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.
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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:
As of May 11, 2018, the registrant had
210,922,398 Common Shares outstanding.
PART I— FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Contents
|
|
|
|
|
Page
|
|
|
|
|
|
|
|
|
|
Condensed consolidated balance sheets as of March 31, 2018 and June 30, 2017 (unaudited)
|
|
2
|
|
|
|
Condensed consolidated statements of operations and comprehensive loss for the three and nine months ended March 31, 2018 and 2017 (unaudited)
|
|
3
|
|
|
|
Condensed consolidated statements of cash flows for the nine months ended March 31, 2018 and 2017 (unaudited)
|
|
4
|
|
|
|
Condensed consolidated statements of shareholders’ equity for the nine months ended March 31, 2018 and the year ended June 30, 2017 (unaudited)
|
|
5
|
|
|
|
Notes to condensed consolidated financial statements (unaudited)
|
|
6 - 14
|
NioCorp Developments Ltd.
Condensed Consolidated Balance Sheets
(expressed in thousands of U.S. dollars, except share data)
(unaudited)
|
|
|
|
|
As of
|
|
|
|
|
|
|
Note
|
|
|
March 31,
2018
|
|
|
June 30,
2017
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
$
|
483
|
|
|
$
|
238
|
|
Restricted cash
|
|
|
4
|
|
|
|
—
|
|
|
|
265
|
|
Prepaid expenses and other
|
|
|
|
|
|
|
28
|
|
|
|
152
|
|
Other current assets
|
|
|
5
|
|
|
|
456
|
|
|
|
—
|
|
Total current assets
|
|
|
|
|
|
|
967
|
|
|
|
655
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
36
|
|
|
|
51
|
|
Available for sale securities at fair value
|
|
|
|
|
|
|
14
|
|
|
|
23
|
|
Equipment
|
|
|
|
|
|
|
2
|
|
|
|
5
|
|
Mineral interests
|
|
|
|
|
|
|
10,617
|
|
|
|
10,617
|
|
Total assets
|
|
|
|
|
|
$
|
11,636
|
|
|
$
|
11,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
$
|
1,845
|
|
|
$
|
3,146
|
|
Related party loans
|
|
|
8
|
|
|
|
1,480
|
|
|
|
1,175
|
|
Convertible debt, current portion
|
|
|
6
|
|
|
|
710
|
|
|
|
2,161
|
|
Derivative liability, convertible debt
|
|
|
|
|
|
|
41
|
|
|
|
—
|
|
Total current liabilities
|
|
|
|
|
|
|
4,076
|
|
|
|
6,482
|
|
Convertible debt, net of current portion
|
|
|
6
|
|
|
|
4,580
|
|
|
|
1,896
|
|
Derivative liability, convertible debt
|
|
|
6
|
|
|
|
—
|
|
|
|
82
|
|
Total liabilities
|
|
|
|
|
|
|
8,656
|
|
|
|
8,460
|
|
SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, unlimited shares authorized; shares outstanding: 210,202,442 and 198,776,337, respectively
|
|
|
7
|
|
|
|
73,246
|
|
|
|
68,029
|
|
Additional paid-in capital
|
|
|
|
|
|
|
12,163
|
|
|
|
10,320
|
|
Accumulated deficit
|
|
|
|
|
|
|
(81,771
|
)
|
|
|
(74,852
|
)
|
Accumulated other comprehensive loss
|
|
|
|
|
|
|
(658
|
)
|
|
|
(606
|
)
|
Total equity
|
|
|
|
|
|
|
2,980
|
|
|
|
2,891
|
|
Total liabilities and equity
|
|
|
|
|
|
$
|
11,636
|
|
|
$
|
11,351
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
NioCorp Developments Ltd.
Condensed Consolidated Statements of Operations and Comprehensive
Loss
(expressed in thousands of U.S. dollars, except share and per share data) (unaudited)
|
|
|
|
|
For the three months ended
March 31,
|
|
|
For the nine months ended
March 31,
|
|
|
|
Note
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee related costs
|
|
|
|
|
|
$
|
410
|
|
|
$
|
409
|
|
|
$
|
1,809
|
|
|
$
|
1,371
|
|
Professional fees
|
|
|
|
|
|
|
150
|
|
|
|
133
|
|
|
|
543
|
|
|
|
745
|
|
Exploration expenditures
|
|
|
9
|
|
|
|
483
|
|
|
|
2,761
|
|
|
|
1,499
|
|
|
|
7,128
|
|
Other operating expenses
|
|
|
|
|
|
|
307
|
|
|
|
772
|
|
|
|
994
|
|
|
|
1,161
|
|
Total operating expenses
|
|
|
|
|
|
|
1,350
|
|
|
|
4,075
|
|
|
|
4,845
|
|
|
|
10,405
|
|
Change in financial instrument fair value
|
|
|
6
|
|
|
|
1,514
|
|
|
|
524
|
|
|
|
1,811
|
|
|
|
189
|
|
Foreign exchange loss (gain)
|
|
|
|
|
|
|
180
|
|
|
|
(80
|
)
|
|
|
(21
|
)
|
|
|
113
|
|
Interest expense
|
|
|
|
|
|
|
99
|
|
|
|
78
|
|
|
|
274
|
|
|
|
218
|
|
Loss on available for sale securities
|
|
|
|
|
|
|
3
|
|
|
|
12
|
|
|
|
10
|
|
|
|
6
|
|
Loss before income taxes
|
|
|
|
|
|
|
3,146
|
|
|
|
4,609
|
|
|
|
6,919
|
|
|
|
10,931
|
|
Income tax benefit
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
|
|
|
|
|
$
|
3,146
|
|
|
$
|
4,609
|
|
|
$
|
6,919
|
|
|
$
|
10,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
$
|
3,146
|
|
|
$
|
4,609
|
|
|
$
|
6,919
|
|
|
$
|
10,931
|
|
Other comprehensive (gain) loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting currency translation
|
|
|
|
|
|
|
(206
|
)
|
|
|
91
|
|
|
|
52
|
|
|
|
(140
|
)
|
Total comprehensive loss
|
|
|
|
|
|
$
|
2,940
|
|
|
$
|
4,700
|
|
|
$
|
6,971
|
|
|
$
|
10,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share, basic and diluted
|
|
|
|
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
|
$
|
0.03
|
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
209,418,833
|
|
|
|
195,081,408
|
|
|
|
205,801,023
|
|
|
|
184,880,012
|
|
The accompanying
notes are an integral part of these condensed consolidated financial statements.
NioCorp Developments Ltd.
Condensed Consolidated Statements of Cash Flows
(expressed in thousands of U.S. dollars) (unaudited)
|
|
For the nine months
ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Total loss for the period
|
|
$
|
(6,919
|
)
|
|
$
|
(10,931
|
)
|
Non-cash elements included in net loss:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
4
|
|
|
|
7
|
|
Change in financial instrument fair value
|
|
|
1,811
|
|
|
|
189
|
|
Unrealized loss on available-for-sale investments
|
|
|
10
|
|
|
|
6
|
|
Accretion of convertible debt
|
|
|
118
|
|
|
|
85
|
|
Foreign exchange gain loss
|
|
|
24
|
|
|
|
157
|
|
Share-based compensation
|
|
|
1,252
|
|
|
|
862
|
|
|
|
|
(3,700
|
)
|
|
|
(9,625
|
)
|
Change in working capital items:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
8
|
|
|
|
—
|
|
Prepaid expenses
|
|
|
121
|
|
|
|
37
|
|
Accounts payable and accrued liabilities
|
|
|
(1,056
|
)
|
|
|
571
|
|
Net cash used in operating activities
|
|
|
(4,627
|
)
|
|
|
(9,017
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
15
|
|
|
|
—
|
|
Net cash used in investing activities
|
|
|
15
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from issuance of capital stock
|
|
|
1,545
|
|
|
|
5,673
|
|
Share issue costs
|
|
|
(189
|
)
|
|
|
(66
|
)
|
Issuance of convertible debt
|
|
|
3,415
|
|
|
|
1000
|
|
Related party debt drawdown
|
|
|
305
|
|
|
|
175
|
|
Other current assets
|
|
|
(456
|
)
|
|
|
—
|
|
Net cash provided by financing activities
|
|
|
4,620
|
|
|
|
6,782
|
|
Exchange rate effect on cash, cash equivalents and restricted cash
|
|
|
(28
|
)
|
|
|
(42
|
)
|
Change in cash, cash equivalents and restricted cash during period
|
|
|
(20
|
)
|
|
|
(2,277
|
)
|
Cash, cash equivalents and restricted cash, beginning of period
|
|
|
503
|
|
|
|
4,412
|
|
Cash, cash equivalents and restricted cash, end of period
|
|
$
|
483
|
|
|
$
|
2,135
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Amounts paid for interest
|
|
$
|
149
|
|
|
$
|
48
|
|
Amounts paid for income taxes
|
|
|
—
|
|
|
|
—
|
|
Non-cash financing transactions
|
|
|
|
|
|
|
|
|
Lind conversions
|
|
|
3,693
|
|
|
|
2,212
|
|
Debt to equity conversion
|
|
|
207
|
|
|
|
—
|
|
The accompanying
notes are an integral part of these condensed consolidated financial statements.
NioCorp Developments Ltd.
Condensed Consolidated Statements of Shareholders’
Equity
(expressed in thousands of U.S. dollars, except for Common Shares outstanding) (unaudited)
|
|
Common
Shares Outstanding
|
|
|
Common
Stock
|
|
|
Additional Paid-in Capital
|
|
|
Deficit
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2016
|
|
|
180,467,990
|
|
|
$
|
58,401
|
|
|
$
|
8,630
|
|
|
$
|
(60,222
|
)
|
|
$
|
(615
|
)
|
|
$
|
6,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of warrants
|
|
|
3,447,137
|
|
|
|
1,675
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,675
|
|
Exercise of options
|
|
|
150,000
|
|
|
|
70
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
70
|
|
Fair value of broker warrants granted
|
|
|
—
|
|
|
|
—
|
|
|
|
20
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20
|
|
Fair value of Lind warrants granted
|
|
|
—
|
|
|
|
—
|
|
|
|
233
|
|
|
|
—
|
|
|
|
—
|
|
|
|
233
|
|
Private placements - February 2017
|
|
|
7,364,789
|
|
|
|
3,927
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,927
|
|
Debt conversions
|
|
|
7,346,421
|
|
|
|
4,103
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,103
|
|
Share issuance costs
|
|
|
—
|
|
|
|
(181
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(181
|
)
|
Fair value of stock options exercised
|
|
|
—
|
|
|
|
34
|
|
|
|
(34
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Share-based payments
|
|
|
—
|
|
|
|
—
|
|
|
|
1,471
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,471
|
|
Reporting currency presentation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9
|
|
|
|
9
|
|
Loss for the year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(14,630
|
)
|
|
|
—
|
|
|
|
(14,630
|
)
|
Balance, June 30, 2017
|
|
|
198,776,337
|
|
|
$
|
68,029
|
|
|
$
|
10,320
|
|
|
$
|
(74,852
|
)
|
|
$
|
(606
|
)
|
|
$
|
2,891
|
|
Exercise of options
|
|
|
10,091
|
|
|
|
5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
Fair value of broker warrants granted
|
|
|
—
|
|
|
|
—
|
|
|
|
41
|
|
|
|
—
|
|
|
|
—
|
|
|
|
41
|
|
Fair value of Lind warrants granted
|
|
|
—
|
|
|
|
—
|
|
|
|
552
|
|
|
|
—
|
|
|
|
—
|
|
|
|
552
|
|
Private placements - July 2017
|
|
|
2,962,500
|
|
|
|
1,540
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,540
|
|
Private placement – September 2017
|
|
|
415,747
|
|
|
|
207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
207
|
|
Debt conversions
|
|
|
8,037,767
|
|
|
|
3,693
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,693
|
|
Share issuance costs
|
|
|
—
|
|
|
|
(230
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(230
|
)
|
Fair value of stock options exercised
|
|
|
—
|
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Share-based payments
|
|
|
—
|
|
|
|
—
|
|
|
|
1,252
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,252
|
|
Reporting currency presentation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(52
|
)
|
|
|
(52
|
)
|
Loss for the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,919
|
)
|
|
|
—
|
|
|
|
(6,919
|
)
|
Balance, March 31, 2018
|
|
|
210,202,442
|
|
|
$
|
73,246
|
|
|
$
|
12,163
|
|
|
$
|
(81,771
|
)
|
|
$
|
(658
|
)
|
|
$
|
2,980
|
|
The accompanying
notes are an integral part of these condensed consolidated financial statements.
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
March 31, 2018
|
(expressed in thousands of U.S. dollars, except per share amounts
or as otherwise stated) (unaudited)
|
|
1.
|
DESCRIPTION
OF BUSINESS
|
NioCorp
Developments Ltd. (“NioCorp” or the “Company”) was incorporated on February 27, 1987 under the laws of
the Province of British Columbia and currently operates in one reportable operating segment consisting of exploration and development
of mineral deposits in North America, specifically, the Elk Creek Niobium/Scandium/Titanium property (the “Elk Creek Project”)
located in southeastern Nebraska.
These
financial statements have been prepared on a going concern basis that contemplates the realization of assets and discharge of
liabilities at their carrying values in the normal course of business for the foreseeable future. These financial statements do
not reflect any adjustments that may be necessary if the Company is unable to continue as a going concern.
The
Company currently earns no operating revenues and will require additional capital in order to advance the Elk Creek Project. The
Company’s ability to continue as a going concern is uncertain and is dependent upon the generation of profits from mineral
properties, obtaining additional financing, and maintaining continued support from its shareholders and creditors.
|
a)
|
Basis
of Preparation and Consolidation
|
The
accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted
accounting principles of the United States of America (“US GAAP”) and the rules and regulations of the Securities
and Exchange Commission (“SEC”). The interim condensed consolidated financial statements include the consolidated
accounts of the Company and its wholly-owned subsidiaries with all significant intercompany transactions eliminated. The accounting
policies followed in preparing these interim condensed consolidated financial statements are those used by the Company as set
out in the audited consolidated financial statements for the year ended June 30, 2017.
In
the opinion of management, all adjustments considered necessary (including reclassifications and normal recurring adjustments)
to present fairly the financial position, results of operations, and cash flows at March 31, 2018, and for all periods presented,
have been included in these interim condensed consolidated financial statements. Certain information and footnote disclosures
normally included in the consolidated financial statements prepared in accordance with US GAAP have been condensed or omitted
pursuant to appropriate SEC rules and regulations. These interim condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements for the year ended June 30, 2017. The interim results are not necessarily
indicative of results for the full year ending June 30, 2018, or future operating periods.
|
b)
|
Recent
Accounting Standards
|
Issued
and Adopted
In
March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2016-09, Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU require, among other things, that
all income tax effects of awards be recognized in the income statement when the awards vest or are settled. The ASU also allows
for an employer to repurchase more of an employee’s shares than it can today for tax withholding purposes without triggering
liability accounting, and it allows for a policy election to account for forfeitures as they occur. The amendments in this ASU
are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We adopted
this guidance during the quarter ended September 30, 2017. The adoption of this ASU had no material impacts on our financial statement
results or disclosures.
Issued
and Not Effective
From
time to time, new accounting pronouncements are issued by the FASB that are adopted by the Company as of the specified effective
date. Unless otherwise discussed, management believes that the impact of recently issued standards did not or will not have a
material impact on the Company’s consolidated financial statements upon adoption.
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
March 31, 2018
|
(expressed in thousands of U.S. dollars, except per share amounts
or as otherwise stated) (unaudited)
|
In
January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The
update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether
transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The update is effective for fiscal
years beginning after December 15, 2017, and interim periods within those fiscal years. The Company will apply the provisions
of the update to potential future acquisitions occurring after the effective date.
In
February 2016, the FASB issued ASU 2016-02, Leases. The standard requires that a lessee recognize on the balance sheet assets
and liabilities for leases with lease terms of more than twelve months. The recognition, measurement, and presentation of expenses
and cash flows arising from a lease have not significantly changed from the previous US GAAP. The standard is effective for fiscal
years beginning after December 15, 2018, including interim periods within such fiscal year, with early adoption permitted. The
Company is currently assessing the impact, if any, of implementing this guidance on its consolidated financial position, results
of operations, and liquidity.
The
preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of expenses during the reporting period. The Company regularly evaluates
estimates and assumptions related to the deferred income tax asset valuations, convertible debt valuations, and share-based compensation.
The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes
to be reasonable under the circumstances, the results of which form the basis for making judgments about the other sources. The
actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent
there are material differences between estimates and the actual results, future results of operations will be affected.
Certain
prior year amounts have been reclassified to conform to fiscal 2018 presentation and these reclassifications had no effect on
the reported results of operations or net equity as previously disclosed.
The
Company incurred a loss of $6,919 for the nine months ended March 31, 2018 (2017 - $10,931) and had a working capital deficit
and an accumulated deficit of $3,109 and $81,771, respectively, as of March 31, 2018. These factors indicate the existence of
a material uncertainty that raises substantial doubt about the Company's ability to continue as a going concern.
The
Company’s ability to continue operations and fund its expenditures is dependent on management’s ability to secure
additional financing. Management is actively pursuing such additional sources of financing, and while it has been successful in
doing so in the past, there can be no assurance it will be able to do so in the future. These consolidated financial statements
do not give effect to any adjustments required to realize its assets and discharge its liabilities in other than the normal course
of business and at amounts different from those reflected in the accompanying financial statements.
Restricted
cash represents amounts held in escrow to secure payment of work related to the Company’s Elk Creek Feasibility Study. Under
the terms of the escrow agreement, the balance of $265 was drawn against outstanding accounts payable during the quarter ended
September 30, 2017.
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
March 31, 2018
|
(expressed in thousands of U.S. dollars, except per share amounts
or as otherwise stated) (unaudited)
|
Other
current assets include legal and other professional fees associated with obtaining project debt financing for the Elk Creek Project.
Amounts will be deferred until funding is completed, at which time the balance will become a direct deduction from the related
debt liability.
|
|
As of
|
|
|
|
March 31, 2018
|
|
|
June 30, 2017
|
|
Convertible debt, current portion
|
|
$
|
710
|
|
|
$
|
2,161
|
|
Noncurrent:
|
|
|
|
|
|
|
|
|
Convertible notes
|
|
$
|
—
|
|
|
$
|
592
|
|
Convertible security
|
|
|
4,580
|
|
|
|
1,304
|
|
|
|
$
|
4,580
|
|
|
$
|
1,896
|
|
Convertible
Security Funding
Changes
in the Lind Asset Management IV, LLC (“Lind”) convertible security (the “Convertible Security”) balance
are comprised of the following:
|
|
Convertible Security
|
|
Balance, June 30, 2017
|
|
$
|
3,465
|
|
Additional debt drawdown
|
|
|
3,500
|
|
Conversions, at fair value
|
|
|
(3,693
|
)
|
Change in fair market value
|
|
|
1,308
|
|
Balance, March 31, 2018
|
|
$
|
4,580
|
|
On
August 10, 2017, Lind provided notice to the Company of its election to advance an additional $1,000 in funding under the Convertible
Security pursuant to its right under the Convertible Security Funding Agreement, dated December 14, 2015, between the Company
and Lind (the “Lind Agreement”). As a result, upon payment of the additional $1,000 in funding by Lind to the Company,
the face value of the Convertible Security was increased by $1,200 ($1,000 in additional funding plus implied interest), and the
Company issued warrants (“Warrants”) to Lind, as follows:
|
|
|
|
|
|
|
|
|
Black
Scholes Pricing Model Inputs
|
Funding
Date
|
|
Face
Value
1
|
|
|
Warrants
Issued
2
|
Issue
Price
3
|
Warrant
Expiry Date
|
Risk-free
Rate
|
Yield
|
Volatility
|
Expected
Life
|
August
15, 2017
|
|
$
|
300
|
|
|
260,483
|
C$0.73
|
August
15, 2020
|
1.23%
|
0%
|
49.6%
|
3
years
|
September 28,
2017
|
|
|
300
|
|
|
283,413
|
C$0.66
|
September 28,
2020
|
1.23%
|
0%
|
47.7%
|
3
years
|
October
31, 2017
|
|
|
300
|
|
|
308,901
|
C$0.62
|
October
31, 2020
|
1.59%
|
0%
|
47.0%
|
3
years
|
December
6, 2017
|
|
|
300
|
|
|
355,132
|
C$0.54
|
December
6, 2020
|
1.59%
|
0%
|
48.9%
|
3
years
|
Total
|
|
$
|
1,200
|
|
|
1,207,929
|
|
|
|
|
|
|
|
1
|
Includes
implied interest.
|
|
2
|
The
value of warrants issued totaled $127, which was expensed to Change in Financial Instrument Fair Value.
|
|
3
|
The
price to convert one warrant into one common share of the Company (“Common Share”).
|
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
March 31, 2018
|
(expressed in thousands of U.S. dollars, except per share amounts
or as otherwise stated) (unaudited)
|
On
January 23, 2018, Lind provided notice to the Company of its election to advance an additional $2,500 in funding (the “Initial
Second Tranche Increase”) under the Convertible Security pursuant to its right under the Lind Agreement. As a result, upon
payment of the additional $2,500 in funding by Lind to the Company, the face value of the Convertible Security was increased by
$3,000 ($2,500 in additional funding plus implied interest), and the Company issued Warrants to Lind, as follows:
|
|
|
|
|
|
|
|
|
Black
Scholes Pricing Model Inputs
|
Funding
Date
|
|
Face Value
1
|
|
|
Warrants
Issued
2
|
Issue
Price
3
|
Warrant
Expiry Date
|
Risk-free
rate
|
Yield
|
Volatility
|
Expected
Life
|
January
30, 2018
|
|
$
|
1,800
|
|
|
1,546,882
|
C$0.72
|
January
30, 2021
|
1.78%
|
0%
|
56.5%
|
3
years
|
February 5, 2018
|
|
|
600
|
|
|
529,344
|
C$0.70
|
February 5, 2021
|
1.78%
|
0%
|
56.6%
|
3
years
|
February
7, 2018
|
|
|
600
|
|
|
541,435
|
C$0.69
|
February
7, 2021
|
1.78%
|
0%
|
56.7%
|
3
years
|
Total
|
|
$
|
3,000
|
|
|
2,617,661
|
|
|
|
|
|
|
|
1
|
Includes
implied interest.
|
|
2
|
The
value of warrants issued totaled $425, which was expensed to Change in Financial Instrument Fair Value.
|
|
3
|
The
price to convert one warrant into one Common Share.
|
On
March 27, 2018, the Company provided notice to Lind of its election to call an additional $1,000 in funding under the Convertible
Security pursuant to its right under the Lind Agreement (together with the Initial Second Tranche Increase, the “Second
Tranche Increase”). This amount was funded by Lind on April 5, 2018, and the face amount of the Convertible Security was
increased by $1,200 ($1,000 in additional funding and $200 in implied interest). In connection with the funding, the Company issued
1,058,872 Warrants to Lind, with each Warrant entitling the holder to acquire one Common Share at a price of C$0.72 per share
until April 5, 2021.
The
Convertible Security is convertible into Common Shares at a conversion price equal to 85% of the volume weighted average trading
price (“Volume Weighted Average Price”) of the Common Shares (in Canadian dollars) on the Toronto Stock Exchange (the
“TSX”) for the five consecutive trading days immediately prior to the date on which Lind provides the Company with
notice of its intention to convert an amount of the Convertible Security from time to time. During the nine-month period ended
March 31, 2018, $3,000 principal amount of the Convertible Security was converted into 8,037,767 Common Shares.
The
Convertible Security contains financial and non-financial covenants customary for a facility of its size and nature, and includes
a financial covenant defining an event of default as all present and future liabilities of the Company or any of its subsidiaries,
exclusive of related party loans, for an amount or amounts exceeding $2,000 and which have not been satisfied on time or within
90 days of invoice, or have become prematurely payable as a result of its default or breach. The Company was in compliance with
these covenants as of March 31, 2018.
Convertible
Notes
Changes
in the Company’s outstanding convertible promissory notes (the “Convertible Notes”) balance are comprised of
the following:
|
|
Convertible Notes
|
|
Balance, June 30, 2017
|
|
$
|
592
|
|
Accreted interest, net of interest paid
|
|
|
118
|
|
Balance, March 31, 2018
|
|
$
|
710
|
|
The
changes in the derivative liability related to the conversion feature of the Convertible Notes are as follows:
|
|
Derivative Liability
|
|
Balance, June 30, 2017
|
|
$
|
82
|
|
Change in fair value of derivative liability
|
|
|
(41
|
)
|
Balance, March 31, 2018
|
|
$
|
41
|
|
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
March 31, 2018
(expressed in thousands of U.S. dollars, except per share amounts
or as otherwise stated) (unaudited)
On July 26, 2017, the Company
closed a brokered private placement (the “July 2017 Private Placement”) of units (“Units”) of the Company.
Under the July 2017 Private Placement, a total of 2,962,500 Units were issued at C$0.65 per Unit, for total gross proceeds to the
Company of approximately C$1,926. Each Unit issued pursuant to the July 2017 Private Placement consists of one Common Share and
one Warrant of the Company. Each Warrant entitles the holder thereof to purchase one additional Common Share at a price of C$0.79
until July 26, 2021.
The July 2017 Private Placement
was brokered by Mackie Research Capital Corporation (the “Agent”). The Company paid the Agent an aggregate cash commission
of approximately C$125, equal to 6.5% of the gross proceeds raised under the July 2017 Private Placement. The Company also issued
to the Agent 192,562 broker warrants (the “Broker Warrants”), equal to 6.5% of the Units sold pursuant to the July
2017 Private Placement. Each Broker Warrant entitles the holder thereof to purchase one Common Share at a price of C$0.79 until
July 26, 2021. The fair value of the Broker Warrants of $41 was estimated based on the Black Scholes pricing model using a risk-free
interest rate of 1.32%, an expected dividend yield of 0%, a volatility of 60.3%, and an expected life of four years. Total cash
issue costs including agents’ commission, legal and other fees was $189.
Proceeds of the July 2017 Private
Placement were used for general working capital purposes and to continue to advance the Company’s Elk Creek Project.
On September 5, 2017, the Company
entered into a shares-for-debt agreement with Northcott Capital Limited (“Northcott”) whereby NioCorp issued 415,747
Common Shares to settle a debt of C$254 owed to Northcott for past and prospective services through December 2017. Northcott manages
NioCorp’s current effort to assemble a debt financing package as part of the Company’s overall Elk Creek Project financing
effort. The shares issued to Northcott were priced at C$0.61 per share, which represents a 10% premium over the five-day Volume
Weighted Average Price of the Common Shares of C$0.5571 as of the date of the agreement.
On November 9, 2017, the Company’s
shareholders voted to approve a new Long-Term Incentive Plan (the “Long-Term Incentive Plan”) and the granting of incentive
securities thereunder until November 9, 2020. Under the Long-Term Incentive Plan, the Company’s Board of Directors (the “Board”)
may, in its discretion from time to time, grant stock options (“Options”) and share units (in the form of RSUs and
PSUs) to directors, employees and certain other service providers (as defined in the Long-Term Incentive Plan) of the Company and
affiliated entities selected by the Board.
Subject to adjustment as described
in the Long-Term Incentive Plan, the aggregate number of Common Shares that may be reserved for issuance to participants under
the Long-Term Incentive Plan, together with all other security-based compensation arrangements of the Company, including with respect
to Options outstanding under the Company’s 2016 Incentive Stock Option Plan, may not exceed 10% of the issued and outstanding
Common Shares from time to time, and the Common Shares reserved for issuance upon settlement of share units shall not exceed 5%
of the issued and outstanding Common Shares from time to time. The Long-Term Incentive Plan limits the maximum number of Common
Shares issued to insiders (as defined under TSX rules for this purpose) within any one-year period, or issuable to insiders at
any time, in the aggregate, under all security-based compensation arrangements (including the Long-Term Incentive Plan) to 10%
of the then issued and outstanding Common Shares. The Long-Term Incentive Plan also limits the aggregate number of Common Shares
that may be reserved for issuance to any one participant under the Long-Term Incentive Plan, together with all other security-based
compensation arrangements of the Company, to 5% of the then issued and outstanding Common Shares (on a non-diluted basis). Under
the Long-Term Incentive Plan, Options and share units granted to non-employee directors, together with all other equity awards,
are limited to an annual equity award value of C$150 per non-employee director. The total value of Options issuable to a non-employee
director in a one-year period is limited to C$100. Further, and subject to the adjustment provisions of the Long-Term Incentive
Plan, the aggregate number of Common Shares actually issued or transferred by the Company upon the exercise of incentive stock
options will not exceed 20,451,895 Common Shares.
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
March 31, 2018
(expressed in thousands of U.S. dollars, except per share amounts
or as otherwise stated) (unaudited)
The Board has the exclusive
power over the granting, amendment, administration or settlement of any award.
Option transactions are summarized
as follows:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise Price
(C$)
|
|
Balance, June 30, 2017
|
|
|
16,605,000
|
|
|
$
|
0.73
|
|
Issued
|
|
|
3,925,000
|
|
|
|
0.47
|
|
Exercised
|
|
|
(10,091
|
)
|
|
|
0.62
|
|
Cancelled/expired
|
|
|
(4,470,000
|
)
|
|
|
0.75
|
|
Balance, March 31, 2018
|
|
|
16,049,909
|
|
|
$
|
0.66
|
|
The following table summarizes
information about Options outstanding at March 31, 2018:
Exercise Price (C$)
|
|
|
Expiry Date
|
|
Number Outstanding
|
|
|
Aggregate Intrinsic Value (C$)
|
|
|
Number Exercisable
|
|
|
Aggregate Intrinsic Value (C$)
|
|
$
|
0.47
|
|
|
November 9, 2022
|
|
|
3,925,000
|
|
|
$
|
510
|
|
|
|
3,925,000
|
|
|
$
|
510
|
|
$
|
0.62
|
|
|
January 19, 2021
|
|
|
5,264,909
|
|
|
|
—
|
|
|
|
5,264,909
|
|
|
|
—
|
|
$
|
0.76
|
|
|
March 6, 2022
|
|
|
5,650,000
|
|
|
|
—
|
|
|
|
4,237,500
|
|
|
|
—
|
|
$
|
0.94
|
|
|
April 28, 2018
|
|
|
400,000
|
|
|
|
—
|
|
|
|
400,000
|
|
|
|
—
|
|
$
|
0.94
|
|
|
April 28, 2019
|
|
|
100,000
|
|
|
|
—
|
|
|
|
75,000
|
|
|
|
—
|
|
$
|
0.94
|
|
|
July 21, 2021
|
|
|
710,000
|
|
|
|
—
|
|
|
|
710,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
16,049,909
|
|
|
$
|
510
|
|
|
|
14,612,409
|
|
|
$
|
510
|
|
The aggregate intrinsic value
in the preceding table represents the total intrinsic value, based on the Company’s closing Common Share price of C$0.60
as of March 31, 2018, that would have been received by the Option holders had all Option holders exercised their Options as of
that date. The total number of in-the-money Options vested and exercisable as of March 31, 2018, was 3,925,000. The total intrinsic
value of Options exercised during the nine months ended March 31, 2018 was nil.
As of March 31, 2018, there
was $109 of unrecognized compensation cost related to unvested share-based compensation arrangements granted under the option plans.
The cost is expected to be recognized over a remaining weighted average period of approximately 0.4 years.
Warrant transactions are summarized
as follows:
|
|
Warrants
|
|
|
Weighted Average
Exercise Price (C$)
|
|
Balance June 30, 2017
|
|
|
20,609,086
|
|
|
$
|
0.79
|
|
Granted
|
|
|
6,980,652
|
|
|
|
0. 73
|
|
Balance, March 31, 2018
|
|
|
27,589,738
|
|
|
$
|
0. 77
|
|
|
|
|
|
|
|
|
|
|
As discussed above under Note
6, the Company granted 3,825,590 Warrants to Lind in connection with the Convertible Security funding increases. As discussed above
under Note 7a, the Company granted 2,962,500 Warrants and 192,562 Broker Warrants in conjunction with the July 2017 Private Placement.
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
March 31, 2018
(expressed in thousands of U.S. dollars, except per share amounts
or as otherwise stated) (unaudited)
At March 31, 2018, the Company has outstanding
exercisable Warrants, as follows:
Number
|
|
|
Exercise Price (C$)
|
|
|
Expiry Date
|
|
355,132
|
|
|
|
0.54
|
|
|
December 6, 2020
|
|
308,901
|
|
|
|
0.62
|
|
|
October 31, 2020
|
|
283,413
|
|
|
|
0.66
|
|
|
September 28, 2020
|
|
541,435
|
|
|
|
0.69
|
|
|
February 7, 2021
|
|
529,344
|
|
|
|
0.70
|
|
|
February 5, 2021
|
|
3,125,000
|
|
|
|
0.72
|
|
|
December 22, 2018
|
|
1,546,882
|
|
|
|
0.72
|
|
|
January 30, 2021
|
|
260,483
|
|
|
|
0.73
|
|
|
August 15, 2020
|
|
9,150,285
|
|
|
|
0.75
|
|
|
January 19, 2019
|
|
3,155,062
|
|
|
|
0.79
|
|
|
July 26, 2021
|
|
3,860,800
|
|
|
|
0.85
|
|
|
February 14, 2020
|
|
3,043,024
|
|
|
|
0.85
|
|
|
February 21, 2020
|
|
539,307
|
|
|
|
0.85
|
|
|
February 28, 2020
|
|
890,670
|
|
|
|
0.90
|
|
|
March 31, 2020
|
|
27,589,738
|
|
|
|
|
|
|
|
|
8.
|
RELATED PARTY TRANSACTIONS AND BALANCES
|
The Company has a loan with Mark Smith,
President, Chief Executive Officer (“CEO”) and Executive Chairman of NioCorp (the “Original Smith Loan”),
that bears an interest rate of 10%, is secured by the Company’s assets pursuant to a concurrently executed general security
agreement (the “General Security Agreement”), and is subject to both a 2.5% establishment fee and 2.5% prepayment fee.
The principal amount outstanding under the Original Smith Loan is $1,000.
The Company also has a non-revolving credit
facility agreement (the “Credit Facility”) in the amount of $2,000 with Mr. Smith. The Credit Facility bears an interest
rate of 10% and drawdowns from the Credit Facility are subject to a 2.5% establishment fee. Amounts outstanding under the Credit
Facility are secured by all of the Company’s assets pursuant to the General Security Agreement. The Credit Facility contains
financial and non-financial covenants customary for a facility of its size and nature. During the nine months ended March 31, 2018,
Mr. Smith advanced an additional $305 to the Company under the Credit Facility.
As of March 31, 2018, the principal amount
outstanding under the Credit Facility was $480 and accounts payable and accrued liabilities included interest payable and loan
establishment fees payable to Mr. Smith of $107.
On April 6, 2018, the Company and Mr. Smith
entered into amending agreements extending the maturity dates of the Original Smith Loan and the Credit Facility to June 17, 2019
and June 16, 2019, respectively.
On June 20, 2016, the Company announced
a joint development agreement (the “Development Agreement”) with IBC Advanced Alloys Corp. (“IBC”) to investigate
and develop applications for scandium-containing alloys for multiple downstream markets. In addition to his management duties at
NioCorp, Mark Smith is also the Chairman of the IBC Board of Directors. Under the terms of the Development Agreement, each party
bears its own costs incurred in development efforts. During the quarter ended December 31, 2017 the Company supplied IBC with a
small quantity of Scandium Trioxide which was used to manufacture several aluminum-scandium alloy ingots. Development of various
alloys materials and potential commercial products is ongoing.
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
March 31, 2018
(expressed in thousands of U.S. dollars, except per share amounts
or as otherwise stated) (unaudited)
|
9.
|
Exploration Expenditures
|
|
|
For the Three Months Ended March 31,
|
|
|
For the Nine Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Technical studies and engineering
|
|
$
|
266
|
|
|
$
|
1,994
|
|
|
$
|
720
|
|
|
$
|
3,982
|
|
Field management and other
|
|
|
141
|
|
|
|
371
|
|
|
|
483
|
|
|
|
1,004
|
|
Metallurgical development
|
|
|
51
|
|
|
|
366
|
|
|
|
223
|
|
|
|
2,057
|
|
Geologists and field staff
|
|
|
24
|
|
|
|
30
|
|
|
|
72
|
|
|
|
85
|
|
Total
|
|
$
|
482
|
|
|
$
|
2,761
|
|
|
$
|
1,498
|
|
|
$
|
7,128
|
|
On December 22, 2017, President Trump signed
into law the Tax Cuts and Jobs Act (the “Act”), which took effect on January 1, 2018. Some notable provisions of the
Act include a reduction of the corporate income tax rate from 35% to 21%, 100% bonus depreciation for certain capital expenditures,
and a change from a worldwide system with deferral to a territorial tax system, which includes a one-time toll charge on certain
undistributed earnings of non-U.S. subsidiaries. The Company does not expect any material impacts of this new legislation on its
consolidated financial statements.
|
11.
|
Fair Value Measurements
|
The Company measures the fair value of
financial assets and liabilities based on US GAAP guidance which defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements.
The Company classifies financial assets
and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables, or other financial liabilities
depending on their nature. Financial assets and financial liabilities are recognized at fair value on their initial recognition.
Financial assets and liabilities classified
as held-for-trading are measured at fair value, with gains and losses recognized in net income. Financial assets classified as
held-to-maturity, loans and receivables, and financial liabilities other than those classified as held-for-trading are measured
at amortized cost, using the effective interest method of amortization. Financial assets classified as available-for-sale are measured
at fair value, with unrealized gains and losses being recognized in income.
Financial instruments including receivables,
accounts payable and accrued liabilities, and related party loans are carried at amortized cost, which management believes approximates
fair value due to the short-term nature of these instruments.
The following tables present information
about the assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2018 and June 30, 2017, respectively,
and indicate the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general,
fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical instruments. Fair values
determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest rates, and yield curves.
Fair values determined by Level 3 inputs are unobservable data points for the financial instrument and include situations where
there is little, if any, market activity for the instrument.
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
March 31, 2018
(expressed in thousands of U.S. dollars, except per share amounts
or as otherwise stated) (unaudited)
|
|
As of March 31, 2018
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
483
|
|
|
$
|
483
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Available-for-sale securities
|
|
|
14
|
|
|
|
14
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
497
|
|
|
$
|
497
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
$
|
4,580
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,580
|
|
Derivative liability, convertible debt
|
|
|
41
|
|
|
|
—
|
|
|
|
—
|
|
|
|
41
|
|
Total
|
|
$
|
4,621
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,621
|
|
|
|
As of June 30, 2017
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
238
|
|
|
$
|
238
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restricted cash
|
|
|
265
|
|
|
|
265
|
|
|
|
—
|
|
|
|
—
|
|
Available-for-sale securities
|
|
|
23
|
|
|
|
23
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
526
|
|
|
$
|
526
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
$
|
3,465
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,465
|
|
Derivative liability, convertible debt
|
|
|
82
|
|
|
|
—
|
|
|
|
—
|
|
|
|
82
|
|
Total
|
|
$
|
3,547
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,547
|
|
The Company measures the fair market value
of the Level 3 components using the Black Scholes model and discounted cash flows, as appropriate. These models take into account
management’s best estimate of the conversion price of the stock, an estimate of the expected time to conversion, an estimate
of the stock’s volatility, and the risk-free rate of return expected for an instrument with a term equal to the duration
of the convertible debt.
The following table sets forth a reconciliation
of changes in the fair value of the Company’s convertible debt components classified as Level 3 in the fair value hierarchy:
Balance, June 30, 2017
|
|
$
|
3,547
|
|
Additional debt drawdown
|
|
|
3,500
|
|
Conversions to equity
|
|
|
(3,693
|
)
|
Realized and unrealized losses
|
|
|
1,267
|
|
Balance, March 31, 2018
|
|
$
|
4,621
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
The following discussion and analysis
should be read in conjunction with our unaudited condensed interim consolidated financial statements as of, and for the three and
nine months ended March 31, 2018, and the related notes thereto, which have been prepared in accordance with generally accepted
accounting principles in the United States (“US GAAP”). This discussion and analysis contains forward-looking
statements and forward-looking information that involve risks, uncertainties, and assumptions. Our actual results may differ materially
from those anticipated in these forward-looking statements and information as a result of many factors, including, but not limited
to, those set forth elsewhere in this Quarterly Report on Form 10-Q. See “Note Regarding Forward-Looking Statements”
below.
All currency amounts are stated in thousands
of U.S. dollars unless noted otherwise.
As used in this report, unless the context
otherwise indicates, references to “we,” “our,” the “Company,” “NioCorp,” and “us”
refer to NioCorp Developments Ltd. and its subsidiaries, collectively.
Note Regarding Forward Looking Statements
This Quarterly Report
on Form 10-Q and the exhibits attached hereto contain “forward-looking statements” within the meaning of Section 27A
of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and “forward-looking information” within the meaning of applicable
Canadian securities legislation (collectively, “forward-looking statements”). Such forward-looking statements concern
our anticipated results and developments in the operations of the Company in future periods, planned exploration activities, the
adequacy of the Company’s financial resources, and other events or conditions that may occur in the future. Forward-looking
statements are frequently, but not always, identified by words such as “expects,” “anticipates,” “believes,”
“intends,” “estimates,” “potential,” “possible,” and similar expressions, or statements
that events, conditions, or results “will,” “may,” “could,” or “should” (or the
negative and grammatical variations of any of these terms) occur or be achieved. Any statements that express or involve discussions
with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, or future events or performance
(often, but not always, using words or phrases such as “expects” or “does not expect,” “is expected,”
“anticipates” or “does not anticipate,” “plans,” “estimates,” or “intends,”
or stating that certain actions, events, or results “may,” “could,” “would,” “might,”
or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements.
Such forward-looking statements reflect the Company’s current views with respect to future events and are subject to certain
known and unknown risks, uncertainties, and assumptions. Many factors could cause actual results, performance, or achievements
to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking
statements, including, among others, risks related to the following:
|
●
|
risks related to our ability to operate as a going concern;
|
|
●
|
risks related to our requirement of significant additional capital;
|
|
●
|
risks related to our limited operating history;
|
|
●
|
risks related to changes in economic valuations of the Elk Creek Project, such as net present value
calculations, changes, or disruptions in the securities markets;
|
|
●
|
risks related to our history of losses;
|
|
●
|
risks related to cost increases for our exploration and, if warranted, development projects;
|
|
●
|
risks related to feasibility study results;
|
|
●
|
risks related to the determination of the economic viability of a deposit;
|
|
●
|
risks related to mineral exploration and production activities;
|
|
●
|
risks related to our lack of mineral production from our properties;
|
|
●
|
risks related to the results of our metallurgical testing;
|
|
●
|
risks related to the price volatility of commodities;
|
|
●
|
risks related to estimates of mineral resources and reserves;
|
|
●
|
risks related to changes in mineral resource and reserve estimates;
|
|
●
|
risks related to differences in United States and Canadian reserve and resource reporting;
|
|
●
|
risks related to our exploration activities being unsuccessful;
|
|
●
|
risks related to our ability to obtain permits and licenses for production;
|
|
●
|
risks related to government and environmental regulations that may increase our costs of doing
business or restrict our operations;
|
|
●
|
risks related to proposed legislation that may significantly affect the mining industry;
|
|
●
|
risks related to land reclamation requirements;
|
|
●
|
risks related to competition in the mining industry;
|
|
●
|
risks related to the difficulties of handling the disposal of mine water at our Elk Creek Project;
|
|
●
|
risks related to equipment and supply shortages;
|
|
●
|
risks related to current and future joint ventures and partnerships;
|
|
●
|
risks related to our ability to attract qualified management;
|
|
●
|
risks related to the ability to enforce judgment against certain of our Directors;
|
|
●
|
risks related to currency fluctuations;
|
|
●
|
risks related to claims on the title to our properties;
|
|
●
|
risks related to surface access on our properties;
|
|
●
|
risks related to potential future litigation;
|
|
●
|
risks related to our lack of insurance covering all our operations;
|
|
●
|
risks related to covenants contained in agreements with our secured creditors that may affect our
assets;
|
|
●
|
risks related to the extent to which our level of indebtedness may impair our ability to obtain
additional financing;
|
|
●
|
risks related to our status as a “passive foreign investment company” under the United
States Internal Revenue Code of 1986, as amended;
|
|
●
|
risks related to the Common Shares, including price volatility, lack of dividend payments, dilution,
and penny stock rules; and
|
|
●
|
risks related to our debt.
|
Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially
from those described herein. This list is not exhaustive of the factors that may affect any of the Company’s forward-looking
statements. Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of
the Company or other future events or conditions may differ materially from those reflected in the forward-looking statements due
to a variety of risks, uncertainties, and other factors, including without limitation those discussed under the heading “Risk
Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2017, as well as other factors described elsewhere
in this report and the Company’s other reports filed with the SEC.
The Company’s forward-looking
statements contained in this Quarterly Report on Form 10-Q are based on the beliefs, expectations, and opinions of management as
of the date of this report. The Company does not assume any obligation to update forward-looking statements if circumstances or
management’s beliefs, expectations, or opinions should change, except as required by law. For the reasons set forth above,
investors should not attribute undue certainty to, or place undue reliance on, forward-looking statements.
National Instrument 43-101 Compliance
Scott Honan, M.Sc., SME-RM, a qualified
person as defined by National Instrument 43-101 - Standards of Disclosure for Mineral Projects (“NI 43-101”), has supervised
the preparation of the scientific and technical information that forms the basis for the Elk Creek Project disclosure in this Quarterly
Report on Form 10-Q and has approved the disclosure in this Quarterly Report on Form 10-Q related thereto. Mr. Honan is not independent
of the Company, as he is the Vice President, Business Development. For additional information on the Elk Creek Project, including
information relating to exploration, data verification, the mineral resource estimates and the mineral reserve estimates, see the
Revised NI 43-101 Technical Report (the “Revised Elk Creek Feasibility Study”), dated December 15, 2017, which is available
under NioCorp’s profile on the Canadian Securities Administrators website at www.sedar.com (“SEDAR”).
Company Overview
NioCorp is developing the Elk Creek Project,
located in southeast Nebraska. The Elk Creek Project is an advanced Niobium (Nb)/Scandium (Sc)/Titanium (Ti) exploration project.
Niobium is used to produce various superalloys that are extensively used in high performance aircraft and jet turbines. It also
is used in High-Strength, Low-Alloy (“HSLA”) steel, a stronger steel used in automotive, bridges, structural systems,
buildings, pipelines, and other applications that generally reduces the weight of those applications, which can result in environmental
benefits, including reduced fuel consumption and material usage and fewer air emissions. Scandium can be combined with aluminum
to make high-performance alloys with increased strength and improved corrosion resistance. Scandium also is a critical component
of advanced solid oxide fuel cells, an environmentally preferred technology for high-reliability, distributed electricity generation.
Titanium is a component of various superalloys and other applications that are used for aerospace applications, weapons systems,
protective armor, medical implants and many others. It also is used in pigments for paper, paint, and plastics.
Our primary business strategy is to advance
our Elk Creek Project to commercial production. We are focused on obtaining additional funds to carry out our near-term planned
work programs associated with securing the project financing necessary to complete mine development and construction of the Elk
Creek Project.
Emerging Growth Company Status
We qualify as an “emerging growth
company” as defined in Section 101 of the Jumpstart our Business Startups Act (“JOBS Act”) as we do not have
more than $1.07 billion in annual gross revenue and did not have such amount as of June 30, 2017, this being the last day of our
most recently completed fiscal year.
We may lose our status as an emerging growth
company on the last day of our fiscal year during which (i) our annual gross revenue exceeds $1.07 billion or (ii) we issue more
than $1.07 billion in non-convertible debt in a three-year period. We will lose our status as an emerging growth company if at
any time we are deemed to be a large accelerated filer, as defined in Rule 405 under the Exchange Act. We will lose our status
as an emerging growth company on the last day of our fiscal year following the fifth anniversary of the date of our first sale
of Common Shares pursuant to an effective registration statement.
As an emerging growth company under the
JOBS Act, we have elected to opt out of the extended transition period for complying with new or revised standards pursuant to
Section 107(b) of the JOBS Act. The election is irrevocable.
As an emerging growth company, we are exempt
from Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section 14A(a) and (b) of the Exchange Act. Such sections are described
below:
|
●
|
Section 404(b) of the Sarbanes-Oxley Act of 2002 requires a public
company’s auditor to attest to, and report on, management’s assessment of its internal controls.
|
|
●
|
Sections 14A(a) and (b) of the Exchange Act, implemented by Section
951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) Act, require companies
to hold shareholder advisory votes on executive compensation and golden parachute compensation.
|
As long as we qualify as an emerging growth
company, we will not be required to comply with the requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section
14A (a) and (b) of the Exchange Act.
Recent Corporate Events
In a Federal Register notice published
on February 16, 2018, the Trump Administration included niobium, scandium, and titanium on a list of 35 materials proposed as “Critical
Minerals.” The Company believes that the proposed listing significantly elevates the strategic importance of the Elk Creek
Project, particularly given that it is the only proposed mine in the U.S. that is expected to produce both niobium and scandium,
two superalloy metals that have significant uses in national defense technologies and upon which the U.S. is currently 100% dependent
on foreign nations.
Long-term financing efforts continued during
the quarter ended March 31, 2018, with principal activities focused on outreach to and discussions with several potential sources
of project funding, as well as completion of the technical due diligence review (the “technical review”) of the Company’s
Revised Elk Creek Feasibility Study by RPM Global USA, Inc. on behalf of a potential debt financing syndicate. The technical review
is a private document which provides an independent analysis and opinion on the technical and environmental content of the Revised
Elk Creek Feasibility Study and will be provided to financial institutions expected to form debt and/or equity syndicates that
will help finance the Elk Creek Project.
With the completion of the technical review,
the following steps remain in our financing plan:
|
●
|
Completion of additional independent market reviews for Sc and Nb;
|
|
●
|
Additional “road show” style presentations to potential debt and equity investors;
|
|
●
|
Completion of legal and financial due diligence; and
|
|
●
|
Negotiation and execution of specific debt and equity financing assistance, along with necessary
regulatory approvals for such financings.
|
Pursuant to notice provided by Lind to
the Company of its election to advance an additional $2,500 in funding under the Initial Second Tranche Increase, Lind funded the
full $2,500 as of February 7, 2018. In connection with the funding, the Company issued Warrants to Lind, as follows:
Funding Date
|
Face Value
1
|
Warrants Issued
|
Issue Price
2
|
Warrant Expiry Date
|
January 30, 2018
|
$1,800
|
1,546,882
|
C$0.72
|
January 30, 2021
|
February 5, 2018
|
600
|
529,344
|
C$0.70
|
February 5, 2021
|
February 7, 2018
|
600
|
541,435
|
C$0.69
|
February 7, 2021
|
1
|
Includes implied interest.
|
2
|
The price to convert one warrant into one Common Share.
|
On March 27, 2018, the Company provided
notice to Lind of its election to call an additional $1,000 under the Second Tranche Increase. This amount was funded by Lind on
April 5, 2018 and the face amount of the Convertible Security was increased by $1,200 ($1,000 in additional funding and $200 in
implied interest). In connection with the funding, the Company issued 1,058,872 Warrants to Lind, with each Warrant entitling the
holder to acquire one Common Share at a price of C$0.72 per share until April 5, 2021.
Elk Creek Project Update
On February 7, 2018, we announced the signing
of an agreement with the Nordmin Group of Companies (“Nordmin”) to complete the detailed engineering for the mining
infrastructure for the Elk Creek Project (the “Nordmin Agreement”). As one of several engineering firms involved in
the development of NioCorp’s Revised Elk Creek Feasibility Study, Nordmin intends to review and update the Project’s
mining approach, mine water management systems, and mine infrastructure concepts with an eye toward further design and optimization.
The Nordmin Agreement includes a provision
to enter into an Engineering, Procurement, and Construction (“EPC”) contract with Nordmin to complete the construction
and undertake the operation of the underground mine portion of the Project, subject to satisfactory completion of the detailed
engineering and final agreement between the parties.
In addition to the Nordmin Agreement, we
continued to advance other Elk Creek Project-related work during the quarter. Primary activities included:
|
●
|
Continued development of an air construction
permit application with the Nebraska Department of Environmental Quality, which we expect to file in calendar 2018;
|
|
●
|
Continued the competitive process to identify
and select engineering, procurement and construction firms for surface development; and
|
|
●
|
Held a series of meetings with federal
and state regulators to advance National Pollutant Discharge Elimination System (“NPDES”), reclamation, and other permitting
issues associated with the Elk Creek Project.
|
Financial and Operating Results
The Company continues to expense all expenditures
when incurred, except for equipment, which is capitalized. The Company has no revenues from mining operations. Operating expenses
incurred related primarily to performing exploration activities, as well as the activities necessary to support corporate and shareholder
duties and are detailed in the following table.
|
|
For the three
months ended
March 31,
|
|
|
For the nine
months ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee-related costs
|
|
$
|
410
|
|
|
$
|
409
|
|
|
$
|
1,809
|
|
|
$
|
1,371
|
|
Professional fees
|
|
|
150
|
|
|
|
133
|
|
|
|
543
|
|
|
|
745
|
|
Exploration expenditures
|
|
|
483
|
|
|
|
2,761
|
|
|
|
1,499
|
|
|
|
7,128
|
|
Other operating expenses
|
|
|
307
|
|
|
|
772
|
|
|
|
994
|
|
|
|
1,161
|
|
Total operating expenses
|
|
|
1,350
|
|
|
|
4,075
|
|
|
|
4,845
|
|
|
|
10,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in financial instrument fair value
|
|
|
1,514
|
|
|
|
524
|
|
|
|
1,811
|
|
|
|
189
|
|
Foreign exchange loss (gain)
|
|
|
180
|
|
|
|
(80
|
)
|
|
|
(21
|
)
|
|
|
113
|
|
Interest expense
|
|
|
99
|
|
|
|
78
|
|
|
|
274
|
|
|
|
218
|
|
Loss on available for sale securities
|
|
|
3
|
|
|
|
12
|
|
|
|
10
|
|
|
|
6
|
|
Income tax expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net Loss
|
|
$
|
3,146
|
|
|
$
|
4,609
|
|
|
$
|
6,919
|
|
|
$
|
10,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended March 31, 2018 compared
to nine months ended March 31, 2017
Significant items affecting operating expenses
are noted below:
Employee related costs
increased
due to increased share-based compensation costs reflecting the timing of option issuances and the corresponding vesting periods,
as well as the number of options granted and associated fair value calculations.
Professional fees
include
legal and accounting services. Overall, these fees decreased, reflecting the timing of registration statements filed with the SEC
and ongoing compliance efforts.
Exploration expenditures
decreased $5.6 million, reflecting the timing of expenditures at the Elk Creek Project as discussed above under “
Elk
Creek Project Update
.” 2018 expenditures primarily related to the final wrap-up and issuance of the NI 43-101 Technical
Report filed in Canada on SEDAR on August 10, 2017 (the “August 2017 Feasibility Study”) and the Revised Elk Creek
Feasibility Study and ongoing permitting and project advancement activities, while 2017 costs were primarily directed towards engineering
and metallurgical bench and pilot plant test work in support of our continuing feasibility study work.
Other operating expenses
include investor relations, general office expenditures, equity offering and proxy expenditures and other miscellaneous costs.
These costs decreased primarily due to the timing of option issuances and the corresponding vesting periods, and the number of
options granted and associated fair value calculations for Board members, as well as the timing of investor relations services.
Other significant items impacting the change
in the Company’s net loss are noted below
:
Change in financial instrument
fair value
represents non-cash changes in the market value of the Convertible Security, which is carried at fair value, as
well as changes in the market value of the derivative liability component of the Company’s outstanding convertible promissory
notes, and the fair market value of Warrants issued under the Convertible Security. The 2018 loss includes the value of Warrants
issued to Lind in connection with the Second Tranche Increase.
Foreign exchange (gain) loss
is primarily due to changes in the United States dollar (“USD”) against the Canadian dollar (“C$”) and
reflects the timing of foreign currency transactions and subsequent changes in exchange rates. The impact in 2018 primarily relates
to changing foreign currency rates as applied to the USD-denominated convertible debt instruments and related-party debt, which
are recorded on the Canadian parent company books in C$.
Three months ended March 31, 2018 compared
to three months ended March 31, 2017
Overall, the increase in net loss for the
quarter ended March 31, 2018 as compared to the same period in 2017 is the result of primarily the same factors underlying the
nine-month changes, as discussed above, with respect to employee-related costs, professional fees, exploration expenditures, change
in financial instrument fair value, and foreign exchange (gain) loss.
Liquidity and Capital Resources
We have no revenue generating operations
from which we can internally generate funds. To date, our ongoing operations have been financed by the sale of our equity securities
by way of private placements, convertible securities issuances, and the exercise of incentive stock options and share purchase
warrants. We believe that we will be able to secure additional private placement financings in the future, although we cannot predict
the size or pricing of any such financings. In addition, we may raise funds through the sale of interests in our mineral properties,
although current market conditions have substantially reduced the number of potential buyers/acquirers of any such interests.
As of March 31, 2018, the Company had cash
of $0.5 million and a working capital deficit of $3.1 million, compared to cash of $0.2 million and working capital deficit of
$5.8 million on June 30, 2017. This change in working capital is the result of cash inflows from financing initiatives and the
continued conversion of the Convertible Security, as well as from the reclassification of related-party loans from current to non-current,
based on amended loan agreements. These positive impacts to the working capital deficit were partially offset by year-to-date operating
expenditures.
We expect that the Company will operate
at a loss for the foreseeable future. The Company’s current planned operational needs are approximately $1.7 million until
June 30, 2018, net of the recent investment by Lind on the Company’s exercise of its right to call $1.0 million under the
Lind Agreement. In addition to outstanding accounts payable and short-term liabilities, our average monthly expenditures are approximately
$300 per month where approximately $245 is for administrative purposes, including overhead and estimated costs related to securing
financing necessary for advancement of the Elk Creek Project. Approximately $49 per month is planned for expenditures relating
to the advancement of Elk Creek Project. The Company’s ability to continue operations and fund our current work plan is dependent
on management’s ability to secure additional financing.
The Company anticipates that it may need
to raise $5.7 to $6.0 million to continue planned operations for the next twelve months focused on financing the Elk Creek Resources
Project. Management is actively pursuing such additional sources of debt and equity financing, and while it has been successful
in doing so in the past, there can be no assurance it will be able to do so in the future.
Elk Creek Property lease commitments are
$17 until June 30, 2018. To maintain its currently held properties and fund its currently anticipated general and administrative
costs and planned exploration and development activities at the Elk Creek Project for the fiscal year ending June 30, 2018, the
Company will require additional financing during the current fiscal year. Should such financing not be available in that time-frame,
we will be required to reduce our activities and will not be able to carry out all our presently planned activities at the Elk
Creek Project.
We currently have no further funding commitments
or arrangements for additional financing at this time (other than the potential exercise of options and Warrants) and there is
no assurance that we will be able to obtain additional financing on acceptable terms, if at all. There is significant uncertainty
that we will be able to secure any additional financing in the current equity or debt markets. The quantity of funds to be raised
and the terms of any proposed equity or debt financing that may be undertaken will be negotiated by management as opportunities
to raise funds arise. management intends to pursue funding sources of both debt and equity financing, including but not limited
to the issuance of equity securities in the form of Common Shares, Warrants, subscription receipts, or any combination thereof
in units of the Company pursuant to private placements to accredited investors or pursuant to equity lines of credit or public
offerings in the form of underwritten/brokered offerings, at-the-market offerings, registered direct offerings, or other forms
of equity financing and public or private issuances of debt securities including secured and unsecured convertible debt instruments
or secured debt project financing. Management does not currently know the terms pursuant to which such financings may be completed
in the future, but any such financings will be negotiated at arm’s-length. Future financings involving the issuance of equity
securities or derivatives thereof will likely be completed at a discount to the then-current market price of the Company’s
securities and will likely be dilutive to current shareholders.
The audit opinion and notes that accompany
our financial statements for the year ended June 30, 2017 disclose a “going concern” qualification and disclosures
to our ability to continue in business. The financial statements included in this Quarterly Report on Form 10-Q have been prepared
under the assumption that we will continue as a going concern. We are an exploration stage company and we have incurred losses
since our inception. We do not have sufficient cash to fund normal operations and meet debt obligations for the next twelve months
without deferring payment on certain current liabilities and raising additional funds. We believe that the going concern condition
cannot be removed with confidence until the Company has entered into a business climate where funding of its planned ongoing operating
activities is secured.
We have no exposure to any asset-backed
commercial paper. Other than cash held by our subsidiaries for their immediate operating needs in Colorado and Nebraska, all of
our cash reserves are on deposit with major United States and Canadian chartered banks. We do not believe that the credit, liquidity,
or market risks with respect thereto have increased as a result of the current market conditions. However, in order to achieve
greater security for the preservation of our capital, we have, of necessity, been required to accept lower rates of interest, which
has also lowered our potential interest income.
Operating Activities
During the nine months ended March 31,
2018, the Company’s operating activities consumed $4.6 million of cash (2017: $9.0 million). The cash used in operating activities
for 2018 reflects the Company’s funding of losses of $6.9 million, partially offset by share-based compensation charges and
other non-cash transactions. Overall, 2018 operational outflows declined from 2017 due to the timing of the work efforts on the
August 2017 Feasibility Study and the Revised Elk Creek Feasibility Study, offset by changes in accounts payable and accrued liabilities.
Going forward, the Company’s working capital requirements are expected to increase substantially in connection the development
of the Elk Creek Project.
Financing Activities
Financing inflows were $4.6 million during
the nine months ended March 31, 2018 as compared to $6.8 million during the corresponding period in 2017, primarily reflecting
the timing of convertible debt instrument and private placement issuances initiated during the comparative periods, as well as
financing provided by NioCorp’s President, CEO and Executive Chairman, Mark Smith.
Cash Flow Considerations
The Company has historically relied upon
equity financings and, to a lesser degree, debt financings, to satisfy its capital requirements and will continue to depend heavily
upon equity capital to finance its activities. The Company may pursue debt financing in the medium term if it is able to procure
such financing on terms more favorable than available equity financing; however, there can be no assurance the Company will be
able to obtain any required financing in the future on acceptable terms.
The Company has limited financial resources
compared to its proposed expenditures, no source of operating income, and no assurance that additional funding will be available
to it for current or future projects, although the Company has been successful in the past in financing its activities through
the sale of equity securities.
The ability of the Company to arrange additional
financing in the future will depend, in part, on the prevailing capital market conditions and its success in developing the Elk
Creek Project. Any quoted market for the Common Shares may be subject to market trends generally, notwithstanding any potential
success of the Company in creating revenue, cash flows, or earnings, and any depression of the trading price of the Common Shares
could impact its ability to obtain equity financing on acceptable terms.
Historically, the Company has used net
proceeds from issuances of Common Shares to provide sufficient funds to meet its near-term exploration and development plans and
other contractual obligations when due. However, further development and construction of the Elk Creek Project will require substantial
additional capital resources. This includes near-term funding and, ultimately, funding for Elk Creek Project construction and other
costs. See “
Liquidity and Capital Resources
” above for the Company’s discussion of arrangements related
to possible future financings.
Contractual Obligations
Other than as described below, there have
been no material changes to our contractual obligations
discussed in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Tabular Disclosure of
Contractual Obligations”
as of June 30, 2017, in our Annual Report on Form 10-K for the fiscal year ended June 30,
2017. During the nine-month period ended March 31, 2018, debt obligations increased by $4.2 million in Convertible Security increases
(including implied interest), partially offset by a $3.0 million decrease due to conversions under the Lind Agreement. There were
no other substantial changes to contractual obligations.
Off Balance Sheet Arrangements
The Company has no off balance sheet arrangements.
Critical Accounting Policies
There have been no material changes in
our critical accounting policies
discussed in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Critical Accounting Policies”
as of June 30, 2017, in our Annual Report on Form 10-K for the fiscal year ended June 30, 2017.
Certain U.S. Federal Income Tax Considerations
The Company has been a “passive foreign
investment company” (“PFIC”) as defined under Section 1297 of the U.S. Internal Revenue Code of 1986, as amended,
in recent years and expects to continue to be a PFIC in the future. Current and prospective United States shareholders should consult
their tax advisors as to the tax consequences of PFIC classification and the U.S. federal tax treatment of PFICs. Additional information
on this matter is included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017, under the
heading “Risks Related to the Common Shares.”
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Interest rate risk
The Company’s exposure to changes
in market interest rates, relates primarily to the Company’s earned interest income on cash deposits and short-term investments.
The Company maintains a balance between the liquidity of cash assets and the interest rate return thereon. The carrying amount
of financial assets, net of any provisions for losses, represents the Company’s maximum exposure to credit risk.
Foreign currency exchange risk
The company incurs expenditures in both
USD and C$. Canadian dollar expenditures are primarily related to metallurgical-related exploration expenses, as well as certain
Common Share-related costs and professional services. As a result, currency exchange fluctuations may impact the costs of our operating
activities. To reduce this risk, we maintain sufficient cash balances in C$ to fund expected near-term expenditures.
Commodity price risk
The Company is exposed to commodity price
risk related to the elements associated with the Elk Creek Project. A significant decrease in the global demand for these elements
may have a material adverse effect on our business. The Elk Creek Project is not in production, and the Company does not currently
hold any commodity derivative positions.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
At the end of the period covered by this
Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, an evaluation was carried out under the supervision of and
with the participation of our management, including the CEO and the Chief Financial Officer (“CFO”), of the effectiveness
of the design and operations of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the
Exchange Act). Based on that evaluation, the CEO and the CFO have concluded that, as of the end of the period covered by this Quarterly
Report, our disclosure controls and procedures were effective in ensuring that: (i) information required to be disclosed by us
in reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized, and reported within the
time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed
under the Exchange Act is accumulated and communicated to management, including the CEO and the CFO, as appropriate, to allow for
accurate and timely decisions regarding required disclosure.
Management does not expect that our disclosure
controls and procedures will prevent all error and all fraud. The effectiveness of our or any system of disclosure controls and
procedures, however well designed and operated, can provide only reasonable assurance that the objectives of the system will be
met and is subject to certain limitations, including the exercise of judgment in designing, implementing and evaluating controls
and procedures and the assumptions used in identifying the likelihood of future events.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s
internal control over financial reporting during the three months ended March 31, 2018 that have materially affected, or are reasonably
likely to materially affect, the Company’s internal controls over financial reporting.