan costs		—		57
Warrant liability fair market adjustment		—		2,821
Derivative liability fair market adjustment		—		778
Accretion of loan discount		—		372
Loss on debt extinguishment		—		1,653
Deferred income taxes		—		(26)
Stock compensation		299		666
Changes in operating assets and liabilities:
Decrease in trade accounts receivable		607		41
Decrease in prepaid expenses and other assets		137		150
(Increase) decrease in inventories		(22)		66
(Increase) decrease in value added tax recoverable, net		(3)		347
Increase in accrued interest payable net of amounts capitalized		—		86
Increase (decrease) in deferred revenue		967		(500)
Decrease in reclamation liability		(4)		(8)
Decrease in accounts payable and accrued liabilities		(34)		(389)
Decrease in deferred leasehold payments		(15)		(13)
Net cash provided by (used in) operating activities	$	22	$	(5,123)