Edgar Filing: PARAMOUNT GOLD & SILVER CORP.

form10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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(Mark One)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2012

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

For the transition period from to

———————

Paramount Gold and Silver Corp.

(Exact name of registrant as specified in its charter)

———————

Delaware	0-51600	20-3690109
(State or Other Jurisdiction	(Commission	(I.R.S. Employer
of Incorporation)	File Number)	Identification No.)

665 Anderson Street, Winnemucca, Nevada 89445

(Address of Principal Executive Office) (Zip Code)

(775) 625-3600

(Issuer’s telephone number, including area code)

N/A

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

Indicate by a 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 the filing requirements for the past 90 days. Yes þ 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 þ No ¨

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

Large accelerated filer ¨	Accelerated filer þ
Non-accelerated filer ¨	Smaller reporting company ¨
(Do not check if smaller reporting company)

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 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 ¨

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock as of the latest practicable date: 147,387,288 shares of Common Stock, $.001 par value as of April 27, 2012.

PART I. FINANCIAL INFORMATION	4

Item 1. Financial Statements	4

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3. Quantitative and Qualitative Disclosures About Market Risk	25

Item 4. Controls and Procedures	26

PART II. OTHER INFORMATION	26

Item 1. Legal Proceedings	26

Item 1A. Risk Factors	26

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 3. Defaults Upon Senior Securities

Item 4. Other Information

Item 6. Exhibits	27

Index

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2012 contains “forward-looking statements”. Generally, the words “believes,” “anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,” “continue,” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements which include, but are not limited to, statements concerning the Company’s expectations regarding its working capital requirements, financing requirements, business prospects, and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Such statements are subject to certain risks and uncertainties, including the matters set forth in this Quarterly Report or other reports or documents the Company files with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected.

These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, economic, political and market conditions and fluctuations, the prevailing market price for gold and silver, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein.

Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. For any forward-looking statements contained in any document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

OTHER PERTINENT INFORMATION

When used in this report, the terms “Paramount,” the “Company,” “we,”, “our,” and “us” refers to Paramount Gold and Silver Corp., a Delaware corporation.

Index

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Consolidated Financial Statements

(Unaudited)

Period ended March 31, 2012 and 2011

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Consolidated Balance Sheets

As at March 31, 2012 (Unaudited) and June 30, 2011 (Audited)

(Expressed in United States dollars, unless otherwise stated)

	As at March 31, 2012 (Unaudited)			As at June 30, 2011 (Audited)
Assets

Current Assets
Cash and cash equivalents	$	16,142,608		$	14,689,241
Amounts receivable		1,615,485			1,625,724
Subscriptions receivable (Note 6 and 12)		8,661,250			-
Prepaid and deposits		341,573			34,252
Prepaid insurance, current portion (Note 11)		245,215			245,215
Marketable securities (Note 3)		-			319,219
Total Current Assets		27,006,131			16,913,651
Non-Current Assets
Mineral properties (Note 8)		50,479,859			49,515,859
Fixed assets (Note 9)		464,973			487,740
Prepaid insurance, non current portion (Note 11)		429,124			613,035
Reclamation bond (Note 11)		2,811,248			2,765,742
Total Non-Current Assets		54,185,204			53,382,376

Total Assets	$	81,191,335		$	70,296,027

Liabilities and Shareholders' Equity

Liabilities

Current Liabilities
Accounts payable	$	2,276,409		$	769,172
Warrant liability (Note 4)		9,854,853			16,914,660
Total Current Liabilities		12,131,262			17,683,832

Non-Current Liabilities
Reclamation and environmental obligation (Note 11)		1,217,443			1,143,892
Total Liabilities	$	13,348,705			18,827,724

Shareholders' Equity
Capital stock (Note 6)		147,363			136,249
Additional paid in capital		151,532,498			129,664,660
Contributed surplus		12,481,382			11,287,242
Deficit accumulated during the exploration stage		(96,247,000	)		(89,637,633	)
Accumulated other comprehensive income		(71,613	)		17,785
Total Shareholders' Equity		67,842,630			51,468,303

Total Liabilities and Shareholders' Equity	$	81,191,335		$	70,296,027

Subsequent Events (Note 12)

The accompanying notes are an integral part of the consolidated financial statements

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

For the Nine Month Period Ended March 31, 2012 and 2011

(Expressed in United States dollars, unless otherwise stated)

	For the Three Month Period Ended March 31, 2012		For the Nine Month Period Ended March 31, 2012			For the Three Month Period Ended March 31, 2011			For the Nine Month Period Ended March 31, 2011			Cumulative Since Inception to March 31, 2012



Revenue
Interest income	$	6,297	$	23,237		$	39,474		$	85,826		$	1,160,069
Other income		-		73,130			2,603			180,833			253,963
Total Revenue	$	6,297	$	96,367		$	42,077		$	266,659		$	1,414,032

Expenses:
Incorporation costs		-		-			-			-			1,773
Exploration		3,046,194		9,850,449			2,531,665			6,244,524			41,632,485
Professional fees		265,380		874,308			283,796			919,805			8,380,231
Directors compensation		948,312		1,172,080			551,895			744,677			2,126,459
Travel & lodging		53,997		162,850			46,214			164,369			1,425,096
Corporate communications		146,822		314,266			137,346			218,770			3,691,673
Consulting fees		116,975		373,605			119,690			365,315			14,643,215
Office & administration		121,706		332,103			59,376			282,207			3,021,726
Interest & service charges		3,062		7,498			3,467			9,483			116,984
Loss on disposal of fixed assets		-		-			-			-			44,669
Insurance		81,409		237,387			95,334			233,922			830,716
Depreciation		19,547		58,985			16,738			54,915			428,562
Accretion		38,426		115,278			35,210			84,674			235,162
Miscellaneous		-		-			-			-			203,097
Financing & listing fees		-		-			-			-			(22,024	)
Acquisition expenses		-		-			45			1,081,075			1,505,334
Income and other taxes		-		-			13,015			13,015			64,747
Write down of mineral property		100,000		100,000			-			-			1,856,049
Total Expenses		4,941,830		13,598,809			3,893,791			10,416,751			80,185,954
Net Loss before other items	$	4,935,533	$	13,502,442		$	3,851,714		$	10,150,092		$	78,771,922

Other items
Change in fair value of equity conversion right		-		-			(164,488	)		15,467			990,236
Change in fair value of warrant liability		228,312		(7,059,807	)		(1,085,671	)		21,233,585			16,318,110
Loss on sale of marketable securities		162,603		166,732			900			900			166,732
Net Loss	$	5,326,448	$	6,609,367		$	2,602,455		$	31,400,044		$	96,247,000

Other comprehensive loss
Foreign currency translation adjustment		59,217		120,343			(220,765	)		(492,544	)		71,613
Total Comprehensive Loss for the Period	$	5,385,665	$	6,729,710		$	2,381,690		$	30,907,500		$	96,318,613

Loss per Common share
Basic	$	0.04	$	0.05		$	0.02		$	0.24
Diluted	$	0.04	$	0.05		$	0.02		$	0.24

Weighted Average Number of Common
Shares Used in Per Share Calculations
Basic		136,962,960		136,799,824			135,096,531			128,841,845
Diluted		136,970,327		136,809,006			135,096,531			128,841,845

The accompanying notes are an integral part of the consolidated financial statements

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Consolidated Statements of Cash Flows (Unaudited)

For the Nine Month Period Ended March 31, 2012 and 2011

(Expressed in United States dollars, unless otherwise stated)

	For the Nine Month Period Ended March 31, 2012			For the Nine Month Period Ended March 31, 2011			Cumulative Since Inception to March 31, 2012

Net Loss	$	(6,609,367	)	$	(31,400,044	)	$	(96,247,000	)
Adjustment for:
Depreciation		58,985			54,915			428,562
Loss on disposal of assets		-			-			44,669
Stock based compensation		1,511,822			1,154,415			19,170,222
Accrued interest		-			-			(58,875	)
Write-down of mineral properties		100,000			-			1,856,049
Accretion expense		115,278			84,674			235,162
Change in reclamation		(4,555	)		(19,532	)		59,037
Insurance expense		183,911			96,648			366,146
Other non cash transactions		205,474			900			204,575
Change in fair value of equity conversion right		-			15,467			990,236
Change in fair value of warrant liability		(7,059,807	)		21,233,585			16,318,110
(Increase) Decrease in accounts receivable		10,239			(369,678	)		(1,532,059	)
(Increase) Decrease in prepaid expenses		(307,321	)		(85,322	)		(341,573	)
Increase (Decrease) in accounts payable		1,507,237			(10,947	)		392,626
Cash used in operating activities	$	(10,288,104	)	$	(9,244,919	)	$	(58,114,113	)

Sale (purchase) of marketable securities		144,690			-			144,690
Increase of reclamation bond		(82,678	)		-			(82,678	)
Purchase of GIC receivable		-			-			58,875
Notes receivable issued		-			243,495			21,365
Purchase of equity conversion right		-			-			(1,337,700	)
Purchase of mineral properties		(100,000	)		(150,000	)		(7,209,870	)
Cash acquired on acquisition of X-Cal		-			-			843,101
Purchase of equipment		(36,218	)		(28,712	)		(938,080	)
Cash provided by (used in) investing activities	$	(74,206	)	$	64,783		$	(8,500,297	)

Demand notes payable issued		-			-			105,580
Issuance of capital Stock		11,936,020			3,572,052			82,767,999
Cash provided by financing activities	$	11,936,020		$	3,572,052		$	82,873,579

Effect of exchange rate changes on cash		(120,343	)		492,544			(116,561	)

Change in cash during period		1,453,367			(5,115,540	)		16,142,608

Cash at beginning of period		14,689,241			21,380,505			-
Cash at end of period	$	16,142,608		$	16,264,965		$	16,142,608

Supplemental Cash Flow Disclosure
Interest Received	$	23,237		$	85,826
Cash	$	13,584,103		$	4,454,979
Short-term investments	$	2,558,505		$	11,809,986

The accompanying notes are an integral part of the consolidated financial statements

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Consolidated Statements of Shareholders’ Equity (Unaudited)

From Inception to the Nine Month Period Ended March 31, 2012

(Expressed in United States dollars, unless otherwise stated)

	Shares			Par Value			Additional Paid in Capital		Deficit			Contributed Surplus			Accumulated Other Comprehensive Income (Loss)			Total Stockholders Equity
Balance at inception		—		$	—		$	—	$	—		$	—		$	—		$	—
Capital issued for financing		104,825,287			104,826			20,277,171		—			—			—			20,381,997
Capital issued for services		4,157,500			4,157			9,477,295		—			—			—			9,481,452
Capital issued for mineral properties		1,178,519			1,179			2,682,617		—			—			—			2,683,796
Capital issued on settlement of notes payable		39,691			39			105,541		—			—			—			105,580
Returned to treasury		(61,660,000	)		(61,660	)		61,660		—			—			—			—
Fair value of warrants		—			—			—		—			8,460,682			—			8,460,682
Stock based compensation		—			—			—		—			5,080,263			—			5,080,263
Foreign currency translation		—			—			—		—			—			(19,977	)		(19,977	)
Net Income (loss)		—			—			—		(35,956,085	)		—			—			(35,956,085	)
Balance at June 30, 2008		48,540,997		$	48,541		$	32,604,284	$	(35,956,085	)	$	13,540,945		$	(19,977	)	$	10,217,708
Capital issued for financing		16,707,791			16,707			5,828,684		—			—			—			5,845,391
Capital issued for services		1,184,804			1,185			683,437		—			—			—			684,622
Capital issued from stock options and warrants exercised		384,627			385			249,623		—			(237,008	)		—			13,000
Capital issued for mineral properties		16,200,000			16,200			13,140,250		—			—			—			13,156,450
Stock based compensation		—			—			—		—			3,612,864			—			3,612,864
Transition adjustment (Note 2)		—			—			—		—			1,052,709			—			1,052,709
Foreign currency translation		—			—			—		—			—			(267,215	)		(267,215	)
Net Income (loss)		—			—			—		(7,241,179	)		—			—			(7,241,179	)
Balance at June 30, 2009		83,018,219		$	83,018		$	52,506,278	$	(43,197,264	)	$	17,969,510		$	(287,192	)	$	27,074,350
Capital issued for financing		18,400,000			18,400			21,371,043		—			—			—			21,389,443
Capital issued from stock options and warrants exercised		8,351,360			8,351			16,361,552		—			(3,841,264	)		—			12,528,639
Capital issued for mineral properties		300,000			300			374,700		—			—			—			375,000
Stock based compensation		—			—			—		—			309,840			—			309,840
Transition adjustment (Note 2)		—			—			—		(12,637,875	)		(3,612,864	)		—			(16,250,739	)
Foreign currency translation		—			—			—		—			—			(156,483	)		(156,483	)
Net Income (loss)		—			—			—		(5,351,958	)		—			—			(5,351,958	)
Balance at June 30, 2010		110,069,579		$	110,069		$	90,613,573	$	(61,187,098	)	$	10,825,222		$	(443,675	)	$	39,918,091

The accompanying notes are an integral part of the consolidated financial statements

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Consolidated Statements of Shareholders’ Equity (Unaudited)

From Inception to the Nine Month Period Ended March 31, 2012

(Expressed in United States dollars, unless otherwise stated)

Capital issued for financing	19,395		19		23,970		—			—			—			23,989
Capital issued from stock options and warrants exercised	4,153,085		4,154		10,219,361		—			(1,053,645	)		—			9,169,870
Capital issued for acquisition	22,007,453		22,007		28,807,756		—			314,790			—			29,144,553
Stock based compensation	—		—		—		—			1,200,875			—			1,200,875
Foreign currency translation	—		—		—		—			—			492,405			492,405
Unrealized loss on available for sale securities	—		—		—		—			—			(30,945	)		(30,945	)
Net Income (loss)	—		—		—		(28,450,535	)		—			—			(28,450,535	)
Balance at June 30, 2011	136,249,512	$	136,249	$	129,664,660	$	(89,637,633	)	$	11,287,242		$	17,785		$	51,468,303
Capital issued from stock options and warrants exercised	137,500		138		215,260		—			(83,897	)		—			131,501
Capital issued for acquisition	400,000		400		963,600		—			—			—			964,000
Stock based compensation	—		—		—		—			45,690			—			45,690
Foreign currency translation	—		—		—		—			—			(61,126	)		(61,126	)
Unrealized loss on available for sale securities	—		—		—		—			—			(96,372	)		(96,372	)
Net Income (loss)	—		—		—		869,894			—			—			869,894
Balance at September 30, 2011	136,787,012	$	136,787	$	130,843,520	$	(88,767,739	)	$	11,249,035		$	(139,713	)	$	53,321,890
Capital issued from stock options and warrants exercised	100,000		100		265,569		—			(200,669	)		—			65,000
Stock based compensation	—		—		—		—			341,065			—			341,065
Unrealized loss on available for sale securities	—		—		—		—			—			(42,679	)		(42,679	)
Net Income (loss)	—		—		—		(2,152,813	)		—			—			(2,152,813	)
Balance at December 31, 2011	136,887,012	$	136,887	$	131,109,089	$	(90,920,552	)	$	11,389,431		$	(182,392	)	$	51,532,463
Capital issued for financing	10,417,776		10,418		20,338,300		—			—			—			20,348,718
Capital issued from stock options and warrants exercised	57,500		58		85,109		—			(33,117	)		—			52,050
Stock based compensation	—		—		—		—			1,125,068			—			1,125,068
Foreign currency translation	—		—		—		—			—			(59,217	)		(59,217	)
Unrealized loss on available for sale securities	—		—		—		—			—			169,996			169,996
Net Income (loss)	—		—		—		(5,326,448	)		—			—			(5,326,448	)
Balance at March 31, 2012	147,362,288	$	147,363	$	151,532,498	$	(96,247,000	)	$	12,481,382		$	(71,613	)	$	67,842,630

The accompanying notes are an integral part of the consolidated financial statements

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Consolidated Financial Statements (Unaudited)

For the Nine Month Period Ended March 31, 2012

(Expressed in United States dollars, unless otherwise stated)

1.	Summary of Significant Accounting Policies:

Paramount Gold and Silver Corp. (the “Company”), incorporated under the General Corporation Law of the State of Delaware, and its wholly-owned subsidiaries are engaged in the acquisition, exploration and development of precious metal properties. The Company’s wholly owned subsidiaries include Paramount Gold de Mexico S.A. de C.V., Magnetic Resources Ltd, Minera Gama SA de CV, and X-Cal Resources Ltd. The Company is an exploration stage company in the process of exploring its mineral properties in both the United States and Mexico, and has not yet determined whether these properties contain reserves that are economically recoverable.

Basis of Presentation and Preparation

The accompanying unaudited Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures required by generally accepted accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all of the normal and recurring adjustments necessary to fairly present the interim financial information set forth herein have been included. The results of operations for interim periods are not necessarily indicative of the operating results of a full year or of future years.

These interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States and, with the exception of new accounting pronouncements described in Note 2, follow the same accounting policies and methods of their application as the most recent annual financial statements. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. These interim financial statements should be read in conjunction with the financial statements and related footnotes included in the Annual Report on Form 10-K of Paramount Gold and Silver Corp. for the year ended June 30, 2011.

Mineral Properties

Mineral property acquisition costs are capitalized when incurred and will be amortized using the units –of – production method over the estimated life of the reserve following the commencement of production. If a mineral property is subsequently abandoned or impaired, any capitalized costs will be expensed in the period of abandonment or impairment.

Acquisition costs include cash consideration and the fair market value of shares issued on the acquisition of mineral properties.

Exploration Costs

Exploration costs, which include maintenance, development and exploration of mineral claims, are expensed as incurred. When it is determined that a mineral deposit can be economically developed as a result of establishing proven and probable reserves, the costs incurred after such determination will be capitalized and amortized over their useful lives. To date, the Company has not established the commercial feasibility of its exploration prospects; therefore, all exploration costs are being expensed.

Derivatives

The Company accounts for its derivative instruments not indexed to our stock as either assets or liabilities and carries them at fair value. Derivatives that are not defined as hedges must be adjusted to fair value through earnings.

Warrants and options issued in prior periods with exercise prices denominated in Canadian dollars are no longer considered indexed to our stock, as their exercise price is not in the Company’s functional currency of the US dollar, and therefore no longer qualify for the scope exception and must be accounted for as a derivative. These warrants and options are reclassified as liabilities under the caption “Warrant liability” and recorded at estimated fair value at each reporting date, computed using the Black-Scholes valuation method. Changes in the liability from period to period are recorded in the Statements of Operations under the caption “Change in fair value of warrant liability.”

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Consolidated Financial Statements (Unaudited)

For the Nine Month Period Ended March 31, 2012

(Expressed in United States dollars, unless otherwise stated)

1.	Summary of Significant Accounting Policies (Continued):

The Company elected to record the change in fair value of the warrant liability as a component of other income and expense on the statement of operations as we believe the amounts recorded relate to financing activities and not as a result of our operations.

Foreign Currency Translation

The parent company’s functional currency is the United States dollar. Foreign currency transactions are translated to United States dollars in accordance with FASB ASC 830 “Foreign Currency Translation” (“ASC 830”). Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the consolidated balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Mexican pesos and Canadian Dollars. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

The functional currencies of the Company’s wholly-owned subsidiaries are the U.S. Dollar and the Canadian Dollar. The financial statements of the subsidiaries are translated to United States dollars in accordance with ASC 830 using period-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues and expenses. Translation gains (losses) are recorded in accumulated other comprehensive income (loss) as a component of stockholders’ equity. Foreign currency transaction gains and losses are included in the statement of operations.

2.	Recent Accounting Pronouncements Adopted:

i) ASU 2011-6

In January 2010, the FASB issued guidance regarding fair value: 1) adding new requirements for disclosures about transfers into and out of Levels 1 and 2 measurements and separate disclosures about purchases, sales, issuances and settlements relating to Level 3 measurements, and 2) clarifying existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The guidance also required that disclosures about postretirement benefit plan assets be provided by classes of assets instead of by major categories of assets. The guidance is effective for the first reporting period beginning after December 15, 2009, except for the requirement to provide Level 3 activity, which was effective for fiscal years beginning after December 15, 2010. The Company has adopted this guidance, which did not have any effect on its results of operations, financial position and cash flows.

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Consolidated Financial Statements (Unaudited)

For the Nine Month Period Ended March 31, 2012

(Expressed in United States dollars, unless otherwise stated)

3.	Marketable Securities and Investments:

As of December 31, 2011, the Company had investments in available-for-sale securities with a cost basis of $332,168. The investments include certain equity securities of entities involved in the exploration of precious metals. During the three month period ended March 31, 2012, the Company sold its investment in available-for-sale securities for proceeds of $130,822.

Also during the three month period ended March 31, 2012, the Company sold 250,000 shares of common stock of Mexoro Minerals Ltd for proceeds of $38,743.

For the three month period ended March 31, 2012, the Company recorded a loss on sale of marketable securities of $162,603.

4.	Fair Value Measurements:

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels of the fair value hierarchy under ASC 820 are described below:

Level 1

Unadjusted quoted prices in active markets that are accessible at the measurementdate for identical, unrestricted assets or liabilities.

Level 2

Inputs other than quoted prices included within Level 1 that are observable for theasset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3

Inputs that are both significant to the fair value measurement and unobservable.

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Consolidated Financial Statements (Unaudited)

For the Nine Month Period Ended March 31, 2012

(Expressed in United States dollars, unless otherwise stated)

4.	Fair Value Measurements (Continued):

The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required by ASC 820, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

			Fair Value at March 31, 2012						June 30, 2011
Assets	Total		Level 1		Level 2		Level 3		Total
	$		$		$		$		$
Cash equivalents		16,142,608		16,142,608		-		-		14,689,241
Marketable Securities		-		-		-		-		319,219

Liabilities
Warrant liability		9,854,853		-		-		9,854,853		16,914,660

The Company’s cash equivalents and GIC are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The cash equivalents that are valued based on quoted market prices in active markets are primarily comprised of commercial paper, short-term certificates of deposit and U.S. Treasury securities. The amounts receivable represent amounts due from a national government regarding refund of taxes.

The estimated fair value of warrants and options accounted for as liabilities was determined on the date of closing and marked to market at each financial reporting period. The change in fair value of the warrants is recorded in the statement of operations as a gain (loss) and is estimated using the Black-Scholes option-pricing model with the following inputs:

	March 31, 2012
Risk free interest rate	0.23%
Expected life of warrants and options	Less than 1 year
Expected stock price volatility	70.1%
Expected dividend yield	0%

The changes in fair value of the warrants during the three month period ended March 31, 2012 was as follows:

Balance at December 31, 2011	$9,626,541
Issuance of warrants and options	-
Change in fair value recorded in earnings	228,312
Transferred to equity upon exercise	-
Balance at March 31, 2012	$9,854,853

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Consolidated Financial Statements (Unaudited)

For the Nine Month Period Ended March 31, 2012

(Expressed in United States dollars, unless otherwise stated)

5.	Non-Cash Transactions:

During the nine month period ended March 31, 2012 and 2011, the Company entered into certain non-cash activities as follows:

	2012		2011
Operating and Financing Activities
From issuance of shares for acquisitions	$	-	$	28,829,763
From issuance of shares for cashless exercise of options	$	-	$	2,341,322
From issuance of shares for mineral property	$	964,000	$	-

6.	Capital Stock:

a) Share issuances:

Authorized capital stock consists of 200,000,000 common shares with par value of $0.001 each.

During the nine month period ended March 31, 2012, the Company issued a total of 11,112,776 (2011 – 26,113,035) common shares which are summarized as follows:

	2012		2011
Financing		10,417,776		-
Acquisition of mineral properties		400,000		-
For exercise of warrants and options		295,000		4,105,582
For acquisition of companies		-		22,007,453
		11,112,776		26,113,035

During the three month period ended March 31, 2012, the Company closed a private placement offering pursuant to which the Company sold 10,417,776 shares of its common stock for gross proceeds of $21,356,441, at an offering price of $2.05 per share. At March 31, 2012, the Company recorded a receivable of $8,661,250 for 4,225,000 shares it issued pursuant to the financing in which it received funds in April 2012 (Note 12). The shares were held in escrow until the funds were received.

During the nine month period ended March 31, 2012, the Company entered into an agreement to purchase mining claims in northwestern Nevada in exchange for 400,000 shares of its common stock. The seller of the mineral claims retains a net smelter royalty of 1.5% on the portion of claims not subject to other royalties and a net smelter royalty of 0.5% on the portion already subject to a 2.0% royalty held by a third party.

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Consolidated Financial Statements (Unaudited)

For the Nine Month Period Ended March 31, 2012

(Expressed in United States dollars, unless otherwise stated)

6.	Capital Stock (Continued):

b) Warrants:

The following share purchase warrants were outstanding at March 31, 2012:

		Exercise price in CAD				Exercise price in USD at March 31, 2012				Number of warrants				Remaining contractual life (years)
Warrants *		$	1.05			$	1.05				7,700,000				0.96

* Strike price of warrant contract in Canadian dollars. At March 31, 2012 $1.00 USD = $1.000 CAD.

	March 31, 2012		March 31, 2011
Risk free interest rate		.23%		.29%
Expected life of warrants	Less than 1 year		1 year
Expected stock price volatility		70.1%		70.9%
Expected dividend yield		0%		0%

c) Stock options:

On August 23, 2007, the board and stockholders approved the 2007/2008 Stock Incentive & Compensation Plan thereby reserving an additional 4,000,000 common shares for issuance to employees, directors and consultants.

On February 24, 2009, the stockholders approved the 2008/2009 Stock Incentive & Equity Compensation Plan thereby reserving an additional 3,000,000 common shares for future issuance. The stockholders also approved the re-pricing of the exercise price of all outstanding stock options to $0.65 per share.

On December 2, 2011, the stockholders approved the 2011/2012 Stock Incentive & Equity Compensation Plan thereby reserving an additional 4,000,000 common shares for future issuance to employees, directors and consultants.

Stock Based Compensation

The Company uses the Black-Scholes option valuation model to value stock options granted. The Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The model requires management to make estimates which are subjective and may not be representative of actual results. Changes in assumptions can materially affect estimates of fair values. For purposes of the calculation, the following assumptions were used:

	March 31, 2012	March 31, 2011
Risk free interest rate	0.10%-0.39%	0.43%
Expected dividend yield	0%	0%
Expected stock price volatility	72% to 84%	62%-87%
Expected life of options	1 to 4 years	1 to 2 years

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Consolidated Financial Statements (Unaudited)

For the Nine Month Period Ended March 31, 2012

(Expressed in United States dollars, unless otherwise stated)

6.	Capital Stock (Continued):

Changes in the Company’s stock options for the nine month period ended March 31, 2012 are summarized below:

Options	Number			Weighted Avg. Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Balance at June 30, 2011		2,161,120			1.74		2.08		3,280,911

Issued		1,492,500			2.52
Cancelled / Expired		(275,500	)		2.66
Exercised		(295,000	)		1.40

Outstanding at March 31, 2012		3,083,120			2.27		2.63		1,060,121
Exercisable at March 31, 2012		2,328,121			1.96		2.11		1,060,121

At March 31, 2012, there were 3,083,120 options outstanding. Options outstanding above that have not been vested at period end are 754,999 which have a maximum service term of 1- 5 years. The vesting of these options is dependent on market conditions or service requirements, which have yet to be met.

For the three and nine month period ended March 31, 2012 the Company recognized stock based compensation expense in the amount of $1,125,068 and $1,511,822 respectively (2011 - $848,104 and $1,154,415) .

7.	Related Party Transactions:

During the nine month period ended March 31, 2012, directors received cash payments in the amount of $147,500 (2011 -$162,500) for their services as directors or members of committees of the Company’s Board. During the three month period ended March 31, 2012, the Company also recorded a non-cash transaction to recognize stock based compensation for directors in the amount of $903,312 (2011- $582,177)

During the three month period ended March 31, 2012 the Company made payments of $24,041 (2011 - $23,228) pursuant to a premises lease agreement to a corporation in which an officer is a shareholder.

All transactions with related parties are made in the normal course of operations and measured at exchange value.

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Consolidated Financial Statements (Unaudited)

For the Nine Month Period Ended March 31, 2012

(Expressed in United States dollars, unless otherwise stated)

8.	Mineral Properties:

The Company has capitalized acquisition costs on mineral properties as follows:

	March 31, 2012		June 30, 2011
Iris Royalty		50,000		50,000
Morelos		−		100,000
San Miguel Project		21,992,263		21,992,263
Sleeper		25,891,490		24,827,490
Mill Creek		2,096,616		2,096,616
Spring Valley		385,429		385,429
Reese River		64,061		64,061
	$	50,479,859	$	49,515,859

During the three month period ended March 31, 2012, the Company decided it would not make the required bi-annual mineral concession payments to the Mexican Government for its interest in the Morelos property. As a result, the value the Company has recorded for its interest in the Morelos property has been written off a loss of $100,000 has been recorded the statement of operations.

During the nine month period ended March 31, 2012, the Company purchased mineral claims that are related to the Sleeper Gold Project for shares in the Company’s common stock. The fair value of the shares issued were $964,000.

During the nine month period ended March 31, 2012, the Company made a payment for $100,000 towards a previously purchased mineral claim that is part of the Sleeper Gold Project.

9.	Fixed Assets:

							Net Book Value
	Cost			Accumulated Amortization			March 31, 2012			June 30,2011

Property and Equipment		$	844,151		$	379,178		$	464,973		$	487,740

During the nine month period ended March 31, 2012, total additions to property, plant and equipment were $36,218 (2011- $45,712) and total disposals of property, plant and equipment were $nil (2011- $16,800). During the nine month period ended March 31, 2012 the Company recorded depreciation of $58,985 (2011-$53,147).

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Consolidated Financial Statements (Unaudited)

For the Nine Month Period Ended March 31, 2012

(Expressed in United States dollars, unless otherwise stated)

10.	Segmented Information:

Segmented information has been compiled based on the geographic regions in which the Company has acquired mineral properties and performs exploration activities.

Loss by geographical segment for the nine month period ended March 31, 2012:

	United States			Mexico		Total
Interest income	$	17,046		$	6,191	$	23,237
Other income		73,130			-		73,130
Total income	$	90,176		$	6,191	$	96,367

Expenses:
Exploration		3,344,404			6,506,045		9,850,449
Professional fees		874,308			-		874,308
Directors compensation		1,172,080			-		1,172,080
Travel and lodging		162,850			-		162,850
Corporate communications		314,266			-		314,266
Consulting fees		373,605			-		373,605
Office and administration		289,139			42,964		332,103
Interest and service charges		5,097			2,401		7,498
Insurance		237,387			-		237,387
Amortization		30,984			28,001		58,985
Accretion		115,278			-		115,278
Write-down of mineral properties		100,000			-		100,000
Total Expenses		7,019,398			6,579,411		13,598,809
Net loss before other items	$	6,929,222		$	6,573,220	$	13,502,442

Other items
Change in fair value of warrant liability		(7,059,807	)		-		(7,059,807	)
Loss on sale of marketable securities		166,732			-		166,732
Net Loss	$	36,147		$	6,573,220	$	6,609,367

Other comprehensive loss
Foreign currency translation adjustment		120,343			-		120,343
Total Comprehensive Loss for the Period	$	156,490		$	6,573,220	$	6,729,710

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Consolidated Financial Statements (Unaudited)

For the Nine Month Period Ended March 31, 2012

(Expressed in United States dollars, unless otherwise stated)

10.	Segmented Information (Continued):

Loss by geographical segment for the nine month period ended March 31, 2011:

	United States			Mexico / Latin America		Total
Interest income	$	65,652		$	20,174	$	85,826
Other income	$	178,230		$	2,603	$	180,833
Total income	$	243,882		$	22,777	$	266,659

Expenses:
Exploration		2,683,214			3,561,310		6,244,524
Professional fees		919,805			-		919,805
Directors compensation		744,677			-		744,677
Travel and lodging		164,369			-		164,369
Corporate communications		218,770			-		218,770
Consulting fees		365,315			-		365,315
Office and administration		246,407			35,800		282,207
Interest and service charges		7,190			2,293		9,483
Insurance		233,922			-		233,922
Amortization		13,414			41,501		54,915
Accretion		84,674			-		84,674
Acquisition expenses		1,081,075			-		1,081,075
Income and other taxes		13,015			-		13,015
Total Expenses		6,775,847			3,640,904		10,416,751
Net loss before other items	$	6,531,965		$	3,618,127	$	10,150,092

Other item
Change in fair value of equity conversion right		15,467			-		15,467
Change in fair value of warrant liability		21,233,585			-		21,233,585
Other income & expenses		900			-		900
Net Loss	$	27,781,917		$	3,618,127	$	31,400,044

Other comprehensive loss
Foreign currency translation adjustment		(492,544	)		-		(492,544	)
Total Comprehensive Loss for the Period	$	27,289,373		$	3,618,127	$	30,907,500

Assets by geographical segment:

	United States		Mexico		Total
March 31, 2012
Mineral properties	$	28,337,596	$	22,142,263	$	50,479,859
Equipment		106,973		358,000		464,973

June 30, 2011
Mineral properties		27,373,596		22,142,263		49,515,859
Equipment	$	131,683	$	356,057	$	487,740

Index

PARAMOUNT GOLD AND SILVER CORP.

(An Exploration Stage Mining Company)

Notes to Consolidated Financial Statements (Unaudited)

For the Nine Month Period Ended March 31, 2012

(Expressed in United States dollars, unless otherwise stated)

11.	Reclamation and Environmental:

The Company holds an insurance policy related to its Sleeper Gold Project that covers reclamation costs in the event the Company defaults on payments of its reclamation costs up to an aggregate of $25 million. The insurance premium is being amortized over ten years and the current and non-current prepaid insurance balance at March 31, 2012 is $674,339.

As a part of the policy, the Company has funds in a commutation account which is used to reimburse reclamation costs and indemnity claims. During the nine month period ended March 31, 2012, the Company and the Bureau of Land Management of Nevada reviewed the previous reclamation cost estimates for the exploration activities of the Company and determined an increase in those estimates was required. As a result, the Company provided additional bonding to the Bureau of Land Management and increased the balance of the commutation account by $82,678. The balance of the commutation account at March 31, 2012 is $2,811,248.

Reclamation and environmental costs are based principally on legal requirements. Management estimates costs associated with reclamation of mineral properties. On an ongoing basis the Company evaluates its estimates and assumptions; however, actual amounts could differ from those based on estimates and assumptions. A liability has been established equal to the present value of the obligation, and the carrying amount of the mineral properties has been increased by the same amount.

Changes to the Company’s asset retirement obligations are as follows:


Balance at December 31, 2011	$	1,198,205
Accretion expense		38,426
Payments		(19,188	)
Balance, at March 31, 2012	$	1,217,443

12.	Subsequent Events:

The Company received $8,661,250 for shares it issued pursuant to the private placement offering it closed on March 30, 2012. As a result, the Company released 4,225,000 shares it held in escrow at March 31, 2012.

Index

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with (i) our accompanying interim consolidated financial statements and related notes (included elsewhere in this report) and (ii) our consolidated financial statements, related notes and management’s discussion and analysis of financial condition and results of operations included in our June 30, 2011 annual report filed on Form 10-K with the Securities and Exchange Commission on September 12, 2011.

We are an exploratory stage mining company that currently has mining concessions in Mexico and mineral claims in Nevada, USA. We have no proven reserves at our San Miguel project in Mexico or at our Sleeper Gold project in Nevada but are currently exploring both projects. The following discussion updates our planned operations for this fiscal year. It also analyzes our financial condition and summarizes the results of operations for the three and nine months period ended March 31, 2012 and compares those results to the three and nine months ended March 31, 2011.

Plan of Operation:

Exploration

Our total company exploration budget for the 2012 calendar year has been set to $12.6 million. We plan to allocate $6.3 million to our Sleeper Gold Project in Nevada and an equal amount to our San Miguel Project in Mexico.

Our work at both the San Miguel Project and Sleeper Gold Project is consistent with Paramount’s strategy of expanding and upgrading known, large-scale precious metal occurrences in established mining camps, defining their economic potential and then partnering them with nearby producers.

Nevada

The Sleeper Gold Project will continue to be the Company’s main focus in Nevada. The Company has engaged Scott E. Wilson Consulting, Inc., a mining consulting firm based in Denver, Colorado to prepare preliminary economic assessment (“PEA”) of the Sleeper Gold Project. The completion of this report is expected by June 2012. The PEA will evaluate both the technical and financial aspects of various production scenarios at the Sleeper Gold Project. After completion of the PEA, the Company expects to engage an independent mining consulting firm to prepare a pre-feasibility study. As a result, the Company has planned to complete over 21,000 feet of core drilling, multiple metallurgical testing programs and geotechnical studies for the 2012 calendar year. We anticipate completion of the pre-feasibility study at the end of 2012. Exploration drilling will also continue and will focus on main targets identified by the Company’s technical team.

During the nine month period ended March 31, 2012, the Company acquired 606 unpatented lode mining claims (the “Dunes Project”) in northwestern Nevada from ICN Resources Ltd (“ICN”). The Dunes Project lies 11 miles south of our Sleeper Gold Project and can be accessed by a paved highway. In consideration, Paramount issued 400,000 shares of its common stock to ICN. ICN retains a net smelter royalty of 0.5% on the portion already subject to a 2.0% royalty held by a third party. The Dunes Project is exploratory in nature and contains no known reserves.

Index

Mexico

We plan, at our San Miguel Project, to complete a PEA by the end of 2012. The Company is currently evaluating proposals from leading consulting firms to commence this work. To advance the project in 2012, the Company has planned over 54,000 feet of core drilling and metallurgical testing required for the PEA report. The Company also expects to conduct sampling and geochemistry tests that are designed to assess areas in between known zones of mineralization.

Liquidity and Capital Resources

At March 31, 2012, we had a cash balance of $16,142,608 compared to $14,689,241 as at June 30, 2011. The cash used to fund our exploration programs and corporate overhead was offset by the financing we completed at March 30, 2012.

At March 31, 2012, we had a net working capital, excluding the non-cash warrant liability, of $24,759,722. We anticipate our cash expenditures to fund exploration programs and general corporate expenses to be approximately $1.25 million per month for three month period ending June 30, 2012. We also anticipate making $1.6 million in option payments for previously purchased mineral concessions in the next 6 months. Anticipated cash outlays will be funded by our available cash reserves and future issuances of shares of our common stock

During the nine month period ended March 31, 2012, the company received $248,550 pursuant to the exercise of stock options.

At March 31, 2012, the Company had 7,700,000 “in-the-money” purchase warrants outstanding. All the warrants are held by the Company’s largest shareholder FCMI Financial Corporation. If all the issued outstanding warrants are exercised, the Company’s cash balances will increase by approximately $8.1 million. These warrants expire March 2013.

At March 31, 2012, the amounts receivable amount of $1,615,485 primarily consisted of value added tax due from the Mexican government. During the three and nine month period ended March 31, 2012, the Company has collected $136,805 and 737,277 respectively in value added tax.

Historically, we have funded our exploration and development activities through equity financing arrangements. We continue to assess our needs for additional capital to ensure sufficient financial resources are available to fund our exploration and working capital needs. We believe that our access to additional capital, together with our existing cash resources will be sufficient to meet our needs for the next twelve months. If, however, we are unable to obtain additional capital or financing, our exploration and development activities will be significantly affected.

Comparison of Operating Results for the nine month period ended March 31, 2012 as to the nine month period ended March 31, 2011.

Net Loss

Our net loss before other items for the nine month period ended March 31, 2012 was $13,472,442 compared to a loss of $10,150,092 in the comparable period in the prior year. The increase in net loss of $3,322,350 or 33% reflects our expanded exploration programs at both the Sleeper Gold Project and the San Miguel Project. We will continue to incur losses for the foreseeable future as we continue with our planned explorations programs at both projects.

Expenses

Our exploration expenses for the nine month period ended March 31, 2012 compared to the comparable prior period increased by 58%. The increase is mainly driven by the increased number of holes and total cumulative length of feet drilled by the Company in both Nevada and Mexico.

Index

The following table summarizes our drilling activities at both projects for the nine month period ended March 31, 2012 and 2011:

	Nine month period ended March 31, 2012				Nine month period ended March 31, 2011
	Holes		Cumulative Length in Feet		Holes		Cumulative Length in Feet
San Miguel Project, Mexico		113		104,023		63		55,808
Sleeper Gold Project, USA		77		18,517		11		10,704
Total		190		122,540		74		66,512

Our general corporate expenses which include professional fees, corporate communications, consulting fees and office and administration totaled $1,894,282 for the nine month period ended March 31, 2012. This is a 6% increase over the comparable nine month period in the 2011. The increase in expenses was primarily due to an increase in legal fees and tax consulting fees during the three month period ended September 30, 2011. Management believes the legal expenses were one time in nature and does not expect similar expenses in future periods.

During the nine month period ended March 31, 2012, the Company’s warrant liability decreased by $7,059,807. The decrease was recorded as a gain on the Consolidated Statement of Operations. The decrease in warrant liability is primarily due to a decrease in the Company’s share price from $3.26 at June 30, 2011 to $2.26 at March 31, 2012.

Comparison of Operating Results for the three month period ended March 31, 2012 as to the three month period ended March 31, 2011

Net Loss

Our net loss before other items for the three month period ended March 31, 2012 was $4,905,533 compared to a loss of $3,851,714 in the comparable period in the prior year. The increase in net loss of $1,053,819 or 26% reflects our expanded exploration programs at both the Sleeper Gold Project and the San Miguel Project. We will continue to incur losses for the foreseeable future as we continue with our planned explorations programs at both projects.

Expenses

Our exploration expenses for the three month period ended March 31, 2012 compared to comparable prior year period increased by 20%. The increase is mainly due to the Company’s exploration activity at its San Miguel project in Mexico. The following table summarizes our drilling activities at both projects for the three month period ended March 31, 2012 and 2011:

	Three month period ended March 31, 2012				Three month period ended March 31, 2011
	Holes		Cumulative Length in Feet		Holes		Cumulative Length in Feet
San Miguel Project, Mexico		48		43,636		14		11,641
Sleeper Gold Project, USA		5		485		-		-
Total		53		44,121		14		11,641

Index

Our general corporate expenses which include professional fees, corporate communications, consulting fees and office and administration totaled $650,883 for the three month period ended March 31, 2012. This is an 8.4% increase over the comparable three month period in the 2011is primarily a result of additional expenses incurred at our San Miguel project in Mexico.

During the three month period ended March 31, 2012, the Company’s warrant liability increased by $228,312. The increase was recorded as a loss on the Consolidated Statement of Operations. The increase in warrant liability is primarily due to an increase in the Company’s share price from $2.14 at December 31, 2011 to $2.26 at March 31, 2012.

Critical Accounting Policies

Management considers the following policies to be most critical in understanding the judgments that are involved in preparing the Company’s consolidated financial statements and the uncertainties that could impact the results of operations, financial condition and cash flows. Our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. Management believes the Company’s critical accounting policies are those related to mineral property acquisition costs, exploration and development cost, stock based compensation, derivative accounting and foreign currency translation.

Estimates

The Company prepares its consolidated financial statements and notes in conformity to U.S. GAAP and requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, management evaluates these estimates, including those related to allowances for doubtful accounts receivable and long-lived assets. Management bases these estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Mineral property acquisition costs

The Company capitalizes the cost of acquiring mineral properties and will amortize these costs over the useful life of a property following the commencement of production or expense if it is determined that the mineral property has no future economic value or the properties are sold or abandoned. Costs include cash consideration and the fair market value of shares issued on the acquisition of mineral properties. Properties acquired under option agreements, whereby payments are made at the sole discretion of the Company, are recorded in the accounts of the specific mineral property at the time the payments are made.

The amounts recorded as mineral properties reflect actual costs incurred to acquire the properties and do not indicate any present or future value of economically recoverable reserves.

Exploration expenses

The company expenses exploration costs as incurred. When it is determined that precious metal resource deposit can be economically and legally extracted or produced based on established proven and probable reserves, further exploration expenses related to such reserves incurred after such a determination will be capitalized. To date, the Company has not established any proven or probable reserves and will continue to expense exploration expenses as incurred.

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Derivatives

The Company has adopted the amended provisions of ASC 815 on determining what types of instruments or embedded features in an instrument held by a reporting entity can be considered indexed to its own stock. The Company has issued stock purchase warrants with exercise prices denominated in a currency other than its functional currency of U.S. dollars. As a result, these warrants are no longer considered indexed to our stock and must be accounted for as a derivative.

Warrants that are issued with exercise prices other than the Company’s functional currency of the U.S. dollar are accounted for as liabilities. The fair value of the outstanding warrants liabilities is determined at each reporting date with any change to the liability from a previous period recorded in the Statement of Operations. We record changes in fair value of the warrant liabilities as a component of other income and expense as we believe the amounts recorded relate to financing activities and not as a result of our operations. If a stock purchase warrant is exercised, the Company is only obligated to issue shares in its common stock.

If the Company were to issue stock purchase warrants with exercise prices in its functional currency, the warrants would be considered indexed to our stock and the fair value at date of issue recorded as equity. There would be no requirement under U.S. GAAP to report changes in its fair value from period to period.

Foreign Currency Translation

The functional currency of the Company is the U.S. dollar. Transactions involving foreign currencies for items included in operations are translated into U.S. dollars using the exchange rate prevailing at the date of transaction and monetary assets and liabilities are translated at the exchange rate prevailing at the consolidated balance sheet date and all other consolidated balance sheet items are translated at historical rates applicable to the transactions that comprise the amounts. Translation gains and losses are included in the determination of other comprehensive loss and gains in the Statement of Operations.

Reclassification

Certain comparative figures have been reclassified to conform to the current quarter presentation.

Off-Balance Sheet Arrangements

We are not currently a party to, or otherwise involved with, any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, or capital resources.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

The Company’s market risk profile has not changed significantly from its year ended June 30, 2011.

Foreign Currency Exchange Rate Risk

The Company holds cash balances in both U.S. and Canadian dollars. We transact most of our business in US and Canadian dollars. Some of our expenses, including labor and operating supplies are denominated in Mexican Pesos. As a result, currency exchange fluctuations may impact our operating costs. We do not manage our foreign currency exchange rate risk through the use of financial or derivative instruments, forward contracts or hedging activities.

In general, the strengthening of the U.S. dollar or Canadian dollar will positively impact our expenses transacted in Mexican Pesos. Conversely, any weakening of the U.S dollar or Canadian dollar will increase our expenses transacted in Mexican Pesos. We do not believe that any weakening of the U.S. or Canadian dollar as compared to the Mexican Peso will have an adverse material effect on our operations.

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Interest Rate Risk

The Company’s investment policy for its cash and cash equivalents is focused on the preservation of capital and supporting the liquidity requirements of the Company. The Company’s interest earned on its cash balances is impacted on the fluctuations of U.S. and Canadian interest rates. We do not use interest rate derivative instruments to manage exposure to interest rate changes. We do not believe that interest rate fluctuations will have any effect on our operations.

Item 4.

Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) and determined that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q. The evaluation considered the procedures designed to ensure that the information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and communicated to our management as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting

During the period covered by this Quarterly Report on Form 10-Q, there was no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(d) and 13d-15(d) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation or effectiveness to future periods are subject to risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

None

Item 1A.

Risk Factors

There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the period ended June 30, 2011.

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Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

On March 30, 2012, the Company closed a private placement offering pursuant to which the Company sold to various institutional and accredited investors and non-U.S. persons 10,417,776 shares of its common stock for gross proceeds of $21,356,441, at an offering price of $2.05 per Share.

None of these transactions involved any underwriters or any public offerings, and we believe that they were exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933. With respect to each transaction described above, the certificate for the shares of common stock contained an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption there from.

Item 6.

Exhibits

Exhibit Number		Description

3.1		Certificate of Incorporation, effective March 31, 2005, incorporated by reference to Exhibit 3.1 to Form 10-SB filed November 2, 2005
3.2		Certificate of Amendment to Certificate of Incorporation, effective August 23, 2007, incorporated by reference to Exhibit 3 to Form 8-K filed August 28, 2007
3.2(b)		Certificate of Amendment to Certificate of Incorporation, effective March 3, 2009, incorporated by reference to Exhibit 3.1 to Form 8-K filed February 26, 2009
3.3		Restated Bylaws, effective April 18, 2005
4.1		Registration Rights Agreement, dated March 30, 2007, incorporated by reference to Exhibit 10.2 to Form 8-K filed April 6, 2007
4.2		Form of Investor Warrant, incorporated by reference to Exhibit 10.3 to Form 8-K filed April 6, 2007
31.1*		Certificate of the Chief Executive Officer pursuant Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2*		Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1*		Certificate of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.2*		Certificate of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

*	Filed Herewith

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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.

	PARAMOUNT GOLD AND SILVER CORP.


Date: May 9, 2012	By:	/s/ Christopher Crupi
		Christopher Crupi
		Chief Executive Officer


Date: May 9, 2012		/s/ CARLO BUFFONE
		Carlo Buffone
		Chief Financial Officer