This prospectus supplement supplements
the prospectus dated April 21, 2017 (the “Prospectus”) of NioCorp Developments Ltd. (the “Company”), which
is part of a registration statement on Form S-1 (Registration No. 333-217272) filed with the Securities and Exchange Commission
(“SEC”) relating to the resale of securities by the selling securityholders as described therein.
The Prospectus relates to the resale or
other disposition from time to time by certain selling security holders as further described in the Prospectus, of up to an aggregate
of 18,019,377 common shares (the “Common Shares”) of the Company consisting of Common Shares, Common Shares acquirable
upon exercise of common share purchase warrants and Common Shares acquirable upon the conversion of a convertible note, that were
issued by the Company to such selling security holders in private transactions.
This prospectus supplement incorporates
into the Prospectus (i) the Company’s Current Report on Form 8-K filed with the SEC on May 11, 2017, (ii) the Company’s
Current Report on Form 8-K filed with the SEC on May 12, 2017 and (iii) the Company’s Quarterly Report on Form 10-Q filed
with the SEC on May 12, 2017.
This prospectus supplement should be read
in conjunction with the Prospectus, as supplemented to date, and this prospectus supplement is qualified by reference to the Prospectus,
as supplemented to date, except to the extent that the information provided by this prospectus supplement supersedes the information
contained in the Prospectus. This prospectus supplement is not complete without, and may not be delivered or utilized except in
connection with, the Prospectus with respect to the securities described above, including any amendments or supplements thereto.
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Indicate by check mark whether the registrant is an emerging
growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this chapter).
On May 10, 2017, NioCorp Developments Ltd. (the “Company”)
issued a press release announcing a C$1.0 million bought deal financing of Units of the Company. A copy of the May 10, 2017 press
release is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Cautionary Note Regarding Forward-Looking
Statements
Neither TSX nor its Regulation Services
Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this document.
Certain statements contained in this document may constitute forward-looking statements, including but not limited to statements
related to the anticipated closing, size and structure of the Offering, as well as the development of the Elk Creek Project. Such
forward-looking statements are based upon NioCorp’s reasonable expectations and business plan at the date hereof, which are
subject to change depending on economic, political and competitive circumstances and contingencies. Readers are cautioned that
such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause a change in such
assumptions and the actual outcomes and estimates to be materially different from those estimated or anticipated future results,
achievements or positions expressed or implied by those forward-looking statements. Risks, uncertainties and other factors that
could cause NioCorp’s plans or prospects to change include changes in demand for and price of commodities (such as fuel and
electricity) and currencies; changes or disruptions in the securities markets; legislative, political or economic developments;
the need to obtain permits and comply with laws and regulations and other regulatory requirements; the possibility that actual
results of work may differ from projections/expectations or may not realize the perceived potential of NioCorp’s projects;
risks of accidents, equipment breakdowns and labor disputes or other unanticipated difficulties or interruptions; the possibility
of cost overruns or unanticipated expenses in development programs; operating or technical difficulties in connection with exploration,
mining or development activities; the speculative nature of mineral exploration and development, including the risks of diminishing
quantities of grades of reserves and resources; the risks involved in the exploration, development, and mining business, and the
risks set forth in the Company’s filings with the SEC at www.sec.gov. NioCorp disclaims any intention or obligation to update
or revise any forward-looking statements whether as a result of new information, future events or otherwise.
CONTACT INFORMATION
NioCorp Developments Ltd.
Jim Sims
VP of External Affairs
720-639-4650
jim.sims@niocorp.com
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of
1934
Date of Report (Date of earliest event reported):
May 12, 2017
NioCorp Developments Ltd.
(Exact name of registrant as specified
in its charter)
British Columbia, Canada
|
000-55710
|
98-1262185
|
(State or other jurisdiction
of incorporation)
|
(Commission
File Number)
|
(IRS Employer
Identification No.)
|
7000 South Yosemite Street, Suite 115
Centennial, Colorado 80112
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number,
including area code: (720) 639-4647
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
☐
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
☐
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
☐
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Indicate by check mark whether the registrant is an emerging
growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
ý
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act.
ý
On May 12, 2017, NioCorp Developments Ltd. (the “Company”)
issued a press release announcing the upsizing of its previously announced bought deal financing of Units of the Company from C$1.0
million to C$2.0 million. A copy of the May 12, 2017 press release is filed as Exhibit 99.1 to this Current Report on Form 8-K
and is incorporated herein by reference.
Item 9.01.
|
|
Financial Statements and Exhibits.
|
Exhibit Number
|
|
Description
|
99.1
|
|
Press Release dated May 12, 2017.
|
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
NIOCORP DEVELOPMENTS LTD.
By:
/s/ Neal Shah
Neal Shah
Chief Financial Officer
Date: May 12, 2017
Exhibit Index
Exhibit Number
|
|
Description
|
99.1
|
|
Press Release dated May 12, 2017.
|
Exhibit
99.1
NEWS
RELEASE May 12, 2017
NOT FOR DISTRIBUTION TO
U.S. NEWSWIRES OR FOR DISSEMINATION IN THE UNITED STATES
NioCorp
Announces Upsizing of Previously Announced Bought Deal Financing to $2,000,050 with Mackie Research Capital Corporation
CENTENNIAL,
Colo.
– May 12, 2017 – NioCorp Developments Ltd. (“
NioCorp
” or the “
Company
”)
(
TSX: NB
;
OTCQX: NIOBF)(FRANKFURT: BR3)
announces that it has entered into an amended agreement, subject to regulatory
approval, with Mackie Research Capital Corporation (“
Mackie
”) to increase the size of its previously announced
bought deal short form prospectus offering. Pursuant to the revised terms of the offering, Mackie has agreed to purchase, on a
bought deal short form prospectus basis, 3,077,000 units of the Company (the “Units”) at a price of C$0.65 per Unit
(the “Issue Price”) for gross proceeds to the Company of up to C$2,000,050 (the “Offering”). Each Unit
will consist of one common share of NioCorp (each, a “Common Share”) and one common share purchase warrant (a “Warrant”).
Each Warrant will entitle the holder to acquire one common share of NioCorp at a price of C$0.85 at any time prior to the date
which is 3 years following completion of the Offering.
The
Company has also granted the underwriter an option (the “
Underwriter’s Option
”) to increase the size of
the Offering by up to 15% in Units, by giving written notice of the exercise of the Underwriter’s Option, or a part thereof,
to the Company at any time up to 30 days after the closing date of the Offering.
Proceeds
of the Offering will be used for general working capital purposes.
NioCorp
intends to file with the Ontario Securities Commissions and other similar regulatory authorities in the provinces of Canada, other
than Quebec, a preliminary short form prospectus relating to the issuance of the Units by May 16, 2017.
The
Offering is scheduled to close on or about May 31, 2017 and is subject to a number of conditions including, but not limited to,
receipt of all necessary approvals including the approval of the Toronto Stock Exchange and applicable securities regulatory authorities.
This
is not an offer to sell or the solicitation of an offer to buy any securities. These securities have not been registered under
the United States Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state
or other jurisdiction, and may not be offered or sold in the United States without registration or an applicable exemption from
the Securities Act and applicable state securities or blue sky laws and foreign securities laws.
On Behalf of the Board of Directors,
Mark Smith, Executive Chairman, CEO, and Director
Source:
NioCorp Developments Ltd.
@NioCorp $NB $NIOBF $BR3 #Niobium #Scandium #ElkCreek
About NioCorp
NioCorp
is developing a superalloy materials project in Southeast Nebraska with an aim to produce Niobium, Scandium, and Titanium. Niobium
is used to produce superalloys as well as High Strength, Low Alloy ("HSLA") steel, which is a lighter, stronger steel
used in automotive, structural, and pipeline applications. Scandium is a superalloy material that can be combined with Aluminum
to make alloys with increased strength and improved corrosion resistance. Scandium also is a critical component of advanced solid
oxide fuel cells. Titanium is used in various superalloys and is a key component of pigments used in paper, paint and plastics
and is also used for aerospace applications, armor and medical implants.
Cautionary Note
Regarding Forward-Looking Statements
Neither
TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy
or accuracy of this document. Certain statements contained in this document may constitute forward-looking statements, including
but not limited to statements related to the anticipated closing, size and structure of the Offering, as well as the development
of the Elk Creek Project. Such forward-looking statements are based upon NioCorp’s reasonable expectations and business plan
at the date hereof, which are subject to change depending on economic, political and competitive circumstances and contingencies.
Readers are cautioned that such forward-looking statements involve known and unknown risks, uncertainties and other factors that
may cause a change in such assumptions and the actual outcomes and estimates to be materially different from those estimated or
anticipated future results, achievements or positions expressed or implied by those forward-looking statements. Risks, uncertainties
and other factors that could cause NioCorp’s plans or prospects to change include changes in demand for and price of commodities
(such as fuel and electricity) and currencies; changes or disruptions in the securities markets; legislative, political or economic
developments; the need to obtain permits and comply with laws and regulations and other regulatory requirements; the possibility
that actual results of work may differ from projections/expectations or may not realize the perceived potential of NioCorp’s
projects; risks of accidents, equipment breakdowns and labor disputes or other unanticipated difficulties or interruptions; the
possibility of cost overruns or unanticipated expenses in development programs; operating or technical difficulties in connection
with exploration, mining or development activities; the speculative nature of mineral exploration and development, including the
risks of diminishing quantities of grades of reserves and resources; the risks involved in the exploration, development, and mining
business, and the risks set forth in the Company’s filings with the SEC at www.sec.gov. NioCorp disclaims any intention or
obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
CONTACT
INFORMATION
NioCorp Developments
Ltd.
Jim Sims
VP of External Affairs
720-639-4650
jim.sims@niocorp.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended March 31, 2017
|
OR
|
¨
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from to
Commission file number: 000-55710
NioCorp
Developments Ltd.
(Exact Name of Registrant
as Specified in its Charter)
British Columbia, Canada
|
|
98-1262185
|
(State or other jurisdiction of incorporation or
organization)
|
|
(I.R.S. Employer Identification No.)
|
7000 South Yosemite Street, Suite 115
Centennial, CO
(Address of Principal Executive Offices)
|
80112
(Zip code)
|
Registrant’s telephone number, including
area code: (855) 264-6267
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes
¨
No
x
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Yes
¨
No
x
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting
company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer
¨
|
Accelerated Filer
¨
|
Non-Accelerated
Filer
x
(Do not check if a smaller reporting company)
|
Small
Reporting Company
¨
Emerging
Growth Company
x
|
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
¨
No
x
As of May 12, 2017, the registrant had
196,330,021 Common Shares outstanding.
PART I— FINANCIAL INFORMATION
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
|
|
March 31,
2017
|
|
|
June 30,
2016
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
$
|
1,870
|
|
|
$
|
4,412
|
|
Restricted cash
|
|
4
|
|
|
265
|
|
|
|
-
|
|
Receivables
|
|
|
|
|
5
|
|
|
|
5
|
|
Prepaid expenses
|
|
|
|
|
63
|
|
|
|
101
|
|
Total current assets
|
|
|
|
|
2,203
|
|
|
|
4,518
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
64
|
|
|
|
65
|
|
Available for sale securities at fair value
|
|
|
|
|
26
|
|
|
|
32
|
|
Equipment
|
|
|
|
|
8
|
|
|
|
14
|
|
Mineral interests
|
|
|
|
|
10,617
|
|
|
|
10,617
|
|
Total assets
|
|
|
|
$
|
12,918
|
|
|
$
|
15,246
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
$
|
1,904
|
|
|
$
|
1,256
|
|
Total current liabilities
|
|
|
|
|
1,904
|
|
|
|
1,256
|
|
Related party loans
|
|
7
|
|
|
1,175
|
|
|
|
1,000
|
|
Convertible debt
|
|
5
|
|
|
5,502
|
|
|
|
6,466
|
|
Derivative liability, convertible debt
|
|
5
|
|
|
115
|
|
|
|
330
|
|
Total liabilities
|
|
|
|
|
8,696
|
|
|
|
9,052
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
Common stock, unlimited shares authorized; shares outstanding: 195,428,961 and 180,467,990, respectively
|
|
6
|
|
|
66,139
|
|
|
|
58,401
|
|
Additional paid-in capital
|
|
|
|
|
9,711
|
|
|
|
8,630
|
|
Accumulated deficit
|
|
|
|
|
(71,153
|
)
|
|
|
(60,222
|
)
|
Accumulated other comprehensive loss
|
|
|
|
|
(475
|
)
|
|
|
(615
|
)
|
Total equity
|
|
|
|
|
4,222
|
|
|
|
6,194
|
|
Total liabilities and equity
|
|
|
|
$
|
12,918
|
|
|
$
|
15,246
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements
NioCorp Developments Ltd.
|
Condensed Consolidated Statements of Operations and Comprehensive Loss
|
(expressed in thousands of U.S. dollars, except share and per share data) (unaudited)
|
|
|
|
|
For the three months ended
March 31,
|
|
|
For the nine months ended
March 31,
|
|
|
|
Note
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
|
|
|
|
$
|
-
|
|
|
$
|
27
|
|
|
$
|
1
|
|
|
$
|
158
|
|
Depreciation
|
|
|
|
|
3
|
|
|
|
3
|
|
|
|
7
|
|
|
|
7
|
|
Employee related costs
|
|
|
|
|
578
|
|
|
|
732
|
|
|
|
1,614
|
|
|
|
1,252
|
|
Finance costs
|
|
|
|
|
4
|
|
|
|
(38
|
)
|
|
|
4
|
|
|
|
240
|
|
Professional fees
|
|
|
|
|
133
|
|
|
|
151
|
|
|
|
745
|
|
|
|
273
|
|
Exploration expenditures
|
|
8
|
|
|
2,761
|
|
|
|
566
|
|
|
|
7,128
|
|
|
|
2,962
|
|
Other operating expenses
|
|
|
|
|
596
|
|
|
|
442
|
|
|
|
906
|
|
|
|
933
|
|
Total operating expenses
|
|
|
|
|
4,075
|
|
|
|
1,883
|
|
|
|
10,405
|
|
|
|
5,825
|
|
Change in financial instrument fair value
|
|
5
|
|
|
524
|
|
|
|
1,132
|
|
|
|
189
|
|
|
|
2,501
|
|
Foreign exchange (gain) loss
|
|
|
|
|
(80
|
)
|
|
|
(686
|
)
|
|
|
113
|
|
|
|
(489
|
)
|
Interest expense
|
|
|
|
|
78
|
|
|
|
62
|
|
|
|
218
|
|
|
|
203
|
|
Loss on available for sale securities
|
|
|
|
|
12
|
|
|
|
19
|
|
|
|
6
|
|
|
|
13
|
|
Loss before income taxes
|
|
|
|
|
4,609
|
|
|
|
2,410
|
|
|
|
10,931
|
|
|
|
8,053
|
|
Income tax benefit
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Net loss
|
|
|
|
$
|
4,609
|
|
|
$
|
2,410
|
|
|
$
|
10,931
|
|
|
$
|
8,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
$
|
4,609
|
|
|
$
|
2,410
|
|
|
$
|
10,931
|
|
|
$
|
8,053
|
|
Other comprehensive (gain) loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting currency translation
|
|
|
|
|
91
|
|
|
|
987
|
|
|
|
(140
|
)
|
|
|
36
|
|
Total comprehensive loss
|
|
|
|
$
|
4,700
|
|
|
$
|
3,397
|
|
|
$
|
10,791
|
|
|
$
|
8,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share, basic
|
|
|
|
$
|
0.02
|
|
|
$
|
0.01
|
|
|
$
|
0.06
|
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
195,081,408
|
|
|
|
167,605,398
|
|
|
|
184,880,012
|
|
|
|
161,140,606
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements
NioCorp Developments Ltd.
|
Condensed Consolidated Statements of Cash Flows
|
(expressed in thousands of U.S. dollars) (unaudited)
|
|
|
For the nine months ended
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Total loss for the period
|
|
$
|
(10,931
|
)
|
|
$
|
(8,053
|
)
|
Non-cash elements included in net loss:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
7
|
|
|
|
7
|
|
Change in financial instrument fair value
|
|
|
189
|
|
|
|
2,501
|
|
Unrealized loss on available-for-sale investments
|
|
|
6
|
|
|
|
13
|
|
Accretion of convertible debt
|
|
|
85
|
|
|
|
57
|
|
Foreign exchange (gain) loss
|
|
|
157
|
|
|
|
(236
|
)
|
Share-based compensation
|
|
|
862
|
|
|
|
643
|
|
|
|
|
(9,625
|
)
|
|
|
(5,068
|
)
|
Change in working capital items:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
-
|
|
|
|
8
|
|
Prepaid expenses
|
|
|
37
|
|
|
|
147
|
|
Accounts payable and accrued liabilities
|
|
|
571
|
|
|
|
(4,155
|
)
|
Net cash used in operating activities
|
|
|
(9,017
|
)
|
|
|
(9,068
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Restricted cash funding
|
|
|
(265
|
)
|
|
|
-
|
|
Acquisition of equipment
|
|
|
-
|
|
|
|
(4
|
)
|
Net cash used in investing activities
|
|
|
(265
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from issuance of capital stock
|
|
|
5,673
|
|
|
|
5,773
|
|
Share issue costs
|
|
|
(66
|
)
|
|
|
(95
|
)
|
Issuance of convertible debt, net of issuance costs
|
|
|
1,000
|
|
|
|
5,060
|
|
Related party debt draws
|
|
|
175
|
|
|
|
600
|
|
Related party debt repayment
|
|
|
-
|
|
|
|
(1,100
|
)
|
Net cash provided by financing activities
|
|
|
6,782
|
|
|
|
10,238
|
|
Exchange rate effect on cash
|
|
|
(42
|
)
|
|
|
228
|
|
Change in cash during the period
|
|
|
(2,542
|
)
|
|
|
1,394
|
|
Cash, beginning of period
|
|
|
4,412
|
|
|
|
753
|
|
Cash, end of period
|
|
$
|
1,870
|
|
|
$
|
2,147
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Amounts paid for interest
|
|
$
|
48
|
|
|
$
|
128
|
|
Amounts paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Non-cash financing transaction
|
|
$
|
2,212
|
|
|
$
|
-
|
|
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 share data) (unaudited)
|
|
|
Common
Shares
Outstanding
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Deficit
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, July 1, 2015
|
|
|
156,420,334
|
|
|
$
|
47,617
|
|
|
$
|
7,250
|
|
|
$
|
(48,814
|
)
|
|
$
|
(1,042
|
)
|
|
$
|
5,011
|
|
Exercise of warrants
|
|
|
12,549,309
|
|
|
|
5,838
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,838
|
|
Exercise of options
|
|
|
1,415,000
|
|
|
|
405
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
405
|
|
Fair value of broker warrants granted
|
|
|
-
|
|
|
|
-
|
|
|
|
15
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15
|
|
Fair value of Lind Warrants granted
|
|
|
-
|
|
|
|
-
|
|
|
|
620
|
|
|
|
-
|
|
|
|
-
|
|
|
|
620
|
|
Private placement - January 2016
|
|
|
9,074,835
|
|
|
|
3,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,750
|
|
Debt conversions
|
|
|
1,008,512
|
|
|
|
638
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
638
|
|
Share issuance costs
|
|
|
-
|
|
|
|
(151
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(151
|
)
|
Fair value of stock options exercised
|
|
|
-
|
|
|
|
304
|
|
|
|
(304
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
1,049
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,049
|
|
Reporting currency presentation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
427
|
|
|
|
427
|
|
Loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,408
|
)
|
|
|
-
|
|
|
|
(11,408
|
)
|
Balance, June 30, 2016
|
|
|
180,467,990
|
|
|
$
|
58,401
|
|
|
$
|
8,630
|
|
|
$
|
(60,222
|
)
|
|
$
|
(615
|
)
|
|
$
|
6,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of warrants
|
|
|
3,447,137
|
|
|
|
1,675
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,675
|
|
Exercise of options
|
|
|
150,000
|
|
|
|
70
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
70
|
|
Fair value of broker warrants granted
|
|
|
-
|
|
|
|
-
|
|
|
|
20
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20
|
|
Fair value of Lind warrants granted
|
|
|
-
|
|
|
|
-
|
|
|
|
233
|
|
|
|
-
|
|
|
|
-
|
|
|
|
233
|
|
Private placements - February 2017
|
|
|
7,364,789
|
|
|
|
3,927
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,927
|
|
Debt conversions
|
|
|
3,999,045
|
|
|
|
2,212
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,212
|
|
Share issuance costs
|
|
|
-
|
|
|
|
(180
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(180
|
)
|
Fair value of stock options exercised
|
|
|
-
|
|
|
|
34
|
|
|
|
(34
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
862
|
|
|
|
-
|
|
|
|
-
|
|
|
|
862
|
|
Reporting currency presentation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
140
|
|
|
|
140
|
|
Loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,931
|
)
|
|
|
-
|
|
|
|
(10,931
|
)
|
Balance, March 31, 2017
|
|
|
195,428,961
|
|
|
$
|
66,139
|
|
|
$
|
9,711
|
|
|
$
|
(71,153
|
)
|
|
$
|
(475
|
)
|
|
$
|
4,222
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements
NioCorp Developments Ltd.
|
Notes to the Condensed Consolidated Financial Statements
|
March 31, 2017
|
(expressed in thousands of U.S. dollars, unless otherwise stated) (unaudited)
|
|
1.
|
DESCRIPTION OF BUSINESS
|
NioCorp Developments Ltd. (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 interim 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 consolidated interim financial statements are those used by the Company as set out in the audited consolidated financial
statements for the year ended June 30, 2016.
In the opinion of Management,
all adjustments considered necessary (including reclassifications and normal recurring adjustments) to present fairly the financial
position, results of operations and cash flows at March 31, 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 such 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, 2016. The interim results are not necessarily indicative of results for the full year ending
June 30, 2017, or future operating periods.
|
b)
|
Recent Accounting Standards
|
In May 2014, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with
Customers ("ASU 2014-09"). ASU 2014-09 supersedes the revenue recognition requirements of FASB Accounting Standards Codification
("ASC") Topic 605, Revenue Recognition, and most industry-specific guidance. ASU 2014-09 requires entities to recognize
revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled to in exchange for those goods or services. This ASU provides alternative methods of
retrospective adoption and is effective for fiscal years, and interim periods within those years, beginning after December 15,
2017. Early adoption would be permitted but not before annual periods beginning after December 15, 2016. The Company is currently
assessing the potential impact of adopting this ASU on its consolidated financial statements and related disclosures.
In August 2014, the FASB issued
ASU 2014-15, Presentation of Financial Statements – Going Concern. The new standard requires management of public and private
companies to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern and, if
so, to disclose that fact. Management will also be required to evaluate and disclose whether its plans alleviate that doubt. The
new standard is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning
after December 15, 2016. The Company adopted this standard during the three-month period ended December 31, 2016, and the adoption
of this standard had no material impacts on our financial statements.
NioCorp Developments Ltd.
|
Notes to the Condensed Consolidated Financial Statements
|
March 31, 2017
|
(expressed in thousands of U.S. dollars, unless otherwise stated) (unaudited)
|
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 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.
In November 2016, the FASB issued
ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash. The standard provides guidance on the presentation of restricted
cash and restricted cash equivalents in the statement of cash flows. Restricted cash and restricted cash equivalents should now
be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the statements
of cash flows. The amendments of this ASU are effective for reporting periods beginning after December 15, 2017, with early adoption
permitted. Other than the revised statement of cash flows presentation of restricted cash (if any), the adoption of this new guidance
is not expected to have an impact on our 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 $10,931
for the nine months ended March 31, 2017 (2016 - $8,053), and has an accumulated deficit of $71,153 as of March 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 Project feasibility study. Under the terms of the
escrow agreement, the balance of $265 will be drawn against outstanding accounts payable once certain project milestones are met.
NioCorp Developments Ltd.
|
Notes to the Condensed Consolidated Financial Statements
|
March 31, 2017
|
(expressed in thousands of U.S. dollars, unless otherwise stated) (unaudited)
|
|
|
As of
|
|
|
|
March 31,
2017
|
|
|
June 30,
2016
|
|
Convertible Security
|
|
$
|
4,943
|
|
|
$
|
5,991
|
|
Convertible Notes
|
|
|
559
|
|
|
|
475
|
|
|
|
$
|
5,502
|
|
|
$
|
6,466
|
|
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, 2016
|
|
$
|
5,991
|
|
Additional debt drawdown
|
|
|
1,000
|
|
Conversions, at fair value
|
|
|
(2,212
|
)
|
Change in fair market value
|
|
|
164
|
|
Balance, March 31, 2017
|
|
$
|
4,943
|
|
Further to the terms of the Convertible
Security, upon satisfaction of certain conditions, including but not limited to a minimum draw down amount by Lind under the Convertible
Security, a minimum market capitalization for the Company, and a minimum amount of cash on the Company’s balance sheet, the
Company had the right to call an additional $1,000 under the Convertible Security (a “First Tranche Increase”). On
February 14, 2017, upon satisfaction of the conditions for the First Tranche Increase, the Company provided notice to Lind to demand
the advancement of an additional $1,000 in funding under the Convertible Security pursuant to its right to call. This amount was
funded by Lind on March 31, 2017, resulting in an increase in the face amount of the Convertible Security increased by $1,200 ($1,000
in funding and $200 in implied interest). The maturity date of the First Tranche increase is March 31, 2019. Consistent with the
accounting method utilized for the original Convertible Security drawdowns, the First Tranche Increase has been accounted for at
fair value.
In connection with the First Tranche Increase
closing, the Company issued Lind 890,670 common share purchase warrants of the Company (the “First Tranche Warrants”).
The First Tranche Warrants have a term of 36 months from issuance, and an exercise price $C0.90. The fair value of the First Tranche
Warrants was estimated based on the Black Scholes pricing model using a risk-free interest rate of 1.30%, an expected dividend
yield of 0%, a volatility of 81%, and an expected life of 3.0 years. The Company recognized $234 in change in financial instrument
fair value in the consolidated statement of operations related to fair value of the First Tranche Warrants at closing.
On March 20, 2017, the Company and Lind
entered into an amendment to extend the term of the Convertible Security from 24 months to 30 months, such that the due date has
been extended to June 17, 2018.
The Convertible Security is convertible
into Common Shares of the Company at a conversion price equal to 85% of the volume weighted average trading price of the Common
Shares (in Canadian dollars) on the TSX for the five consecutive trading days immediately prior to the date on which the Lind provides
the Company with notice of its intention to convert an amount of the Convertible Security from time to time. During the nine-month
period ended March 31, 2017, $1,850 face value of the Convertible Security was converted into 3,999,045 Common Shares.
The Convertible Security contains financial
and non-financial covenants customary for a facility of this 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 as of March 31, 2017.
NioCorp Developments Ltd.
|
Notes to the Condensed Consolidated Financial Statements
|
March 31, 2017
|
(expressed in thousands of U.S. dollars, unless otherwise stated) (unaudited)
|
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, 2016
|
|
$
|
475
|
|
Accreted interest, net of interest paid
|
|
|
84
|
|
Balance, March 31, 2017
|
|
$
|
559
|
|
The changes in the derivative liability
related to the conversion feature are as follows:
|
|
Derivative Liability
|
|
Balance, June 30, 2016
|
|
$
|
330
|
|
Change in fair value of derivative liability
|
|
|
(215
|
)
|
Balance, March 31, 2017
|
|
$
|
115
|
|
On February 14, 2017, the Company
completed the first tranche closing (the "First Tranche Closing") of a non-brokered private placement of units (each
a “Unit”) announced January 27, January 30, February 7, and February 10, 2017 (the “February 2017 Offering”).
The First Tranche Closing consisted of the issuance of 3,860,800 Units at a price of C$0.70 per Unit, for gross proceeds of C$2.7
million. Each Unit consists of one Common Share and one transferable Common Share purchase warrant (each whole such warrant a "Warrant"),
with each Warrant entitling the holder thereof to acquire one additional Common Share at a price of C$0.85 for a period of 36 months
from their date of issuance.
On February 28, 2017, the Company
completed the second and final tranche closing (the "Final Closing") of the February 2017 Offering. The Final Closing
consisted of the issuance of 3,503,989 units including 2,964,682 units dated February 21, 2017, and 539,307 units dated February
28, 2017 (collectively, the “Final Closing Units”), at a price of C$0.70 per Unit, for gross aggregate proceeds of
C$2.5 million. Each Final Closing Unit consists of one Common Share and one transferable Common Share purchase warrant (a "Warrant"),
with each Warrant entitling the holder thereof to acquire one additional Common Share at a price of C$0.85 for a period of three
years from Unit issuance. The Company paid cash commissions of C$88 and issued 78,342 broker warrants (having the same terms as
the Warrants) in connection with the Final Closing to brokers outside of the United States. The broker warrants were valued at
C$26 using a risk-free rate of 0.75%, expected volatility of 81.27% and expected life of three years.
The Company has a rolling stock
option plan (the “Plan”) whereby the Company may grant stock options to executive officers and directors, employees,
and consultants at an exercise price to be determined by the board of directors, provided the exercise price is not lower than
the greater of (i) the last closing price of the Company’s common shares on the TSX and (ii) the volume weighted average
closing price of the Company’s common shares on the TSX for the five days immediately prior to the date of grant. The Plan
provides for the issuance of up to 10% of the Company’s issued Common Shares as at the date of grant with each stock option
having a maximum term of ten years. The board of directors has the exclusive power over the granting of options and their vesting
provisions.
NioCorp Developments Ltd.
|
Notes to the Condensed Consolidated Financial Statements
|
March 31, 2017
|
(expressed in thousands of U.S. dollars, unless otherwise stated) (unaudited)
|
Stock option transactions are
summarized as follows:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise Price
(C$)
|
|
Balance, June 30, 2016
|
|
|
11,465,000
|
|
|
$
|
0.69
|
|
Granted
|
|
|
6,360,000
|
|
|
|
0.78
|
|
Exercised
|
|
|
(150,000
|
)
|
|
|
0.62
|
|
Cancelled/expired
|
|
|
(650,000
|
)
|
|
|
0.76
|
|
Balance, March 31, 2017
|
|
|
17,025,000
|
|
|
$
|
0.72
|
|
The following table summarizes
the information and assumptions used to determine option costs for the nine-month period ended March 31, 2017:
Fair value per option granted during the period (C$)
|
|
$
|
0.42
|
|
Risk-free interest rate
|
|
|
0.75
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
Expected stock price volatility (historical basis)
|
|
|
92.93
|
%
|
Expected option life in years
|
|
|
2.15
|
|
The following table summarizes
information about stock options outstanding at March 31, 2017:
Exercise
price (C$)
|
|
|
Expiry date
|
|
Number
outstanding
|
|
|
Aggregate
Intrinsic Value
(C$000s)
|
|
|
Number
exercisable
|
|
|
Aggregate
Intrinsic Value
(C$000s)
|
|
$
|
0.50
|
|
|
May 9, 2017
|
|
|
370,000
|
|
|
$
|
89
|
|
|
|
370,000
|
|
|
$
|
89
|
|
$
|
0.62
|
|
|
January 19, 2021
|
|
|
5,275,000
|
|
|
|
633
|
|
|
|
3,956,250
|
|
|
|
475
|
|
$
|
0.65
|
|
|
May 20, 2017
|
|
|
50,000
|
|
|
|
4
|
|
|
|
50,000
|
|
|
|
4
|
|
$
|
0.65
|
|
|
July 28, 2017
|
|
|
1,250,000
|
|
|
|
113
|
|
|
|
1,250,000
|
|
|
|
113
|
|
$
|
0.76
|
|
|
September 2, 2017
|
|
|
500,000
|
|
|
|
-
|
|
|
|
500,000
|
|
|
|
-
|
|
$
|
0.76
|
|
|
March 7, 2022
|
|
|
5,650,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
$
|
0.80
|
|
|
December 22, 2017
|
|
|
2,720,000
|
|
|
|
-
|
|
|
|
2,720,000
|
|
|
|
-
|
|
$
|
0.94
|
|
|
April 28, 2018
|
|
|
500,000
|
|
|
|
-
|
|
|
|
500,000
|
|
|
|
-
|
|
$
|
0.96
|
|
|
July 21, 2021
|
|
|
710,000
|
|
|
|
-
|
|
|
|
355,000
|
|
|
|
-
|
|
Balance March 31, 2017
|
|
|
17,025,000
|
|
|
$
|
839
|
|
|
|
9,701,250
|
|
|
$
|
681
|
|
The aggregate intrinsic value
in the preceding table represents the total intrinsic value, based on the Company’s closing stock price of C$0.74 as of March
31, 2017, which would have been received by the option holders had all option holders exercised their options as of that date.
In-the-money options vested and exercisable as of March 31, 2017, totaled 5,626,250.
As March 31, 2017, there was
$1,436 of unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Plan. The
cost is expected to be recognized over a remaining weighted average period of approximately 1.4 years.
NioCorp Developments Ltd.
|
Notes to the Condensed Consolidated Financial Statements
|
March 31, 2017
|
(expressed in thousands of U.S. dollars, unless otherwise stated) (unaudited)
|
Warrant transactions are summarized
as follows:
|
|
Warrants
|
|
|
Weighted average
exercise price (C$)
|
|
Balance June 30, 2016
|
|
|
22,733,685
|
|
|
$
|
0.74
|
|
Granted
|
|
|
8,333,801
|
|
|
|
0.86
|
|
Exercised
|
|
|
(3,447,137
|
)
|
|
|
0.65
|
|
Expired
|
|
|
(7,011,263
|
)
|
|
|
0.79
|
|
Balance, March 31, 2017
|
|
|
20,609,086
|
|
|
$
|
0.79
|
|
As discussed above under Note
6a, the Company granted 7,364,789 warrants and 78,342 broker warrants in conjunction with the February 2017 Offering. In addition,
as discussed above under Note 5, the Company granted 890,670 First Tranche Increase warrants to Lind in connection with the funding
of the First Tranche Increase.
At March 31, 2017, the Company has outstanding
exercisable warrants, as follows:
Number
|
|
|
Exercise
Price (C$)
|
|
|
Expiry Date
|
|
3,125,000
|
|
|
|
0.72
|
|
|
December 22, 2018
|
|
9,150,285
|
|
|
|
0.75
|
|
|
January 19, 2019
|
|
3,860,800
|
|
|
|
0.85
|
|
|
February 14, 2020
|
|
2,964,682
|
|
|
|
0.85
|
|
|
February 21, 2020
|
|
617,649
|
|
|
|
0.85
|
|
|
February 28, 2020
|
|
890,670
|
|
|
|
0.90
|
|
|
March 31, 2020
|
|
20,609,086
|
|
|
|
|
|
|
|
|
7.
|
RELATED PARTY TRANSACTIONS AND BALANCES
|
On January 16, 2017, the Company
entered into a non-revolving credit facility agreement (the “Credit Facility”) in the amount of $2,000 with Mark Smith,
Chief Executive Officer and Executive Chairman of NioCorp. 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 a general security agreement between the Company and Mr. Smith dated June 17, 2015. The
Credit Facility contains financial and non-financial covenants customary for a facility of this size and nature. On January 18,
2017, the Company completed a drawdown from the Credit Facility in the amount of $175.
The Company has an additional
loan with Mr. Smith (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, 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.
On March 20, 2017, the due dates
on the Smith Credit Facility and the Original Smith Loan were extended to June 16, 2018 and June 17, 2018, respectively.
As of March 31, 2017, accounts
payable and accrued liabilities included interest payable to Mr. Smith of $107.
NioCorp Developments Ltd.
|
Notes to the Condensed Consolidated Financial Statements
|
March 31, 2017
|
(expressed in thousands of U.S. dollars, unless otherwise stated) (unaudited)
|
|
8.
|
Exploration Expenditures
|
|
|
For the three months
ended March 31,
|
|
|
For the nine months
ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Technical studies and engineering
|
|
$
|
1,994
|
|
|
$
|
215
|
|
|
$
|
3,982
|
|
|
$
|
1,878
|
|
Field management and other
|
|
|
371
|
|
|
|
275
|
|
|
|
1,004
|
|
|
|
668
|
|
Drilling
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
197
|
|
Metallurgical development
|
|
|
366
|
|
|
|
68
|
|
|
|
2,057
|
|
|
|
178
|
|
Geologists and field staff
|
|
|
30
|
|
|
|
8
|
|
|
|
85
|
|
|
|
41
|
|
Total
|
|
$
|
2,761
|
|
|
$
|
566
|
|
|
$
|
7,128
|
|
|
$
|
2,962
|
|
|
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 table presents information
about the assets and liabilities that are measured at fair value on a recurring basis as at March 31, 2017 and June 30, 2016, 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 included situations where
there is little, if any, market activity for the instrument:
|
|
As of March 31, 2017
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,852
|
|
|
$
|
1,852
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Available for sale securities
|
|
|
26
|
|
|
|
26
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
1,878
|
|
|
$
|
1,878
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
$
|
4,943
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,943
|
|
Derivative liability, convertible debt
|
|
|
115
|
|
|
|
-
|
|
|
|
-
|
|
|
|
115
|
|
Total
|
|
$
|
5,058
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,058
|
|
NioCorp Developments Ltd.
|
Notes to the Condensed Consolidated Financial Statements
|
March 31, 2017
|
(expressed in thousands of U.S. dollars, unless otherwise stated) (unaudited)
|
|
|
As of June 30, 2016
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,412
|
|
|
$
|
4,412
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Available for sale securities
|
|
|
32
|
|
|
|
32
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
4,444
|
|
|
$
|
4,444
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
$
|
5,991
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,991
|
|
Derivative liability, convertible debt
|
|
|
330
|
|
|
|
-
|
|
|
|
-
|
|
|
|
330
|
|
Total
|
|
$
|
6,321
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,321
|
|
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 are prepared by
a third party and 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, 2016
|
|
$
|
6,321
|
|
Additional debt drawdown
|
|
|
1,000
|
|
Conversions to equity
|
|
|
(2,212
|
)
|
Realized and unrealized losses
|
|
|
(51
|
)
|
Balance, March 31, 2017
|
|
$
|
5,058
|
|
10. SUBSEQUENT EVENT
On May 10, 2017, the Company announced that it had entered into an agreement, subject to regulatory approval,
with Mackie Research Capital Corporation (“Mackie”), which agreement was subsequently amended on May 12, 2017.
Pursuant to the amended agreement, Mackie has agreed to purchase, on a bought deal short form prospectus basis, 3,077,000
units of the Company (the “May 2017 Units”) at a price of C$0.65 per May 2017 Unit for gross proceeds to the Company
of up to C$2,000,050 (the “May 2017 Offering”), subject to an option to increase the size of the May 2017 Offering
by up to 15% in May 2017 Units. Each May 2017 Unit will consist of one Common Share and one warrant, with each warrant entitling
the holder to acquire one Common Share at a price of C$0.85 at any time prior to the date which is three years following completion
of the May 2017 Offering. Proceeds of the May 2017 Offering will be used for general working capital 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 at and for the three and
nine months ended March 31, 2017 and the related notes thereto, which have been prepared in accordance with generally accepted
accounting principles in the United States (“U.S. 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 section heading “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 and Section 21E of the United States Exchange Act of 1934, as amended, 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 our history of losses;
|
|
·
|
risks related to cost increases for our exploration and, if warranted, development projects;
|
|
·
|
risks related to our properties being in the exploration stage;
|
|
·
|
risks related to mineral exploration and production activities;
|
|
·
|
risks related to our lack of mineral production from our properties;
|
|
·
|
risks related to estimates of mineral resources;
|
|
·
|
risks related to changes in mineral resource estimates;
|
|
·
|
risks related to differences in United States and Canadian reserve and resource reporting;
|
|
·
|
risks related to our exploration activities being unsuccessful;
|
|
·
|
risks related to our ability to obtain permits and licenses for production;
|
|
·
|
risks related to government and environmental regulations that may increase our costs of doing
business or restrict our operations;
|
|
·
|
risks related to proposed legislation that may significantly affect the mining industry;
|
|
·
|
risks related to land reclamation requirements;
|
|
·
|
risks related to competition in the mining industry;
|
|
·
|
risks related to equipment and supply shortages;
|
|
·
|
risks related to current and future joint ventures and partnerships;
|
|
·
|
risks related to our ability to attract qualified management;
|
|
·
|
risks related to the ability to enforce judgment against certain of our Directors;
|
|
·
|
risks related to currency fluctuations;
|
|
·
|
risks related to claims on the title to our properties;
|
|
·
|
risks related to surface access on our properties;
|
|
·
|
risks related to potential future litigation;
|
|
·
|
risks related to our lack of insurance covering all our operations;
|
|
·
|
risks related to our status as a “passive foreign investment company” under US federal
tax code;
|
|
·
|
risks related to the Common Shares, including price volatility, lack of dividend payments, dilution,
and penny stock rules; and
|
|
·
|
risks related to our debt.
|
Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially
from those described herein. This list is not exhaustive of the factors that may affect any of the Company’s forward-looking
statements. Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of
the Company or other future events or conditions may differ materially from those reflected in the forward-looking statements due
to a variety of risks, uncertainties, and other factors, including without limitation those discussed under the heading “Risk
Factors” of our Registration Statement on Form S-1, as filed with the SEC on April 12, 2017, which are incorporated herein
by reference, as well as other factors described elsewhere in this report and the Company’s other reports filed with the
SEC.
The Company’s forward-looking
statements contained in this Quarterly Report on Form 10-Q are based on the beliefs, expectations, and opinions of Management as
of the date of this report. The Company does not assume any obligation to update forward-looking statements if circumstances or
Management’s beliefs, expectations, or opinions should change, except as required by law. For the reasons set forth above,
investors should not attribute undue certainty to or place undue reliance on forward-looking statements.
Company Overview
NioCorp is developing the Elk Creek Project,
located in southeast Nebraska. The Elk Creek Project is an advanced Niobium/Scandium/Titanium exploration project. Niobium is used
to produce High-Strength, Low-Alloy (“HSLA”) steel, a stronger steel used in automotive, structural, and pipeline applications
that is lighter than carbon steel with the same strength. Scandium can be combined with Aluminum and other metals 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 advanced method of generating electricity with fewer emissions than conventional methods. Titanium
is a key component of pigments used in paper, paint, and plastics, and also is a component of high-performance metal alloys used
for aerospace applications, armor, and medical implants.
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 and complete a feasibility study for the Elk Creek Project (the “Feasibility Study”). Subject to delivering
a positive Feasibility Study, we intend to secure the project financing necessary to complete the development, construction, commissioning,
and start-up of commercial 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, 2016, 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. 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 the first sale of common equity securities 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 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 Securities Exchange Act of 1934. Such sections
are provided below:
|
·
|
Section 404(b) of the Sarbanes-Oxley Act of 2002 requires a public
company’s auditor to attest to, and report on, Management's assessment of its internal controls.
|
|
·
|
Sections 14A(a) and (b) of the Securities and Exchange Act, implemented
by Section 951 of the Dodd-Frank Act, require companies to hold shareholder advisory votes on executive compensation and golden
parachute compensation.
|
As long as we qualify as an emerging growth
company, we will not be required to comply with the requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section
14A (a) and (b) of the Securities Exchange Act of 1934.
Recent Corporate Events
|
·
|
On January 16, 2017, we entered into a
non-revolving credit facility agreement (the “Credit Facility”) in the amount of $2.0 million with Mark Smith. The
Credit Facility bears an interest rate of 10% and is drawdowns are subject to a 2.5% establishment fee. Amounts outstanding under
the Credit Facility will become due January 16, 2018, and are secured by all of the Company’s assets pursuant to a general
security agreement between the Company and Mr. Smith dated June 17, 2015. The Credit Facility contains financial and non-financial
covenants customary for a facility of this size and nature. On January 18, 2017, we completed a drawdown from the Credit Facility
in the amount of $175.
|
|
·
|
On January 27, 2017, we announced a non-brokered
private placement (the “February 2017 Offering”) of up to 2,857,143 units of the Company (each a “Unit”)
at a price of C$0.70 per Unit. Subsequently, the maximum February 2017 Offering was increased to 7,364,789 Units. Each Unit consists
of one Common Share and one transferable Common Share purchase warrant (each whole such warrant a "Warrant"), with each
Warrant entitling the holder thereof to acquire one additional Common Share at a price of C$0.85 for a period of 36 months from
their date of issuance.
|
|
·
|
On February 1, 2017, the Company issued
617,971 common shares of the Company to Lind upon conversion of US$275 in principal amount of the Company’s outstanding convertible
note issued in December of 2015 at a conversion price of C$0.76641 per share.
|
|
·
|
On February 6, 2017, the Company issued
1,698,072 common shares of the Company to Lind Asset Management IV, LLC upon conversion of US$750 in principal amount of the Company’s
outstanding convertible note issued in December of 2015 at a conversion price of C$0.76426 per share.
|
|
·
|
On February 14, 2017, the Company completed
the first tranche closing (the "First Tranche Closing") of the February 2017 Offering. The First Tranche Closing consisted
of the issuance of 3,860,800 Units at a price of C$0.70 per Unit, for gross proceeds of C$2.7 million.
|
|
·
|
On February 21, 2017, we announced that,
further to our existing Lind Agreement, the Company had provided Lind with its demand, pursuant to which the Company called an
additional $1.0 million in funds from Lind under the Lind Agreement (the “First Tranche Increase”). NioCorp was entitled
to demand the First Tranche Increase pursuant to the terms of the Lind Agreement. The First Tranche Increase funds were required
to be delivered by Lind to the Company on or before March 30, 2017, will have a term of two years and bear prepaid interest at
a rate of 10% per annum. In connection with the First Tranche Increase, the Company is obligated to issue Lind warrants of the
Company at the time of funding of the First Tranche Increase (the “First Tranche Increase Warrants”). The First Tranche
Increase Warrants will have a term of 36 months from issuance, and the number of First Tranche Warrants to be issued will be equal
to $1.0 million divided by the VWAP for the five (5) consecutive trading days immediately before the First Tranche Increase funding
is received, multiplied by 0.5. The exercise price of the First Tranche Increase Warrants issuable in connection with the First
Tranche Increase will be equal to 120% of the Company’s five (5) trading day VWAP per share immediately prior to the date
the First Tranche Increase funding is received.
|
|
·
|
On February 28, 2017, the Company completed
the second and final tranche closing (the "Final Closing") of the February 2017 Offering. The Final Closing consisted
of the issuance of 3,503,989 Units including 2,964,682 Units dated February 21, 2017, and 539,307 Units dated February 28, 2017,
at a price of C$0.70 per Unit, for gross aggregate proceeds of C$2.5 million.
|
|
·
|
On March 24, 2017, we announced that we
had entered into an amending agreement dated March 20, 2017, with Lind to extend the term of the Initial Convertible Security by
six months to June 17, 2018, and entered into amending agreements dated March 20, 2017, with Mark Smith to extend the due dates
of the Smith Credit Agreement and Original Smith Loan to June 16, 2018 and June 17, 2018, respectively.
|
|
·
|
On
March 31, 2017, we received $1.0 million in First Tranche Increase funding from Lind.
In connection with this additional funding, the Company issued 890,670 Lind first Tranche
Increase Warrants, at an exercise price of C$0.90 per warrant.
|
|
·
|
On May 10, 2017, the Company announced that it had entered into an agreement, subject to regulatory approval, with Mackie
Research Capital Corporation (“Mackie”), which agreement was subsequently amended on May 12, 2017. Pursuant to
the amended agreement, Mackie has agreed to purchase, on a bought deal short form prospectus basis, 3,077,000 units of the
Company (the “May 2017 Units”) at a price of C$0.65 per May 2017 Unit for gross proceeds to the Company of up
to C$2,000,050 (the “May 2017 Offering”), subject to an option to increase the size of the May 2017 Offering by
up to 15% in May 2017 Units. Each May 2017 Unit will consist of one Common Share and one warrant, with each warrant entitling
the holder to acquire one Common Share at a price of C$0.85 at any time prior to the date which is three years following completion
of the May 2017 Offering. Proceeds of the May 2017 Offering will be used for general working capital purposes.
|
Elk Creek Project Update
|
·
|
On January 9, 2017, we announced the successful
conclusion of negotiations with private landowners in the Elk Creek, Nebraska area that will allow the Company to purchase land
needed for the preferred layout of the Elk Creek Project’s proposed underground mine and surface processing facility.
|
|
·
|
On January 18, 2017, we announced the
achievement of two major process breakthroughs as part of final design work for the Feasibility Study. Both advances – one
in the Niobium metallurgical process and one related to regenerating useful materials from process streams previously slated for
disposal – may lead to lower-than-expected capital expenditures (CAPEX) and operating expenses (OPEX) for the sub-systems
involved. Subsequently, on January 24, 2017, we announced that based on these breakthroughs we will eliminate a planned railroad
spur line and supporting infrastructure from the Elk Creek Project. The original railroad spur line would have required constructing
several railroad bridges over the Nemaha River, Elk Creek, and various tributaries, as well as impacting an estimated 2.6 acres
of wetlands and open water, and more than 1,700 feet of various water channels. Final CAPEX estimates will be determined
when all remaining Feasibility Study work is complete.
|
|
·
|
On January 24, 2017, we announced that
recent metallurgical process breakthroughs allowing the recycling of materials previously planned for disposal as part of the Elk
Creek Project should simplify and streamline the Elk Creek Project’s permitting by the United States Army Corps of Engineers
(the “USACE”) because of significantly reduced environmental impacts. The Company’s October 2015 Preliminary
Economic Assessment called for a seven-kilometer railroad spur line, along with supporting rail infrastructure, in order to deliver
approximately 7,000 tonnes per week of reagents needed for separation and purification of the three superalloy metals (Niobium,
Scandium, and Titanium) that NioCorp plans to produce. Metallurgical process advances announced January 18, 2017 will allow The
Elk Creek Project to recycle many of these reagents from material that previously was planned for disposal either in an on-site
tailings storage area or as mine backfill. They also will allow an elimination of the planned railroad spur line and supporting
infrastructure. That, in turn, will reduce the Elk Creek Project’s projected impacts to wetlands and waterways that are subject
to regulation by the USACE.
|
|
·
|
On February 6, 2017, we announced that
new environmental improvements in our Elk Creek Project may allow for a permit under the USACE Nationwide Permit program under
Section 404 of the Clean Water Act, instead of the USACE’s lengthier and more costly Individual Permit process. As a result
of recent engineering and environmental design advances achieved by NioCorp and its consulting team, we believe that the Elk Creek
Project’s estimated impacts on federally regulated wetlands and stream channels have been materially reduced. As a result,
the Elk Creek Project is expected to qualify for a Nationwide Permit rather than an Individual Permit under Section 404 of the
Clean Water Act. USACE officials have confirmed to NioCorp that impacts at these relatively low levels generally qualify a project
for the Nationwide Permit program, although a final determination by the USACE can be made only after a complete permit application
is submitted.
|
|
·
|
On March 27, 2017, we announced that we
successfully produced high-purity 99.9% commercial grade Scandium from the Elk Creek Project resource. In addition, we announced
the finalization of plans for the proposed Scandium purification circuit to be used at Elk Creek Project.
|
|
·
|
On March 30, 2017, we announced the submission
of a Pre-Construction Notification (“PCN”) permit application to the U.S. Army Corps of Engineers (“USACE”)
for the proposed waterline from the Elk Creek Project to the Missouri River. The PCN covers the outfall structure portion of the
Project’s waterline in the Missouri River. Under current federal law (40CFR330.1 (e)), NioCorp may presume that the PCN qualifies
for the USACE’s Nationwide Permit 12 (Utility Line Activities) unless it is notified by the USACE within 45 calendar days.
If the USACE notifies NioCorp that the notification is incomplete, one additional 45-day period commences upon receipt of the revised
notification.
|
|
·
|
On April 10, 2017, we announced that we
had reached agreement with private landowners on the final land parcel needed prior to completion of a feasibility study for our
Elk Creek Project. The perpetual easement between NioCorp and the landowners is for a land parcel at the terminus of the Company’s
proposed waterline to the Missouri River from its Elk Creek property. The easement facilitates the shortest route for the waterline
between the property and the Missouri River, which helps to cut costs, reduce the Elk Creek Project’s environmental footprint,
and furthers the Company’s goal of minimizing impacts to federally regulated wetlands and stream channels.
|
We continued to advance Feasibility Study
and other Elk Creek Project-related work during the quarter. This included advancing the final confirmatory metallurgical test
programs at third party labs to firm up the basis of design for the surface production plant, as well as advancing characterization
studies for the various products that the surface production plant would produce. In parallel with this work, the Company has completed
equipment sizing, layout and engineering design sufficient to support a Feasibility Study level cost estimate for the project.
With the completion of the work efforts
noted above, we are now engaged in wrapping up the final components of the Feasibility Study and expect to publicly release our
FS results by June 30, 2017. Remaining work elements are currently being worked to completion, and include the following tasks:
|
·
|
Materials Characterization for Impoundment
Design and Mine Backfill Purposes: We are now analyzing and quantifying the physical, geotechnical, environmental, and geochemical
properties of our plant tailings and evaluating their engineering properties for use as a backfill material in the mine. Testing
required in this process involves the curing of a range of mixtures of the tailings with cement and or backfill that can take up
to 28 days. The properties determined during these test programs will drive the capital and operating costs of the backfill system
and the surface impoundment.
|
|
·
|
Feasibility Study-Level Hydrometallurgical
Engineering Design: We have now locked down hydrometallurgical process and are working to complete the Feasibility Study level
process engineering, layout, and cost estimating for the hydrometallurgical plant (where we separate and purify Scandium, Titanium
and Niobium). We have already completed this work for the pyrometallurgical plant, mineral processing plant, wastewater treatment
plant, and supporting infrastructure systems.
|
|
·
|
Cost Estimating: We are securing multiple
vendor cost estimates on major equipment and process systems as design engineering for those systems is advanced. This involves
providing a Feasibility Study-level engineering specification to each vendor in order to get a Feasibility Study-level estimate
for the cost of each major piece of equipment. These quotes are important in estimating costs of construction, a key input to the
Feasibility Study.
|
|
·
|
Updates to Market Studies for Planned
Commercial Products: Given that previously commissioned market studies are more than one year old, we are having these updated.
These updates have been completed as of April 13, 2017.
|
|
·
|
Final CAPEX/OPEX Estimates: Once all design
engineering, cost estimates, and other inputs are finalized, this data is integrated into the Feasibility Study Technical Economic
Model, which will provide project CAPEX, mining rates, production rates, and OPEX. The model is prepared with a targeted CAPEX
and OPEX accuracy of +/-15%. The model will reflect a detailed construction and commissioning schedule for all aspects of the Project.
|
|
·
|
Final Review of Feasibility Study Prior
to Release: A careful review will be conducted of the Feasibility Study documents to ensure consistency across its many elements.
|
Once these remaining steps have been completed,
we will announce the Feasibility Study results and findings, followed by the required filing of the complete Feasibility Study
Technical Report within 45 days of such announcement.
In the eighteen months since the publication
of our PEA, we have spent approximately $11.7 million in exploration related expenditures. The following table compares cost guidance
from the PEA to actual exploration costs incurred.
|
|
|
|
PEA
|
|
|
Actual Expenditures
|
|
Category
|
|
Description
|
|
Guidance
1
|
|
|
FY2016
|
|
|
YTD2017
|
|
|
Totals
|
|
PEA Recommended & Budgeted Work
2
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Feasibility Study and Engineering
|
|
Feasibility study with hydrogeological, geochemistry, and geotechnical work programs
|
|
$
|
6,000
|
|
|
$
|
2,617
|
|
|
$
|
3,952
|
|
|
$
|
6,569
|
|
Metallurgical
|
|
Process feasibility study design and metallurgical testing program including backfill testing
|
|
|
2,400
|
|
|
|
844
|
|
|
|
2,057
|
|
|
|
2,901
|
|
Other
2
|
|
Tailings geotechnical field test work with drilling, logging, cone penetration testing, and in situ and borrow materials laboratory testing in Area 7
|
|
|
160
|
|
|
|
-
|
|
|
|
17
|
|
|
|
17
|
|
|
|
Marketing Studies
|
|
|
200
|
|
|
|
-
|
|
|
|
13
|
|
|
|
13
|
|
Sub Total
|
|
|
|
|
8,760
|
|
|
|
3,461
|
|
|
|
6,039
|
|
|
|
9,500
|
|
Other exploration expenditures
3
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drilling
|
|
|
|
|
-
|
|
|
|
197
|
|
|
|
-
|
|
|
|
197
|
|
Geologists and Field Staff
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
85
|
|
|
|
85
|
|
Field Management and Other
|
|
|
|
|
|
|
|
|
944
|
|
|
|
1,004
|
|
|
|
1,948
|
|
Total
|
|
|
|
$
|
8,760
|
|
|
$
|
4,602
|
|
|
$
|
7,128
|
|
|
$
|
11,730
|
|
1
Anticipated
expenditures required to develop a feasibility study, as outlined in the PEA.
2
Expenditures
included in “Feasibility study and engineering” in financial statements.
3
Expenditures
incurred to advance the overall Elk Creek Project and Feasibility Study.
Substantially all the Feasibility Study
work has now been completed and as of March 31, 2017, we anticipate approximately $0.2 – $0.3 million of work remains, which
is expected to be incurred for final Feasibility Study and engineering wrap up. While we may ultimately exceed the amounts as budgeted
in the PEA by 5-10%, most of this deviation is for additional metallurgical analyses that Management incurred to identified process
breakthroughs with the potential to reduce CAPEX and OPEX, as discussed above.
Financial and Operating Results
The Company continues to expense all expenditures
when incurred, except for equipment, which is capitalized. The Company has no revenues from mining operations. Operating expenses
incurred related primarily to performing exploration activities, as well as the activities necessary to support corporate and shareholder
duties, and are detailed in the following table.
|
|
For the three
months ended
March 31,
|
|
|
For the nine
months ended
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
|
|
$
|
-
|
|
|
$
|
27
|
|
|
$
|
1
|
|
|
$
|
158
|
|
Depreciation
|
|
|
3
|
|
|
|
3
|
|
|
|
7
|
|
|
|
7
|
|
Employee-related costs
|
|
|
578
|
|
|
|
732
|
|
|
|
1,614
|
|
|
|
1,252
|
|
Finance costs
|
|
|
4
|
|
|
|
(38
|
)
|
|
|
4
|
|
|
|
240
|
|
Professional fees
|
|
|
133
|
|
|
|
151
|
|
|
|
745
|
|
|
|
273
|
|
Exploration expenditures
|
|
|
2,761
|
|
|
|
566
|
|
|
|
7,128
|
|
|
|
2,962
|
|
Other operating expenses
|
|
|
596
|
|
|
|
442
|
|
|
|
906
|
|
|
|
933
|
|
Total operating expenses
|
|
|
4,075
|
|
|
|
1,883
|
|
|
|
10,405
|
|
|
|
5,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in financial instrument fair value
|
|
|
524
|
|
|
|
1,132
|
|
|
|
189
|
|
|
|
2,501
|
|
Foreign exchange loss (gain)
|
|
|
(80
|
)
|
|
|
(686
|
)
|
|
|
113
|
|
|
|
(489
|
)
|
Interest expense
|
|
|
78
|
|
|
|
62
|
|
|
|
218
|
|
|
|
203
|
|
Loss (gain) on available for sale securities
|
|
|
12
|
|
|
|
19
|
|
|
|
6
|
|
|
|
13
|
|
Income tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net Loss
|
|
$
|
4,609
|
|
|
$
|
2,410
|
|
|
$
|
10,931
|
|
|
$
|
8,053
|
|
Nine months ended March 31, 2017 compared
to nine months ended March 31, 2016
Significant items affecting operating expenses
are noted below:
Employee related costs
increased
primarily due to increased share-based compensation costs reflecting the timing of option issuances, as well as the number of options
granted and associated fair value calculations, as well as the impact of additional personnel costs to support finance and external
communications activities.
Professional fees
include
legal and accounting services, and increased $0.5 million. This increase reflects costs associated with registration statements
filed with the SEC and ongoing compliance efforts. The Company expects that professional fees through the remainder of the fiscal
year will return to historical levels as the Company has completed the transition to being a reporting issuer with the SEC.
Exploration expenditures
increased $4.2 million, reflecting the timing of expenditures at the Elk Creek Project as discussed above under “
Elk
Creek Project Update
.” 2017 expenditures primarily related to engineering and metallurgical bench and pilot plant testwork
in support of our continuing Feasibility Study work, while 2016 costs were primarily directed towards engineering costs in support
of the Preliminary Economic Assessment studies that were completed that year.
Other operating expenses
include investor relations, general office expenditures, stock and proxy expenditures and other miscellaneous costs. The decline
in expenditures was related to financing-related costs incurred in 2016.
Other significant items impacting the change
in the Company’s net loss are noted below
:
Change in financial instrument
fair value
represents non-cash changes in the market value of the Convertible Security, which is carried at fair value, as
well as changes in the market value of the derivative liability component of the Convertible Notes and the fair market value of
warrants issued in connection with the Convertible Security. Overall, the decline in expenses relates to fair value amounts ascribed
to the Convertible Security at original issuance.
Foreign exchange (gain) loss
is primarily due to changes in the United States dollar (“USD”) against the Canadian dollar (“C$”), and
reflects the timing of foreign currency transactions and subsequent changes in exchange rates. The impacts in both periods primarily
relates to the impact of changing foreign currency rates as applied to the USD-denominated convertible debt instruments and related
party debt, which are recorded on the Canadian parent company books.
Three months ended March 31, 2017 compared
to three months ended March 31, 2016
Operating expenses increased $2.2 million
,
reflecting the timing of expenditures at the Elk Creek Project as discussed above under “
Elk Creek Project Update
.”
Other impacts to net loss include declines in both change in financial instrument fair value and foreign exchange gain as discussed
above under “
Nine months ended March 31, 2017 compared to nine months ended March 31, 2016.”
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 placements financings in the future, although we cannot
predict the size or pricing of any such financings. In addition, we can 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
interest(s). This situation is unlikely to change until such time as we can complete work on the Feasibility Study.
As of March 31, 2017, the Company had cash
of $1.9 million and working capital of $0.3 million, compared to cash of $4.4 million and working capital of $2.3 million on June
30, 2016. This change in working capital is the result of our continued work towards completion of the Feasibility Study, and the
timing of financing inflows.
We expect that the Company will operate
at a loss for the foreseeable future. The Company’s current planned operational needs are approximately $1.6 million until
June 30, 2017. In addition to outstanding accounts payable, our ongoing burn rate averages to approximately $400 per month where
approximately $320 is for administrative purposes and approximately $84 is for planned exploration expenditures related to the
completion of the Feasibility Study, permitting efforts, and third party consultants until June 30, 2017. The Company’s ability
to continue operations and fund our current work plan is dependent on Management’s ability to secure additional financing.
The Company anticipates that it may need
to raise $5 million to $6 million to continue planned operations focused on financing the Elk Creek Resources Project after the
completion of the Feasibility Study. 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.
Exploration expenditure commitments (for
example, lease payments) are $32 until June 30, 2017 and planned exploration and development activities are approximately $0.2
million until June 30, 2017. 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, 2017, the
Company may require additional financing during 2017. Should such financing not be available in that time-frame, we will be required
to reduce our activities and will not be able to carry out all our presently planned exploration and development activities at
the Elk Creek Project.
We currently have no further funding commitments
or arrangements for additional financing at this time (other than the potential exercise of options and warrants) and there is
no assurance that we will be able to obtain additional financing on acceptable terms, if at all. There is significant uncertainty
that we will be able to secure any additional financing in the current equity markets. The quantity of funds to be raised and the
terms of any proposed equity financing that may be undertaken will be negotiated by Management as opportunities to raise funds
arise. Specific plans related to the use of proceeds will be devised once financing has been completed and Management knows what
funds will be available for these purposes. 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 arms-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, 2016 disclose a “going concern” qualification to our ability to
continue in business. The accompanying financial statements 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 12 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 its capital, we have, of necessity, been required to accept lower rates of interest, which
has also lowered our potential interest income.
Operating Activities
During the nine months ended March 31,
2017, the Company's operating activities consumed $9.0 million of cash (2016: $9.1 million). The cash used in operating activities
for 2017 reflects the Company's funding of losses of $10.9 million offset by minor non-cash adjustments and changes in working
capital items. Overall, 2017 operational outflows remained steady with 2016. 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 $6.8 million in 2017 as compared to $10.2
million in 2016, reflecting the timing of convertible debt instrument and private placement issuances 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 Company's 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 Company’s
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 financing(s).
Contractual Obligations
Other than as described below, there have
been no material changes to our contractual obligations
discussed in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Tabular Disclosure of
Contractual Obligations”
as of June 30, 2016, in our registration statement on Form S-1 (333-213451) filed on September
2, 2016, as amended September 22, 2016, which discussion is incorporated herein by reference. During the nine-month period ended
March 31, 2017, debt obligations decreased $0.5 million due to conversions under the Lind Agreement, partially offset by funds
received from the Lind First Tranche Increase and the Smith Credit Facility. There were no other substantial changes to contractual
obligations.
Off Balance Sheet Arrangements
The Company has no off balance sheet arrangements.
Critical Accounting Policies
There have been no material changes in
our critical accounting policies
discussed in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Critical Accounting Policies”
as of June 30, 2016, in our registration statement on Form S-1 (333-213451) filed on September 2, 2016, as amended September 22,
2016 and incorporated herein by reference.