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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2023

 

OR

 

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

 

For the transition period from        to      

 

Commission file number: 000-55710

 

NioCorp Developments Ltd.

(Exact Name of Registrant as Specified in its Charter)

 

British Columbia, Canada   98-1262185
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
     

 7000 South Yosemite Street, Suite 115 Centennial, CO

(Address of Principal Executive Offices)  

 

80112

(Zip code)

     
Registrant’s telephone number, including area code: (720) 334-7066

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Shares, without par value   NB   The Nasdaq Stock Market LLC
Warrants, each exercisable for 1.11829212 Common Shares   NIOBW   The Nasdaq Stock Market LLC

 

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

 

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

 

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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:

 

Large Accelerated Filer Accelerated Filer
Non-Accelerated Filer Smaller Reporting Company
  Emerging Growth Company

 

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

 

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

 

As of May 30, 2023, the registrant had 30,396,120 Common Shares outstanding.

 

 

 

 

TABLE OF CONTENTS

 

      Page
PART I — FINANCIAL INFORMATION     
       
ITEM 1.  FINANCIAL STATEMENTS   1
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   28
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   39
ITEM 4.  CONTROLS AND PROCEDURES   39
       
PART II — OTHER INFORMATION     
       
ITEM 1.  LEGAL PROCEEDINGS   41
ITEM 1A.  RISK FACTORS   41
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   43
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES   43
ITEM 4.  MINE SAFETY DISCLOSURES   43
ITEM 5.  OTHER INFORMATION   43
ITEM 6.  EXHIBITS   43
       
SIGNATURES    45

 

 

PART I — FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Contents

 

    Page
Condensed consolidated balance sheets as of March 31, 2023 and June 30, 2022 (unaudited)   2
     
Condensed consolidated statements of operations and comprehensive loss for the three and nine months ended March 31, 2023 and 2022 (unaudited)   3
     
Condensed consolidated statements of cash flows for the nine months ended March 31, 2023 and 2022 (unaudited)   4
     
Condensed consolidated statements of shareholders’ equity and redeemable noncontrolling interest for the three and nine months ended March 31, 2023 and 2022 (unaudited)   5-6
     
Notes to condensed consolidated financial statements (unaudited)   7 - 27

1

 

 

NioCorp Developments Ltd.

Condensed Consolidated Balance Sheets

(expressed in thousands of U.S. dollars, except share data) (unaudited)

 

 

                     
          As of  
    Note     March 31,
2023
   

June 30,

2022

 
ASSETS                  
Current                  
Cash         $ 7,145     $ 5,280  
Prepaid expenses and other           96       402  
Total current assets           7,241       5,682  
Non-current                      
Other assets           35       35  
Investment in equity securities           7       10  
Right-of-use assets           248       94  
Land and buildings, net   6       840       850  
Mineral interests           16,085       16,085  
Total assets         $ 24,456     $ 22,756  
                       
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND SHAREHOLDERS’ EQUITY                      
Current liabilities                      
Accounts payable and accrued liabilities   7     $ 3,319     $ 817  
Related party loan   11       1,289       2,000  
Convertible debt   8       -       2,169  
Operating lease liability   13       70       82  
Total current liabilities           4,678       5,068  
Convertible debt   8       12,263       -  
Warrant liabilities, at fair value   8,10       5,303       -  
Earnout Shares liability, at fair value   9       12,314       -  
Operating lease liability   13       177       23  
Total liabilities           34,735       5,091  
Commitments and contingencies                      
Redeemable noncontrolling interest   9       2,233       -  
SHAREHOLDERS’ EQUITY                      
Common shares, no par value, unlimited shares authorized; shares outstanding: 30,081,655 at March 31, 2023 and 27,667,060 at June 30, 2022   10       134,445       129,055  
Accumulated deficit           (146,046 )     (110,397 )
Accumulated other comprehensive loss           (911 )     (993 )
Total shareholders’ equity           (12,512 )     17,665  
Total liabilities, redeemable noncontrolling interest and equity         $ 24,456     $ 22,756  

 

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

 

2

 

 

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     2023     2022     2023     2022  
Operating expenses                                      
Employee related costs         $ 1,405     $ 308     $ 1,989     $ 1,859  
Professional fees           157       16       583       530  
Exploration expenditures   12       1,410       845       4,015       1,957  
Other operating expenses   5       26,220       217       26,888       1,324  
Total operating expenses           29,192       1,386       33,475       5,670  
                                       
Change in fair value of Earnout Shares liability   9       (881 )     -       (881 )     -  
Change in fair value of warrant liability   8,10       784       -       868       -  
Loss on debt extinguishment    8       300       -       1,922       -  
Foreign exchange (gain) loss           83       (66 )     192       98  
Interest expense           142       679       362       2,306  
Gain on sale of assets   6       -       -       (13 )     -  
Loss on equity securities           1       1       2       6  
Loss before income taxes           29,621       2,000       35,927       8,080  
Income tax benefit           (186 )     -       (186 )     -  
Net loss           29,435       2,000       35,741       8,080  
Net loss attributable to redeemable noncontrolling interest           92       -       92       -  
Net loss attributable to the Company         $ 29,343     $ 2,000     $ 35,649     $ 8,080  
                                       
Other comprehensive loss:                                      
Net loss         $ 29,435     $ 2,000     $ 35,741     $ 8,080  
Other comprehensive loss (gain):                                      
Reporting currency translation           (112 )     38       (82 )     (72 )
Total comprehensive loss           29,323       2,038       35,659       8,008  
Comprehensive loss attributable to redeemable noncontrolling interest           92       -       92       -  
Comprehensive loss attributable to the Company         $ 29,231     $ 2,038     $ 35,567     $ 8,008  
                                       
Loss per common share, basic and diluted   2d     $ 1.00     $ 0.08     $ 1.26     $ 0.31  
                                       
Weighted average common shares outstanding           28,546,379       26,576,440       28,128,731       26,172,981  

  

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

 

3

 

 

NioCorp Developments Ltd. 

Condensed Consolidated Statements of Cash Flows  

(expressed in thousands of U.S. dollars) (unaudited)

 

 

             
  

For the nine months ended

March 31,

 
   2023   2022 
CASH FLOWS FROM OPERATING ACTIVITIES          
Net loss for the period  $(35,741)  $(8,080)
Adjustments to reconcile net loss to net cash used in operations:          
Initial valuation of warrants   3,848    - 
Change in fair value of warrants   868    - 
Initial valuation of Earnout Shares liability   13,195    - 
Change in fair value of Earnout Shares liability   (881)   - 
Share-based compensation   1,788    1,568 
Fair value of Commitment Shares issued   650    - 
Accretion of convertible debt   215    2,149 
Loss on debt extinguishment   1,422    - 
Foreign exchange loss   200    148 
Unrealized loss on equity securities   2    6 
Depreciation   2    2 
Gain on sale of assets   (13)   - 
Noncash lease expense   (12)   (5)
Total   (14,457)   (4,212)
Change in working capital items:          
Prepaid expenses and other   304    (516)
Accounts payable and accrued liabilities   2,688    314 
Net cash used in operating activities   (11,465)   (4,414)
           
 CASH FLOWS FROM INVESTING ACTIVITIES          
Acquisition of land and buildings   -    (16)
Proceeds from sale of assets   21    - 
Net cash provided by (used in) investing activities   21    (16)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Proceeds from issuance of common shares   11    973 
Share issuance costs   (21)   - 
Convertible debt repayment   (515)   - 
Proceeds of debt issuance, net of costs   14,857    - 
Related party debt draws   1,130    - 
Related party debt repayments   (1,841)   (318)
Net cash provided by financing activities   13,621    655 
Exchange rate effect on cash and cash equivalents   (312)   (78)
Change in cash and cash equivalents during period   1,865    (3,853)
Cash and cash equivalents, beginning of period   5,280    7,317 
Cash and cash equivalents, end of period  $7,145   $3,464 
           
Supplemental cash flow information:          
Amounts paid for interest  $239   $40 
Non-cash financing transactions:          
Conversions of debt for common shares  $1,950   $6,622 

 

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

 

4

 

 

NioCorp Developments Ltd. 

Condensed Consolidated Statements of Shareholders’ Equity and Redeemable Noncontrolling Interest  

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

                                             
   For the Nine Months Ended March 31, 2023 and 2022 
  

 Common

Shares

Outstanding

   Common Stock  

Accumulated
Deficit

  

 Accumulated

other

comprehensive

income

  

Total

shareholders’

equity

  

Redeemable

Noncontrolling

Interest

 
Balance, June 30, 2021   25,637,991   $113,882   $(99,510)  $(1,159)  $13,213   $- 
Exercise of warrants   87,175    543    -    -    543    - 
Exercise of options   192,653    430    -    -    430    - 
Debt conversions   890,550    6,622    -    -    6,622    - 
Share-based compensation   -    1,568    -    -    1,568    - 
Reporting currency translation   -    -    -    72    72    - 
Loss for the period   -    -    (8,080)   -    (8,080)   - 
Balance, March 31, 2022   26,808,369   $123,045   $(107,590)  $(1,087)  $14,368   $- 
                               
Balance, June 30, 2022   27,667,060   $129,055   $(110,397)  $(993)  $17,665   $- 
Exercise of options   265,138    11    -    -    11    - 
Fair value of Financing Warrants issued   -    3,337    -    -    3,337    - 
Common Shares issued in the GXII Transaction   1,753,821    -    -    -    -    - 
Redeemable noncontrolling interest   -    (2,325)   -    -    (2,325)   2,325 
Commitment Shares issued   81,213    650    -    -    650    - 
Debt conversions   314,423    1,950    -    -    1,950    - 
Share issuance costs   -    (21)   -    -    (21)   - 
Share-based compensation   -    1,788    -    -    1,788    - 
Reporting currency translation   -    -    -    82    82    - 
Loss for the period   -    -    (35,649)   -    (35,649)   (92)
Balance, March 31, 2023   30,081,655   $134,445   $(146,046)  $(911)  $(12,512)  $2,233 

 

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

 

5

 

 

NioCorp Developments Ltd. 

Condensed Consolidated Statements of Shareholders’ Equity and Redeemable Noncontrolling Interest  

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

                                             
   For the Three Months Ended March 31, 2023 and 2022 
  

 Common

Shares

Outstanding

   Common Stock  

Accumulated
Deficit

  

 Accumulated

other

comprehensive

income

  

 Total

shareholders’

equity

  

Redeemable

noncontrolling

Interest

 
Balance, December 31, 2021   26,402,696   $120,936   $(105,590)  $(1,050)  $14,296   $- 
Exercise of options   90,692    9    -    -    9    - 
Debt conversions   314,981    2,100    -    -    2,100    - 
Reporting currency translation   -    -    -    (37)   (37)   - 
Loss for the period   -    -    (2,000)   -    (2,000)   - 
Balance, March 31, 2022   26,808,369   $123,045   $(107,590)  $(1,087)  $14,368    - 
                               
Balance, December 31, 2022   28,242,064   $130,995   $(116,703)  $(1,023)  $13,269   $- 
Exercise of options   4,557    -    -    -    -    - 
Fair value of Financing Warrants issued   -    3,337    -    -    3,337    - 
Common Shares issued in the GXII Transaction   1,753,821    -    -    -    -    - 
Redeemable noncontrolling interest   -    (2,325)   -    -    (2,325)   2,325 
Commitment Shares issued   81,213    650    -    -    650    - 
Share-based compensation   -    1,788    -    -    1,788    - 
Reporting currency translation   -    -    -    112    112    - 
Loss for the period   -    -    (29,343)   -    (29,343)   (92)
Balance, March 31, 2023   30,081,655   $134,445   $(146,046)  $(911)  $(12,512)  $2,233 

 

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

 

6

 

 

NioCorp Developments Ltd. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2023 

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

1.DESCRIPTION OF BUSINESS

 

NioCorp Developments Ltd. (“we,” “us,” “our,” “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.

 

As further discussed in Notes 5, 8, and 9, on March 17, 2023 (the “Closing Date”), the Company closed the GXII Transaction (as defined below) with GX Acquisition Corp. II (“GXII”), pursuant to the Business Combination Agreement, dated September 25, 2022 (the “Business Combination Agreement”), among the Company, GXII and Big Red Merger Sub Ltd (the “Closing”). At the Closing, the Company also closed convertible debt financings (the “Yorkville Convertible Debt Financing”) with YA II PN, Ltd., an investment fund managed by Yorkville Advisors Global, LP (together with YA II PN, Ltd., “Yorkville”), and the standby equity purchase facility with Yorkville (the “Yorkville Equity Facility Financing” and, together with the Yorkville Convertible Debt Financing, the “Yorkville Financings”) became effective. The transactions contemplated by the Business Combination Agreement, including the GXII Transaction, the Yorkville Financings and the Reverse Stock Split (as defined below), are referred to, collectively, as the “Transactions.”

 

The GXII Transaction is being accounted for as an equity raise transaction in accordance with generally accepted accounting principles of the United States of America (“U.S. GAAP”). Under this method of accounting, GXII is treated as the “acquired” company for financial reporting purposes. Accordingly, the GXII Transaction is treated as the equivalent of NioCorp issuing common shares, no par value, of the Company (“Common Shares”) for the assets and liabilities of GXII. The net assets of GXII are stated at historical cost, with no goodwill or other intangible assets recorded.

 

These interim condensed consolidated 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 to construction and commercial operation. As further discussed in Note 4, these matters raised substantial doubt about the Company’s ability to continue as a going concern, and the Company is dependent upon the generation of profits from mineral properties, obtaining additional financing and maintaining continued support from its shareholders and creditors.

 

 

2.BASIS OF PREPARATION

 

  a) Basis of Preparation and Consolidation

 

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. 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, 2022. Certain transactions include reference to Canadian dollars (“C$”) where applicable.

 

In the opinion of management, all adjustments considered necessary (including normal recurring adjustments) for a fair statement of the financial position, results of operations, and cash flows at March 31, 2023, 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 U.S. GAAP have been condensed or omitted pursuant to appropriate SEC rules and regulations. These interim condensed consolidated financial statements should

 

7

 

 

NioCorp Developments Ltd. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2023 

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

be read in conjunction with the audited consolidated financial statements for the year ended June 30, 2022. The interim results are not necessarily indicative of results for the full year ending June 30, 2023, or future operating periods.

 

 

  b) Recent Accounting Standards

 

Issued and Adopted 

In August 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), which simplifies the accounting for convertible instruments. ASU 2020-06 removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. Either a modified retrospective method of transition or a fully retrospective method of transition is permissible for the adoption of this standard. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company adopted ASU 2020-06 on July 1, 2022, with no material effect on the Company’ s current financial position, results of operations or financial statement 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.

 

 

  c) Use of Estimates

 

The preparation of consolidated financial statements in conformity with U.S. 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, earnout valuation, warrant liabilities, 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.

 

 

  d) Basic and Diluted Earnings per Share

 

Basic earnings (loss) per share represents net earnings (loss) attributable to common shareholders divided by the weighted average number of Common Shares outstanding during the period. The Company considers Vested Shares and Released Earnout Shares (each as defined in Note 9), to be participating securities, requiring the use of the two-class method. Diluted earnings per share represents net earnings attributable to common shareholders divided by the weighted average number of Common Shares outstanding, inclusive of the dilutive impact of all potentially dilutive securities outstanding during the period, as applicable.

 

The Company utilizes the weighted average method to determine the impact of changes in a participating security on the calculation of loss per share. The following table sets forth the computation of the Company’s basic and diluted net loss per share attributable to common shareholders for the three and nine months ended March 31, 2023:

 

   For the three months ended March 31,   For the nine months ended March 31, 
   2023   2022   2023   2022 
Numerator:                
Net loss  $29,435   $2,000   $35,741   8,080 
Adjust:  Net loss attributable to noncontrolling interest   (56)   -    (43)   - 
Net loss available to participating securities   29,379    2,000    35,698    8,080 
Net loss attributable to Vested Shares   (708)   -    (271)   - 
Net loss attributed to common shareholders - basic and diluted  $28,671   $2,000   $35,427   $8,080 
Denominator:                    
Weighted average shares outstanding – basic and diluted   28,546,379    26,576,440    28,128,731    26,172,981 
                     
Loss per Common Share outstanding – basic and diluted  $1.00   $0.08   $1.26   $0.31 

 

The following shares underlying Options, Warrants, outstanding convertible debt and redeemable noncontrolling interest shares were antidilutive due to a net loss in the periods presented and, therefore, were excluded from the dilutive securities computation for the three- and nine-month periods ended March 31, 2023 and 2022, as indicated below.

 

8

 

 

NioCorp Developments Ltd. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2023 

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

   For the three and nine months ended
March 31,
 
   2023   2022 
Excluded potentially dilutive securities (1)(2):          
Options   1,561,500    1,408,900 
Warrants   19,257,515    1,347,011 
Convertible debt   2,723,500    632,900 
Total potential dilutive securities   23,542,515    3,388,811 

 

  (1) The number of shares is based on the maximum number of shares issuable on exercise or conversion of the related securities as of the period end. Such amounts have not been adjusted for the treasury stock method or weighted average outstanding calculations as required if the securities were dilutive.
  (2) Earnout Shares (as defined below) are excluded as the vesting terms were not met as of the end of the reporting period. 

 

 

 

  e) Reverse Stock Split

 

On March 17, 2023, the Company effected a reverse stock split (the “Reverse Stock Split”) on the basis of one (1) post-Reverse Stock Split Common Share for every ten (10) pre-Reverse Stock Split Common Shares issued and outstanding, with any fractional shares resulting from the Reverse Stock Split rounded down to the nearest whole share. Immediately after the Reverse Stock Split, there were 30,000,442 Common Shares issued and outstanding. All references to share and per share amounts (excluding authorized shares) in the consolidated financial statements and accompanying notes have been retroactively restated to reflect the Reverse Stock Split.

 

 

  f) Redeemable Noncontrolling Interest

 

Redeemable Noncontrolling Interest refers to non-controlling interest associated with the Vested Shares that are redeemable upon the occurrence of an event that is not solely within the Company’s control and is reported in the mezzanine section between total liabilities and shareholders’ deficit, as temporary equity in the Company’s consolidated balance sheets. The Company adjusts the Redeemable Noncontrolling Interest balance to reflect its estimate of the maximum redemption amount each reporting period. The Company’s non-controlling interest is redeemable at fair value, and no adjustment to the earnings per share numerator is required because redemption at fair value is not considered an economic distribution different from other common stockholders.

 

 

  g) Foreign Currency Translation and Functional Currency Conversion

 

Items included in these interim condensed consolidated financial statements of each of the Company and the Company’s consolidated subsidiaries are measured using the currency of the primary economic environment in which the entities operate (the “functional currency”). Prior to March 17, 2023, the Company’s functional currency was the Canadian dollar. Translation gains and losses from the application of the U.S. dollar as the reporting currency during the period that the Canadian dollar was the functional currency are included as part of cumulative currency translation adjustment, which is reported as a component of shareholders’ equity under accumulated other comprehensive loss.

 

The Company re-assessed its functional currency and determined that on March 17, 2023, its functional currency changed from the Canadian dollar to the U.S. dollar based on significant changes in economic facts and circumstances in our organization. The change in functional currency was accounted for prospectively from March 17, 2023 and prior-period financial statements were not restated for the change in functional currency.

 

9

 

 

NioCorp Developments Ltd. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2023 

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

For both monetary and non-monetary assets and liabilities, translated balances as of March 17, 2023 became the new accounting basis. The exchange rate on the date of change became the historical rate at which non-monetary assets and liabilities were translated in subsequent periods. There was no effect on the cumulative translation adjustment on the consolidated basis. Previously recorded cumulative translation adjustments were not reversed. For periods commencing after March 17, 2023, monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates in effect at the balance sheet date. Opening balances related to non-monetary assets and liabilities are based on prior period translated amounts, and non-monetary assets and non-monetary liabilities incurred after March 17, 2023 are translated at the approximate exchange rate prevailing at the date of the transaction. Revenue and expense transactions are translated at the approximate exchange rate in effect at the time of the transactions. Foreign exchange gains and losses are included in the statement of operations and comprehensive loss as foreign exchange gains.

 

The functional currency for the Company’s Canadian subsidiary, 0896800 BC Ltd., which has no independent operations from its parent, also changed from the Canadian dollar to the U.S. dollar. The functional currency for Elk Creek Resources Corp. remains as the U.S. dollar.

 

 

 

3. RESTATEMENTS

 

On February 16, 2021, the Company entered into a Convertible Security Funding Agreement (as amended by Amendment #1 to the Convertible Security Funding Agreement dated December 2, 2021, the “CSFA”) with Lind Global Asset Management III, LLC (“Lind”), pursuant to which the Company issued a convertible security to Lind (the “Lind III Convertible Security”). Pursuant to the CSFA, Lind had certain consent and participation rights applicable in connection with the GXII Transaction and the Yorkville Financings. As more fully discussed in Note 8, on September 25, 2022, the Company and Lind, entered into an agreement (the “Lind Consent”), which modified certain aspects of the CSFA. The Company originally accounted for the Lind Consent under Accounting Standards Codification (“ASC”) Topic 450, Contingencies. In connection with the preparation of the Company’s financial statements for the period ended March 31, 2023, the Audit Committee, in consultation with the Company’s management, determined that the Lind Consent should have been evaluated using ASC Topic 470 – Debt (“ASC 470”), which requires an evaluation of the contract amendment under applicable ASC debt modification guidance. This error impacted the Company’s condensed consolidated balance sheets as of September 30, 2022 and December 31, 2022 and condensed consolidated statements of operations and comprehensive loss and condensed consolidated statements of shareholders’ equity for the periods ended September 30, 2022 and December 31, 2022, as well as certain notes thereto. The identification of the need for the restatement arose during the Company’s quarterly close for the quarter ended March 31, 2023.

 

The Company performed a comparison of the discounted cash flows of the Lind III Convertible Security pursuant to the original CSFA and pursuant to the CSFA as amended by the Lind Consent and determined that a debt extinguishment loss of $201 had occurred. Further, ASC 470 requires that the minimum estimated Consent Payment (as defined below) of $200 also be included in the calculation of the gain or loss on debt extinguishment. The Company also evaluated the Contingent Consent Warrant (as defined below) feature included in the Lind Consent and determined that the Contingent Consent Warrants meet the criteria to be considered separate, freestanding instruments, should be accounted for as a liability under ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), and should be booked at fair value on the date of the Lind Consent, with subsequent changes in valuation recorded as a non-operating gain or loss in the statement of operations. The following table summarizes the components of the initial loss on extinguishment:

 

  

Amount

 
Minimum Consent Payment at inception  $200 
Debt extinguishment fair value adjustment   201 
Initial fair value of Contingent Consent Warrants   1,221 
Total loss on debt extinguishment  $1,622 

 

These interim financial statements as of and for the three and nine months ended March 31, 2023 include the impacts of this restatement.

 

10

 

 

The following tables disclose the impacts of the restatement on the previously filed Quarterly Reports on Form 10-Q for the reporting periods ended September 30, 2022 and December 31, 2022.

 

Restatement Impacts to the Condensed Consolidated Balance Sheet (unaudited) 

As of September 30, 2022      

 

                   
    As Previously Reported     Restatement Impacts     Restated  
Deferred transaction costs   $ 2,809     $ (200 )   $ 2,609  
Total assets     23,246       (200 )     23,046  
Convertible debt     755       159       914  
Total current liabilities     6,511       159       6,670  
Warrant liability     -       964       964  
Total liabilities     6,511       1,123       7,634  
Accumulated deficit     (112,951 )     (1,323 )     (114,274 )
Total shareholders’ equity     16,735       (1,323 )     15,412  
Total liabilities and equity     23,246       (200 )     23,046  

 

Restatement Impacts to the Condensed Consolidated Statement of Operations and Comprehensive Loss (unaudited)

For the Three Months Ended September 30, 2022

 

    As Previously Reported     Restatement Impacts     Restated  
Interest expense   $ 300     $ (42 )   $ 258  
Loss on debt extinguishment     -       1,622       1,622  
Change in fair value of warrant liability     -       (257 )     (257 )
Loss before income taxes     2,554       1,323       3,877  
Net loss     2,554       1,323       3,877  
Total comprehensive loss     2,559       1,323       3,882  
Loss per share   $ 0.09     $ 0.05     $ 0.14  
Weighted average shares outstanding, on post-reverse stock split basis     27,792,632       -       27,792,632  

 

Restatement Impacts to the Condensed Consolidated Statement of Cash Flows (unaudited)

For the Three Months Ended September 30, 2022

 

    As Previously Reported     Restatement Impacts     Restated  
CASH FLOWS FROM OPERATING ACTIVITIES                        
Net loss for the period   $ (2,554 )   $ (1,323 )   $ (3,877 )
Accretion of convertible debt     236       (42 )     194  
Loss on debt extinguishment     -       1,622       1,622  
Change in fair value of warrant liability     -       (257 )     (257 )

 

Restatement Impacts to the Condensed Consolidated Statement of Shareholders’ Equity (unaudited)

As of September 30, 2022

      Common
Shares
   Accumulated
Deficit
   Accumulated
Other
Comprehensive
Loss
   Total 
As Previously Reported
Balance, June 30, 2022     $129,055   $(110,397)  $(993)  $17,665 
Debt conversions      1,650    -    -    1,650 
Share issuance costs      (21)   -    -    (21)
Reporting currency translation      -    -    (5)   (5)
Loss for the period As restated (a)      -    (2,554)   -    (2,554)
Balance, September 30, 2022 As restated (a)     $130,684   $(112,951)  $(998)  $16,735 
Restatement Impacts
Balance, June 30, 2022     $-   $-   $-   $- 
Loss for the period As restated (a)      -    (1,323)   -    (1,323)
Balance, September 30, 2022 As restated (a)     $-   $(1,323)  $-   $(1,323)
As Adjusted
Balance, June 30, 2022     $129,055   $(110,397)  $(993)  $17,665 
Debt conversions      1,650    -    -    1,650 
Share issuance costs      (21)   -    -    (21)
Reporting currency translation      -    -    (5)   (5)
Loss for the period As restated (a)      -    (3,877)   -    (3,877)
Balance, September 30, 2022 As restated (a)     $130,684   $(114,274)  $(998)  $15,412 

 

11

 

 

Restatement Impacts to the Condensed Consolidated Balance Sheet (unaudited)

As of December 31, 2022

 

                         
      As Previously Reported       Restatement Impacts       Restated  
Deferred transaction costs   $ 4,338     $ (200 )   $ 4,138  
Total assets     21,901       (200 )     21,701  
Convertible debt     502       39       541  
Total current liabilities     7,088       39       7,127  
Warrant liability     -       1,305       1,305  
Total liabilities     7,088       1,344       8,432  
Accumulated deficit     (115,159 )     (1,544 )     (116,703 )
Total shareholders’ equity     14,813       (1,544 )     13,269  
Total liabilities and equity     21,901       (200 )     21,701  

 

 

Restatement Impacts to the Condensed Consolidated Statement of Operations and Comprehensive Loss (unaudited)

For the Three Months Ended December 31, 2022

 

                         
      As Previously Reported       Restatement Impacts       Restated  
Interest expense (income)   $ 82     $ (120 )   $ (38 )
Change in fair value of warrant liability     -       341       341  
Loss before income taxes     2,208       221       2,429  
Net loss     2,208       221       2,429  
Total comprehensive loss     2,233       221       2,454  
Loss per share   $ 0.08     $ 0.01     $ 0.09  
Weighted average shares outstanding, on post-reverse stock split basis     28,056,263       -       28,056,263  

 

Restatement Impacts to the Condensed Consolidated Statement of Operations and Comprehensive Loss (unaudited)

For the Six Months Ended December 31, 2022       

 

      As Previously Reported       Restatement Impacts       Restated  
Interest expense   $ 382     $ (162 )   $ 220  
Loss on debt extinguishment     -       1,622       1,622  
Change in fair value of warrant liability     -       84       84  
Loss before income taxes     4,762       1,544       6,306  
Net loss     4,762       1,544       6,306  
Total comprehensive loss     4,792       1,544       6,336  
Loss per share   $ 0.17     $ 0.06     $ 0.23  
Weighted average shares outstanding, on post-reverse stock split basis     27,924,227       -       27,924,227  

 

Restatement Impacts to the Condensed Consolidated Statement of Cash Flows (unaudited)

For the Six Months Ended December 31, 2022

 

   As Previously Reported   Restatement Impacts   Restated 
CASH FLOWS FROM OPERATING ACTIVITIES               
Net loss for the period  $(4,762)  $(1,544)  $(6,306)
Accretion of convertible debt   283    (162)   121 
Loss on debt extinguishment   -    1,622    1,622 
Change in financial instrument fair value   -    84    84 

 

12

 

 

Restatement Impacts to the Condensed Consolidated Statement of Shareholders’ Equity (unaudited)

For the Three Months Ended December 31, 2022

 

      Common
Shares
   Accumulated
Deficit
   Accumulated
Other
Comprehensive
Loss
   Total 
As Previously Reported
Balance, September 30, 2022     $130,684   $(112,951)  $(998)  $16,735 
Exercise of options      11    -         11 
Debt conversions      300    -    -    300 
Reporting currency translation      -    -    (25)   (25)
Loss for the period As restated (a)      -    (2,208)   -    (2,208)
Balance, December 31, 2022 As restated (a)     $130,995   $(115,159)  $(1,023)  $14,813 
Restatement Impacts
Balance, September 30, 2022     $-   $(1,323)  $-   $(1,323)
Loss for the period As restated (a)      -    (221)   -    (221)
Balance, December 31, 2022 As restated (a)     $-   $(1,544)  $-   $(1,544)
As Adjusted
Balance, September 30, 2022     $130,684   $(114,274)  $(998)  $15,412 
Exercise of options      11    -         11 
Debt conversions      300    -    -    300 
Reporting currency translation      -    -    (25)   (25)
Loss for the period As restated (a)      -    (2,429)   -    (2,429)
Balance, December 31, 2022 As restated (a)     $130,995   $(116,703)  $(1,023)  $13,269 

 

Restatement Impacts to the Condensed Consolidated Statement of Shareholders’ Equity (unaudited)

For the Six Months Ended December 31, 2022 

 

      Common Shares   Accumulated
Deficit
   Accumulated Other Comprehensive Loss   Total 
As Previously Reported
Balance, June 30, 2022     $129,055   $(110,397)  $(993)  $17,665 
Exercise of warrants      11    -    -    11 
Debt conversions      1,950    -    -    1,950 
Share issuance costs      (21)   -    -    (21)
Reporting currency translation      -    -    (30)   (30)
Loss for the period As restated (a)      -    (4,762)   -    (4,762)
Balance, December 31, 2022 As restated (a)     $130,995   $(115,159)  $(1,023)  $14,813 
Restatement Impacts
Balance, June 30, 2022     $-   $-   $-   $- 
Loss for the period As restated (a)      -    (1,544)   -    (1,544)
Balance, December 31, 2022 As restated (a)     $-   $(1,544)  $-   $(1,544)
As Adjusted
Balance, June 30, 2022     $129,055   $(110,397)  $(993)  $17,665 
Exercise of warrants      11    -    -    11 
Debt conversions      1,950    -    -    1,950 
Share issuance costs      (21)   -    -    (21)
Reporting currency translation      -    -    (30)   (30)
Loss for the period As restated (a)      -    (6,306)   -    (6,306)
Balance, December 31, 2022 As restated (a)     $130,995   $(116,703)  $(1,023)  $13,269 

 

As previously reported, the Company restated its consolidated balance sheets as of June 30, 2022 and 2021, and consolidated statements of operations and comprehensive income, equity and cash flows for the years ended June 30, 2022 and 2021. In addition, the restatement impacted the first, second and third quarters of our fiscal year ended June 30, 2022. The summarized restatement impacts for the comparable interim period in fiscal year 2022 are presented below. The restatement corrects errors related to the accounting for the unamortized deferred financing costs and debt discounts upon extinguishments of debt related to debt conversions.

 

13

 

 

NioCorp Developments Ltd. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2023 

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

                       

Restatement Impacts to the Condensed Consolidated Statement of Operations and Comprehensive Loss (unaudited) For the Three Months Ended March 31, 2022

                       
    As Previously Reported    Restatement Impacts    Restated 
Foreign exchange gain  $(48)  $(18)  $(66)
Interest expense   477    202    679 
Loss before income taxes   1,816    184    2,000 
Net loss   1,816    184    2,000 
Reporting currency translation   18    20    38 
Total comprehensive loss   1,834    204    2,038 
Loss per share  $0.07   $0.01   $0.08 
Weighted average shares outstanding, on post-reverse stock split basis   26,576,440    -    26,576,440 

 

                       
Restatement Impacts to the Condensed Consolidated Statement of Shareholders’ Equity (unaudited)

For the Three Months Ended March 31, 2022

 
    As Previously Reported    Restatement Impacts    Restated 
December 31, 2021 opening balance adjustments:               
Deficit  $(104,494)  $(1,096)  $(105,590)
Accumulated other comprehensive loss   (1,049)   -    (1,049)
Total Shareholders’ equity   15,392    (1,096)   14,296 
Activity adjustments:               
Loss for the period   (1,816)   (184)   (2,000)
Reporting currency translation   (18)   (20)   (38)
March 31, 2022 ending balance adjustments:               
Deficit   (106,310)   (1,280)   (107,590)
Accumulated other comprehensive loss   (1,067)   (20)   (1,087)
Total equity   15,668    (1,300)   14,368 

 

 

                       
Restatement Impacts to the Condensed Consolidated Statement of Operations and Comprehensive Loss (unaudited)
For the Nine Months Ended March 31, 2022
                       
    As Previously Reported    Restatement Impacts    Restated 
Foreign exchange loss  $101   $(3)  $98 
Interest expense   1,457    849    2,306 
Loss before income taxes   7,234    846    8,080 
Net loss   7,234    846    8,080 
Reporting currency translation   (76)   4    (72)
Total comprehensive loss   7,158    850    8,008 
Loss per share  $0.28   $0.03   $0.31 
Weighted average shares outstanding, on post-reverse stock split basis   26,172,981    -    26,172,981 

 

                       
Restatement Impacts to the Condensed Consolidated Statement of Cash Flows (unaudited)

For the Nine Months Ended March 31, 2022

 
    As Previously Reported    Restatement Impacts    Restated 
CASH FLOWS FROM OPERATING ACTIVITIES               
Total loss for the period  $(7,234)  $(846)  $(8,080)
Accretion of convertible debt   1,300    849    2,149
Foreign exchange loss   151    (3)   148 

 

14

 

 

NioCorp Developments Ltd. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2023 

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

 

                       
Restatement Impacts to the Condensed Consolidated Statement of Shareholders’ Equity (unaudited)
For the Nine Months Ended March 31, 2022
 
    Deficit    Restatement Impacts    Restated 
June 30, 2021 balances as previously reported               
Deficit  $(99,076)  $(434)  $(99,510)
Accumulated other comprehensive loss   (1,143)   (16)   (1,159)
Total Shareholders’ equity   13,663    (450)   13,213 
Activity adjustments:               
Loss for the period   (7,234)   (846)   (8,080)
Reporting currency translation   76    (4)   72 
March 31, 2022 ending balance adjustments:               
Deficit   (106,310)   (1,280)   (107,590)
Accumulated other comprehensive loss   (1,067)   (20)   (1,087)
Total equity   15,668    (1,300)   14,368 

  

 

4. GOING CONCERN ISSUES

 

The Company incurred a loss of $35,649 for the nine months ended March 31, 2023 (2022 - $8,080) and had an accumulated deficit of $146,046 as of March 31, 2023. As a development stage issuer, the Company has not yet commenced its mining operations and accordingly does not generate any revenue. As of March 31, 2023, the Company had cash of $7,145, which may not be sufficient to fund normal operations for the next twelve months without deferring payment on certain liabilities or raising additional funds. In addition, the Company will be required to raise additional funds for construction and commencement of operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company’s ability to continue operations and fund its expenditures, which have averaged approximately $1,929 per quarter over the preceding three-year period, is dependent on management’s ability to secure additional financing. NioCorp expects to have access to up to $61,600 in net proceeds from the Yorkville Equity Facility Financing over the next three years, as discussed in Note 8. In addition, the Company may pursue 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. Other than the potential issuance of Common Shares under the Yorkville Equity Facility Financing Agreement, the Company did not have any further funding commitments or arrangements for additional financing as of March 31, 2023. These interim condensed consolidated financial statements do not give effect to any adjustments required to realize the Company’s 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.

 

Recent worldwide events have created general global economic uncertainty as well as uncertainty in capital markets, supply chain disruptions, increased interest rates and inflation, and the potential for geographic recessions. We believe this could have an adverse impact on our ability to obtain financing, development plans, results of operations, financial position, and cash flows during the current fiscal year. The full extent to which these events and our precautionary measures may continue to impact our business will depend on future developments, which continue to be highly uncertain and cannot be predicted at this time.

 

 

5. GXII TRANSACTION

 

Pursuant to the Business Combination Agreement, the following transactions (collectively, the “GXII Transaction”) occurred on the Closing Date:

 

As a result of a series of transactions, GXII became an indirect, majority-owned subsidiary of NioCorp and changed its name to “Elk Creek Resources Corp” (“ECRC”).

As the parent company of the merged entity, NioCorp issued 1,753,821 post-Reverse Stock Split Common Shares in exchange for all of the Class A shares of GXII issued and outstanding immediately prior to the Closing, including 83,770 Common Shares issued to BTIG, LLC in exchange for Class A shares of GXII that it received as partial payment for advisory services.

All of the Class B shares of GXII issued and outstanding immediately prior to the Closing (after giving effect to the surrender of certain Class B shares of GXII in accordance with the Sponsor Support Agreement, dated September 25, 2022 (the “Sponsor Support Agreement”), among GX Sponsor II LLC (the “Sponsor”), GXII, NioCorp and the other persons party thereto) were converted into 7,957,404 shares of Class B common stock of GXII (now known as ECRC) as the surviving entity of the mergers that occurred on the Closing Date as part of the GXII Transaction. Pursuant to the Business Combination Agreement, the Sponsor Support Agreement and the Exchange Agreement, dated as of March 17, 2023 (as amended, supplemented or otherwise modified, the “Exchange Agreement”), by and among NioCorp, ECRC and the Sponsor, after the Closing, the shares of Class B common stock of ECRC are exchangeable into Common Shares on a one-for-one basis, subject to certain equitable adjustments, under certain conditions. See Note 9 for additional information regarding the Class B common stock of ECRC.

NioCorp assumed GXII’s obligations under the agreement (the “GXII Warrant Agreement”) governing the GXII share purchase warrants (the “GXII Warrants”) and issued an aggregate of 15,666,626 warrants (the “NioCorp Assumed Warrants”) to purchase up to an aggregate of 17,519,864 Common Shares. See Note 10b for additional information regarding the NioCorp Assumed Warrants.

 

15

 

 

NioCorp Developments Ltd. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2023 

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

After the distribution of funds to GXII redeeming shareholders and prior to paying transaction costs incurred by GXII, $15,676 became available to the Company. The following table summarizes the elements of the GXII Transaction allocated to the Consolidated Statements of Operations:

 

    Amount 
Gross cash proceeds, net of transaction costs incurred by GXII  $2,168 
Less:     
Net liabilities assumed   392 
Warrants assumed at fair value   3,848 
Earnout Shares assumed at fair value   13,195 
Transaction costs expensed   6,309 
Net costs allocated to other operating expense  $21,576 

 

The number of Common Shares issued and outstanding immediately following the consummation of the Transactions were as follows:

 

   Common Shares   Percentage 
Legacy NioCorp Shareholders   28,246,621    93.90%
Former GXII Class A Shareholders1   1,753,821    5.83%
Other2   81,213    0.27%
Total Common Shares Outstanding Upon Completion of Transactions   30,081,655    100%

 

  1Includes 83,770 Common Shares issued to BTIG, LLC in exchange for Class A shares of GXII that it received as partial payment for advisory services.

  2 Represents Commitment Shares (as defined below) issued under the Yorkville Equity Facility Financing Agreement.

 

In connection with the GXII Transaction, the Company also closed the Yorkville Convertible Debt Financing and the Yorkville Equity Facility Financing, as discussed in Note 8. 

 

6. LAND AND BUILDINGS, NET

 

In October 2022, the Company entered into an agreement with the State of Nebraska (the “State”) to sell a strip of Company-owned land totaling approximately 1.27 acres located adjacent to State Highway 50 in connection with highway improvements to be completed by the State, for $21, inclusive of estimated fence replacement costs. The Company recorded a gain of $13 associated with this sale.

 

 

7.ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

                   
       As of 
   Note  

March 31,

2023

  

June 30,

2022

 
Accounts payable, trade      $926   $115 
Accounts payable accruals       2,055    654 
Taxes payable       259    - 
Interest and fees payable to related party  11    31    - 
Other accruals       48    48 
Total accounts payable and accrued liabilities      $3,319   $817 

 

 

16

 

 

NioCorp Developments Ltd. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2023 

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

8. CONVERTIBLE DEBT

 

Lind III Convertible Security

 

Changes in the Lind III Convertible Security are as follows:

 

  Lind III
Convertible
Security
 
Balance, June 30, 2022  $2,169 
Fair value increase due to debt extinguishment   201 
Accretion expense   95 
Conversions   (1,950)
Payment at maturity   (515)
Balance, March 31, 2023  $- 

 

On September 25, 2022, the Company and Lind entered into the Lind Consent, which included the following principal terms: (i) the consent of Lind to the GXII Transaction disclosed in Note 5 and Yorkville Financings disclosed in Note 8, including all actions taken by NioCorp as set out in the Business Combination Agreement to permit the completion of the Transactions; (ii) the consent of Lind to NioCorp’s expected cross-listing to The Nasdaq Stock Market LLC (“Nasdaq”) and the consolidation of the Common Shares in order to meet the minimum listing requirements thereof; (iii) the waiver of Lind of its participation right for up to 15% of the total offering in the Yorkville Equity Facility Financing; and (iv) the waiver of Lind of certain restrictive covenants in the CSFA.

  

As consideration for entering into the Lind Consent, Lind received, amongst other things: (i) the right to receive a payment of $500, which would have been reduced to $200 if the Transactions had not been consummated on or before April 30, 2023 (collectively, the “Consent Payment”); (ii) an extension of its existing participation rights under the CSFA in future financings of NioCorp for a further two-year period, subject to certain exceptions as well as an extension of such participation rights beyond the additional two-year period if Yorkville or any affiliate is a party to any such applicable transaction; and (iii) the right to receive additional Warrants (the “Contingent Consent Warrants”) if on the date that is 18 months following the Closing Date, the closing trading price of the Common Shares on the Toronto Stock Exchange (the “TSX”) or such other stock exchange on which such shares may then be listed, is less than C$10.00 (on a post-Reverse Stock Split basis), subject to adjustments. The number of Contingent Consent Warrants to be issued, if any, is based on the Canadian dollar equivalent (based on the then current Canadian to US dollar exchange rate as reported by Bloomberg, LP) of $5,000 divided by the five-day volume weighted average price of the Common Shares on the date of issuance. Further, the number of Contingent Consent Warrants issued will be proportionately adjusted based on the percentage of Warrants currently held by Lind that are exercised, if any, prior to the issuance of any Contingent Consent Warrants. The Lind Consent was signed as an amendment to the existing CSFA.

  

Management determined that the Lind Consent should have been evaluated using ASC 470, which requires an evaluation of the contract amendment under debt modification guidance. The Company performed a comparison of the discounted cash flows of the Lind III Convertible Security pursuant to the existing CSFA and pursuant to the CSFA as amended by the Lind Consent and determined that a debt extinguishment loss of $201 had occurred. Further, ASC 470 requires that the minimum estimated Consent Payment of $200 also be included in the calculation of the gain or loss on debt extinguishment. The Company also evaluated the Contingent Consent Warrant feature included in the Lind Consent and determined that the Contingent Consent Warrants meet the criteria to be considered separate, freestanding instruments, should be accounted for as a liability under ASC 480, and should be booked at fair value on the date of the Lind Consent, with subsequent changes in valuation recorded as a non-operating gain or loss in the statement of operations. The following table summarizes the components of the initial loss on extinguishment:

  

17

 

 

NioCorp Developments Ltd. 

Notes to the Condensed Consolidated Financial Statements 

March 31, 2023 

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

Component of loss  Amount 
Minimum Consent Payment at inception  $200 

Loss on debt extinguishment

   201 
Initial fair value of Contingent Consent Warrants   1,221 
Initial loss on debt extinguishment  $1,622 

 

Changes in the fair value of the Contingent Consent Warrants are presented below:

 

   Amount 
Initial valuation, September 25, 2022  $1,221 
Change in valuation   (257)
Valuation at September 30, 2022   964 
Change in valuation   341 
Valuation at December 31, 2022   1,305 
Change in valuation   220 
Valuation at March 31, 2023  $1,525 

 

The Contingent Consent Warrants are classified as a Level 3 financial instrument and were valued utilizing a Monte Carlo simulation pricing model, which calculates multiple potential outcomes for future share prices based on historic volatility of the Common Shares to determine the probability of issuance at 18 months following the applicable valuation date and to determine the value of the Contingent Consent Warrants. The following table discloses the primary inputs into the Monte Carlo model at each valuation date, and the probability of issuance calculated by the model.

 

Key Valuation Input 

September 25,

2022(1)

  

September 30,

2022(1)

  

December 31,

2022(1)

  

March 31,

2023

 
Share price on valuation date  $7.82   $10.40   $7.40   $6.36 
Volatility   62.4%   63.4%   63.5%   71.3%
Risk free rate   3.93%   4.04%   3.98%   3.59%
Probability of issuance   59.4%   45.5%   62.5%   64.5%

 

  

(1)– Share price adjusted to reflect the Reverse Stock Split.

 

The $300 loss on debt extinguishment booked in the quarter ended March 31, 2023 represents the difference between our accrual of the minimum Consent Payment at September 25, 2022 and the actual payment made on March 17, 2023. Loss on debt extinguishment is presented as a non-operating expense in the Company’s consolidated statements of operations and comprehensive loss. This accounting also resulted in a decrease in the amount of accretion to be recognized over the remaining life of the Lind III Convertible Security through February 2023. Accretion expenses are disclosed as a part of interest expense, which is not included as a component of operating costs.

  

Yorkville Convertible Debentures

 

In connection with the GXII Transaction, on January 26, 2023, NioCorp entered into definitive agreements with respect to the Yorkville Financings, including a Securities Purchase Agreement, dated January 26, 2023 (as amended the “Yorkville Convertible Debt Financing Agreement”), between the Company and Yorkville, and a Standby Equity Purchase Agreement, dated January 26, 2023 (the “Yorkville Equity Facility Financing Agreement”), between the Company and Yorkville.

 

Pursuant to the Yorkville Convertible Debt Financing Agreement, at the Closing, Yorkville advanced a total amount of $15,360 to NioCorp in consideration of the issuance by NioCorp to Yorkville of (i) $16,000 aggregate principal amount of unsecured convertible debentures (the “Convertible Debentures”) and (ii) Common Share purchase warrants, exercisable for up to 1,789,267 Common Shares for cash or, if at any time there is no effective registration statement registering, or no current prospectus available for, the resale of the underlying Common Shares, on a cashless basis, at the option of the holder, at a price per Common Share of approximately $8.9422, subject to adjustment to give effect to any stock dividend, stock split, reverse stock split or similar transaction (the “Financing Warrants”).

 

Each Convertible Debenture issued under the Yorkville Convertible Debt Financing is an unsecured obligation of NioCorp, has an 18-month term from the Closing Date, which may be extended for one six-month period in certain circumstances at the option of NioCorp, and incurs a simple interest rate obligation of 5.0% per annum

 

18

 

 

NioCorp Developments Ltd.

Notes to the Condensed Consolidated Financial Statements

March 31, 2023

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

(which will increase to 15.0% per annum upon the occurrence of an event of default). The outstanding principal amount of, accrued and unpaid interest, if any, on, and premium, if any, on the Convertible Debentures must be paid by NioCorp in cash when the same becomes due and payable under the terms of the Convertible Debentures at their stated maturity, upon their redemption or otherwise.

 

Subject to certain limitations contained within the Yorkville Convertible Debt Financing Agreement and the Convertible Debentures, including those as described below, holders of the Convertible Debentures will be entitled to convert the principal amount of, and accrued and unpaid interest, if any, on each Convertible Debenture, in whole or in part, from time to time over their term, into a number of Common Shares equal to the quotient of the principal amount and accrued and unpaid interest, if any, being converted divided by the Conversion Price. The “Conversion Price” means, as of any Conversion Date (as defined below) or other date of determination, the greater of (i) 90% of the average of the daily U.S. dollar volume-weighted average price of the Common Shares on the principal U.S. market for the Common Shares as reported by Bloomberg Financial Markets during the five consecutive trading days immediately preceding the date on which the holder exercises its conversion right in accordance with the requirements of the Yorkville Convertible Debt Financing Agreement (the “Conversion Date”) or other date of determination, but not lower than the Floor Price (as defined below), and (ii) the five-day volume-weighted average price of the Common Shares on the TSX (or on the principal U.S. market if the majority of the trading volume and value of the Common Shares occurred on Nasdaq during the relevant period) for the five consecutive trading days immediately prior to the Conversion Date or other date of determination less the maximum applicable discount allowed by the TSX. The “Floor Price” means a price of $2.1435 per share, which is equal to the lesser of (a) 30% of the average of the daily volume-weighted average price of the Common Shares on the principal U.S. market for the Common Shares as reported by Bloomberg Financial Markets during the five consecutive trading days immediately preceding the Debenture Closing and (b) 30% of the average of the volume-weighted average price of the Common Shares on the principal U.S. market for the Common Shares as reported by Bloomberg Financial Markets during the five consecutive trading days immediately following the Debenture Closing, subject to certain adjustments to give effect to any stock dividend, stock split, reverse stock split, recapitalization or similar event.

 

The terms of the Convertible Debentures restrict the number of Convertible Debentures that may be converted during each calendar month by Yorkville at a Conversion Price below a fixed price equal to the quotient of (i) $10.00 divided by (ii) 1.11829212 (being the number of Common Shares that were exchanged for each share of GXII at the Closing, after giving effect to the Reverse Stock Split), subject to adjustment to give effect to any stock dividend, stock split, reverse stock split, recapitalization or similar event. The Convertible Debentures are subject to customary anti-dilution adjustments.

 

The terms of the Convertible Debentures restrict the conversion of Convertible Debentures by Yorkville if such a conversion would cause Yorkville to exceed certain beneficial ownership thresholds in NioCorp or such a conversion would cause the aggregate number of Common Shares issued pursuant to the Yorkville Convertible Debt Financing Agreement to exceed the thresholds for issuance of Common Shares under the rules of the TSX and Nasdaq, unless prior shareholder approval is obtained.

 

Pursuant to the terms of the Convertible Debentures, following certain trigger events, and until a subsequent cure event, NioCorp will be required to redeem $1,125 aggregate principal amount of Convertible Debentures (the “Triggered Principal Amount”) each month by making cash payments to the Investors, on a pro rata basis, in an amount equal to the Triggered Principal Amount, plus accrued and unpaid interest thereon, if any, plus a redemption premium of 7% of the Triggered Principal Amount. Such monthly prepayments under the terms of the Convertible Debentures are triggered (i) at the time when NioCorp has issued 95% of the total amount of Common Shares pursuant to the Yorkville Convertible Debt Financing that it may issue under applicable TSX and Nasdaq rules or (ii) when NioCorp has delayed or suspended the effectiveness or use of the Convertible Debt Financing Registration Statement for more than 20 consecutive calendar days, and such monthly prepayment obligations will continue until, with respect to (i) above, shareholder approval is obtained or, with respect to (ii) above, the Investors may once again resell Common Shares under the Convertible Debt Financing Registration Statement, respectively.

 

19

 

 

NioCorp Developments Ltd.

Notes to the Condensed Consolidated Financial Statements

March 31, 2023

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

The Convertible Debentures may also be redeemed at NioCorp’s option at any time and from time to time over their term at a redemption price equal to 110% of the principal amount being redeemed, plus accrued and unpaid interest, if any.

 

In conjunction with the issuance of the Convertible Debentures, NioCorp issued to Yorkville 1,789,267 Common Share purchase warrants entitling Yorkville to purchase Common Shares (the “Financing Warrants”) at an exercise price of approximately $8.9422 per Common Share (the “Exercise Price”), subject to adjustment to give effect to any stock dividend, stock split, reverse stock split recapitalization or similar event.

 

The Financing Warrants are exercisable, in whole or in part, but not in increments of less than $50 aggregate Exercise Price (unless the remaining aggregate Exercise Price is less than $50), beginning on May 4, 2023, and may be exercised at any time prior to their expiration. Holders of the Financing Warrants may exercise their Financing Warrants, at their election, by paying the Exercise Price in cash or, if at any time there is no effective registration statement registering, or no current prospectus available for, the resale of the underlying Common Shares, on a cashless exercise basis. 1/12th of the Financing Warrants will expire on each of the first 12 monthly anniversaries of the date that is six months following the Closing Date.

 

The Financing Warrants have customary anti-dilution adjustments to be determined in accordance with the requirements of the applicable stock exchanges, including the TSX.

 

The terms of the Financing Warrants restrict the exercise of Financing Warrants by Yorkville if such an exercise would cause Yorkville to exceed certain beneficial ownership thresholds in NioCorp or such an exercise would cause the aggregate number of Common Shares issued pursuant to the Yorkville Convertible Debt Financing Agreement to exceed the thresholds for issuance of Common Shares under the rules of the TSX and Nasdaq, unless prior shareholder approval is obtained.

 

The Financing Warrants were originally recorded as a $2,794 contingent liability on January 26, 2023, and were subsequently marked to market through March 16, 2023 ($3,337). The change in fair value during this period resulted in a loss of $633, which was booked to change in fair value of warrant liability in the Statement of Operations and Comprehensive Loss. The Financing Warrants were reclassified to shareholders equity on March 17, 2023, in connection with the closing of the Convertible Debentures as noted below.

 

The Company allocated the net proceeds of $15,360 from the Convertible Debentures as follows:

 

$2,704 was booked to Common Shares, representing the initial fair value of the Financing Warrant tranches on January 26, 2023 based on the Black Scholes pricing model using a risk-free interest rate of 4.33%, an expected dividend yield of 0%, a volatility of 64.6%, and an expected life of 6 months to 18 months.

 

$12,656 was booked to the convertible debt liability. In addition, transaction costs of $503 were recognized as a direct deduction from the debt liability, resulting in a net opening balance of $12,153. This balance will be accreted to face value of the Convertible Debentures at maturity using the effective interest method and recorded as non-cash interest expense in the consolidated statement of operations.

 

Changes in the Convertible Debentures are as follows:

 

    Amount 
Opening balance, March 17, 2023   12,153 
Accretion expense   110 
Balance, March 31, 2023  $12,263 

 

The Convertible Debentures contain events of default customary for instruments of their type (with customary grace periods, as applicable) and provide that, upon the occurrence of an event of default arising from certain events of bankruptcy or insolvency with respect to NioCorp, all outstanding Convertible Debentures will become due and payable immediately without further action or notice. If any other type of event of default occurs and is continuing, then any holder may declare all of its Convertible Debentures to be due and payable immediately. The Company obtained a waiver from Yorkville with respect to any acceleration rights it may have under the Convertible Debentures in connection with the restatements of the Company's financial statements for the periods ended September 30, 2022 and December 31, 2021 and the delay in filing the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023.

 

Based on the Company’s closing Common Share price of $6.36 as of March 31, 2023, conversion of the remaining Convertible Debenture balance, including accrued interest, would require the issuance of

 

20

 

 

NioCorp Developments Ltd.

Notes to the Condensed Consolidated Financial Statements

March 31, 2023

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

approximately 2,723,500 Common Shares. For each $0.10 change in the fair value of one Common Share, the total shares the Company would be obligated to issue would change by approximately 42,300 shares.

 

The Yorkville Convertible Debt Financing Agreement also contains certain covenants that, among other things, limit NioCorp’s ability to use the proceeds from the Yorkville Convertible Debt Financing to repay related party debt or to enter into any variable rate transaction other than with Yorkville, subject to certain exceptions.

 

Yorkville Equity Facility Financing

 

Concurrent with the closing of the Recapitalization Transaction, the Yorkville Equity Facility Financing became effective. Pursuant to the Yorkville Equity Facility Financing Agreement, Yorkville has committed to purchase up to $65,000 of Common Shares (the “Commitment Amount”), at NioCorp’s direction from time to time for a period commencing upon the Closing Date and ending on the earliest of (i) the first day of the month next following the 36-month anniversary of the Closing, (ii) the date on which Yorkville shall have made payment of the full Commitment Amount and (iii) the date that the Yorkville Equity Facility Financing Agreement otherwise terminates in accordance with its terms (the “Commitment Period”), subject to certain limitations and the satisfaction of the conditions in the Yorkville Equity Facility Financing Agreement. The Common Shares that may be sold pursuant to the Yorkville Equity Facility Financing Agreement would be purchased by Yorkville at a purchase price equal to 97% of the daily volume-weighted average price of the Common Shares on Nasdaq or such other principal U.S. market for the Common Shares if the Common Shares are ever listed or traded on the New York Stock Exchange or the NYSE American as reported by Bloomberg Financial Markets (or, if not available, a similar service provider of national recognized standing) during the applicable pricing period, which is a period during a single trading day or a period of three consecutive trading days, at the Company’s option and subject to certain restrictions, in each case, defined based on when an Advance Notice (as defined in the Yorkville Equity Facility Financing Agreement) is submitted, subject to certain limitations.

 

Pursuant to the terms of the Yorkville Equity Facility Financing Agreement, NioCorp issued 81,213 of Common Shares (the “Commitment Shares”) valued at $650 to Yorkville as consideration for its irrevocable commitment to purchase Common Shares under the Yorkville Equity Facility Financing Agreement. Additionally, NioCorp is required to pay Yorkville an aggregate cash fee of $1,500 (the “Cash Fee”), including $500 that NioCorp paid on the Closing Date and the remainder that it will pay in installments over a 12-month period following the Closing Date, provided that, it will have the right to prepay without penalty all or part of the remaining installments of the Cash Fee at any time. In addition, legal and other costs of $496 were incurred in connection with the Yorkville Equity Facility Financing and were expensed on the effective date. As of March 31, 2023, no Common Shares had been issued under the Yorkville Equity Facility Financing Agreement. The following amounts related to the Yorkville Equity Facility Financing Agreement were expensed as other operating costs during the quarter ended March 31, 2023:

    

Amount 

 
Yorkville Cash Fee  $1,500 
Fair value of Commitment Shares issued   650 
Legal and other related costs   496 
Net costs expensed to other operating expense  $2,646 

 

 

 

9.CLASS B COMMON STOCK OF ECRC

 

Pursuant to the Business Combination Agreement, the Sponsor Support Agreement, and the Exchange Agreement, after the Closing, the GXII founders have the right to exchange shares of Class B common stock of ECRC for Common Shares on a one-for-one basis, subject to certain equitable adjustments, under certain conditions. All 7,957,404 shares of Class B common stock of ECRC that were issued in connection with the Closing were issued and outstanding as of March 31, 2023. Of the issued and outstanding shares of Class B common stock of ECRC, 4,565,808 shares (the “Vested Shares”) were vested as of the Closing Date and are exchangeable at any time, and from time to time, until the tenth anniversary of the Closing Date (the “Ten-Year Anniversary”) and 3,391,596 shares (the “Earnout Shares”) are exchangeable until the Ten-Year Anniversary, subject to certain vesting conditions. Under certain circumstances, and subject to certain exceptions, NioCorp may instead settle all or a portion of any exchange pursuant to the terms of the Exchange Agreement in cash, in lieu of Common Shares, based on a volume-weighted average price of Common Shares.

 

All of the shares of Class B common stock of ECRC are subject to the Amended and Restated Registration Rights Agreement, dated as of March 17, 2023 (the “Registration Rights and Lock-up Agreement”), among NioCorp, GXII, the Sponsor, the pre-Closing directors and officers of NioCorp and the other parties thereto, including the members of the Sponsor. Pursuant to Registration Rights and Lock-up Agreement, all shares of

 

21

 

 

NioCorp Developments Ltd.

Notes to the Condensed Consolidated Financial Statements

March 31, 2023

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

Class B common Stock of ECRC (including the Vested Shares and the Released Earnout Shares) are subject to certain “lock-up” restrictions on transfer beginning upon the Closing and ending upon the earlier of (i) one year after the Closing and (ii) the date on which the trading price of Common Shares exceeds certain thresholds or the date on which NioCorp completes a transaction that results in all of NioCorp’s shareholders having the right to exchange their Common Shares for cash, securities or other property. Both Vested Shares and Released Earnout Shares may be exchanged by the holders into Common Shares at any time. Under the Exchange Agreement, all Vested Shares and Earnout Shares must be exchanged for Common Shares by the Ten-Year Anniversary except for Released Earnout Shares that have been vested for a period of fewer than twenty-four months as of the Ten-Year Anniversary. Such Released Earnout Shares will be forfeited if not exchanged for Common Shares by the date that is twenty-four months after the vesting date.

 

Vested Shares

 

As the exchange of Vested Shares are contingently redeemable at the option of the noncontrolling interest shareholders, the Company classifies the carrying amount of the redeemable noncontrolling interest in the mezzanine section on the consolidated balance sheet, which is presented above the equity section and below liabilities. The redeemable noncontrolling interests are classified as a Level 1 financial instrument and are measured at the fair value of the Company’s Common Shares at each reporting period. Adjustments to the carrying value of the redeemable noncontrolling interest are recorded through retained earnings.

 

Earnout Shares

 

The Earnout Shares vest (the “Released Earnout Shares”) in two equal tranches based upon achieving market share price milestones of approximately $12.00 per Common Share and approximately $15.00 per Common Share, respectively, prior to the Ten-Year Anniversary, or upon a change in control as defined in the underlying agreement. These shares will be forfeited if the market share price milestones or an acceleration event is not reached prior to the Ten-Year Anniversary. At such time that the Earnout Shares shall become vested, and therefore, become Released Earnout Shares, the shares will be transferred to the redeemable noncontrolling interest in the mezzanine section of the consolidated balance sheet.

 

The Earnout Shares were classified as a liability due to failure to meet the equity classification criteria under ASC 815-40, as Level 3 instruments under the fair value hierarchy and are considered a financial liability under ASC 480, Distinguishing Liabilities from Equity. The Earnout Shares were measured at fair value on the Closing Date with subsequent changes in fair value recorded in earnings. The Earnout Shares were valued utilizing a Monte Carlo simulation pricing model, which calculates multiple potential outcomes for future share prices and establishes current fair value based on the most likely outcome. The following table discloses the primary inputs into the Monte Carlo models.

 

Key Valuation Input

 

Transaction Close

 

March 31, 2023

Closing Common Share price   $7.00   $6.36
Term (expiry)   March 17, 2033   March 17, 2033
Implied volatility of Public Warrants   19.5%   23.5%
Risk-free rate   3.39%   3.48%

 

The following table sets forth a summary of the changes in the fair value of the Earnout Shares liability for the period ended March 31, 2023:

 

   Amount 
Fair value as of March 17, 2023  $13,195 
Change in fair value   (881)
Fair value as of March 31, 2023  $12,314 

 

 

22

 

 

NioCorp Developments Ltd.

Notes to the Condensed Consolidated Financial Statements

March 31, 2023

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

10.COMMON SHARES

 

a)Stock Options

    Number of Options   Weighted Average Exercise Price 
Balance, June 30, 2022    1,446,400   C$8.30 
Granted    578,000    9.52 
Exercised    (265,129)   4.99 
Cancelled/expired    (197,771)   5.09 
Balance, March 31, 2023    1,561,500   C$9.69 

 

The following table summarizes information about Options outstanding at March 31, 2023: 

 

Exercise Price     Expiry Date   Number Outstanding     Aggregate Intrinsic Value     Number Exercisable     Aggregate Intrinsic Value  
C$ 8.40     September 18, 2023     105,000     C$ 18       105,000     C$ 18  
C$ 5.40     November 15, 2023     208,500       661       208,500       661  
C$ 7.50     December 14, 2023     170,000       182       170,000       182  
C$ 7.50     December 16, 2023     52,500       56       52,500       56  
C$ 13.60     December 17, 2024     397,500       -       397,500       -  
C$ 11.00     May 30, 2025     50,000       -       50,000       -  
C$ 9.52     March 27, 2026     578,000       -       578,000       -  
              1,561,500     C$ 917       1,561,500     C$ 917  

 

The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on the Company’s closing Common Share price of C$8.57 as of March 31, 2023, that would have been received by the Option holders had all Option holders exercised their Options as of that date. As of March 31, 2023, there was $0 of unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Option plans.

 

b)Warrants

    Number of Warrants   Weighted Average Exercise Price 
Balance, June 30, 2022    1,851,622   $8.99 
Granted (1)    17,455,893    11.24 
Exercised    -    - 
Cancelled/expired    (50,000)   5.91 
Balance, March 31, 2023    19,257,515   $10.99 
(1)Includes 15,666,626 NioCorp Assumed Warrants assumed in connection with the Closing of the Transactions discussed below.

 

At March 31, 2023, the Company had outstanding exercisable Warrants, as follows: 

23

 

 

NioCorp Developments Ltd.

Notes to the Condensed Consolidated Financial Statements

March 31, 2023

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

Number     Exercise Price     Expiry Date
441,211     C$ 16.30     May 10, 2023
504,611     C$ 11.00     June 30, 2024
855,800     C$ 9.70     February 19, 2025
1,789,267     US$ 8.94     (1)
15,666,626     US$ 11.50     March 17, 2028
19,257,515              

(1)Represents the Financing Warrants, 1/12th of which will expire on each of the first 12 monthly anniversaries of the date that is six months following the Closing Date.

 

In connection with the Closing, pursuant to the Business Combination Agreement, the Company assumed the GXII Warrant Agreement and each GXII Warrant thereunder that was issued and outstanding immediately prior to the Closing Date was converted into one NioCorp Assumed Warrant pursuant to the GXII Warrant Agreement, as amended by an Assignment, Assumption and Amendment Agreement, dated March 17, 2023, among the Company, GXII, Continental Stock Transfer & Trust Company, as the existing warrant agent, and Computershare Inc. and its affiliate, Computershare Trust Company, N.A, together as the successor warrant agent (the “NioCorp Assumed Warrant Agreement”). In connection with the Closing, NioCorp issued (a) 9,999,959 public NioCorp Assumed Warrants (the “Public Warrants”) in respect of the GXII Warrants that were publicly traded prior to the Closing and (b) 5,666,667 NioCorp Assumed Warrants (the “Private Warrants”) to the Sponsor in respect of the GXII Warrants that it held prior to the Closing, which NioCorp Assumed Warrants were subsequently distributed by the Sponsor to its members in connection with the Closing.

 

Each NioCorp Assumed Warrant entitles the holder to the right to purchase 1.11829212 Common Shares at an exercise price of $11.50 per 1.11829212 Common Shares (subject to adjustments for stock splits, stock dividends, reorganizations, recapitalizations and the like). No fractional shares will be issued upon exercise of any NioCorp Assumed Warrants, and fractional shares that would otherwise be due to the exercising holder will be rounded down to the nearest whole Common Share. In no event will the Company be required to net cash settle any NioCorp Assumed Warrant.

 

Public Warrants

 

The Company may elect to redeem the Public Warrants subject to certain conditions, in whole and not in part, at a price of $0.01 per Public Warrant if (i) 30 days’ prior written notice of redemption is provided to the holders, (ii) the last reported sale price of the Common Shares equals or exceeds approximately $16.10 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders and (iii) there is an effective registration statement covering the Common Shares issuable upon exercise of the Public Warrants, and a current prospectus relating thereto, available through the redemption date. Upon issuance of a redemption notice by the Company, the warrant holders will have until the redemption date to exercise for cash, or, at the Company’s election, on a cashless basis. The Public Warrants are not precluded from equity classification and are accounted for as such on the date of issuance, and each balance sheet date thereafter. Because the Transactions resulted in an excess of liabilities over assets acquired, no value was ascribed to the Public Warrants. 

 

Private Warrants

 

The Private Warrants: (i) will be exercisable either for cash or on a cashless basis at the holder’s option and (ii) will not be redeemable by the Company, in either case as long as the Private Warrants are held by the Sponsor, its members or any of their permitted transferees (as prescribed in the NioCorp Assumed Warrant Agreement). In accordance with the NioCorp Assumed Warrant Agreement, any Private Warrants that are held by someone other than the Sponsor, its members or any their permitted transferees are treated as Public Warrants.

 

The Company accounts for the Private Warrants assumed in the Transactions in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the Private Warrants do not meet the criteria for equity treatment thereunder, each Private Warrant must be recorded as a liability. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to its current fair value, with the change in fair value recognized in the Company’s statement of operations. The Company will reassess the classification at each balance sheet date.

 

The Company classifies Private Warrants as Level 2 instruments under the fair value hierarchy and estimated the fair value using a Black Scholes model with the following assumptions:

 

24

 

 

NioCorp Developments Ltd.

Notes to the Condensed Consolidated Financial Statements

March 31, 2023

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

Key Valuation Input  March 17, 2023   March 31, 2023 
Stock price on valuation date  $7.00   $6.36 
Strike price  $10.28   $10.28 
Implied volatility of Public Warrants   19.5%   23.5%
Risk free rate   3.47%   3.61%
Dividend yield   0%   0%

 

Changes in the fair value of the Private Warrants are shown below:

 

  

Amount

 
Initial valuation, March 17, 2023  $3,848 
  Change in valuation   (70)
Valuation at March 31, 2023  $3,778 

 

 

 

11.RELATED PARTY TRANSACTIONS AND BALANCES

 

Borrowings under the non-revolving credit facility agreement (the “Smith Credit Facility”) with Mark Smith, Chief Executive Officer, President, and Executive Chairman of NioCorp, bear interest at a rate of 10% and drawdowns from the Smith Credit Facility are subject to a 2.5% establishment fee. Amounts outstanding under the Smith Credit Facility are secured by all of the Company’s assets pursuant to a general security agreement. The Smith Credit Facility contains financial and non-financial covenants customary for a facility of its size and nature. The maturity date for the Smith Credit Facility is June 30, 2023. On February 28, 2023, the Smith Credit facility was amended to increase the borrowing limit to $4,000 from the previous limit of $3,500. The Company subsequently drew down $1,130, leaving an available balance under the Smith Credit Facility of $52.

 

On March 22, 2023, the Company repaid Mr. Smith $2,000, representing $159 of interest and $1,841 of principal borrowed under the Smith Credit Facility. This repayment was made out of funds transferred to the Company from the GXII trust account on the Closing Date. As of March 31, 2023, the principal amount outstanding under the Smith Credit Facility was $1,289 and accounts payable and accrued liabilities as of March 31, 2023, include accrued interest of $3 and $28 of origination fees payable under the Smith Credit Facility. 

 

 

12.EXPLORATION EXPENDITURES

 

   For the Three Months Ended
March 31,
   For the Nine Months Ended
March 31,
 
   2023   2022   2023   2022 
Technical studies and engineering  $85   $45   $222   $179 
Field management and other   195    139    588    420 
Metallurgical development   1,130    625    3,203    1,211 
Geologists and field staff   -    36    2    147 
Total  $1,410   $845   $4,015   $1,957 

 

 

25

 

 

NioCorp Developments Ltd.

Notes to the Condensed Consolidated Financial Statements

March 31, 2023

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

13.LEASES

 

 The Company incurred lease costs as follows:

 

                         
   For the Three Months Ended
March 31,
   For the Nine Months Ended
March 31,
 
   2023   2022   2023   2022 
Operating Lease Cost:                    
Fixed rent expense  $15   $23   $60   $66 
Variable rent expense   3    2    9    7 
Short-term lease cost   3    4    7    12 
Sublease income   (6)   (8)   (24)   (23)
Net lease cost – other operating expense  $15   $21   $52   $62 

 

The maturities of lease liabilities are as follows at March 31, 2023:

 

   Future Lease Maturities 
Total remaining lease payments  $338 
Less portion of payments representing interest   (91)
Present value of lease payments   247 
Less current portion of lease payments   (70)
Non current lease liability   177 

 

Effective February 21, 2023, the Company executed an amendment to its existing office lease agreement, extending the lease for 39 months through January 31, 2027.

 

 

14.FAIR VALUE MEASUREMENTS

 

The Company measures the fair value of financial assets and liabilities based on U.S. 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, including investments in equity securities, 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, 2023, and June 30, 2022, 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.

 

26

 

 

NioCorp Developments Ltd.

Notes to the Condensed Consolidated Financial Statements

March 31, 2023

(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)

 

 

   As of March 31, 2023 
   Total   Level 1   Level 2   Level 3 
Assets:                
Cash and cash equivalents  $7,145   $7,145   $-   $- 
Investment in equity securities   7    7    -    - 
Total  $7,152   $7,152   $-   $- 
Liabilities:                    

Earnout Shares liability

  $12,314   $-   $-   $12,314 
Warrants liabilities   5,303    -    3,778    1,525 
Total  $17,617   $-   $3,778   $13,839 

 

   As of June 30, 2022 
   Total   Level 1   Level 2   Level 3 
Assets:                
Cash and