ITEM
1. FINANCIAL STATEMENTS
Contents
NioCorp
Developments Ltd.
|
Condensed
Consolidated Balance Sheets
|
(expressed
in thousands of U.S. dollars, except share data) (unaudited)
|
|
|
|
|
As of
|
|
|
|
Note
|
|
September 30,
2019
|
|
|
June 30,
2019
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
$
|
46
|
|
|
$
|
357
|
|
Prepaid expenses and other
|
|
|
|
|
20
|
|
|
|
71
|
|
Total current assets
|
|
|
|
|
66
|
|
|
|
428
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
35
|
|
|
|
35
|
|
Available for sale securities at fair value
|
|
|
|
|
2
|
|
|
|
5
|
|
Mineral interests
|
|
|
|
|
10,617
|
|
|
|
10,617
|
|
Total assets
|
|
|
|
$
|
10,720
|
|
|
$
|
11,085
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
$
|
3,246
|
|
|
$
|
2,941
|
|
Related party loans
|
|
6
|
|
|
1,695
|
|
|
|
1,480
|
|
Convertible debt, current portion
|
|
4
|
|
|
1,116
|
|
|
|
800
|
|
Derivative liability, convertible debt
|
|
|
|
|
-
|
|
|
|
-
|
|
Total current liabilities
|
|
|
|
|
6,057
|
|
|
|
5,221
|
|
Convertible debt, net of current portion
|
|
|
|
|
-
|
|
|
|
1,012
|
|
Total liabilities
|
|
|
|
|
6,057
|
|
|
|
6,233
|
|
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
Common stock, unlimited shares authorized; shares outstanding: 234,293,107 and 232,496,215, respectively
|
|
5
|
|
|
83,641
|
|
|
|
82,939
|
|
Additional paid-in capital
|
|
|
|
|
13,050
|
|
|
|
13,124
|
|
Accumulated deficit
|
|
|
|
|
(91,690
|
)
|
|
|
(90,685
|
)
|
Accumulated other comprehensive loss
|
|
|
|
|
(338
|
)
|
|
|
(526
|
)
|
Total equity
|
|
|
|
|
4,663
|
|
|
|
4,852
|
|
Total liabilities and equity
|
|
|
|
$
|
10,720
|
|
|
$
|
11,085
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
NioCorp
Developments Ltd.
|
Condensed
Consolidated Statements of Operations and Comprehensive Loss
|
(expressed
in thousands of U.S. dollars, except share and per share data) (unaudited)
|
|
|
|
|
For the three months ended September 30,
|
|
|
|
Note
|
|
2019
|
|
|
2018
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Employee related costs
|
|
|
|
$
|
354
|
|
|
$
|
312
|
|
Professional fees
|
|
|
|
|
118
|
|
|
|
51
|
|
Exploration expenditures
|
|
7
|
|
|
223
|
|
|
|
777
|
|
Other operating expenses
|
|
|
|
|
197
|
|
|
|
118
|
|
Total operating expenses
|
|
|
|
|
892
|
|
|
|
1,258
|
|
Change in financial instrument fair value
|
|
4
|
|
|
7
|
|
|
|
493
|
|
Foreign exchange loss (gain)
|
|
|
|
|
43
|
|
|
|
(118
|
)
|
Interest expense
|
|
|
|
|
60
|
|
|
|
99
|
|
Loss (gain) on available for sale securities
|
|
|
|
|
3
|
|
|
|
(1
|
)
|
Loss before income taxes
|
|
|
|
|
1,005
|
|
|
|
1,731
|
|
Income tax benefit
|
|
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
|
|
$
|
1,005
|
|
|
$
|
1,731
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
$
|
1,005
|
|
|
$
|
1,731
|
|
Other comprehensive (gain) loss:
|
|
|
|
|
|
|
|
|
|
|
Reporting currency translation
|
|
|
|
|
(188
|
)
|
|
|
103
|
|
Total comprehensive loss
|
|
|
|
$
|
817
|
|
|
$
|
1,834
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share, basic and diluted
|
|
|
|
$
|
0.00
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
233,755,865
|
|
|
|
215,355,392
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
NioCorp
Developments Ltd.
|
Condensed
Consolidated Statements of Cash Flows
|
(expressed
in thousands of U.S. dollars) (unaudited)
|
|
|
For the three months ended September 30,
|
|
|
|
2019
|
|
|
2018
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Total loss for the period
|
|
$
|
(1,005
|
)
|
|
$
|
(1,731
|
)
|
Non-cash elements included in net loss:
|
|
|
|
|
|
|
|
|
Change in financial instrument fair value
|
|
|
7
|
|
|
|
493
|
|
Unrealized loss (gain) on available-for-sale investments
|
|
|
3
|
|
|
|
(1
|
)
|
Accretion of convertible debt
|
|
|
-
|
|
|
|
44
|
|
Foreign exchange loss (gain)
|
|
|
37
|
|
|
|
(105
|
)
|
Share-based compensation
|
|
|
74
|
|
|
|
41
|
|
|
|
|
(884
|
)
|
|
|
(1,259
|
)
|
Change in working capital items:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
51
|
|
|
|
(146
|
)
|
Accounts payable and accrued liabilities
|
|
|
309
|
|
|
|
33
|
|
Net cash used in operating activities
|
|
|
(524
|
)
|
|
|
(1,372
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from issuance of capital stock
|
|
|
-
|
|
|
|
2,412
|
|
Share issue costs
|
|
|
-
|
|
|
|
(44
|
)
|
Issuance of convertible debt
|
|
|
-
|
|
|
|
1,000
|
|
Related party debt drawdown
|
|
|
215
|
|
|
|
-
|
|
Other current assets
|
|
|
-
|
|
|
|
(69
|
)
|
Net cash provided by financing activities
|
|
|
215
|
|
|
|
3,299
|
|
Exchange rate effect on cash and cash equivalents
|
|
|
(2
|
)
|
|
|
11
|
|
Change in cash and cash equivalents during period
|
|
|
(311
|
)
|
|
|
1,938
|
|
Cash and cash equivalents, beginning of period
|
|
|
357
|
|
|
|
73
|
|
Cash and cash equivalent, end of period
|
|
$
|
46
|
|
|
$
|
2,011
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Amounts paid for interest
|
|
$
|
16
|
|
|
$
|
16
|
|
Amounts paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Non-cash financing transactions
|
|
|
|
|
|
|
|
|
Lind conversions
|
|
$
|
703
|
|
|
$
|
1,077
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
NioCorp
Developments Ltd.
|
Condensed
Consolidated Statements of Shareholders’ Equity
|
(expressed
in thousands of U.S. dollars, except for Common Shares outstanding) (unaudited)
|
|
|
Three months ended September 30, 2019 and 2018
|
|
|
|
Common
Shares
Outstanding
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Deficit
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
Total
|
|
Balance, June 30, 2018
|
|
|
213,405,372
|
|
|
$
|
74,683
|
|
|
$
|
12,379
|
|
|
$
|
(83,349
|
)
|
|
$
|
(520
|
)
|
|
$
|
3,193
|
|
Exercise of options
|
|
|
16,203
|
|
|
|
15
|
|
|
|
(15
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Fair value of Lind warrants granted
|
|
|
-
|
|
|
|
-
|
|
|
|
156
|
|
|
|
-
|
|
|
|
-
|
|
|
|
156
|
|
Private placements – September 2018
|
|
|
4,975,158
|
|
|
|
2,412
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,412
|
|
Debt conversions
|
|
|
2,547,427
|
|
|
|
1,077
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,077
|
|
Share issuance costs
|
|
|
-
|
|
|
|
(44
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(44
|
)
|
Share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
41
|
|
|
|
-
|
|
|
|
-
|
|
|
|
41
|
|
Reporting currency presentation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(103
|
)
|
|
|
(103
|
)
|
Loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,731
|
)
|
|
|
-
|
|
|
|
(1,731
|
)
|
Balance, September 30, 2018
|
|
|
220,944,160
|
|
|
$
|
78,143
|
|
|
$
|
12,561
|
|
|
$
|
(85,080
|
)
|
|
$
|
(623
|
)
|
|
$
|
5,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019
|
|
|
232,496,215
|
|
|
$
|
82,939
|
|
|
$
|
13,124
|
|
|
$
|
(90,685
|
)
|
|
$
|
(526
|
)
|
|
$
|
4,852
|
|
Debt conversions
|
|
|
1,796,892
|
|
|
|
702
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
702
|
|
Share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
(74
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(74
|
)
|
Reporting currency presentation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
188
|
|
|
|
188
|
|
Loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,005
|
)
|
|
|
-
|
|
|
|
(1,005
|
)
|
Balance, September 30, 2019
|
|
|
234,293,107
|
|
|
$
|
83,641
|
|
|
$
|
13,050
|
|
|
$
|
(91,690
|
)
|
|
$
|
(338
|
)
|
|
$
|
4,663
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
NioCorp
Developments Ltd.
|
Notes
to the Condensed Consolidated Financial Statements
|
September
30, 2019
|
(expressed
in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
|
|
1.
|
DESCRIPTION OF BUSINESS
|
NioCorp Developments Ltd. (“NioCorp”
or the “Company”) was incorporated on February 27, 1987 under the laws of the Province of British Columbia and currently
operates in one reportable operating segment consisting of exploration and development of mineral deposits in North America, specifically,
the Elk Creek Niobium/Scandium/Titanium property (the “Elk Creek Project”) located in southeastern Nebraska.
These financial statements have been prepared
on a going concern basis that contemplates the realization of assets and discharge of liabilities at their carrying values in the
normal course of business for the foreseeable future. These financial statements do not reflect any adjustments that may be necessary
if the Company is unable to continue as a going concern.
The Company currently earns no operating
revenues and will require additional capital in order to advance the Elk Creek Project. The Company’s ability to continue
as a going concern is uncertain and is dependent upon the generation of profits from mineral properties, obtaining additional financing,
and maintaining continued support from its shareholders and creditors.
|
a)
|
Basis of Preparation and Consolidation
|
The accompanying unaudited interim
condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles of the
United States of America (“US GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”).
The interim condensed consolidated financial statements include the consolidated accounts of the Company and its wholly-owned subsidiaries
with all significant intercompany transactions eliminated. The accounting policies followed in preparing these interim condensed
consolidated financial statements are those used by the Company as set out in the audited consolidated financial statements for
the year ended June 30, 2019.
In the opinion of management,
all adjustments considered necessary (including reclassifications and normal recurring adjustments) to present fairly the financial
position, results of operations, and cash flows at September 30, 2019, and for all periods presented, have been included in these
interim condensed consolidated financial statements. Certain information and footnote disclosures normally included in the consolidated
financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to appropriate SEC rules and regulations.
These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial
statements for the year ended June 30, 2019. The interim results are not necessarily indicative of results for the full year ending
June 30, 2020, or future operating periods.
|
b)
|
Recent Accounting Standards
|
Issued and Adopted
On July 1, 2019, NioCorp adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases, which
requires the recognition of right-of-use (“ROU”) assets and related liabilities associated with all leases that are
not short-term in nature. NioCorp has elected the practical expedient option to use July 1, 2019, the effective date of adoption,
as the initial date of transition and not to restate comparative prior periods and to carry forward historical lease classifications.
The new standard also provides practical expedients for a company’s ongoing accounting. For those leases with a lease term
of 12 months or less, the Company will not recognize ROU assets or lease liabilities. Management
reviewed the impact of existing leases at adoption date and determined the resulting changes did not require the recording of any
assets or liabilities on NioCorp’s condensed consolidated balance sheets and had no other material impacts on the financial
statements.
On July 1, 2019, NioCorp adopted
ASU 2018-07, Compensation - Stock Compensation - Improvements to Nonemployee Share-Based Payment Accounting. This update aimed
to simplify the accounting for share-based payments awarded to non-employees for goods or services acquired. The update specifies
that the measurement date is the grant date and that awards are required to be measured at fair value. The adoption of this standard
had no impacts on the financial statements.
NioCorp
Developments Ltd.
|
Notes
to the Condensed Consolidated Financial Statements
|
September
30, 2019
|
(expressed
in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
|
Issued and Not Effective
From time to time, new accounting
pronouncements are issued by the Financial Accounting Standards Board (“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.
In August 2018, the FASB issued
ASU 2018-13 - Fair Value Measurements (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value
Measurement. This update modifies the disclosure requirements on fair value measurements in Topic 820 and eliminates ‘at
a minimum’ from the phrase ‘an entity shall disclose at a minimum’ to promote the appropriate exercise of discretion
by entities when considering fair value disclosures and to clarify that materiality is an appropriate consideration. The guidance
is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption
permitted. The Company is currently evaluating the impacts that adoption of this guidance will have on its consolidated financial
statements.
The preparation of consolidated
financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements,
and the reported amounts of expenses during the reporting period. The Company regularly evaluates estimates and assumptions related
to the deferred income tax asset valuations, convertible debt valuations, and share-based compensation. The Company bases its estimates
and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the
circumstances, the results of which form the basis for making judgments about the other sources. The actual results experienced
by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences
between estimates and the actual results, future results of operations will be affected.
The Company incurred a loss of $1,005 for
the three months ended September 30, 2019 (2018 - $1,731) and had a working capital deficit and an accumulated deficit of $5,991
and $91,690, respectively, as of September 30, 2019. These factors indicate the existence of a material uncertainty that raises
substantial doubt about the Company's ability to continue as a going concern.
The Company’s ability to continue
operations and fund its expenditures is dependent on management’s ability to secure additional financing. Management is actively
pursuing such additional sources of financing, and while it has been successful in doing so in the past, there can be no assurance
it will be able to do so in the future. These consolidated financial statements do not give effect to any adjustments required
to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those
reflected in the accompanying financial statements.
|
|
As of
|
|
|
|
September 30,
2019
|
|
|
June 30,
2019
|
|
Convertible notes, current portion
|
|
$
|
800
|
|
|
$
|
800
|
|
Convertible security, current portion
|
|
|
316
|
|
|
|
-
|
|
|
|
$
|
1,116
|
|
|
$
|
800
|
|
|
|
|
|
|
|
|
|
|
Convertible security, noncurrent potion
|
|
$
|
-
|
|
|
$
|
1,102
|
|
NioCorp
Developments Ltd.
|
Notes
to the Condensed Consolidated Financial Statements
|
September
30, 2019
|
(expressed
in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
|
Convertible Security Funding
The change in the Lind Asset Management
IV, LLC (“Lind”) convertible securities balance is comprised of the following:
|
|
Convertible Security
|
|
Balance, June 30, 2019
|
|
$
|
1,012
|
|
Conversions, at fair value
|
|
|
(703
|
)
|
Changes in fair market value
|
|
|
7
|
|
Balance, September 30, 2019
|
|
$
|
316
|
|
The convertible security issued to Lind
pursuant to the Convertible Security Funding Agreement, dated June 27,2018, between the Company and Lind (the “Second Convertible
Security”), is convertible into common shares of the Company (“Common Shares”) at a conversion price equal to
85% of the volume weighted average trading price of the Common Shares (in Canadian dollars) on the Toronto Stock Exchange for the
five consecutive trading days immediately prior to the date on which Lind provides the Company with notice of its intention to
convert an amount of the applicable Convertible Security from time to time. During the three months ended September 30, 2019, $625
principal amount of the Second Convertible Security was converted into 1,796,892 Common Shares.
Convertible Notes
Effective October 10, 2019, the due date
for the Company’s outstanding convertible promissory notes was extended for one year to October 14, 2020. All other terms
and conditions remained unchanged.
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price (C$)
|
|
Balance, June 30, 2019
|
|
|
19,449,909
|
|
|
$
|
0.62
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Cancelled/expired
|
|
|
-
|
|
|
|
-
|
|
Balance, September 30, 2019
|
|
|
19,449,909
|
|
|
$
|
0.62
|
|
The following table summarizes
information about options to purchase Common Shares (“Options”) outstanding at September 30, 2019:
Exercise
Price
(C$)
|
|
|
Expiry
Date
|
|
Number
Outstanding
|
|
|
Aggregate
Intrinsic
Value
|
|
|
Number
Exercisable
|
|
|
Aggregate
Intrinsic
Value
|
|
$
|
0.62
|
|
|
January 19, 2021
|
|
|
5,264,909
|
|
|
C$
|
-
|
|
|
|
5,264,909
|
|
|
C$
|
-
|
|
$
|
0.94
|
|
|
July 21, 2021
|
|
|
540,000
|
|
|
|
-
|
|
|
|
540,000
|
|
|
|
-
|
|
$
|
0.76
|
|
|
March 6, 2022
|
|
|
5,400,000
|
|
|
|
-
|
|
|
|
5,400,000
|
|
|
|
-
|
|
$
|
0.47
|
|
|
November 9, 2022
|
|
|
3,800,000
|
|
|
|
494
|
|
|
|
3,800,000
|
|
|
|
494
|
|
$
|
0.54
|
|
|
November 15,
2023
|
|
|
4,445,000
|
|
|
|
267
|
|
|
|
2,222,500
|
|
|
|
134
|
|
|
|
|
|
|
|
|
19,449,909
|
|
|
C$
|
761
|
|
|
|
17,227,409
|
|
|
C$
|
628
|
|
The aggregate intrinsic value
in the preceding table represents the total intrinsic value, based on the Company’s closing Common Share price of C$0.60
as of September 30, 2019, that would have been received by the Option holders had all Option holders exercised their Options as
of that date. The total number of in-the-money Options vested and exercisable as of September 30, 2019, was 6,022,500.
NioCorp
Developments Ltd.
|
Notes
to the Condensed Consolidated Financial Statements
|
September
30, 2019
|
(expressed
in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
|
As of September 30, 2019, there
was $83 of unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Option plans.
The cost is expected to be recognized over a remaining weighted average period of approximately 0.6 years.
|
|
Warrants
|
|
|
Weighted
Average Exercise Price
|
|
Balance June 30, 2019
|
|
|
21,374,801
|
|
|
C$
|
0.78
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Balance, September 30, 2019
|
|
|
21,374,801
|
|
|
C$
|
0.78
|
|
At September 30, 2019, the Company had
outstanding exercisable Warrants, as follows:
Number
|
|
|
Exercise
Price (C$)
|
|
|
Expiry
Date
|
|
3,860,800
|
|
|
C$
|
0.85
|
|
|
February 14, 2020
|
|
3,043,024
|
|
|
C$
|
0.85
|
|
|
February 21, 2020
|
|
539,307
|
|
|
C$
|
0.85
|
|
|
February 28, 2020
|
|
890,670
|
|
|
C$
|
0.90
|
|
|
March 31, 2020
|
|
260,483
|
|
|
C$
|
0.73
|
|
|
August 15, 2020
|
|
1,458,792
|
|
|
C$
|
0.75
|
|
|
September 14, 2020
|
|
1,028,785
|
|
|
C$
|
0.75
|
|
|
September 28, 2020
|
|
283,413
|
|
|
C$
|
0.66
|
|
|
September 28, 2020
|
|
308,901
|
|
|
C$
|
0.62
|
|
|
October 31, 2020
|
|
355,132
|
|
|
C$
|
0.54
|
|
|
December 6, 2020
|
|
1,546,882
|
|
|
C$
|
0.72
|
|
|
January 30, 2021
|
|
529,344
|
|
|
C$
|
0.70
|
|
|
February 5, 2021
|
|
541,435
|
|
|
C$
|
0.69
|
|
|
February 7, 2021
|
|
1,058,872
|
|
|
C$
|
0.72
|
|
|
April 5, 2021
|
|
833,330
|
|
|
C$
|
0.72
|
|
|
April 29, 2021
|
|
645,250
|
|
|
C$
|
0.72
|
|
|
May 9, 2021
|
|
1,035,319
|
|
|
C$
|
0.77
|
|
|
July 9, 2021
|
|
3,155,062
|
|
|
C$
|
0.79
|
|
|
July 26, 2021
|
|
21,374,801
|
|
|
|
|
|
|
|
|
6.
|
RELATED PARTY TRANSACTIONS AND BALANCES
|
The Company has a loan with Mark Smith,
President, Chief Executive Officer (“CEO”) and Executive Chairman of NioCorp (the “Original Smith Loan”),
that bears an interest rate of 10%, is secured by the Company’s assets pursuant to a concurrently executed general security
agreement (the “General Security Agreement”) and is subject to both a 2.5% establishment fee and 2.5% prepayment fee.
The principal amount outstanding under the Original Smith Loan is $1,000.
The Company also has a non-revolving credit
facility agreement (the “Credit Agreement”) in the amount of $2,000 with Mr. Smith. The Credit Agreement bears an interest
rate of 10% and drawdowns from the Credit Agreement are subject to a 2.5% establishment fee. Amounts outstanding under the Credit
Agreement are secured by all of the Company’s assets pursuant to the General Security Agreement. The Credit Agreement contains
financial and non-financial covenants customary for a facility of its size and nature. In August 2019 and September 2019, Mr. Smith
advanced an additional $125 and $90, respectively, to the Company under the Credit Agreement, and as of September 30, 2019, the
principal amount outstanding under the Credit Agreement was $695.
Accounts payable and accrued liabilities
as of September 30, 2019 include origination fees and interest payable to Mr. Smith under the Original Smith Loan and the Credit
Agreement of $214.
NioCorp
Developments Ltd.
|
Notes
to the Condensed Consolidated Financial Statements
|
September
30, 2019
|
(expressed
in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
|
|
7.
|
Exploration Expenditures
|
|
|
For the Three Months Ended
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Technical studies and engineering
|
|
$
|
17
|
|
|
$
|
609
|
|
Field management and other
|
|
|
165
|
|
|
|
129
|
|
Metallurgical development
|
|
|
41
|
|
|
|
39
|
|
Total
|
|
$
|
223
|
|
|
$
|
777
|
|
The Company has three operating
leases with an average remaining life of 12 months as of September 30, 2019. The Company incurred lease costs of $27 for the three
months ended September 30, 2019 and 2018, respectively.
|
9.
|
Fair Value Measurements
|
The Company measures the fair value of
financial assets and liabilities based on US GAAP guidance which defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements.
The Company classifies financial assets
and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables, or other financial liabilities
depending on their nature. Financial assets and financial liabilities are recognized at fair value on their initial recognition.
Financial assets and liabilities classified
as held-for-trading are measured at fair value, with gains and losses recognized in net income. Financial assets classified as
held-to-maturity, loans and receivables, and financial liabilities other than those classified as held-for-trading are measured
at amortized cost, using the effective interest method of amortization. Financial assets classified as available-for-sale are measured
at fair value, with unrealized gains and losses being recognized in income.
Financial instruments including receivables,
accounts payable and accrued liabilities, and related party loans are carried at amortized cost, which management believes approximates
fair value due to the short-term nature of these instruments.
The following tables present information
about the assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2019 and June 30, 2019,
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.
|
|
As of September 30, 2019
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
46
|
|
|
$
|
46
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Available-for-sale securities
|
|
|
2
|
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
48
|
|
|
$
|
48
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
$
|
316
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
316
|
|
Derivative liability, convertible debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
316
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
316
|
|
NioCorp
Developments Ltd.
|
Notes
to the Condensed Consolidated Financial Statements
|
September
30, 2019
|
(expressed
in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
|
|
|
As of June 30, 2019
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
357
|
|
|
$
|
357
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Available-for-sale securities
|
|
|
5
|
|
|
|
5
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
362
|
|
|
$
|
362
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
$
|
1,012
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,012
|
|
Derivative liability, convertible debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
1,012
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,012
|
|
The Company measures the fair market value
of the Level 3 components using the Black Scholes model and discounted cash flows, as appropriate. These models take into account
management's best estimate of the conversion price of the stock, an estimate of the expected time to conversion, an estimate of
the stock's volatility, and the risk-free rate of return expected for an instrument with a term equal to the duration of the convertible
debt.
The following table sets forth a reconciliation
of changes in the fair value of the Company's convertible debt components classified as Level 3 in the fair value hierarchy:
Balance, June 30, 2019
|
|
$
|
1,012
|
|
Conversions to equity
|
|
|
(703
|
)
|
Realized and unrealized losses
|
|
|
7
|
|
Balance, September 30, 2019
|
|
$
|
316
|
|
On October 8, and October 24,
2019, the Company completed drawdowns from the Credit Agreement in the amount of $115 and $125, respectively. The Company expects
that the funds will be used for general corporate purposes. Following the drawdown, the remaining availability under the Credit
Agreement is $1,065. These drawdowns are subject to the interest, establishment fee, covenants, events of default and other terms
of the Credit Agreement.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis should be read in conjunction with our unaudited condensed interim consolidated financial statements
as of, and for the three months ended September 30, 2019, and the related notes thereto, which have been prepared in accordance
with generally accepted accounting principles in the United States (“US GAAP”). This discussion and analysis
contains forward-looking statements and forward-looking information that involve risks, uncertainties, and assumptions. Our actual
results may differ materially from those anticipated in these forward-looking statements and information as a result of many factors,
including, but not limited to, those set forth elsewhere in this Quarterly Report on Form 10-Q. See “Note Regarding Forward-Looking
Statements” below.
All
currency amounts are stated in thousands of U.S. dollars unless noted otherwise.
As
used in this report, unless the context otherwise indicates, references to “we,” “our,” the “Company,”
“NioCorp,” and “us” refer to NioCorp Developments Ltd. and its subsidiaries, collectively.
Note
Regarding Forward Looking Statements
This
Quarterly Report on Form 10-Q and the exhibits attached hereto contain “forward-looking statements” within the meaning
of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and “forward-looking information” within the meaning
of applicable Canadian securities legislation (collectively, “forward-looking statements”). Such forward-looking statements
concern our anticipated results and developments in the operations of the Company in future periods, planned exploration activities,
the adequacy of the Company’s financial resources, and other events or conditions that may occur in the future. Forward-looking
statements are frequently, but not always, identified by words such as “expects,” “anticipates,” “believes,”
“intends,” “estimates,” “potential,” “possible,” and similar expressions, or statements
that events, conditions, or results “will,” “may,” “could,” or “should” (or the
negative and grammatical variations of any of these terms) occur or be achieved. Any statements that express or involve discussions
with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, or future events or performance
(often, but not always, using words or phrases such as “expects” or “does not expect,” “is expected,”
“anticipates” or “does not anticipate,” “plans,” “estimates,” or “intends,”
or stating that certain actions, events, or results “may,” “could,” “would,” “might,”
or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements.
Such forward-looking statements reflect the Company’s current views with respect to future events and are subject to certain
known and unknown risks, uncertainties, and assumptions. Many factors could cause actual results, performance, or achievements
to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking
statements, including, among others, risks related to the following:
|
●
|
risks
related to our ability to operate as a going concern;
|
|
●
|
risks
related to our requirement of significant additional capital;
|
|
●
|
risks
related to our limited operating history;
|
|
●
|
risks
related to changes in economic valuations of the Elk Creek Project, such as net present
value calculations, changes or disruptions in the securities markets;
|
|
●
|
risks
related to our history of losses;
|
|
●
|
risks
related to cost increases for our exploration and, if warranted, development projects;
|
|
●
|
risks
related to feasibility study results;
|
|
●
|
risks
related to mineral exploration and production activities;
|
|
●
|
risks
related to our lack of mineral production from our properties;
|
|
●
|
risks
related to the results of our metallurgical testing;
|
|
●
|
risks
related to the price volatility of commodities;
|
|
●
|
risks
related to estimates of mineral resources and reserves;
|
|
●
|
risks
related to changes in mineral resource and reserve estimates;
|
|
●
|
risks
related to differences in U.S. and Canadian reserve and resource reporting;
|
|
●
|
risks
related to our exploration activities being unsuccessful;
|
|
●
|
risks
related to our ability to obtain permits and licenses for production;
|
|
●
|
risks
related to government and environmental regulations that may increase our costs of doing
business or restrict our operations;
|
|
●
|
risks
related to proposed legislation that may significantly affect the mining industry;
|
|
●
|
risks
related to land reclamation requirements;
|
|
●
|
risks
related to competition in the mining industry;
|
|
●
|
risks
related to the difficulties of managing and treating water at our Elk Creek Project;
|
|
●
|
risks
related to equipment and supply shortages;
|
|
●
|
risks
related to current and future joint ventures and partnerships;
|
|
●
|
risks
related to our ability to attract qualified management;
|
|
●
|
risks
related to the ability to enforce judgment against certain of our Directors;
|
|
●
|
risks
related to claims on the title to our properties;
|
|
●
|
risks
related to surface access on our properties;
|
|
●
|
risks
related to potential future litigation;
|
|
●
|
risks
related to our lack of insurance covering all our operations;
|
|
●
|
risks
related to the need for resilience in the face of potential impacts from climate change;
|
|
●
|
risks
related to a disruption in, or failure of, our information technology (“IT”)
systems, including those related to cybersecurity;
|
|
●
|
risks
related to covenants contained in agreements with our secured creditors that may affect
our assets;
|
|
●
|
risks
related to the extent to which our level of indebtedness may impair our ability to obtain
additional financing;
|
|
●
|
risks
related to our status as a “passive foreign investment company” under the
U.S. Internal Revenue Code of 1986, as amended;
|
|
●
|
risks
related to our Common Shares, including price volatility, lack of dividend payments,
dilution and penny stock rules; and
|
|
●
|
risks
related to our status as an “emerging growth company” and the impact of related
reduced reporting requirements on our ability to attract investors.
|
Should
one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may
vary materially from those described herein. This list is not exhaustive of the factors that may affect any of the Company’s
forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and actual
achievements of the Company or other future events or conditions may differ materially from those reflected in the forward-looking
statements due to a variety of risks, uncertainties, and other factors, including without limitation those discussed under the
heading “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, as well as other
factors described elsewhere in this report and the Company’s other reports filed with the Securities and Exchange Commission
(“SEC”).
The
Company’s forward-looking statements contained in this Quarterly Report on Form 10-Q are based on the beliefs, expectations,
and opinions of management as of the date of this report. The Company does not assume any obligation to update forward-looking
statements if circumstances or management’s beliefs, expectations, or opinions should change, except as required by law.
For the reasons set forth above, investors should not attribute undue certainty to, or place undue reliance on, forward-looking
statements.
National
Instrument 43-101 Compliance
Scott
Honan, M.Sc., SME-RM, a qualified person as defined by National Instrument 43-101 - Standards of Disclosure for Mineral Projects
(“NI 43-101”), has supervised the preparation of the scientific and technical information that forms the basis for
the Elk Creek Project disclosure in this Quarterly Report on Form 10-Q and has approved the disclosure in this Quarterly Report
on Form 10-Q related thereto. Mr. Honan is not independent of the Company, as he is the Vice President, Business Development.
Additional information on the updated NI 43-101 Feasibility Study for the Elk Creek Project (the “2019 Feasibility Study”)
is available in our NI 43-101 Technical Report, issued May 29, 2019, which is available under NioCorp’s profile on the Canadian
Administrators website at www.sedar.com and on our website at www.niocorp.com/wp-content/uploads/180001_FINAL_43-101_FS_NioCorp_AS_FILED.pdf.
Company
Overview
NioCorp
is developing the Elk Creek Project, located in southeast Nebraska. The Elk Creek Project is an advanced Niobium (“Nb”)/Scandium
(“Sc”)/Titanium (“Ti”) exploration project. Niobium is used to produce various superalloys that are extensively
used in high performance aircraft and jet turbines. It also is used in High-Strength, Low-Alloy (“HSLA”) steel, a
stronger steel used in automotive, bridges, structural systems, buildings, pipelines, and other applications that generally reduces
the weight of those applications, which can result in environmental benefits, including reduced fuel consumption and material
usage and fewer air emissions. Scandium can be combined with aluminum to make high-performance alloys with increased strength
and improved corrosion resistance. Scandium also is a critical component of advanced solid oxide fuel cells, an environmentally
preferred technology for high-reliability, distributed electricity generation. Titanium is a component of various superalloys
and other applications that are used for aerospace applications, weapons systems, protective armor, medical implants and many
others. It also is used in pigments for paper, paint, and plastics.
Our
primary business strategy is to advance our Elk Creek Project to commercial production. We are focused on obtaining additional
funds to carry out our near-term planned work programs associated with securing the project financing necessary to complete mine
development, construction, commissioning, and operation of the Elk Creek Project.
Emerging
Growth Company Status
We
qualify as an “emerging growth company” as defined in Section 101 of the Jumpstart our Business Startups Act (“JOBS
Act”) as we do not have more than $1.07 billion in annual gross revenue and did not have such amount as of June 30, 2019,
this being the last day of our most recently completed fiscal year.
We
may lose our status as an emerging growth company on the last day of our fiscal year during which (i) our annual gross revenue
exceeds $1.07 billion or (ii) we issue more than $1.07 billion in non-convertible debt in a three-year period. We will lose our
status as an emerging growth company if at any time we are deemed to be a large accelerated filer, as defined in Rule 405 under
the Exchange Act. We will lose our status as an emerging growth company on the last day of our fiscal year following the fifth
anniversary of the date of our first sale of Common Shares pursuant to an effective registration statement.
As
an emerging growth company under the JOBS Act, we have elected to opt out of the extended transition period for complying with
new or revised standards pursuant to Section 107(b) of the JOBS Act. The election is irrevocable.
As
an emerging growth company, we are exempt from Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section 14A(a) and (b) of
the Exchange Act. Such sections are described below:
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Section
404(b) of the Sarbanes-Oxley Act of 2002 requires a public company’s auditor to
attest to, and report on, management's assessment of its internal controls.
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Sections
14A(a) and (b) of the Exchange Act, implemented by Section 951 of the Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”)
Act, require companies to hold shareholder advisory votes on executive compensation and
golden parachute compensation.
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As
long as we qualify as an emerging growth company, we will not be required to comply with the requirements of Section 404(b) of
the Sarbanes-Oxley Act of 2002 and Section 14A (a) and (b) of the Exchange Act.
Recent
Corporate Events
On
August 7, 2019, the Company announced the successful production of an Aluminum-Scandium (“AlSc”) master alloy using
a metallurgical process that helps to demonstrate a pathway to potential commercial production of the master alloy. The
AlSc master alloy was produced at Ames Laboratory’s Materials Preparation Center, located in Ames, Iowa, under the supervision
of NioCorp engineers and employing an improved production methodology specified by Tactical Alloys, a firm with over 20 years
of experience in the AlSc alloy space. Ames Laboratory is a U.S. Department of Energy national laboratory recognized as a world
leader in the research and development of rare earth and rare metal materials, such as scandium. NioCorp commercially purchased
the scandium used to create the master alloy at Ames Laboratory’s Materials Preparation Center. The recent alloy production
was the second such AlSc master alloy production test run performed by NioCorp and researchers at Ames Laboratory’s Materials
Preparation Center.
Elk
Creek Project Update
In
early July 2019, the Company finalized work on the air construction permit application (the “Air Permit”) for the
State of Nebraska, and our application for the Air Permit was submitted to the Nebraska
Department of Environmental and Energy (“NDEE”) on July 24, 2019. The permit review process will be led by
NDEE personnel. The advanced emissions control technologies included as part of the planned Elk Creek Project resulted in
prospective air emissions that are below levels that trigger the need for a permit under the federal Prevention of Significant
Deterioration (“PSD”) program. As a result, the Elk Creek Project is expected to be able to navigate a more
efficient state-level permitting process than is typically encountered under the PSD process.
The
NDEE notified the Company that the permit application was administratively complete on July 29, 2019, and that the permit application
was technically complete on September 27, 2019. In the second quarter of fiscal year 2020, the NDEE is expected to continue to
review regulatory issues associated with the permit application as well as develop the draft permit.
The
NDEE allows for applicants to request a variance under state law to allow construction to start before a final state air quality
construction permit is issued. A variance request would only be pursued if issuance of the construction permit extends past
the time where the construction of permanent project features is expected to take place. Once project financing is obtained
and on-the-ground activity commences at the Elk Creek Project site, the Company can legally proceed without the air quality construction
permit or a permit variance to conduct work related to site preparation, land grading and clearing, drilling, geotechnical examination,
equipment mobilization, temporary worker support infrastructure, off-site electrical and natural gas supply development, and other
earthwork-related activities that are not directly associated with permanent project features.
Other
Activities
We
continued to advance the competitive process to identify and select engineering, procurement and construction firms for surface
development, and underground mine development.
Our
long-term financing efforts continued during the quarter ended September 30, 2019. As funds become available through the Company’s
fundraising efforts, we expect to undertake the following activities:
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Acquisition
of key land parcels currently subject to the Company’s Option to Purchase agreements
(“OTPs”) and extensions to the OTPs governing land parcels that are not needed
for initial project development;
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Continuation
of the Company’s efforts to secure federal, state and local permits;
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Negotiation
and completion of engineering, procurement and construction (“EPC”)
agreements;
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Completion
of the final detailed engineering for the underground portion of the Elk Creek Project;
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Completion
of the final detailed engineering for surface project facilities;
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Construction
of natural gas and electrical infrastructure to serve the Elk Creek Project site;
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Initiation
of revised mine groundwater investigation and control activities; and
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Initiation
of long-lead equipment procurement activities.
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Financial
and Operating Results
The
Company continues to expense all expenditures when incurred, except for equipment, which is capitalized. The Company has no revenues
from mining operations. Operating expenses incurred related primarily to performing exploration activities, as well as the activities
necessary to support corporate and shareholder duties and are detailed in the following table.
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For the Three Months
Ended September 30,
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2019
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2018
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Operating expenses:
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Employee-related costs
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$
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354
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$
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312
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Professional fees
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118
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51
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Exploration expenditures
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223
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777
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Other operating expenses
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197
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118
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Total operating expenses
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892
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1,258
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Change in financial instrument fair value
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7
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493
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Foreign exchange loss (gain)
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43
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(118
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Interest expense
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60
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99
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(Gain) loss on available for sale securities
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3
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(1
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Income tax expense
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-
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-
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Net Loss
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$
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1,005
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$
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1,731
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Three
months ended September 30, 2019 compared to three months ended September 30, 2018
Significant
items affecting operating expenses are noted below:
Employee-related
costs increased due primarily to increased share-based compensation costs reflecting the timing of Option issuances and the
corresponding vesting periods, as well as the number of Options granted and associated fair value calculations and salary adjustments.
Professional
fees include legal and accounting services. Overall, these fees increased, reflecting the timing of legal fees associated
with SEC filings, annual general meeting matters and ongoing compliance efforts.
Exploration
expenditures decreased reflecting our efforts in the prior year to evaluate mine engineering design changes and the related
costs associated with developing the 2019 Feasibility Study.
Other
operating expenses include investor relations, general office expenditures, equity offering and proxy expenditures and other
miscellaneous costs. These costs increased primarily due to expenses associated with financial services, which were deferred in
the comparative prior period.
Other
significant items impacting the change in the Company’s net loss are noted below:
Change
in financial instrument fair value represents non-cash changes in the market value of convertible securities, which are carried
at fair value, as well as changes in the market value of the derivative liability component of the Company’s outstanding
convertible promissory notes, and the fair market value of Warrants issued in connection with the funding of convertible securities.
The 2018 loss includes the value of Warrants issued to Lind in July 2019 in connection with the Second Convertible Security funding,
as well as recognition of prepaid interest incurred on funding.
Foreign
exchange (gain) loss is primarily due to changes in the U. S. dollar against the Canadian dollar and reflects the timing of
foreign currency transactions and subsequent changes in exchange rates.
Liquidity
and Capital Resources
We
have no revenue generating operations from which we can internally generate funds. To date, our ongoing operations have been financed
by the sale of our equity securities by way of private placements, convertible securities issuances, and the exercise of incentive
stock options and share purchase warrants. We believe that we will be able to secure additional private placement financings in
the future, although we cannot predict the size or pricing of any such financings. In addition, we may raise funds through the
sale of interests in our mineral properties, although current market conditions have substantially reduced the number of potential
buyers/acquirers of any such interests.
As
of September 30, 2019, the Company had cash of $0.046 million and a working capital deficit of $6.0 million, compared to cash
of $0.4 million and working capital deficit of $4.8 million on June 30, 2019. The working capital deficit increased due to the
timing of cash infusions to support current operations.
We
expect that the Company will operate at a loss for the foreseeable future. The Company’s current planned operational needs
are approximately $9.1 million until June 30, 2020. In addition to outstanding accounts payable and short-term liabilities, our
average monthly expenditures are approximately $350 per month where approximately $238 is for corporate overhead and estimated
costs related to securing financing necessary for advancement of the Elk Creek Project. Approximately $33 per month is planned
for expenditures relating to the advancement of Elk Creek Project by NioCorp’s wholly-owned subsidiary, Elk Creek Resources
Corp. The Company’s ability to continue operations and fund our current work plan is dependent on management’s ability
to secure additional financing.
The
Company anticipates that it may need to raise $8.3 million - $9.5 million to continue planned operations for the next twelve months
focused on financing, permitting, OTP extensions and/or exercises and detailed engineering efforts related to the Elk Creek Project.
Management is actively pursuing such additional sources of debt and equity financing, and while it has been successful in doing
so in the past, there can be no assurance it will be able to do so in the future.
Elk
Creek property lease commitments are $9 until June 30, 2020, exclusive of costs incurred to exercise or, if necessary, extend
our current land and mineral right option agreements, which expire at various times between December 2019 and September 2021.
To maintain its currently held properties and fund its currently anticipated general and administrative costs and planned exploration
and development activities at the Elk Creek Project for the fiscal year ending June 30, 2020, the Company will likely require
additional financing during the current fiscal year. Should such financing not be available in that timeframe, we will be required
to reduce our activities and will not be able to carry out all our presently planned activities at the Elk Creek Project.
On
October 8, and October 24, 2019, the Company completed drawdowns from the Credit Agreement in the amount of $115 and $125, respectively.
The Company expects that the funds will be used for general corporate purposes. Following the drawdown, the remaining availability
under the Credit Agreement is $1,065. These drawdowns are subject to the interest, establishment fee, covenants, events of default
and other terms of the Credit Agreement.
We
currently have no further funding commitments or arrangements for additional financing at this time (other than the potential
exercise of Options and Warrants) and there is no assurance that we will be able to obtain additional financing on acceptable
terms, if at all. There is significant uncertainty that we will be able to secure any additional financing in the current equity
or debt markets. The quantity of funds to be raised and the terms of any proposed equity or debt financing that may be undertaken
will be negotiated by management as opportunities to raise funds arise. management intends to pursue funding sources of both debt
and equity financing, including but not limited to the issuance of equity securities in the form of Common Shares, Warrants, subscription
receipts, or any combination thereof in units of the Company pursuant to private placements to accredited investors or pursuant
to equity lines of credit or public offerings in the form of underwritten/brokered offerings, at-the-market offerings, registered
direct offerings, or other forms of equity financing and public or private issuances of debt securities including secured and
unsecured convertible debt instruments or secured debt project financing. Management does not currently know the terms pursuant
to which such financings may be completed in the future, but any such financings will be negotiated at arm’s-length. Future
financings involving the issuance of equity securities or derivatives thereof will likely be completed at a discount to the then-current
market price of the Company’s securities and will likely be dilutive to current shareholders.
The
audit opinion and notes that accompany our financial statements for the year ended June 30, 2019 disclose a “going concern”
qualification and disclosures to our ability to continue in business. The financial statements included in this Quarterly Report
on Form 10-Q have been prepared under the assumption that we will continue as a going concern. We are an exploration stage company
and we have incurred losses since our inception. We do not have sufficient cash to fund normal operations and meet debt obligations
for the next twelve months without deferring payment on certain current liabilities and raising additional funds. We believe that
the going concern condition cannot be removed with confidence until the Company has entered into a business climate where funding
of its planned ongoing operating activities is secured.
We
have no exposure to any asset-backed commercial paper. Other than cash held by our subsidiaries for their immediate operating
needs in Colorado and Nebraska, all of our cash reserves are on deposit with major United States and Canadian chartered banks.
We do not believe that the credit, liquidity, or market risks with respect thereto have increased as a result of the current market
conditions. However, in order to achieve greater security for the preservation of our capital, we have, of necessity, been required
to accept lower rates of interest, which has also lowered our potential interest income.
Operating
Activities
During
the three months ended September 30, 2019, the Company's operating activities consumed $0.5 million of cash (2018: $1.4 million).
The cash used in operating activities for 2019 reflects the Company’s funding of losses of $1.0 million, partially offset
by share-based compensation charges, other non-cash transactions and a $0.3 million increase in accounts payable and accrued liabilities.
Overall, 2019 operational outflows decreased slightly from 2018 due to the timing of project-related expenditures. Going forward,
the Company’s working capital requirements are expected to increase substantially in connection the development of the Elk
Creek Project.
Financing
Activities
Financing
inflows were $0.2 million during the three months ended September 30, 2019, as compared to $3.3 million during the corresponding
period in 2018, primarily reflecting the timing of private placement issuances and related party debt drawdowns initiated during
the comparative periods.
Cash
Flow Considerations
The
Company has historically relied upon equity financings and, to a lesser degree, debt financings, to satisfy its capital requirements
and will continue to depend heavily upon equity capital to finance its activities. The Company may pursue debt financing in the
medium term if it is able to procure such financing on terms more favorable than available equity financing; however, there can
be no assurance the Company will be able to obtain any required financing in the future on acceptable terms.
The
Company has limited financial resources compared to its proposed expenditures, no source of operating income, and no assurance
that additional funding will be available to it for current or future projects, although the Company has been successful in the
past in financing its activities through the sale of equity securities.
The
ability of the Company to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions
and its success in developing the Elk Creek Project. Any quoted market for the Common Shares may be subject to market trends generally,
notwithstanding any potential success of the Company in creating revenue, cash flows, or earnings, and any depression of the trading
price of the Common Shares could impact its ability to obtain equity financing on acceptable terms.
Historically,
the Company has used net proceeds from issuances of Common Shares to provide sufficient funds to meet its near-term exploration
and development plans and other contractual obligations when due. However, further development and construction of the Elk Creek
Project will require substantial additional capital resources. This includes near-term funding and, ultimately, funding for Elk
Creek Project construction and other costs. See “Liquidity and Capital Resources” above for the Company’s
discussion of arrangements related to possible future financings.
Contractual
Obligations
There
have been no material changes to our contractual obligations discussed in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” under the heading “Tabular Disclosure of Contractual Obligations”
as of June 30, 2019, in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, other than the continued conversion
of outstanding convertible Lind debt.
Off
Balance Sheet Arrangements
The
Company has no off balance sheet arrangements.
Critical
Accounting Policies
There
have been no material changes in our critical accounting policies discussed in “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” under the heading “Critical Accounting Policies” as of June
30, 2019, in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019.
Certain
U.S. Federal Income Tax Considerations
The
Company has been a “passive foreign investment company” (“PFIC”) as defined under Section 1297 of the
U.S. Internal Revenue Code of 1986, as amended, in recent years and expects to continue to be a PFIC in the future. Current and
prospective United States shareholders should consult their tax advisors as to the tax consequences of PFIC classification and
the U.S. federal tax treatment of PFICs. Additional information on this matter is included in the Company’s Annual Report
on Form 10-K for the fiscal year ended June 30, 2019, under the heading “Risks Related to the Common Shares.”