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
|
|
|
December
31, 2020
|
|
|
June
30,
2020
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
$
|
133
|
|
|
$
|
307
|
|
Prepaid
expenses and other
|
|
|
|
|
|
|
51
|
|
|
|
31
|
|
Total
current assets
|
|
|
|
|
|
|
184
|
|
|
|
338
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
35
|
|
|
|
35
|
|
Investment
in equity securities
|
|
|
|
|
|
|
9
|
|
|
|
7
|
|
Right
of use assets
|
|
|
10
|
|
|
|
221
|
|
|
|
—
|
|
Mineral
interests
|
|
|
|
|
|
|
10,617
|
|
|
|
10,617
|
|
Total
assets
|
|
|
|
|
|
$
|
11,066
|
|
|
$
|
10,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
|
4
|
|
|
$
|
1,408
|
|
|
$
|
3,065
|
|
Related
party loan
|
|
|
8
|
|
|
|
3,818
|
|
|
|
3,818
|
|
Convertible
debt
|
|
|
5
|
|
|
|
2,075
|
|
|
|
838
|
|
Notes
payable, current portion
|
|
|
6
|
|
|
|
212
|
|
|
|
258
|
|
Operating
lease liability
|
|
|
10
|
|
|
|
80
|
|
|
|
—
|
|
Derivative
liability, convertible debt
|
|
|
5
|
|
|
|
62
|
|
|
|
33
|
|
Total
current liabilities
|
|
|
|
|
|
|
7,655
|
|
|
|
8,012
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
payable, net of current portion
|
|
|
6
|
|
|
|
137
|
|
|
|
344
|
|
Operating
lease liability
|
|
|
10
|
|
|
|
153
|
|
|
|
—
|
|
Total
liabilities
|
|
|
|
|
|
|
7,945
|
|
|
|
8,356
|
|
SHAREHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, unlimited shares authorized; shares outstanding: 240,110,267 at December 31, 2020 and 235,925,684 at June 30,
2020
|
|
|
7
|
|
|
|
86,839
|
|
|
|
84,476
|
|
Additional
paid-in capital
|
|
|
|
|
|
|
13,844
|
|
|
|
13,206
|
|
Accumulated
deficit
|
|
|
|
|
|
|
(96,820
|
)
|
|
|
(94,686
|
)
|
Accumulated
other comprehensive loss
|
|
|
|
|
|
|
(742
|
)
|
|
|
(355
|
)
|
Total
shareholder equity
|
|
|
|
|
|
|
3,121
|
|
|
|
2,641
|
|
Total
liabilities and equity
|
|
|
|
|
|
$
|
11,066
|
|
|
$
|
10,997
|
|
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
December 31,
|
|
|
For the
six months ended
December 31,
|
|
|
|
Note
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
related costs
|
|
|
|
|
|
$
|
686
|
|
|
$
|
345
|
|
|
$
|
1,005
|
|
|
$
|
699
|
|
Professional
fees
|
|
|
|
|
|
|
85
|
|
|
|
67
|
|
|
|
193
|
|
|
|
185
|
|
Exploration
expenditures
|
|
|
9
|
|
|
|
189
|
|
|
|
454
|
|
|
|
414
|
|
|
|
677
|
|
Other
operating expenses
|
|
|
|
|
|
|
253
|
|
|
|
135
|
|
|
|
664
|
|
|
|
332
|
|
Total
operating expenses
|
|
|
|
|
|
|
1,213
|
|
|
|
1,001
|
|
|
|
2,276
|
|
|
|
1,893
|
|
Other
income
|
|
|
6
|
|
|
|
(186
|
)
|
|
|
—
|
|
|
|
(186
|
)
|
|
|
—
|
|
Loss
on debt extinguishment
|
|
|
5
|
|
|
|
163
|
|
|
|
—
|
|
|
|
163
|
|
|
|
—
|
|
Change
in financial instrument fair value
|
|
|
5
|
|
|
|
62
|
|
|
|
81
|
|
|
|
28
|
|
|
|
88
|
|
Foreign
exchange gain
|
|
|
|
|
|
|
(302
|
)
|
|
|
(79
|
)
|
|
|
(403
|
)
|
|
|
(36
|
)
|
Interest
expense
|
|
|
|
|
|
|
131
|
|
|
|
73
|
|
|
|
258
|
|
|
|
133
|
|
Other
(Gain) loss on equity securities
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
3
|
|
Loss
before income taxes
|
|
|
|
|
|
|
1,081
|
|
|
|
1,076
|
|
|
|
2,134
|
|
|
|
2,081
|
|
Income
tax benefit
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net
loss
|
|
|
3
|
|
|
$
|
1,081
|
|
|
$
|
1,076
|
|
|
$
|
2,134
|
|
|
$
|
2,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
$
|
1,081
|
|
|
$
|
1,076
|
|
|
$
|
2,134
|
|
|
$
|
2,081
|
|
Other
comprehensive loss (gain):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting
currency translation
|
|
|
|
|
|
|
257
|
|
|
|
231
|
|
|
|
387
|
|
|
|
43
|
|
Total
comprehensive loss
|
|
|
|
|
|
$
|
1,338
|
|
|
$
|
1,307
|
|
|
$
|
2,521
|
|
|
$
|
2,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share,
basic and diluted
|
|
|
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
239,060,052
|
|
|
|
234,738,616
|
|
|
|
237,965,059
|
|
|
|
234,247,239
|
|
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 six months ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Total loss for the period
|
|
$
|
(2,134
|
)
|
|
$
|
(2,081
|
)
|
Non-cash elements included in net loss:
|
|
|
|
|
|
|
|
|
Change in financial instrument fair value
|
|
|
28
|
|
|
|
88
|
|
Unrealized (gain) loss on equity securities
|
|
|
(2
|
)
|
|
|
3
|
|
Accretion of convertible debt
|
|
|
3
|
|
|
|
—
|
|
Noncash lease expense
|
|
|
11
|
|
|
|
—
|
|
Loss on debt extinguishment
|
|
|
163
|
|
|
|
—
|
|
Gain on debt forgiveness
|
|
|
(186
|
)
|
|
|
—
|
|
Foreign exchange (gain) loss
|
|
|
(319
|
)
|
|
|
(30
|
)
|
Share-based compensation
|
|
|
797
|
|
|
|
117
|
|
|
|
|
(1,639
|
)
|
|
|
(1,903
|
)
|
Change in working capital items:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(17
|
)
|
|
|
63
|
|
Accounts payable and accrued liabilities
|
|
|
(103
|
)
|
|
|
460
|
|
Net cash used in operating activities
|
|
|
(1,759
|
)
|
|
|
(1,380
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from issuance of capital stock
|
|
|
1,636
|
|
|
|
—
|
|
Loan repayments
|
|
|
(67
|
)
|
|
|
—
|
|
Related party debt drawdown
|
|
|
—
|
|
|
|
1,080
|
|
Net cash provided by financing activities
|
|
|
1,569
|
|
|
|
1,080
|
|
Exchange rate effect on cash and cash equivalents
|
|
|
16
|
|
|
|
(1
|
)
|
Change in cash and cash equivalents during period
|
|
|
(174
|
)
|
|
|
(301
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
307
|
|
|
|
357
|
|
Cash and cash equivalent, end of period
|
|
$
|
133
|
|
|
$
|
56
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Amounts paid for interest
|
|
$
|
37
|
|
|
$
|
32
|
|
Amounts paid for income taxes
|
|
|
—
|
|
|
|
—
|
|
Non-cash financing transactions
|
|
|
|
|
|
|
|
|
Lind conversions
|
|
$
|
38
|
|
|
$
|
933
|
|
Nordmin conversions
|
|
|
418
|
|
|
|
—
|
|
Recognition of operating lease liabilities
|
|
|
231
|
|
|
|
—
|
|
Loan amounts forgiven
|
|
|
186
|
|
|
|
—
|
|
Accounts payable to convertible debt conversion
|
|
|
1,693
|
|
|
|
—
|
|
The accompanying
notes are an integral part of these condensed consolidated financial statements.
NioCorp
Developments Ltd.
Condensed
Consolidated Statements of Shareholders’ Equity
(expressed in thousands of
U.S. dollars, except for Common Shares outstanding) (unaudited)
|
|
For the six months ended December 31, 2020 and 2019
|
|
|
|
Common Shares Outstanding
|
|
|
Common Stock
|
|
|
Additional Paid-in Capital
|
|
|
Deficit
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
Total
|
|
Balance, June 30, 2019
|
|
|
232,496,215
|
|
|
$
|
82,939
|
|
|
$
|
13,124
|
|
|
$
|
(90,685
|
)
|
|
$
|
(526
|
)
|
|
$
|
4,852
|
|
Debt conversions
|
|
|
2,343,383
|
|
|
|
933
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
933
|
|
Share-based payments
|
|
|
—
|
|
|
|
—
|
|
|
|
117
|
|
|
|
—
|
|
|
|
—
|
|
|
|
117
|
|
Reporting currency presentation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(43
|
)
|
|
|
(43
|
)
|
Loss for the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,081
|
)
|
|
|
—
|
|
|
|
(2,081
|
)
|
Balance, December 31, 2019
|
|
|
234,839,598
|
|
|
$
|
83,872
|
|
|
$
|
13,241
|
|
|
$
|
(92,766
|
)
|
|
$
|
(569
|
)
|
|
$
|
3,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2020
|
|
|
235,925,684
|
|
|
$
|
84,476
|
|
|
$
|
13,206
|
|
|
$
|
(94,686
|
)
|
|
$
|
(355
|
)
|
|
$
|
2,641
|
|
Exercise of options
|
|
|
438,617
|
|
|
|
244
|
|
|
|
(103
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
141
|
|
Exercise of warrants
|
|
|
2,777,422
|
|
|
|
1,614
|
|
|
|
(119
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
1,495
|
|
Fair value of
warrants granted
|
|
|
—
|
|
|
|
—
|
|
|
|
63
|
|
|
|
—
|
|
|
|
—
|
|
|
|
63
|
|
Debt conversions
|
|
|
968,544
|
|
|
|
506
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
506
|
|
Share issuance costs
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
Share-based payments
|
|
|
—
|
|
|
|
—
|
|
|
|
797
|
|
|
|
—
|
|
|
|
—
|
|
|
|
797
|
|
Reporting currency presentation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(387
|
)
|
|
|
(387
|
)
|
Loss for the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,134
|
)
|
|
|
—
|
|
|
|
(2,134
|
)
|
Balance, December 31, 2020
|
|
|
240,110,267
|
|
|
$
|
86,839
|
|
|
$
|
13,844
|
|
|
$
|
(96,820
|
)
|
|
$
|
(742
|
)
|
|
$
|
3,121
|
|
|
|
For the three months ended December 31, 2020 and 2019
|
|
|
|
Common Shares Outstanding
|
|
|
Common Stock
|
|
|
Additional Paid-in Capital
|
|
|
Deficit
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
Total
|
|
Balance, September 30, 2019
|
|
|
234,293,107
|
|
|
$
|
83,641
|
|
|
$
|
13,050
|
|
|
$
|
(91,690
|
)
|
|
$
|
(338
|
)
|
|
$
|
4,663
|
|
Debt conversions
|
|
|
546,491
|
|
|
|
231
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
231
|
|
Share-based payments
|
|
|
—
|
|
|
|
—
|
|
|
|
191
|
|
|
|
—
|
|
|
|
—
|
|
|
|
191
|
|
Reporting currency presentation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(231
|
)
|
|
|
(231
|
)
|
Loss for the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,076
|
)
|
|
|
—
|
|
|
|
(1,076
|
)
|
Balance, December 31, 2019
|
|
|
234,839,598
|
|
|
$
|
83,872
|
|
|
$
|
13,241
|
|
|
$
|
(92,766
|
)
|
|
$
|
(569
|
)
|
|
$
|
3,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020
|
|
|
238,667,620
|
|
|
$
|
85,942
|
|
|
$
|
13,462
|
|
|
$
|
(95,739
|
)
|
|
$
|
(485
|
)
|
|
$
|
3,180
|
|
Exercise of options
|
|
|
229,500
|
|
|
|
165
|
|
|
|
(55
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
110
|
|
Exercise of warrants
|
|
|
308,901
|
|
|
|
263
|
|
|
|
(119
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
144
|
|
Fair value of
warrants granted
|
|
|
—
|
|
|
|
—
|
|
|
|
63
|
|
|
|
—
|
|
|
|
—
|
|
|
|
63
|
|
Debt conversions
|
|
|
904,246
|
|
|
|
469
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
469
|
|
Share issuance costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Share-based payments
|
|
|
—
|
|
|
|
—
|
|
|
|
493
|
|
|
|
—
|
|
|
|
—
|
|
|
|
493
|
|
Reporting currency presentation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(257
|
)
|
|
|
(257
|
)
|
Loss for the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,081
|
)
|
|
|
—
|
|
|
|
(1,081
|
)
|
Balance, December 31, 2020
|
|
|
240,110,267
|
|
|
$
|
86,839
|
|
|
|
13,844
|
|
|
|
(96,820
|
)
|
|
$
|
(742
|
)
|
|
$
|
3,121
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
NioCorp
Developments Ltd.
Notes
to the Condensed Consolidated Financial Statements
December
31, 2020
(expressed in thousands of
U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
|
1.
|
DESCRIPTION OF BUSINESS
|
NioCorp
Developments Ltd. (“NioCorp” or the “Company”) was incorporated on February 27, 1987, under the laws of
the Province of British Columbia and currently operates in one reportable operating segment consisting of exploration and development
of mineral deposits in North America, specifically, the Elk Creek Niobium/Scandium/Titanium property (the “Elk Creek Project”)
located in southeastern Nebraska.
These
financial statements have been prepared on a going concern basis that contemplates the realization of assets and discharge of
liabilities at their carrying values in the normal course of business for the foreseeable future. These financial statements do
not reflect any adjustments that may be necessary if the Company is unable to continue as a going concern.
The
Company currently earns no operating revenues and will require additional capital in order to advance the Elk Creek Project to
construction and commercial operation. The Company’s ability to continue as a going concern is uncertain and is dependent
upon obtaining sufficient financing, the generation of profits from mineral properties, and maintaining continued support from
its shareholders and creditors.
|
a)
|
Basis of Preparation
and Consolidation
|
The
accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted
accounting principles of the United States of America (“US GAAP”) and the rules and regulations of the Securities
and Exchange Commission (“SEC”). The interim condensed consolidated financial statements include the consolidated
accounts of the Company and its wholly owned subsidiaries with all significant intercompany transactions eliminated. The accounting
policies followed in preparing these interim condensed consolidated financial statements are those used by the Company as set
out in the audited consolidated financial statements for the year ended June 30, 2020.
In
the opinion of management, all adjustments considered necessary (including reclassifications and normal recurring adjustments)
to present fairly the financial position, results of operations, and cash flows at December 31, 2020, and for all periods presented,
have been included in these interim condensed consolidated financial statements. Certain information and footnote disclosures
normally included in the consolidated financial statements prepared in accordance with US GAAP have been condensed or omitted
pursuant to appropriate SEC rules and regulations. These interim condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements for the year ended June 30, 2020. The interim results are not necessarily
indicative of results for the full year ending June 30, 2021, or future operating periods.
|
b)
|
Recent Accounting
Standards
|
Issued
and Adopted
On
July 1, 2020, NioCorp adopted Accounting Standards Update 2018-13 - Fair Value Measurements (Topic 820): Disclosure Framework
- Changes to the Disclosure Requirements for Fair Value Measurement. This update modifies the disclosure requirements on fair
value measurements in Topic 820 and eliminates ‘at a minimum’ from the phrase ‘an entity shall disclose at a
minimum’ to promote the appropriate exercise of discretion by entities when considering fair value disclosures and to clarify
that materiality is an appropriate consideration. The adoption of this standard had no impact on the consolidated financial statements.
Issued
and Not Effective
From
time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board that are adopted by the Company
as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards
did not or will not have a material impact on the Company’s consolidated financial statements upon adoption.
NioCorp
Developments Ltd.
Notes
to the Condensed Consolidated Financial Statements
December
31, 2020
(expressed in thousands of
U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
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 $2,134 for the six months ended December 31, 2020 (2019 - $2,081) and had
a working capital deficit and an accumulated deficit of $7,471 and $96,820, respectively, as of December 31, 2020. As an exploration
stage entity, the Company has not yet commenced its mining operations and accordingly does not generate any revenue.
The
Company’s ability to continue operations and fund its expenditures, which have historically averaged $700 to $850 per quarter,
is dependent on management’s ability to secure additional financing. As of December 31, 2020, the Company had cash of $133,
which is not sufficient cash to fund normal operations and meet debt obligations for the next twelve months without deferring
payment on certain current liabilities and raising additional funds. Management is actively pursuing 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. The
Company has approximately $700 available on its non-revolving credit facility agreement with a related party (refer to Note 8),
however, the Company did not have any further funding commitments or arrangements for additional financing as of December 31,
2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
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.
Since March 2020, several measures
have been implemented in the United States, Canada, and the rest of the world in response to the increased impact from the novel
coronavirus (“COVID-19”) pandemic. While the impact of the COVID-19 pandemic is expected to be temporary, the current
circumstances are dynamic and the impact on business operations cannot be reasonably estimated at this time. The continued spread
of COVID-19 has resulted in business travel restrictions and other capital market disruptions, and this has had an impact on the
following: the Company’s ability to obtain financing and advance development plans; and the Company’s results of operations,
financial position, and cash flows during the current fiscal year.
NioCorp
Developments Ltd.
Notes
to the Condensed Consolidated Financial Statements
December
31, 2020
(expressed in thousands of
U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
|
4.
|
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
|
|
|
|
|
As of
|
|
|
|
Note
|
|
|
December 31,
2020
|
|
|
June 30,
2020
|
|
Accounts payable, trade
|
|
|
|
|
|
$
|
661
|
|
|
$
|
2,460
|
|
Interest payable to related party
|
|
|
8
|
|
|
|
667
|
|
|
|
450
|
|
Other accruals
|
|
|
|
|
|
|
80
|
|
|
|
155
|
|
Total accounts payable and accrued liabilities
|
|
|
|
|
|
$
|
1,408
|
|
|
$
|
3,065
|
|
On
December 18, 2020, an accounts payable balance of $1,640 was exchanged for a convertible note as discussed in Note 5.
|
|
As of
|
|
|
|
December 31, 2020
|
|
|
June 30,
2020
|
|
Nordmin convertible note
|
|
$
|
1,325
|
|
|
$
|
—
|
|
Convertible promissory notes
|
|
|
750
|
|
|
|
800
|
|
Convertible security
|
|
|
—
|
|
|
|
38
|
|
Total convertible debt
|
|
$
|
2,075
|
|
|
$
|
838
|
|
Nordmin
Convertible Note
On
December 18, 2020, the Company issued a convertible note in the principal amount of approximately $1,872 (the “Nordmin Note”)
and 500,000 warrants (the “Nordmin Warrants”) to Nordmin Engineering Ltd. (“Nordmin”) pursuant to a convertible
note and warrant subscription agreement (the “Nordmin Agreement”) under which Nordmin agreed to subscribe for and
purchase the Nordmin Note and Nordmin Warrants for a subscription price of approximately $1,804. This amount was set off against
the amount owed to Nordmin by NioCorp for past services.
The
Nordmin Note will mature on December 18, 2021 and has no stated interest rate, an implied interest rate of 5% per annum and, subject
to certain terms and conditions, is convertible into up to 4,500,000 common shares of the Company (“Common Shares”)
at a conversion price of 92% of the five-day volume-weighted average price of the Common Shares on the Toronto Stock Exchange
at the time of conversion. The Nordmin Note contains restrictions on how much of the principal amount may be converted in any
30-day period. The Nordmin Note also provides the Company with the option to prepay, in whole or in part, any outstanding principal
amount thereunder, upon three days’ notice to Nordmin. In addition, Nordmin is entitled to accelerate the maturity of the
Nordmin Note and require the Company to prepay the outstanding principal amount upon the occurrence of an event of default and
other designated events described in the Nordmin Note.
Subject
to certain terms and conditions, each Nordmin Warrant is exercisable into one Common Share at a price of C$0.80 per share until
December 18, 2022. The Nordmin Note and the Nordmin Warrants are, and the Common Shares underlying the Nordmin Warrants, will
be, as applicable, subject to resale restrictions and are or will be “restricted securities” within the meaning of
Rule 144 under the United States Securities Act of 1933.
The
Company accounted for this transaction as a debt extinguishment under Accounting Standards Codification 470, Debt. Accordingly,
the Company wrote off the value of the existing obligation, calculated the fair value of the Nordmin Note and recorded a loss
of $163 on the difference in the consolidated statement of operations. This loss included $63 related to the fair value of the
Nordmin Warrants at closing. The fair value of the Nordmin Warrants was estimated based on the Black Scholes pricing model using
a risk-free interest rate of 0.32%, an expected dividend yield of 0%, a volatility of 43.16%, and an expected life of 2.0 years.
The
Company initially recorded the Nordmin Note at a fair value of $1,740. The remaining initial fair value balance will be accreted
up to net face value of the Nordmin Note over the remaining time until maturity using the effective interest method. In addition,
transaction costs of $25 were expensed at closing.
NioCorp
Developments Ltd.
Notes
to the Condensed Consolidated Financial Statements
December
31, 2020
(expressed in thousands of
U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
Pursuant
to the terms of the Nordmin Agreement, on December 18, 2020, the Company issued 836,551 Common Shares to Nordmin upon an initial
conversion of $450 in principal amount of the Nordmin Note at a conversion price of C$0.684 per share.
Based
on the Company’s closing Common Share price of C$0.81 as of December 31, 2020, conversion of the remaining Nordmin Note
balance would require the issuance of 2,428,888 Common Shares. For each
C$0.01 change in the fair value of one Common Share, the total shares the Company would be obligated to issue would change by
approximately 30,000 shares.
Convertible
Promissory Notes
Effective
October 12, 2020, the maturity date for $750 of the Company’s outstanding convertible promissory notes was extended for
one year to October 14, 2021. All terms and conditions remained unchanged, except the amended agreement provides that the Company
may repay all or any of the amount of outstanding principal and any accrued but unpaid interest, with 14 days’ advance written
notice (the “Notice”), as follows:
|
●
|
with respect to
the outstanding principal and any accrued but unpaid interest, in cash, using the Bank of Canada daily US$-C$ exchange rate
on the date of the Notice; or
|
|
●
|
with respect to
the outstanding principal only, provided that the volume weighted average trading price of the Common Shares is C$0.97 or
greater for a period of ten consecutive trading days prior to the date of the Notice, and subject to Toronto Stock Exchange
approval, by converting all or any portion of the outstanding principal into Common Shares at a conversion rate of C$0.97
per Common Share, using the Bank of Canada daily US$-C$ exchange rate on the date of the Notice.
|
$50
of the Company’s convertible promissory notes was not extended under the agreement above and was converted into 67,695 Common
Shares on October 14, 2020.
The
changes in the derivative liability related to the conversion feature of the company’s convertible promissory notes are
as follows:
|
|
Derivative Liability
|
|
Balance, June 30, 2020
|
|
$
|
33
|
|
Change in fair value of derivative liability
|
|
|
29
|
|
Balance, December 31, 2020
|
|
$
|
62
|
|
Convertible
Security
On
July 9, 2020, Lind Asset Management IV, LLC, the holder of the convertible security, converted the remaining balance thereunder
of $38 into 64,298 Common Shares.
NioCorp Developments Ltd.
Notes to the Condensed
Consolidated Financial Statements
December 31, 2020
(expressed in thousands of
U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
|
|
As of
|
|
|
|
December 31, 2020
|
|
|
June 30,
2020
|
|
Current Portion:
|
|
|
|
|
|
|
|
|
Vendor note
|
|
$
|
202
|
|
|
$
|
166
|
|
SBA loan
|
|
|
10
|
|
|
|
92
|
|
Total current portion
|
|
$
|
212
|
|
|
$
|
258
|
|
Noncurrent Portion:
|
|
|
|
|
|
|
|
|
Vendor note
|
|
$
|
137
|
|
|
$
|
240
|
|
SBA Loan
|
|
|
—
|
|
|
|
104
|
|
Total noncurrent portion
|
|
$
|
137
|
|
|
$
|
344
|
|
SBA
Loan
On
April 17, 2020, the NioCorp’s subsidiary, Elk Creek Resources Corp., received a U.S. Small Business Administration Loan
(the “SBA Loan”) from American National Bank, pursuant to the Paycheck Protection Program (the “PPP”)
established under the Coronavirus Aid, Relief, and Economic Security Act, commonly referred to as the CARES Act, in the amount
of $196. Under the terms of the SBA Loan, the Company may be eligible for full or partial loan forgiveness. The unforgiven portion
of the SBA Loan is payable over two years at an annual interest rate of 1%, with a deferral of payments for the first six months.
The Company used the proceeds for purposes consistent with the PPP.
On
October 27, 2020, the Company applied for loan forgiveness of $186, comprising the initial SBA Loan balance less $10 representing
an Economic Injury Disaster Loan Advance grant (the “EIDL advance”) received by the Company in April 2020. On November
18, 2020, the Company was notified that the $186 loan forgiveness request had been approved and recorded a corresponding gain
in other income in the consolidated statement of operations.
On
December 21, 2020, the U.S. Congress passed the Consolidated Appropriations Act, 2021 (the “Act”), which provided
additional COVID-19 relief as well as government funding and other bills. The Act removes the previous requirement that PPP borrowers
deduct the amount of any EIDL advance from their PPP forgiveness amount. The Small Business Administration is currently developing
the guidance and procedures associated with this change in statute, and the Company expects to apply for this additional forgiveness
once the process is completed.
|
7.
|
COMMON
STOCK
|
|
|
|
|
a)
|
Stock
Options
|
|
|
|
Number of Options
|
|
|
Weighted Average Exercise Price (C$)
|
|
Balance, June 30, 2020
|
|
|
|
19,129,409
|
|
|
$
|
0.62
|
|
Granted
|
|
|
|
3,700,000
|
|
|
|
0.78
|
|
Exercised
|
|
|
|
(438,617
|
)
|
|
|
0.56
|
|
Cancelled/expired
|
|
|
|
(165,883
|
)
|
|
|
0.47
|
|
Balance, December 31, 2020
|
|
|
|
22,224,909
|
|
|
$
|
0.65
|
|
NioCorp Developments Ltd.
Notes to the Condensed
Consolidated Financial Statements
December 31, 2020
(expressed in thousands of
U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
The
Company granted 3,700,000 options at an average fair value price of $C0.25 per option, based on Black-Scholes models with an average
risk-free rate of 0.26%, average stock price volatility of 54.07%, and a three-year expected option life.
The
following table summarizes information about options to purchase Common Shares (“Options”) outstanding at December
31, 2020:
Exercise Price (C$)
|
|
|
Expiry Date
|
|
Number Outstanding
|
|
|
Aggregate Intrinsic Value
|
|
|
Number Exercisable
|
|
|
Aggregate Intrinsic Value
|
|
$
|
0.62
|
|
|
January 19, 2021
|
|
|
4,684,909
|
|
|
C$
|
890
|
|
|
|
4,684,909
|
|
|
C$
|
890
|
|
$
|
0.94
|
|
|
July 21, 2021
|
|
|
540,000
|
|
|
|
—
|
|
|
|
540,000
|
|
|
|
—
|
|
$
|
0.76
|
|
|
March 6, 2022
|
|
|
5,400,000
|
|
|
|
270
|
|
|
|
5,400,000
|
|
|
|
270
|
|
$
|
0.47
|
|
|
November 9, 2022
|
|
|
3,455,000
|
|
|
|
1,175
|
|
|
|
3,455,000
|
|
|
|
1,175
|
|
$
|
0.84
|
|
|
September 18, 2023
|
|
|
1,300,000
|
|
|
|
—
|
|
|
|
1,300,000
|
|
|
|
—
|
|
$
|
0.54
|
|
|
November 15, 2023
|
|
|
4,445,000
|
|
|
|
1,200
|
|
|
|
4,445,000
|
|
|
|
1,200
|
|
$
|
0.75
|
|
|
December 14, 2023
|
|
|
1,850,000
|
|
|
|
111
|
|
|
|
1,850,000
|
|
|
|
111
|
|
$
|
0.75
|
|
|
December 16, 2023
|
|
|
550,000
|
|
|
|
33
|
|
|
|
550,000
|
|
|
|
33
|
|
|
|
|
|
|
|
|
22,224,909
|
|
|
C$
|
3,679
|
|
|
|
22,224,909
|
|
|
C$
|
3,679
|
|
The
aggregate intrinsic value in the preceding table represents the total intrinsic value, based on the Company’s closing Common
Share price of C$0.81 as of December 31, 2020, that would have been received by the Option holders had all Option holders exercised
their Options as of that date. The total number of in-the-money Options vested and exercisable as of December 31, 2020, was 17,239,909.
As of December 31, 2020, there was $0 of unrecognized compensation cost related to unvested share-based compensation arrangements
granted under the Option plans.
|
|
|
Warrants
|
|
|
Weighted Average Exercise Price
|
|
Balance June 30, 2020
|
|
|
|
12,376,451
|
|
|
C$
|
0.74
|
|
Granted
|
|
|
|
500,000
|
|
|
|
0.80
|
|
Exercised
|
|
|
|
(2,777,422
|
)
|
|
|
0.71
|
|
Expired
|
|
|
|
(388,535
|
)
|
|
|
0.75
|
|
Balance, December 31, 2020
|
|
|
|
9,710,494
|
|
|
C$
|
0.75
|
|
At
December 31, 2020, the Company had outstanding exercisable Warrants, as follows:
Number
|
|
|
Exercise
Price
|
|
|
Expiry
Date
|
|
1,546,882
|
|
|
C$
|
0.72
|
|
|
January
30, 2021
|
|
529,344
|
|
|
C$
|
0.70
|
|
|
February
5, 2021
|
|
541,435
|
|
|
C$
|
0.69
|
|
|
February
7, 2021
|
|
1,058,872
|
|
|
C$
|
0.72
|
|
|
April
5, 2021
|
|
833,330
|
|
|
C$
|
0.72
|
|
|
April
29, 2021
|
|
645,250
|
|
|
C$
|
0.72
|
|
|
May
9, 2021
|
|
1,035,319
|
|
|
C$
|
0.77
|
|
|
July
9, 2021
|
|
3,020,062
|
|
|
C$
|
0.79
|
|
|
July
26, 2021
|
|
500,000
|
|
|
C$
|
0.80
|
|
|
December
18, 2022
|
|
9,710,494
|
|
|
|
|
|
|
|
NioCorp Developments Ltd.
Notes to the Condensed
Consolidated Financial Statements
December 31, 2020
(expressed in thousands of
U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
|
8.
|
RELATED
PARTY TRANSACTIONS AND BALANCES
|
The
Company has a loan with Mark Smith, President, Chief Executive Officer (“CEO”) and Executive Chairman of NioCorp (the
“Original Smith Loan”), that bears an interest rate of 10%, is secured by the Company’s assets pursuant to a
concurrently executed general security agreement (the “General Security Agreement”) and is subject to both a 2.5%
establishment fee and 2.5% prepayment fee. As of December 31, 2020, the principal amount outstanding under the Original Smith
Loan was $1,000.
The
Company also has a non-revolving credit facility agreement (the “Credit Agreement”) with a limit of $3,500 with Mr.
Smith. The Credit Agreement bears an interest rate of 10% and drawdowns from the Credit Agreement are subject to a 2.5% establishment
fee. Amounts outstanding under the Credit Agreement are secured by all of the Company’s assets pursuant to the General Security
Agreement. The Credit Agreement contains financial and non-financial covenants customary for a facility of its size and nature.
As of December 31, 2020, the principal amount outstanding under the Credit Agreement was $2,818.
On
December 14, 2020, the maturity dates for the Original Smith Loan and the Credit Agreement were extended from December 15, 2020
to December 15, 2021.
Accounts
payable and accrued liabilities as of December 31, 2020, include accrued interest of $667 and origination fees of $58 payable
to Mr. Smith under the Original Smith Loan and the Credit Agreement.
|
9.
|
Exploration
Expenditures
|
|
|
For the Three Months Ended
December 31,
|
|
|
For the Six Months Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Technical studies and engineering
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
23
|
|
Field management and other
|
|
|
148
|
|
|
|
405
|
|
|
|
330
|
|
|
|
570
|
|
Metallurgical development
|
|
|
41
|
|
|
|
43
|
|
|
|
84
|
|
|
|
84
|
|
Total
|
|
$
|
189
|
|
|
$
|
454
|
|
|
$
|
414
|
|
|
$
|
677
|
|
Effective
August 1, 2020, the Company entered into a three-year corporate office lease extension and recognized the corresponding right
of use asset and lease liability associated with this lease extension, along with two existing nominal leases. The Company has
applied a discount rate of 16%.
These
three operating leases have an average remaining life of 2.2 years as of December 31, 2020. The Company incurred lease costs of
$44 and $53 for the six months ended December 31, 2020 and 2019, respectively.
The maturities of lease liabilities
are as follows at December 31, 2020:
|
|
|
Fiscal Year Lease Maturities
|
|
2021
|
|
$
|
56
|
|
2022
|
|
|
110
|
|
2023 and thereafter
|
|
|
116
|
|
Total lease payments
|
|
|
282
|
|
Less portion of payments representing interest
|
|
|
(49
|
)
|
Present value of lease payments
|
|
$
|
233
|
|
NioCorp Developments Ltd.
Notes to the Condensed
Consolidated Financial Statements
December 31, 2020
(expressed in thousands of
U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
|
11.
|
Fair
Value Measurements
|
The
Company measures the fair value of financial assets and liabilities based on US GAAP guidance which defines fair value, establishes
a framework for measuring fair value, and expands disclosures about fair value measurements.
The
Company classifies financial assets and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables,
or other financial liabilities depending on their nature. Financial assets and financial liabilities are recognized at fair value
on their initial recognition.
Financial
assets and liabilities classified as held-for-trading are measured at fair value, with gains and losses recognized in net income.
Financial assets classified as held-to-maturity, loans and receivables, and financial liabilities other than those classified
as held-for-trading are measured at amortized cost, using the effective interest method of amortization. Financial assets classified
as available-for-sale are measured at fair value, with unrealized gains and losses being recognized in income.
Financial
instruments including receivables, accounts payable and accrued liabilities, and related party loans are carried at amortized
cost, which management believes approximates fair value due to the short-term nature of these instruments.
The
following tables present information about the assets and liabilities that are measured at fair value on a recurring basis as
of December 31, 2020 and June 30, 2020, respectively, and indicate the fair value hierarchy of the valuation techniques the Company
utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted)
in active markets for identical instruments. Fair values determined by Level 2 inputs utilize data points that are observable,
such as quoted prices, interest rates, and yield curves. Fair values determined by Level 3 inputs are unobservable data points
for the financial instrument and include situations where there is little, if any, market activity for the instrument.
|
|
As of December 31, 2020
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
133
|
|
|
$
|
133
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity securities
|
|
|
9
|
|
|
|
9
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
142
|
|
|
$
|
142
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability, convertible debt
|
|
$
|
62
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
62
|
|
Total
|
|
$
|
62
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
62
|
|
|
|
As of June 30, 2020
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
307
|
|
|
$
|
307
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity securities
|
|
|
7
|
|
|
|
7
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
314
|
|
|
$
|
314
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
$
|
38
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
38
|
|
Derivative liability, convertible debt
|
|
|
33
|
|
|
|
—
|
|
|
|
—
|
|
|
|
33
|
|
Total
|
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
71
|
|
NioCorp Developments Ltd.
Notes to the Condensed
Consolidated Financial Statements
December 31, 2020
(expressed in thousands of
U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
The
Company measures the fair market value of the Level 3 components using the Black Scholes model and discounted cash flows, as appropriate.
These models take into account management’s best estimate of the conversion price of the stock, an estimate of the expected
time to conversion, an estimate of the stock’s volatility, and the risk-free rate of return expected for an instrument with
a term equal to the duration of the convertible debt.
The
following table sets forth a reconciliation of changes in the fair value of the Company’s convertible debt components classified
as Level 3 in the fair value hierarchy:
Balance, June 30, 2020
|
|
$
|
71
|
|
Additions to convertible debt
|
|
|
—
|
|
Conversions to equity
|
|
|
(38
|
)
|
Realized and unrealized losses
|
|
|
29
|
|
Balance, December 31, 2020
|
|
$
|
62
|
|
As
discussed in Note 5, the Nordmin Note was initially recorded at fair value, which represents a nonrecurring fair value measurement
using a Level 3 input. The significant unobservable valuation inputs for the Nordmin Note includes an expected return of
7%.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis should be read in conjunction with our unaudited condensed interim consolidated financial statements
as of, and for the three and six months ended December 31, 2020, and the related notes thereto, which have been prepared in accordance
with generally accepted accounting principles in the United States (“US GAAP”). This discussion and analysis
contains forward-looking statements and forward-looking information that involve risks, uncertainties, and assumptions. Our actual
results may differ materially from those anticipated in these forward-looking statements and information as a result of many factors,
including, but not limited to, those set forth elsewhere in this Quarterly Report on Form 10-Q. See “Note Regarding Forward-Looking
Statements” below.
All
currency amounts are stated in thousands of U.S. dollars unless noted otherwise.
As
used in this report, unless the context otherwise indicates, references to “we,” “our,” the “Company,”
“NioCorp,” and “us” refer to NioCorp Developments Ltd. and its subsidiaries, collectively.
Note
Regarding Forward Looking Statements
This
Quarterly Report on Form 10-Q and the exhibits attached hereto contain “forward-looking statements” within the meaning
of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and “forward-looking information” within the meaning
of applicable Canadian securities legislation (collectively, “forward-looking statements”). Such forward-looking statements
concern our anticipated results and developments in the operations of the Company in future periods, planned exploration activities,
the adequacy of the Company’s financial resources, and other events or conditions that may occur in the future. Forward-looking
statements are frequently, but not always, identified by words such as “expects,” “anticipates,” “believes,”
“intends,” “estimates,” “potential,” “possible,” and similar expressions, or statements
that events, conditions, or results “will,” “may,” “could,” or “should” (or the
negative and grammatical variations of any of these terms) occur or be achieved. Any statements that express or involve discussions
with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, or future events or performance
(often, but not always, using words or phrases such as “expects” or “does not expect,” “is expected,”
“anticipates” or “does not anticipate,” “plans,” “estimates,” or “intends,”
or stating that certain actions, events, or results “may,” “could,” “would,” “might,”
or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements.
Such forward-looking statements reflect the Company’s current views with respect to future events and are subject to certain
known and unknown risks, uncertainties, and assumptions. Many factors could cause actual results, performance, or achievements
to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking
statements, including, among others, risks related to the following:
|
●
|
risks
related to our ability to operate as a going concern;
|
|
●
|
risks
related to our requirement of significant additional capital;
|
|
●
|
risks
related to our limited operating history;
|
|
●
|
risks
related to changes in economic valuations of the Elk Creek Project, such as net present value calculations, changes or disruptions
in the securities markets;
|
|
●
|
risks
related to our history of losses;
|
|
●
|
risks
related to cost increases for our exploration and, if warranted, development projects;
|
|
●
|
risks
related to feasibility study results;
|
|
●
|
risks
related to mineral exploration and production activities;
|
|
●
|
risks
related to our lack of mineral production from our properties;
|
|
●
|
risks
related to the results of our metallurgical testing;
|
|
●
|
risks
related to the price volatility of commodities;
|
|
●
|
risks
related to estimates of mineral resources and reserves;
|
|
●
|
risks
related to changes in mineral resource and reserve estimates;
|
|
●
|
risks
related to differences in U.S. and Canadian reserve and resource reporting;
|
|
●
|
risks
related to our exploration activities being unsuccessful;
|
|
●
|
risks
related to our ability to obtain permits and licenses for production;
|
|
●
|
risks
related to government and environmental regulations that may increase our costs of doing business or restrict our operations;
|
|
●
|
risks
related to proposed legislation that may significantly affect the mining industry;
|
|
●
|
risks
related to land reclamation requirements;
|
|
●
|
risks
related to competition in the mining industry;
|
|
●
|
risks
related to the difficulties of managing and treating water at our Elk Creek Project;
|
|
●
|
risks
related to equipment and supply shortages;
|
|
●
|
risks
related to current and future joint ventures and partnerships;
|
|
●
|
risks
related to our ability to attract qualified management;
|
|
●
|
risks
related to the ability to enforce judgment against certain of our Directors;
|
|
●
|
risks
related to claims on the title to our properties;
|
|
●
|
risks
related to surface access on our properties;
|
|
●
|
risks
related to potential future litigation;
|
|
●
|
risks
related to our lack of insurance covering all our operations;
|
|
●
|
risks
related to the need for resilience in the face of potential impacts from climate change;
|
|
●
|
risks
related to a disruption in, or failure of, our information technology (“IT”) systems, including those related
to cybersecurity;
|
|
●
|
risks
related to covenants contained in agreements with our secured creditors that may affect our assets;
|
|
●
|
risks
related to the extent to which our level of indebtedness may impair our ability to obtain additional financing;
|
|
●
|
risks
related to our status as a “passive foreign investment company” under the U.S. Internal Revenue Code of 1986,
as amended;
|
|
●
|
risks
related to our Common Shares, including price volatility, lack of dividend payments, dilution and penny stock rules;
|
|
●
|
risks
related to our status as an “emerging growth company” and the impact of related reduced reporting requirements
on our ability to attract investors; and
|
|
●
|
Risks
related to the effects of the COVID-19 pandemic on our business plans, financial condition and liquidity.
|
Should
one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may
vary materially from those described herein. This list is not exhaustive of the factors that may affect any of the Company’s
forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and actual
achievements of the Company or other future events or conditions may differ materially from those reflected in the forward-looking
statements due to a variety of risks, uncertainties, and other factors, including without limitation those discussed under the
heading “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2020, as well as other
factors described elsewhere in this report and the Company’s other reports filed with the Securities and Exchange Commission
(“SEC”).
The
Company’s forward-looking statements contained in this Quarterly Report on Form 10-Q are based on the beliefs, expectations,
and opinions of management as of the date of this report. The Company does not assume any obligation to update forward-looking
statements if circumstances or management’s beliefs, expectations, or opinions should change, except as required by law.
For the reasons set forth above, investors should not attribute undue certainty to, or place undue reliance on, forward-looking
statements.
National
Instrument 43-101 Compliance
Scott
Honan, M.Sc., SME-RM, a qualified person as defined by National Instrument 43-101 - Standards of Disclosure for Mineral Projects
(“NI 43-101”), has supervised the preparation of the scientific and technical information that forms the basis for
the Elk Creek Project disclosure in this Quarterly Report on Form 10-Q and has approved the disclosure in this Quarterly Report
on Form 10-Q related thereto. Mr. Honan is not independent of the Company, as he is the Chief Operating Officer. Additional information
on the updated Feasibility Study for the Elk Creek Project (the “2019 Feasibility Study”) is available in our NI 43-101
Technical Report, issued May 29, 2019, which is available under NioCorp’s profile on the Canadian Administrators website
at www.sedar.com and on our website at www.niocorp.com/wp-content/uploads/180001_FINAL_43-101_FS_NioCorp_AS_FILED.pdf.
Company
Overview
NioCorp
is developing the Elk Creek Project, located in southeast Nebraska. The Elk Creek Project is an advanced Niobium (“Nb”)/Scandium
(“Sc”)/Titanium (“Ti”) exploration project. Niobium is used to produce various superalloys that are extensively
used in high performance aircraft and jet turbines. It also is used in High-Strength, Low-Alloy (“HSLA”) steel, a
stronger steel used in automobiles, bridges, structural systems, buildings, pipelines, and other applications that generally increases
strength and/or reduces weight, which can result in environmental benefits, including reduced fuel consumption and material usage
and fewer air emissions. Scandium can be combined with aluminum to make high-performance alloys with increased strength and improved
corrosion resistance. Scandium also is a critical component of advanced solid oxide fuel cells, an environmentally preferred technology
for high-reliability, distributed electricity generation. Titanium is a component of various superalloys and other applications
that are used for aerospace applications, weapons systems, protective armor, medical implants and many others. It also is used
in pigments for paper, paint, and plastics.
Our
primary business strategy is to advance our Elk Creek Project to commercial production. We are focused on obtaining additional
funds to carry out our near-term planned work programs associated with securing the project financing necessary to complete mine
development, construction, commissioning, and operation of the Elk Creek Project.
Emerging
Growth Company Status
We
qualify as an “emerging growth company” as defined in Section 101 of the Jumpstart our Business Startups Act (“JOBS
Act”) as we do not have more than $1.07 billion in annual gross revenue and did not have such amount as of June 30, 2020,
this being the last day of our most recently completed fiscal year.
We
may lose our status as an emerging growth company on the last day of our fiscal year during which (i) our annual gross revenue
exceeds $1.07 billion or (ii) we issue more than $1.07 billion in non-convertible debt in a three-year period. We will lose our
status as an emerging growth company if at any time we are deemed to be a large accelerated filer, as defined in Rule 405 under
the Exchange Act. We will lose our status as an emerging growth company on the last day of our fiscal year following the fifth
anniversary of the date of our first sale of Common Shares pursuant to an effective registration statement.
As
an emerging growth company under the JOBS Act, we have elected to opt out of the extended transition period for complying with
new or revised standards pursuant to Section 107(b) of the JOBS Act. The election is irrevocable.
As
an emerging growth company, we are exempt from Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section 14A(a) and (b) of
the Exchange Act. Such sections are described below:
|
●
|
Section
404(b) of the Sarbanes-Oxley Act of 2002 requires a public company’s auditor to attest to, and report on, management’s
assessment of its internal controls.
|
|
●
|
Sections
14A(a) and (b) of the Exchange Act, implemented by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection
Act of 2010 (the “Dodd-Frank Act”), require companies to hold shareholder advisory votes on executive compensation
and golden parachute compensation.
|
As
long as we qualify as an emerging growth company, we will not be required to comply with the requirements of Section 404(b) of
the Sarbanes-Oxley Act of 2002 and Section 14A (a) and (b) of the Exchange Act.
COVID-19
In
December 2019, COVID-19 was identified in Wuhan, China, and has since spread to other countries, including the United States.
In March 2020, the World Health Organization characterized COVID-19 as a pandemic. Several countries, including the United States,
continue to take steps to restrict travel, temporarily close businesses and issue quarantine orders, and it remains unclear how
long currently enacted measures will remain in place. As a result of the COVID-19 pandemic, the Company continues to curtail corporate
travel and project site visitations. Additionally, the Company is following, and will continue to follow, social distancing, health
and safety protocol, business-related social gathering restrictions, and other similar guidelines promulgated by both Colorado
and Nebraska governmental officials.
On
April 17, 2020, NioCorp’s subsidiary, Elk Creek Resources Corp., received a U.S. Small Business Administration Loan (the
“SBA Loan”) from American National Bank, pursuant to the Paycheck Protection Program (the “PPP”) established
under the Coronavirus Aid, Relief, and Economic Security Act, commonly referred to as the CARES Act, in the amount of $196. Under
the terms of the SBA Loan, the Company may be eligible for full or partial loan forgiveness. The unforgiven portion of the SBA
Loan is payable over two years at an annual interest rate of 1%, with a deferral of payments for the first six months. The Company
used the proceeds for purposes consistent with the PPP.
On
October 27, 2020, the Company applied for loan forgiveness of $186, comprising the initial SBA Loan balance less $10 representing
an Economic Injury Disaster Loan Advance grant (the “EIDL advance”) received by the Company in April 2020. On November
18, 2020, the Company was notified that the $186 loan forgiveness request had been approved.
On
December 21, 2020, the U.S. Congress passed the Consolidated Appropriations Act, 2021 (the “Act”), which provided
additional COVID-19 relief legislation as well as government funding and other bills. The Act removes the previous requirement
that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount. The Small Business Administration
is currently developing the guidance and procedures associated with this change in statute, and the Company will apply for this
additional forgiveness once the process is completed.
The
COVID-19 pandemic continues to create uncertainty with regards to overall project funding timelines and has heightened the risk
that we may be unable to secure sufficient additional capital, including but not limited to equity and debt offerings, to fund
future expenditures or to maintain our liquidity. It is also possible that the COVID-19 pandemic could further adversely affect
our business plans, results of operations, financial condition or liquidity in the future. The impact of the COVID-19 pandemic
is fluid and continues to evolve, and therefore, we cannot currently predict the extent to which our business plans, results of
operations, financial condition or liquidity will ultimately be impacted.
Recent
Corporate Events
On
December 14, 2020, the Company announced the appointment of Fernanda Fenga to its Board of Directors. A former senior executive
at the world’s largest producer of niobium, Companhia Brasileira Metalúrgica e Mineração (“CBMM”),
Ms. Fenga currently serves as a senior advisor to mining companies in Brazil and in the U.S. Previously, she was Legal and
Compliance Director at Somos Educação, Brazil’s largest basic education company and one of the largest education
groups in the world. In addition, Ms. Fenga worked for more than nine years at CBMM, where she served as Corporate Superintendent.
In that position, she managed the company’s legal, compliance, investor relations, public affairs, and corporate risk management
departments. She also played an integral role in some of CBMM’s largest commercial transactions, two of which were
valued at more than U.S.$1.9 billion each.
On
December 18, 2020, the Company issued a convertible note in the principal amount of approximately $1,872 (the “Nordmin Note”)
and 500,000 warrants (the “Nordmin Warrants”) to Nordmin Engineering Ltd. (“Nordmin”) pursuant to a convertible
note and warrant subscription agreement (the “Nordmin Agreement”) under which Nordmin agreed to subscribe for and
purchase the Nordmin Note and Nordmin Warrants for a subscription price of approximately $1,804, which amount was set off against
the amount owing to Nordmin by NioCorp for past services.
The
Nordmin Note will mature on December 18, 2021 with an implied interest rate of 5% per annum and, subject to certain terms and
conditions, is convertible into up to 4,500,000 common shares of the Company (“Common Shares”) at a conversion price
of 92% of the five-day volume-weighted average price Common Shares on the Toronto Stock Exchange at the time of conversion. The
Nordmin Note contains restrictions on how much of the principal amount may be converted in any 30-day period. The Nordmin Note
also provides the Company with the option to prepay, in whole or in part, any outstanding principal amount thereunder, upon three
days’ notice to Nordmin. In addition, Nordmin is entitled to accelerate the maturity of the Nordmin Note and require the
Company to prepay the outstanding principal amount upon the occurrence of an event of default and other designated events described
in the Nordmin Note.
Subject
to certain terms and conditions, each Nordmin Warrant is exercisable into one Common Share at a price of C$0.80 per share until
December 18, 2022. The Nordmin Note and the Nordmin Warrants are, and the Common Shares underlying the Nordmin Warrants, will
be, subject to resale restrictions and are or will be, as applicable, “restricted securities” within the meaning of
Rule 144 under the United States Securities Act of 1933.
Pursuant
to the terms of the Nordmin Agreement, on December 18, 2020, the Company issued 836,551 Common Shares to Nordmin upon an initial
conversion of $450 in principal amount of the Nordmin Note at a conversion price of C$0.684 per share.
Elk
Creek Project Update
On
September 29, 2020, the Company announced that advances by its technical team have uncovered a potential alternative process for
extracting niobium from the Elk Creek Project. If further proven to be technologically and economically feasible at scale for
the Elk Creek Project, and if incorporated by NioCorp into the Elk Creek Project’s design and construction, the new approach
could result in lower up-front capital and operating costs for the Elk Creek Project.
A
series of metallurgical tests completed for NioCorp by L3 Process Development (“L3”) of West Jordan, Utah, has established
carbonation as a potential alternative metallurgical process for the extraction of niobium from ore that NioCorp expects to mine
from the Elk Creek Project site, subject to receipt of necessary funding. Carbonation is a relatively clean, environmentally friendly,
and sustainable hydrometallurgical process that can potentially be employed to use and recycle carbon dioxide to extract niobium
and other elements from ore in a manner similar to extractions with acids such as hydrochloric or sulphuric acid.
The
carbonation test work to date has demonstrated the ability at a small scale to extract niobium from the same Elk Creek ore sample
used for metallurgical testing for the Company’s 2019 Feasibility Study without co-extraction of titanium. L3 and the Company
intend to conduct additional carbonation testing on a larger scale to optimize carbonation operating conditions, confirm reaction
kinetics, evaluate total potential extraction for niobium and other elements and complete additional mass balances, as funds become
available. NioCorp has partnered with L3 and a Canadian testing facility to apply for Canadian government funding to complete
additional development work on the carbonation process.
The
development of the Elk Creek Project will require significant additional capital above what NioCorp has raised to date, and the
Company anticipates that any significant work on the Elk Creek Project pursuant to agreements that may be reached with key contractors
will be contingent on obtaining sufficient project financing, if and when available.
Other
Activities
Our
long-term financing efforts continued during the quarter ended December 31, 2020. However, as noted above under “COVID-19,”
the COVID-19 pandemic has created uncertainty and continues to impact processes related to the Company’s efforts to
obtain project financing. As funds become available through the Company’s fundraising efforts, we expect to undertake the
following activities:
|
●
|
Continuation
of the Company’s efforts to secure federal, state and local permits;
|
|
●
|
Negotiation
and completion of engineering, procurement and construction agreements;
|
|
●
|
Completion
of the final detailed engineering for the underground portion of the Elk Creek Project;
|
|
●
|
Initiation
and completion of the final detailed engineering for surface project facilities;
|
|
●
|
Construction
of natural gas and electrical infrastructure under existing agreements to serve the Elk Creek Project site;
|
|
●
|
Completion
of water supply agreements and related infrastructure to deliver fresh water to the project site;
|
|
●
|
Initiation
of revised mine groundwater investigation and control activities; and
|
|
●
|
Initiation
of long-lead equipment procurement activities.
|
Financial
and Operating Results
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
December 31,
|
|
|
For
the Six Months Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee-related
costs
|
|
$
|
686
|
|
|
$
|
345
|
|
|
$
|
1,005
|
|
|
$
|
699
|
|
Professional
fees
|
|
|
85
|
|
|
|
67
|
|
|
|
193
|
|
|
|
185
|
|
Exploration
expenditures
|
|
|
189
|
|
|
|
454
|
|
|
|
414
|
|
|
|
677
|
|
Other
operating expenses
|
|
|
253
|
|
|
|
135
|
|
|
|
664
|
|
|
|
332
|
|
Total
operating expenses
|
|
|
1,213
|
|
|
|
1,001
|
|
|
|
2,276
|
|
|
|
1,893
|
|
Other
income
|
|
|
(186
|
)
|
|
|
—
|
|
|
|
(186
|
)
|
|
|
—
|
|
Loss
on extinguishment
|
|
|
163
|
|
|
|
—
|
|
|
|
163
|
|
|
|
—
|
|
Change
in financial instrument fair value
|
|
|
62
|
|
|
|
81
|
|
|
|
28
|
|
|
|
88
|
|
Foreign
exchange gain
|
|
|
(302
|
)
|
|
|
(79
|
)
|
|
|
(403
|
)
|
|
|
(36
|
)
|
Interest
expense
|
|
|
131
|
|
|
|
73
|
|
|
|
258
|
|
|
|
133
|
|
(Gain)
loss on equity securities
|
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
3
|
|
Income
tax expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net
Loss
|
|
$
|
1,081
|
|
|
$
|
1,076
|
|
|
$
|
2,134
|
|
|
$
|
2,081
|
|
Six
months ended December 31, 2020 compared to six months ended December 31, 2019
Significant
items affecting operating expenses are noted below:
Employee-related
costs increased in 2020 as compared to 2019, primarily due to increased share-based compensation costs, which reflect the
timing of 2020 Option grants, which were fully vested and expensed on the grant date.
Exploration
expenditures decreased in 2020 as compared to 2019, primarily due to the costs incurred in 2019 related to advancing work
to obtain an air construction permit from the State of Nebraska. 2020 expenditures primarily related to the ongoing personnel
costs, as general project advancement activities.
Other
operating expenses include investor relations, general office expenditures, equity offering and proxy expenditures, board-related
expenditures and other miscellaneous costs. These costs increased in 2020 as compared to 2019 primarily due to 2020 Option grants,
which were fully vested and expensed on the grant date. These costs were partially offset by a decrease in finance-related contract
costs.
Other
significant items impacting the change in the Company’s net loss are noted below:
Other
income for 2020 represents the forgiveness of the Company’s SBA Loan as discussed in Note 6 to the financial statements
included in this Quarterly Report on Form 10-Q.
Loss
on extinguishment for 2020 represents the loss incurred in connection with the conversion of the Nordmin accounts payable
balance to a one-year convertible debt instrument, as discussed in Note 5 to the financial statements included in this Quarterly
Report on Form 10-Q.
Change
in financial instrument fair value represents non-cash changes in the market value of convertible securities, which are carried
at fair value, as well as changes in the market value of the derivative liability component of the Company’s outstanding
convertible promissory notes. Higher costs in 2019, as compared to 2020, reflect the recognition of accrued interest and initial
fair market valuations of additional advances from Lind Asset Management IV, LLC (“Lind”) in that period.
Foreign
exchange gain is primarily due to changes in the U.S. dollar against the Canadian dollar and reflects the timing of foreign
currency transactions, primarily U.S. dollar-based related party loans, and subsequent changes in exchange rates, and the increase
in gain during 2020 as compared to 2019 is due to a decline in the U.S. dollar relative to the Canadian dollar in 2020.
Interest
expense increased in 2020 as compared to 2019 primarily due to the timing of increases in principal amounts outstanding under
the non-revolving credit facility agreement (the “Credit Agreement”) with Mark Smith, President, Chief Executive Officer
(“CEO”) and Executive Chairman of NioCorp.
Three
months ended December 31, 2020 compared to three months ended December 31, 2019
Overall,
the increase in net loss for the three months ended December 31, 2020, as compared to the same period in 2019, is primarily the
result of the same factors underlying the six-month changes as discussed above.
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, the exercise of incentive
stock options and share purchase warrants, and related party loans. While the COVID-19 pandemic has created uncertainty with respect
to overall project funding timelines, we believe that we will be able to secure additional private placement financings in the
future, although we cannot predict the timing, size, or pricing of any such financings. In addition, we could raise funds through
the sale of interests in our mineral properties, although current market conditions and the impacts of the COVID-19 pandemic have
substantially reduced the number of potential buyers/acquirers of any such interests.
As
of December 31, 2020, the Company had cash of $0.1 million and a working capital deficit of $7.5 million, compared to cash of
$0.3 million and working capital deficit of $7.7 million on June 30, 2020. The working capital deficit decreased due to the timing
of warrant redemptions to support current operations and a continued effort to reduce outstanding accounts payable balances.
We
expect that the Company will operate at a loss for the foreseeable future. The Company’s current planned operational needs
are approximately $6.0 million until June 30, 2021. In addition to outstanding accounts payable and short-term liabilities, our
average monthly expenditures are approximately $265 per month where approximately $230 is for corporate overhead and estimated
costs related to securing financing necessary for advancement of the Elk Creek Project. Approximately $35 per month is planned
for expenditures relating to the advancement of Elk Creek Project by NioCorp’s wholly owned subsidiary, Elk Creek Resources
Corp. The Company’s ability to continue operations and fund our current work plan is dependent on management’s ability
to secure additional financing.
The
Company anticipates that it may need to raise $7.0 million - $8.5 million to continue planned operations for the next twelve months
focused on financing, permitting, option-to-purchase agreement exercises and detailed engineering efforts related to the Elk Creek
Project. Management is actively pursuing such additional sources of debt and equity financing, and while it has been successful
in doing so in the past, there can be no assurance it will be able to do so in the future.
Elk
Creek property lease commitments are $35 until June 30, 2021. To maintain its currently held properties and fund its currently
anticipated general and administrative costs and planned exploration and development activities at the Elk Creek Project for the
fiscal year ending June 30, 2021, the Company will likely require additional financing during the current fiscal year. Should
such financing not be available in that timeframe, we will be required to reduce our activities and will not be able to carry
out all our presently planned activities at the Elk Creek Project.
We
currently have no further funding commitments or arrangements for additional financing at this time (other than the potential
exercise of Options and Warrants) and there is no assurance that we will be able to obtain additional financing on acceptable
terms, if at all. There is significant uncertainty that we will be able to secure any additional financing in the current equity
or debt markets. The quantity of funds to be raised and the terms of any proposed equity or debt financing that may be undertaken
will be negotiated by management as opportunities to raise funds arise. Management intends to pursue funding sources of both debt
and equity financing, including but not limited to the issuance of equity securities in the form of Common Shares, Warrants, subscription
receipts, or any combination thereof in units of the Company pursuant to private placements to accredited investors or pursuant
to equity lines of credit or public offerings in the form of underwritten/brokered offerings, at-the-market offerings, registered
direct offerings, or other forms of equity financing and public or private issuances of debt securities including secured and
unsecured convertible debt instruments or secured debt project financing. Management does not currently know the terms pursuant
to which such financings may be completed in the future, but any such financings will be negotiated at arm’s-length. Future
financings involving the issuance of equity securities or derivatives thereof will likely be completed at a discount to the then-current
market price of the Company’s securities and will likely be dilutive to current shareholders.
The
audit opinion and notes that accompany our financial statements for the year ended June 30, 2020 disclose that substantial doubt
exists as to our ability to continue in business. The financial statements included in this Quarterly Report on Form 10-Q have
been prepared under the assumption that we will continue as a going concern. We are an exploration stage company and we have incurred
losses since our inception. We do not have sufficient cash to fund normal operations and meet debt obligations for the next twelve
months without deferring payment on certain current liabilities and raising additional funds. The continued spread of COVID-19
has resulted in business travel restrictions and capital market disruptions, and this has had an adverse impact on our ability
to obtain financing, development plans, results of operations, financial position, and cash flows during the current fiscal year.
We believe that the going concern uncertainty cannot be alleviated with confidence until the Company has entered into a business
climate where funding of its planned ongoing operating activities is secured.
We
have no exposure to any asset-backed commercial paper. Other than cash held by our subsidiaries for their immediate operating
needs in Colorado and Nebraska, all of our cash reserves are on deposit with major United States and Canadian chartered banks.
We do not believe that the credit, liquidity, or market risks with respect thereto have increased as a result of the current market
conditions. However, in order to achieve greater security for the preservation of our capital, we have, of necessity, been required
to accept lower rates of interest, which has also lowered our potential interest income.
Operating
Activities
During the six months ended December 31, 2020, the Company’s operating activities consumed $1.8
million of cash (2019: $1.4 million). The cash used in operating activities for the six months ended December 31, 2020 reflects
the Company’s funding of losses of $2.1 million, partially offset by share-based compensation charges, other non-cash transactions
and a $0.1 million decrease in accounts payable and accrued liabilities. Overall, operational outflows during the six months ended
December 31, 2020 increased from the corresponding period of 2019 due to the continued focus on paying down our outstanding accounts
payable. Going forward, the Company’s working capital requirements are expected to increase substantially in connection with
the development of the Elk Creek Project.
Financing
Activities
Financing
inflows were $1.6 million during the six months ended December 31, 2020, as compared to $1.1 million during the corresponding
period in 2019, primarily reflecting the timing of warrant and option exercises and related party debt drawdowns initiated during
the comparative periods.
Cash
Flow Considerations
As
noted above under “COVID-19,” the COVID-19 pandemic has created uncertainty with respect to overall project
funding timelines. The Company has historically relied upon debt and equity financings to finance its activities. The Company
may pursue additional debt and/or equity financing in the medium term; 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,
including the impacts of the COVID-19 pandemic on the timing and availability of funding, and its success in developing the Elk
Creek Project. Any quoted market for the Common Shares may be subject to market trends generally, notwithstanding any potential
success of the Company in creating revenue, cash flows, or earnings, and any depression of the trading price of the Common Shares
could impact its ability to obtain equity financing on acceptable terms.
Historically,
the Company has used net proceeds from issuances of Common Shares to provide sufficient funds to meet its near-term exploration
and development plans and other contractual obligations when due. However, development and construction of the Elk Creek Project
will require substantial additional capital resources. This includes near-term funding and, ultimately, funding for Elk Creek
Project construction and other costs. See “Liquidity and Capital Resources” above for the Company’s discussion
of arrangements related to possible future financings.
Contractual
Obligations
There
have been no material changes to our contractual obligations discussed in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” under the heading “Contractual Obligations” as of June 30, 2020,
in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020, other than (i) the signing of the three-year corporate
office lease extension; (ii) the conversion of the remaining balance under the convertible security held by Lind of $38 into 64,298
Common Shares on July 9, 2020; (iii) the conversion of $50 of the Company’s convertible promissory notes into 67,695 Common
Shares on the maturity date, October 14, 2020; (iv) the forgiveness of $186 of the SBA Loan on November 18, 2020; and (v) the
set-off of accounts payable relating to past services provided by Nordmin with the issuance of the Nordmin Note in the principal
amount of $1,872 on December 18, 2020. Effective October 14, 2020, the maturity date for the remaining $750 of the Company’s
convertible promissory notes was extended for one year to October 14, 2021 and effective December 14, 2020, the maturity dates
for the loan from Mark Smith and the Credit Agreement were extended to December 15, 2021.
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, 2020, in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020.
Certain
U.S. Federal Income Tax Considerations
The
Company has been a “passive foreign investment company” (“PFIC”) as defined under Section 1297 of the
U.S. Internal Revenue Code of 1986, as amended, in recent years and expects to continue to be a PFIC in the future. Current and
prospective United States shareholders should consult their tax advisors as to the tax consequences of PFIC classification and
the U.S. federal tax treatment of PFICs. Additional information on this matter is included in the “Risk Factors” section
of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020, under the heading “Risks Related
to the Common Shares.”