Notes
to the Condensed Consolidated Financial Statements
December
31, 2017
(expressed
in thousands of U.S. dollars, unless otherwise stated) (unaudited)
|
1.
|
DESCRIPTION
OF BUSINESS
|
NioCorp
Developments Ltd. (“NioCorp” or the “Company”) was incorporated on February 27, 1987 under the laws of
the Province of British Columbia and currently operates in one reportable operating segment consisting of exploration and development
of mineral deposits in North America, specifically, the Elk Creek Niobium/Scandium/Titanium property (the “Elk Creek Project”)
located in southeastern Nebraska.
These
financial statements have been prepared on a going concern basis that contemplates the realization of assets and discharge of
liabilities at their carrying values in the normal course of business for the foreseeable future. These financial statements do
not reflect any adjustments that may be necessary if the Company is unable to continue as a going concern.
The
Company currently earns no operating revenues and will require additional capital in order to advance the Elk Creek Project. The
Company’s ability to continue as a going concern is uncertain and is dependent upon the generation of profits from mineral
properties, obtaining additional financing, and maintaining continued support from its shareholders and creditors.
|
a)
|
Basis
of Preparation and Consolidation
|
The
accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted
accounting principles of the United States of America (“US GAAP”) and the rules and regulations of the Securities
and Exchange Commission (“SEC”). The interim condensed consolidated financial statements include the consolidated
accounts of the Company and its wholly-owned subsidiaries with all significant intercompany transactions eliminated. The accounting
policies followed in preparing these interim condensed consolidated financial statements are those used by the Company as set
out in the audited consolidated financial statements for the year ended June 30, 2017.
In
the opinion of Management, all adjustments considered necessary (including reclassifications and normal recurring adjustments)
to present fairly the financial position, results of operations, and cash flows at December 31, 2017, and for all periods presented,
have been included in these interim condensed consolidated financial statements. Certain information and footnote disclosures
normally included in the consolidated financial statements prepared in accordance with US GAAP have been condensed or omitted
pursuant to appropriate SEC rules and regulations. These interim condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements for the year ended June 30, 2017. The interim results are not necessarily
indicative of results for the full year ending June 30, 2018, or future operating periods.
|
b)
|
Recent
Accounting Standards
|
Issued
and Adopted
In
March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2016-09, Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU require, among other things, that
all income tax effects of awards be recognized in the income statement when the awards vest or are settled. The ASU also allows
for an employer to repurchase more of an employee’s shares than it can today for tax withholding purposes without triggering
liability accounting, and it allows for a policy election to account for forfeitures as they occur. The amendments in this ASU
are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We adopted
this guidance during the quarter ended September 30, 2017. The adoption of this ASU had no material impacts on our financial statement
results or disclosures.
Issued
and Not Effective
From
time to time, new accounting pronouncements are issued by the FASB that are adopted by the Company as of the specified effective
date. Unless otherwise discussed, management believes that the impact of recently issued standards did not or will not have a
material impact on the Company’s consolidated financial statements upon adoption.
NioCorp
Developments Ltd.
Notes
to the Condensed Consolidated Financial Statements
December
31, 2017
(expressed
in thousands of U.S. dollars, unless otherwise stated) (unaudited)
In
January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The
update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether
transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The update is effective for fiscal
years beginning after December 15, 2017, and interim periods within those fiscal years. The Company will apply the provisions
of the update to potential future acquisitions occurring after the effective date.
In
February 2016, the FASB issued ASU 2016-02, Leases. The standard requires that a lessee recognize on the balance sheet assets
and liabilities for leases with lease terms of more than twelve months. The recognition, measurement, and presentation of expenses
and cash flows arising from a lease have not significantly changed from the previous US GAAP. The standard is effective for fiscal
years beginning after December 15, 2018, including interim periods within such fiscal year, with early adoption permitted. The
Company is currently assessing the impact, if any, of implementing this guidance on its consolidated financial position, results
of operations, and liquidity.
The
preparation of consolidated financial statements in conformity with US GAAP requires Management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of expenses during the reporting period. The Company regularly evaluates
estimates and assumptions related to the deferred income tax asset valuations, convertible debt valuations, and share-based compensation.
The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes
to be reasonable under the circumstances, the results of which form the basis for making judgments about the other sources. The
actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent
there are material differences between estimates and the actual results, future results of operations will be affected.
Certain
prior year amounts have been reclassified to conform to fiscal 2018 presentation and these reclassifications had no effect on
the reported results of operations or net equity as previously disclosed.
The
Company incurred a loss of $3,773 for the six months ended December 31, 2017 (2016 - $6,322), and had a working capital deficit
and an accumulated deficit of $4,370 and $78,625, respectively, as of December 31, 2017. These factors indicate the existence
of a material uncertainty that raises substantial doubt about the Company’s ability to continue as a going concern.
The
Company’s ability to continue operations and fund its expenditures is dependent on Management’s ability to secure
additional financing. Management is actively pursuing such additional sources of financing, and while it has been successful in
doing so in the past, there can be no assurance it will be able to do so in the future. These consolidated financial statements
do not give effect to any adjustments required to realize its assets and discharge its liabilities in other than the normal course
of business and at amounts different from those reflected in the accompanying financial statements.
Restricted
cash represents amounts held in escrow to secure payment of work related to the Company’s Elk Creek Feasibility Study. Under
the terms of the escrow agreement, the balance of $265 was drawn against outstanding accounts payable during the quarter ended
September 30, 2017.
NioCorp
Developments Ltd.
Notes
to the Condensed Consolidated Financial Statements
December
31, 2017
(expressed
in thousands of U.S. dollars, unless otherwise stated) (unaudited)
Other
current assets include legal and other professional fees associated with obtaining project debt financing for the Elk Creek Project.
Amounts will be deferred until funding is completed, at which time the balance will become a direct deduction from the related
debt liability.
|
|
As of
|
|
|
|
December 31, 2017
|
|
|
June 30, 2017
|
|
Convertible debt, current portion
|
|
$
|
667
|
|
|
$
|
2,161
|
|
Noncurrent:
|
|
|
|
|
|
|
|
|
Convertible notes
|
|
$
|
—
|
|
|
$
|
592
|
|
Convertible security
|
|
|
1,609
|
|
|
|
1,304
|
|
|
|
$
|
1,609
|
|
|
$
|
1,896
|
|
Convertible
Security Funding
Changes
in the Lind Partners Asset Management IV, LLC (“Lind”) convertible security (the “Convertible Security”)
balance are comprised of the following:
|
|
Convertible Security
|
|
Balance, June 30, 2017
|
|
$
|
3,465
|
|
Additional debt drawdown
|
|
|
1,000
|
|
Conversions, at fair value
|
|
|
(3,030
|
)
|
Change in fair market value
|
|
|
174
|
|
Balance, December 31, 2017
|
|
$
|
1,609
|
|
On
August 10, 2017, Lind provided notice to the Company of its election to advance an additional $1.0 million in funding (the “Initial
Convertible Security Increase”) under the convertible security (the ‘Initial Convertible Security”) pursuant
to its right under the Convertible Security Funding Agreement, dated December 14, 2015, between the Company and Lind (the “Lind
Agreement”). As a result, upon payment of the additional $1,000 in funding by Lind to the Company, the face value of the
Initial Convertible Security was increased by $1,200 ($1,000 in additional funding plus implied interest), and the Company issued
Warrants to Lind, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Black Scholes pricing model inputs
|
Funding Date
|
|
Face Value
1
|
|
|
Warrants Issued
2
|
|
|
Issue Price
3
|
|
|
Warrant Expiry Date
|
|
Risk-free rate
|
|
|
Yield
|
|
|
Volatility
|
|
|
Expected Life
|
August 15, 2017
|
|
$
|
300
|
|
|
|
260,483
|
|
|
|
C$0.73
|
|
|
August 15, 2020
|
|
|
1.23
|
%
|
|
|
0
|
%
|
|
|
49.6
|
%
|
|
3 years
|
September 28, 2017
|
|
|
300
|
|
|
|
283,413
|
|
|
|
C$0.66
|
|
|
September 28, 2020
|
|
|
1.23
|
%
|
|
|
0
|
%
|
|
|
47.7
|
%
|
|
3 years
|
October 31, 2017
|
|
|
300
|
|
|
|
308,901
|
|
|
|
C$0.62
|
|
|
October 31, 2020
|
|
|
1.59
|
%
|
|
|
0
|
%
|
|
|
47.0
|
%
|
|
3 years
|
December 6, 2017
|
|
|
300
|
|
|
|
355,132
|
|
|
|
C$0.54
|
|
|
December 6, 2020
|
|
|
1.59
|
%
|
|
|
0
|
%
|
|
|
48.9
|
%
|
|
3 years
|
Total
|
|
$
|
1,200
|
|
|
|
1,207,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Includes
implied interest.
|
|
2
|
The
value of warrants issued totaled $127, which was expensed to Change in Financial Instrument Fair Value. .
|
|
3
|
The
price to convert one warrant into one Common Share.
|
The
Initial 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 (“Volume Weighted Average Price”) of the Common Shares (in Canadian
dollars) on the Toronto Stock Exchange (the “TSX”) for the five consecutive trading days immediately prior to the
date on which Lind provides the Company with notice of its intention to convert an amount of the Initial Convertible Security
from time to time. During the six-month period ended December 31, 2017, $2,425 principal amount of the Initial Convertible Security
was converted into 6,696,590 Common Shares.
NioCorp
Developments Ltd.
Notes
to the Condensed Consolidated Financial Statements
December
31, 2017
(expressed
in thousands of U.S. dollars, unless otherwise stated) (unaudited)
The
Convertible Security contains financial and non-financial covenants customary for a facility of its size and nature, and includes
a financial covenant defining an event of default as all present and future liabilities of the Company or any of its subsidiaries,
exclusive of related party loans, for an amount or amounts exceeding $2,000 and which have not been satisfied on time or within
90 days of invoice, or have become prematurely payable as a result of its default or breach. The Company was in compliance with
these covenants as of December 31, 2017.
Convertible
Notes
Changes
in the Company’s outstanding convertible promissory notes (the “Convertible Notes”) balance are comprised of
the following:
|
|
Convertible Notes
|
|
Balance, June 30, 2017
|
|
$
|
592
|
|
Accreted interest, net of interest paid
|
|
|
75
|
|
Balance, December 31, 2017
|
|
$
|
667
|
|
The
changes in the derivative liability related to the conversion feature of the Convertible Notes are as follows:
|
|
Derivative Liability
|
|
Balance, June 30, 2017
|
|
$
|
82
|
|
Change in fair value of derivative liability
|
|
|
(—
|
)
|
Balance, December 31, 2017
|
|
$
|
82
|
|
On
July 26, 2017, the Company closed a brokered private placement (the “July 2017 Private Placement”) of units (the “Units”)
of the Company. Under the July 2017 Private Placement, a total of 2,962,500 Units were issued at C$0.65 per Unit, for total gross
proceeds to the Company of approximately C$1,926. Each Unit issued pursuant to the July 2017 Private Placement consists of one
Common Share and one warrant of the Company (“Warrant”). Each Warrant entitles the holder thereof to purchase one
additional Common Share at a price of C$0.79 until July 26, 2021.
The
July 2017 Private Placement was brokered by Mackie Research Capital Corporation (the “Agent”). The Company paid the
Agent an aggregate cash commission of approximately C$125, equal to six and a half per cent (6.5%) of the gross proceeds raised
under the July 2017 Private Placement. The Company also issued to the Agent 192,562 broker warrants (the “Broker Warrants”),
equal to six and a half per cent (6.5%) of the Units sold pursuant to the July 2017 Private Placement. Each Broker Warrant entitles
the holder thereof to purchase one Common Share at a price of C$0.79 until July 26, 2021. The fair value of the Broker Warrants
of $41 was estimated based on the Black Scholes pricing model using a risk-free interest rate of 1.32%, an expected dividend yield
of 0%, a volatility of 60.3%, and an expected life of four years. Total cash issue costs including agents’ commission, legal
and other fees was $189.
Proceeds
of the July 2017 Private Placement were used for general working capital purposes and to continue to advance the Company’s
Elk Creek Project.
On
September 5, 2017, the Company entered into a shares-for-debt agreement with Northcott Capital Limited (“Northcott”)
whereby NioCorp issued 415,747 Common Shares to settle a debt of C$253,606 owed to Northcott for past and prospective services
through December 2017. Northcott manages NioCorp’s current effort to assemble a debt financing package as part of the Company’s
overall Elk Creek Project financing effort. The shares issued to Northcott were priced at C$0.61 per share, which represents a
10% premium over the five-day Volume Weighted Average Price of the Common Shares of C$0.5571 as of the date of the agreement.
NioCorp
Developments Ltd.
Notes
to the Condensed Consolidated Financial Statements
December
31, 2017
(expressed
in thousands of U.S. dollars, unless otherwise stated) (unaudited)
On
November 9, 2017, the Company’s shareholders voted to approve a new Long-Term Incentive Plan (the “Long-Term Incentive
Plan”) and the granting of incentive securities thereunder until November 9, 2020. Under the Long-Term Incentive Plan, the
Company’s Board of Directors (the “Board”) may, in its discretion from time to time, grant Options and share
units (in the form of RSUs and PSUs) to directors, employees and certain other service providers (as defined in the Long-Term
Incentive Plan) of the Company and affiliated entities selected by the Board.
Subject
to adjustment as described in the Long-Term Incentive Plan, the aggregate number of Common Shares that may be reserved for issuance
to participants under the Long-Term Incentive Plan, together with all other security -based compensation arrangements of the Company,
including with respect to Options outstanding under the Company’s 2016 Incentive Stock Option Plan, may not exceed 10% of
the issued and outstanding Common Shares from time to time, and the Common Shares reserved for issuance upon settlement of share
units shall not exceed 5% of the issued and outstanding Common Shares from time to time. The Long-Term Incentive Plan limits the
maximum number of Common Shares issued to insiders (as defined under TSX rules for this purpose) within any one-year period, or
issuable to insiders at any time, in the aggregate, under all security -based compensation arrangements (including the Long-Term
Incentive Plan) to 10% of the then issued and outstanding Common Shares. The Long-Term Incentive Plan also limits the aggregate
number of Common Shares that may be reserved for issuance to any one participant under the Long-Term Incentive Plan, together
with all other security -based compensation arrangements of the Company, to 5% of the then issued and outstanding Common Shares
(on a non-diluted basis). Under the Long-Term Incentive Plan, Options and share units granted to non-employee directors, together
with all other equity awards, are limited to an annual equity award value of C$150 per non-employee director. The total value
of Options issuable to a non-employee director in a one-year period is limited to C$100. Further, and subject to the adjustment
provisions of the Long-Term Incentive Plan, the aggregate number of Common Shares actually issued or transferred by the Company
upon the exercise of incentive stock options will not exceed 20,451,895 Common Shares.
The
Board has the exclusive power over the granting, amendment, administration or settlement of any award.
Stock
option transactions are summarized as follows:
|
|
Number of Options
|
|
|
Weighted Average Exercise Price (C$)
|
|
Balance, June 30, 2017
|
|
|
16,605,000
|
|
|
$
|
0.73
|
|
Issued
|
|
|
3,925,000
|
|
|
|
0.47
|
|
Exercised
|
|
|
(10,091
|
)
|
|
|
0.62
|
|
Cancelled/expired
|
|
|
(4,470,000
|
)
|
|
|
0.75
|
|
Balance, December 31, 2017
|
|
|
16,049,909
|
|
|
$
|
0.66
|
|
The
following table summarizes information about stock options outstanding at December 31, 2017:
Exercise price (C$)
|
|
|
Expiry date
|
|
Number outstanding
|
|
|
Aggregate Intrinsic Value (C$000s)
|
|
|
Number exercisable
|
|
|
Aggregate Intrinsic Value (C$000s)
|
|
$
|
0.47
|
|
|
November 9, 2022
|
|
|
3,925,000
|
|
|
$
|
1,060
|
|
|
|
3,925,000
|
|
|
$
|
1,060
|
|
$
|
0.62
|
|
|
January 19, 2021
|
|
|
5,264,909
|
|
|
|
632
|
|
|
|
5,264,909
|
|
|
|
632
|
|
$
|
0.76
|
|
|
March 6, 2022
|
|
|
5,650,000
|
|
|
|
—
|
|
|
|
2,825,000
|
|
|
|
—
|
|
$
|
0.94
|
|
|
April 28, 2018
|
|
|
400,000
|
|
|
|
—
|
|
|
|
400,000
|
|
|
|
—
|
|
$
|
0.94
|
|
|
April 28, 2019
|
|
|
100,000
|
|
|
|
—
|
|
|
|
100,000
|
|
|
|
—
|
|
$
|
0.94
|
|
|
July 21, 2021
|
|
|
710,000
|
|
|
|
—
|
|
|
|
532,500
|
|
|
|
—
|
|
|
Balance December 31, 2017
|
|
|
16,049,909
|
|
|
$
|
1,692
|
|
|
|
13,047,409
|
|
|
$
|
1,692
|
|
NioCorp
Developments Ltd.
Notes
to the Condensed Consolidated Financial Statements
December
31, 2017
(expressed
in thousands of U.S. dollars, unless otherwise stated) (unaudited)
The
aggregate intrinsic value in the preceding table represents the total intrinsic value, based on the Company’s closing Common
Share price of C$0.74 as of December 31, 2017, 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 December 31, 2017 was 9,189,909.
The total intrinsic value of options exercised during the six months ended December 31, 2017 was nil.
As
of December 31, 2017, there was $247 of unrecognized compensation cost related to unvested share-based compensation arrangements
granted under the 2016 Incentive Stock Option Plan. The cost is expected to be recognized over a remaining weighted average period
of approximately 0.7 years.
Warrant
transactions are summarized as follows:
|
|
Warrants
|
|
|
Weighted average exercise price (C$)
|
|
Balance June 30, 2017
|
|
|
20,609,086
|
|
|
$
|
0.79
|
|
Granted
|
|
|
4,362,991
|
|
|
|
0. 75
|
|
Balance, December 31, 2017
|
|
|
24,972,077
|
|
|
$
|
0. 78
|
|
As
discussed above under Note 6, the Company granted 1,207,929 Warrants to Lind in connection with the funding of the Convertible
Security Increase. As discussed above under Note 7a, the Company granted 2,962,500 Warrants and 192,562 Broker Warrants in conjunction
with the July 2017 Private Placement.
At
December 31, 2017, the Company has outstanding exercisable Warrants, as follows:
Number
|
|
|
Exercise Price (C$)
|
|
|
Expiry Date
|
|
355,132
|
|
|
|
0.54
|
|
|
December 6, 2020
|
|
308,901
|
|
|
|
0.62
|
|
|
October 31, 2020
|
|
283,413
|
|
|
|
0.66
|
|
|
September 28, 2020
|
|
3,125,000
|
|
|
|
0.72
|
|
|
December 22, 2018
|
|
260,483
|
|
|
|
0.73
|
|
|
August 15, 2020
|
|
9,150,285
|
|
|
|
0.75
|
|
|
January 19, 2019
|
|
3,155,062
|
|
|
|
0.79
|
|
|
July 26, 2021
|
|
3,860,800
|
|
|
|
0.85
|
|
|
February 14, 2020
|
|
3,043,024
|
|
|
|
0.85
|
|
|
February 21, 2020
|
|
539,307
|
|
|
|
0.85
|
|
|
February 28, 2020
|
|
890,670
|
|
|
|
0.90
|
|
|
March 31, 2020
|
|
24,972,077
|
|
|
|
|
|
|
|
|
8.
|
RELATED
PARTY TRANSACTIONS AND BALANCES
|
The
Company has a loan with Mark Smith, President, Chief Executive Officer (“CEO”) and Executive Chairman of NioCorp (the
“Original Smith Loan”), that bears an interest rate of 10%, is secured by the Company’s assets pursuant to a
concurrently executed general security agreement (the “General Security Agreement”), and is subject to both a 2.5%
establishment fee and 2.5% prepayment fee. The principal amount outstanding under the Original Smith Loan is $1,000, and is due
on June 17, 2018.
NioCorp
Developments Ltd.
Notes
to the Condensed Consolidated Financial Statements
December
31, 2017
(expressed
in thousands of U.S. dollars, unless otherwise stated) (unaudited)
The
Company has a non-revolving credit facility agreement (the “Credit Facility”) in the amount of $2,000 with Mr. Smith.
The Credit Facility bears an interest rate of 10% and drawdowns from the Credit Facility are subject to a 2.5% establishment fee.
Amounts outstanding under the Credit Facility are secured by all of the Company’s assets pursuant to the General Security
Agreement. The Credit Facility contains financial and non-financial covenants customary for a facility of its size and nature
and is due on June 16, 2018. During the quarter ended December 31, 2017, Mr. Smith advanced an additional $180 to the Company
under the Credit Facility. As of December 31, 2017, the principal amount outstanding under the Credit Facility is $355 and accounts
payable and accrued liabilities included interest payable and loan establishment fees payable to Mr. Smith of $176.
On
June 20, 2016, the Company announced a joint development agreement (the “Development Agreement”) with IBC Advanced
Alloys Corp. (“IBC”) to investigate and develop applications for scandium-containing alloys for multiple downstream
markets. In addition to his management duties at NioCorp, Mark Smith is also the Chairman of the IBC Board of Directors. Under
the terms of the Development Agreement, each party bears its own costs incurred in development efforts. During the quarter ended
December 31, 2017 the company supplied IBC with a small quantity of Scandium Trioxide which was used to manufacture several aluminum-scandium
alloy ingots. The ingots, representing a range of scandium content, will undergo chemical analysis and other metallurgical testing
to confirm the microstructure and performance of the alloys.
|
9.
|
Exploration
Expenditures
|
|
|
For the three months ended December 31,
|
|
|
For the six months ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Technical studies and engineering
|
|
$
|
59
|
|
|
$
|
1,551
|
|
|
$
|
454
|
|
|
$
|
1,988
|
|
Field management and other
|
|
|
132
|
|
|
|
399
|
|
|
|
342
|
|
|
|
633
|
|
Metallurgical development
|
|
|
89
|
|
|
|
419
|
|
|
|
172
|
|
|
|
1,691
|
|
Geologists and field staff
|
|
|
23
|
|
|
|
28
|
|
|
|
48
|
|
|
|
55
|
|
Total
|
|
$
|
303
|
|
|
$
|
2,397
|
|
|
$
|
1,016
|
|
|
$
|
4,367
|
|
On
December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “Act”), which took effect on January
1, 2018. Some notable provisions of the Act include a reduction of the corporate income tax rate from 35% to 21%, 100% bonus depreciation
for certain capital expenditures, and a change from a worldwide system with deferral to a territorial tax system, which includes
a one-time toll charge on certain undistributed earnings of non-U.S. subsidiaries. The Company does not expect any material impacts
of this new legislation on its consolidated financial statements.
|
11.
|
Fair
Value Measurements
|
The
Company measures the fair value of financial assets and liabilities based on US GAAP guidance which defines fair value, establishes
a framework for measuring fair value, and expands disclosures about fair value measurements.
The
Company classifies financial assets and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables,
or other financial liabilities depending on their nature. Financial assets and financial liabilities are recognized at fair value
on their initial recognition.
Financial
assets and liabilities classified as held-for-trading are measured at fair value, with gains and losses recognized in net income.
Financial assets classified as held-to-maturity, loans and receivables, and financial liabilities other than those classified
as held-for-trading are measured at amortized cost, using the effective interest method of amortization. Financial assets classified
as available-for-sale are measured at fair value, with unrealized gains and losses being recognized in income.
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
December 31, 2017
|
(expressed in thousands of U.S. dollars, unless otherwise stated)
(unaudited)
|
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 table presents information about the assets and liabilities that are measured at fair value on a recurring basis as
of December 31, 2017 and June 30, 2017, and indicates 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 December 31, 2017
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
80
|
|
|
$
|
80
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Available-for-sale securities
|
|
|
17
|
|
|
|
17
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
97
|
|
|
$
|
97
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
$
|
1,609
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,609
|
|
Derivative liability, convertible debt
|
|
|
82
|
|
|
|
—
|
|
|
|
—
|
|
|
|
82
|
|
Total
|
|
$
|
1,691
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,691
|
|
|
|
As of June 30, 2017
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
238
|
|
|
$
|
238
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restricted cash
|
|
|
265
|
|
|
|
265
|
|
|
|
—
|
|
|
|
—
|
|
Available-for-sale securities
|
|
|
23
|
|
|
|
23
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
526
|
|
|
$
|
526
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
$
|
3,465
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,465
|
|
Derivative liability, convertible debt
|
|
|
82
|
|
|
|
—
|
|
|
|
—
|
|
|
|
82
|
|
Total
|
|
$
|
3,547
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,547
|
|
The
Company measures the fair market value of the Level 3 components using the Black Scholes model and discounted cash flows, as appropriate.
These models take into account Management’s best estimate of the conversion price of the stock, an estimate of the expected time
to conversion, an estimate of the stock’s volatility, and the risk-free rate of return expected for an instrument with a term
equal to the duration of the convertible debt.
The
following table sets forth a reconciliation of changes in the fair value of the Company’s convertible debt components classified
as Level 3 in the fair value hierarchy:
Balance, June 30, 2017
|
|
$
|
3,547
|
|
Additional debt drawdown
|
|
|
1,000
|
|
Conversions to equity
|
|
|
(3,030
|
)
|
Realized and unrealized gains
|
|
|
174
|
|
Balance, December 31, 2017
|
|
$
|
1,691
|
|
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
December 31, 2017
|
(expressed in thousands of U.S. dollars, unless otherwise stated)
(unaudited)
|
12.
Subsequent events
Pursuant
to notice provided by Lind to the Company of its election to advance an additional $2,500 in funding under the Initial
Convertible Security and the Lind Agreement (the “Second Tranche Increase”), Lind funded the full $2,500 Second
Tranche Increase as of February 7, 2018. Upon payment of the full $2,500 in funding by Lind to the Company, the face amount of
the Initial Convertible Security was increased by $3,000 ($2,500 in additional funding and $500 in implied
interest amount). In connection with the funding, the Company issued Common Share purchase warrants (the ‘Second
Tranche Warrants”) to Lind as follows:
Funding
Date
|
|
Face
Value
1
|
Warrants
Issued
|
Issue
Price
2
|
Warrant
Expiry Date
|
January 30, 2018
|
$
|
1,800
|
1,546,882
|
C$0.72
|
January 30, 2021
|
February 5, 2018
|
|
600
|
529,344
|
C$0.70
|
February 5, 2021
|
February 7, 2018
|
|
600
|
541,435
|
C$0.69
|
February 7, 2021
|
|
1
|
Includes
implied interest.
|
|
2
|
The
price to convert one warrant into one Common Share.
|
In
addition, the terms of the Lind Agreement, as amended, provide for additional funding of up to $2,000 as part of the second tranche,
subject to certain conditions, for total gross proceeds to the Company of up to $4,500.
In
January 2018, Mark Smith advanced an additional $125 in funding under the existing Credit Facility with the Company. This funding
is subject to the same terms and conditions as the prior drawdowns under the Credit Facility and will be used for general corporate
purposes.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis should be read in conjunction with our unaudited condensed interim consolidated financial statements
as of, and for the three and six months ended, December 31, 2017 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.