UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q10-Q/A
(Amendment No. 1)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
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 115Centennial, CO (Address of Principal Executive Offices) | 80112
(Zip code) | ||
Registrant’s telephone number, including area code: |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Not Applicable | Not Applicable | Not Applicable |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically 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 ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
Non-Accelerated Filer
| ☒ | Smaller Reporting Company | ☒ |
Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of February 9, 2018,November 14, 2022, the registrant had 208,861,265 Common Shares outstanding.
EXPLANATORY NOTE
NioCorp Developments Ltd. (“NioCorp” or the “Company”) filed its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022 with the U.S. Securities and Exchange Commission (“SEC”) on November 14, 2022 (the “Original Form 10-Q”). This Amendment No. 1 on Form 10-Q/A (this “Amendment” or “Form 10-Q/A”) is being filed to restate (the “Restatement”) certain information in the Company’s previously issued condensed consolidated financial statements as of and for the three months ended September 30, 2022 (the “Affected Period”).
Background of Restatement
On May 19, 2023, the Audit Committee of the Board of Directors (the “Audit Committee”) of the Company, in consultation with the Company’s management, concluded that the Company’s previously issued condensed consolidated financial statements with respect to the Affected Period contained errors related to the accounting for the Waiver and Consent Agreement, dated September 25, 2022 (the “Lind Consent”), between the Company and Lind Global Asset Management III, LLC, and its evaluation under Accounting Standards Codification Topic 450 – Contingencies (“ASC 450”) instead of under Accounting Standards Codification Topic 470 – Debt (“ASC 470”), which requires an evaluation of the contract amendment under ASC 470 debt modification guidance. As a result of this error, the Audit Committee determined that the Company’s condensed consolidated financial statements for the Affected Period should not be relied upon and should be restated by adjusting deferred transaction costs, convertible debt, and warrant liability recognized in the Affected Period. Any previously issued or filed reports, press releases, earnings releases and investor presentations or other communications describing the Company’s previously issued condensed consolidated financial statements and other related financial information covering the Affected Period should no longer be relied upon.
The identification of the need for the restatement arose during the Company’s quarterly close for the quarter ended March 31, 2023. Pursuant to these procedures, the Audit Committee, in consultation with the Company’s management, assessed the Company’s accounting policies, as well as the presentation and accounting for modifications of debt agreements, and concluded that the Company should have evaluated the Lind Consent as a contract amendment under ASC 470 debt modification guidance.
This correction affects the Company’s condensed consolidated statements of operations and comprehensive loss and also impacts the Company’s condensed consolidated balance sheet, condensed consolidated statements of shareholders’ equity, and certain notes to the condensed consolidated financial statements, as well as management’s discussion and analysis of financial condition and results of operations included in the Original Form 10-Q. This correction does not impact the condensed consolidated statements of cash flows besides offsetting adjustments
between net loss, accretion of convertible debt, and loss on debt extinguishment within the cash flows from operating activities section.
See Note 3 to the condensed consolidated financial statements in Part I, Item 1, “Financial Statements” for more information regarding this correction and the background of the Restatement.
Internal Control Considerations
The Company’s management has concluded that the Company had material weaknesses in its internal control over financial reporting during the Affected Period relating to the error described above. For a discussion of management’s considerations of the Company’s disclosures controls and procedures, internal control over financial reporting, and material weaknesses identified, refer to Part I, Item 4, “Controls and Procedures.”
Items Amended in this Amendment
This Amendment sets forth the Original Form 10-Q, as modified and superseded where necessary to reflect the Restatement and the related internal control considerations. Accordingly, the following items included in the Original Form 10-Q have been amended, as appropriate, to reflect the Restatement and the related internal control considerations:
● | Part I, Item 1, “Financial Statements”; | |
● | Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; | |
● | Part I, Item 4, “Controls and Procedures”; | |
● | Part II, Item 1A, “Risk Factors”; and | |
● | Part II, Item 6, “Exhibits.” |
On March 17, 2023, the Company effected a reverse stock split (the “Reverse Stock Split”) of its common shares, without par value (“Common Shares”), on the basis of one (1) post-Reverse Stock Split Common Share for every ten (10) pre-Reverse Stock Split Common Shares issued and outstanding, with any fractional shares resulting from the Reverse Stock Split rounded down to the nearest whole share. All references to share and per share amounts (excluding authorized shares), as well as option and warrant amounts and exercise prices, in this Amendment, including the condensed consolidated financial statements and accompanying notes, have also been restated to give retroactive effect to the Reverse Stock Split.
Additionally, in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, the Company is including with this Amendment currently dated certifications from its Chief Executive Officer and Chief Financial Officer. These certifications are filed or furnished, as applicable, as Exhibits 31.1, 31.2, 32.1 and 32.2.
Except as described above, this Amendment does not amend, update or change any other disclosures in the Original Form 10-Q. In addition, the information contained in this Amendment does not reflect events occurring after the Original Form 10-Q was filed and does not modify or update the disclosures therein, except to reflect the effects of the Restatement and the restatement of share and per share amounts (excluding authorized shares), as well as option and warrant amounts and exercise prices, to give retroactive effect to the Reverse Stock Split, as discussed above. This Amendment should be read in conjunction with the Company’s other filings with the SEC.
TABLE OF CONTENTS
PART I—I — FINANCIAL INFORMATION
Contents
1
NioCorp Developments Ltd.
Condensed Consolidated Balance Sheets
(expressed in thousands of U.S. dollars, except share data) (unaudited)
As of | |||||||||||||||||||||||
As of | Note | September 30, 2022 | June 30, 2022 | ||||||||||||||||||||
Note | December 31, 2017 | June 30, 2017 | As restated (a) | ||||||||||||||||||||
ASSETS | |||||||||||||||||||||||
Current | |||||||||||||||||||||||
Cash | $ | 80 | $ | 238 | $ | 3,192 | $ | 5,280 | |||||||||||||||
Restricted cash | 4 | — | 265 | ||||||||||||||||||||
Prepaid expenses and other | 4 | 152 | 189 | 402 | |||||||||||||||||||
Other current assets | 5 | 422 | — | ||||||||||||||||||||
Total current assets | 506 | 655 | 3,381 | 5,682 | |||||||||||||||||||
Non-current | |||||||||||||||||||||||
Deferred transaction costs | 5 | 2,609 | - | ||||||||||||||||||||
Deposits | 36 | 51 | 35 | 35 | |||||||||||||||||||
Available for sale securities at fair value | 17 | 23 | |||||||||||||||||||||
Equipment | 2 | 5 | |||||||||||||||||||||
Investment in equity securities | 10 | 10 | |||||||||||||||||||||
Right-of-use assets | 76 | 94 | |||||||||||||||||||||
Land and buildings, net | 850 | 850 | |||||||||||||||||||||
Mineral interests | 10,617 | 10,617 | 16,085 | 16,085 | |||||||||||||||||||
Total assets | $ | 11,178 | $ | 11,351 | $ | 23,046 | $ | 22,756 | |||||||||||||||
LIABILITIES | |||||||||||||||||||||||
Current | |||||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 2,772 | $ | 3,146 | 6 | $ | 3,670 | $ | 817 | ||||||||||||||
Related party loans | 8 | 1,355 | 1,175 | ||||||||||||||||||||
Convertible debt, current portion | 6 | 667 | 2,161 | ||||||||||||||||||||
Derivative liability, convertible debt | 82 | — | |||||||||||||||||||||
Related party loan | 9 | 2,000 | 2,000 | ||||||||||||||||||||
Convertible debt | 7 | 914 | 2,169 | ||||||||||||||||||||
Operating lease liability | 11 | 86 | 82 | ||||||||||||||||||||
Total current liabilities | 4,876 | 6,482 | 6,670 | 5,068 | |||||||||||||||||||
Convertible debt, net of current portion | 6 | 1,609 | 1,896 | ||||||||||||||||||||
Derivative liability, convertible debt | 6 | — | 82 | ||||||||||||||||||||
Non-current | |||||||||||||||||||||||
Warrant liability | 3 | 964 | - | ||||||||||||||||||||
Operating lease liability | 11 | - | 23 | ||||||||||||||||||||
Total liabilities | 6,485 | 8,460 | 7,634 | 5,091 | |||||||||||||||||||
SHAREHOLDERS’ EQUITY | |||||||||||||||||||||||
Common stock, unlimited shares authorized; shares outstanding: 208,861,265 and 198,776,337, respectively | 7 | 72,583 | 68,029 | ||||||||||||||||||||
Additional paid-in capital | 11,599 | 10,320 | |||||||||||||||||||||
Common shares, shares authorized; shares outstanding: at September 30, 2022 and at June 30, 2022 (b) | 8 | 130,684 | 129,055 | ||||||||||||||||||||
Accumulated deficit | (78,625 | ) | (74,852 | ) | (114,274 | ) | (110,397 | ) | |||||||||||||||
Accumulated other comprehensive loss | (864 | ) | (606 | ) | (998 | ) | (993 | ) | |||||||||||||||
Total equity | 4,693 | 2,891 | |||||||||||||||||||||
Total shareholders’ equity | 15,412 | 17,665 | |||||||||||||||||||||
Total liabilities and equity | $ | 11,178 | $ | 11,351 | $ | 23,046 | $ | 22,756 |
(a) | Amounts are restated. See Note 3 for more information. |
(b) | Amounts of shares outstanding are restated to give retroactive effect to the Reverse Stock Split (as defined below). See Note 2d for more information. |
The accompanying notes are an integral part of these condensed consolidated financial statements.
NioCorp Developments Ltd.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(expressed in thousands of U.S. dollars, except share and per share data) (unaudited)
For the three months ended September 30, | ||||||||||||
Note | 2022 | 2021 | ||||||||||
As restated (a) | ||||||||||||
Operating expenses | ||||||||||||
Employee related costs | $ | 293 | $ | 319 | ||||||||
Professional fees | 164 | 90 | ||||||||||
Exploration expenditures | 10 | 1,288 | 621 | |||||||||
Other operating expenses | 337 | 226 | ||||||||||
Total operating expenses | 2,082 | 1,256 | ||||||||||
Change in fair value of warrant liability | (257) | - | ||||||||||
Loss on debt extinguishment | 1,622 | - | ||||||||||
Foreign exchange loss | 173 | 225 | ||||||||||
Interest expense | 258 | 605 | ||||||||||
Other (gain) loss on equity securities | (1 | ) | 2 | |||||||||
Loss before income taxes | 3,877 | 2,088 | ||||||||||
Income tax benefit | - | - | ||||||||||
Net loss | 4 | $ | 3,877 | $ | 2,088 | |||||||
Other comprehensive loss: | ||||||||||||
Net loss | $ | 3,877 | $ | 2,088 | ||||||||
Other comprehensive loss (gain): | ||||||||||||
Reporting currency translation | 5 | (124 | ) | |||||||||
Total comprehensive loss | $ | 3,882 | $ | 1,964 | ||||||||
Loss per common share, basic and diluted (b) | $ | 0.14 | $ | 0.08 | ||||||||
Weighted average common shares outstanding (b) | 27,792,631 | 25,802,304 |
(a) | Amounts are restated. See Note 3 for more information. |
(b) | Amounts are restated to give effect to the Reverse Stock Split. See Note 2d for more information. |
For the three months ended December 31, | For the six months ended December 31, | ||||||||||||||||||
Note | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
Operating expenses | |||||||||||||||||||
Employee related costs | $ | 751 | $ | 459 | $ | 1,399 | $ | 962 | |||||||||||
Professional fees | 118 | 279 | 393 | 612 | |||||||||||||||
Exploration expenditures | 9 | 303 | 2,397 | 1,016 | 4,367 | ||||||||||||||
Other operating expenses | 391 | 215 | 687 | 389 | |||||||||||||||
Total operating expenses | 1,563 | 3,350 | 3,495 | 6,330 | |||||||||||||||
Change in financial instrument fair value | 6 | 274 | (39 | ) | 297 | (335 | ) | ||||||||||||
Foreign exchange loss (gain) | 36 | 160 | (201 | ) | 193 | ||||||||||||||
Interest expense | 91 | 71 | 175 | 140 | |||||||||||||||
(Loss) gain on available for sale securities | (4 | ) | 5 | 7 | (6 | ) | |||||||||||||
Loss before income taxes | 1,960 | 3,547 | 3,773 | 6,322 | |||||||||||||||
Income tax benefit | — | — | — | — | |||||||||||||||
Net loss | $ | 1,960 | $ | 3,547 | $ | 3,773 | $ | 6,322 | |||||||||||
Other comprehensive loss: | |||||||||||||||||||
Net loss | $ | 1,960 | $ | 3,547 | $ | 3,773 | $ | 6,322 | |||||||||||
Other comprehensive (gain) loss: | |||||||||||||||||||
Reporting currency translation | (27 | ) | (165 | ) | 258 | (231 | ) | ||||||||||||
Total comprehensive loss | $ | 1,933 | $ | 3,382 | $ | 4,031 | $ | 6,091 | |||||||||||
Loss per common share, basic | $ | 0.01 | $ | 0.02 | $ | 0.02 | $ | 0.03 | |||||||||||
Weighted average common shares outstanding | 206,000,263 | 183,625,989 | 204,027,181 | 182,078,028 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
NioCorp Developments Ltd.
Condensed Consolidated Statements of Cash Flows
(expressed in thousands of U.S. dollars) (unaudited)
For the three months ended September 30, | ||||||||
2022 | 2021 | |||||||
As restated (a) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss for the period | $ | (3,877 | ) | $ | (2,088 | ) | ||
Adjustments to reconcile net loss to net cash used in operations: | ||||||||
Unrealized (gain) loss on equity securities | (1 | ) | 2 | |||||
Accretion of convertible debt | 194 | 551 | ||||||
Noncash lease expense | (2 | ) | (1 | ) | ||||
Change in fair value of warrant liability | (257 | ) | - | |||||
Loss on debt extinguishment | 1,622 | - | ||||||
Depreciation | 1 | 1 | ||||||
Foreign exchange loss | 177 | 288 | ||||||
(2,143 | ) | (1,247 | ) | |||||
Change in working capital items: | ||||||||
Prepaid expenses and other | 209 | (270 | ) | |||||
Accounts payable and accrued liabilities | 196 | (92 | ) | |||||
Net cash used in operating activities | (1,738 | ) | (1,609 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Acquisition of land and buildings | - | (16 | ) | |||||
Net cash used in financing activities | - | (16 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from issuance of common shares | - | 664 | ||||||
Share issue costs | (21 | ) | - | |||||
Related party debt repayments | - | (318 | ) | |||||
Net cash provided by financing activities | (21 | ) | 346 | |||||
Exchange rate effect on cash and cash equivalents | (329 | ) | (170 | ) | ||||
Change in cash and cash equivalents during period | (2,088 | ) | (1,449 | ) | ||||
Cash and cash equivalents, beginning of period | 5,280 | 7,317 | ||||||
Cash and cash equivalent, end of period | $ | 3,192 | $ | 5,868 | ||||
Supplemental cash flow information: | ||||||||
Amounts paid for interest | $ | - | $ | 40 | ||||
Amounts paid for income taxes | - | - | ||||||
Non-cash financing transactions: | ||||||||
Conversions of debt for common shares | $ | 1,650 | $ | 1,350 | ||||
Deferred transaction costs, accrued but not paid | 2,809 | - |
For the six months ended December 31, | ||||||||
2017 | 2016 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Total loss for the period | $ | (3,773 | ) | $ | (6,322 | ) | ||
Non-cash elements included in net loss: | ||||||||
Depreciation | 3 | 4 | ||||||
Change in financial instrument fair value | 297 | (335 | ) | |||||
Unrealized gain (loss) on available-for-sale investments | 7 | (6 | ) | |||||
Accretion of convertible debt | 75 | 54 | ||||||
Foreign exchange (gain) loss | (197 | ) | 228 | |||||
Share-based compensation | 1,113 | 394 | ||||||
(2,475 | ) | (5,983 | ) | |||||
Change in working capital items: | ||||||||
Receivables | 7 | — | ||||||
Prepaid expenses | 144 | 68 | ||||||
Accounts payable and accrued liabilities | (242 | ) | 842 | |||||
Net cash used in operating activities | (2,566 | ) | (5,073 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Deposits | 15 | — | ||||||
Net cash used in investing activities | 15 | — | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from issuance of capital stock | 1,545 | 1,675 | ||||||
Share issue costs | (189 | ) | ||||||
Issuance of convertible debt | 1,000 | |||||||
Related party debt drawdown | 180 | |||||||
Other current assets | (422 | ) | ||||||
Net cash provided by financing activities | 2,114 | 1,675 | ||||||
Exchange rate effect on cash, cash equivalents and restricted cash | 14 | (20 | ) | |||||
Change in cash, cash equivalents and restricted cash during period | (423 | ) | (3,418 | ) | ||||
Cash, cash equivalents and restricted cash, beginning of period | 503 | 4,412 | ||||||
Cash, cash equivalents and restricted cash, end of period | $ | 80 | $ | 994 | ||||
Supplemental cash flow information: | ||||||||
Amounts paid for interest | $ | 32 | $ | 32 | ||||
Amounts paid for income taxes | ||||||||
Non-cash financing transactions | ||||||||
Lind conversions | 3,030 | 983 | ||||||
Debt to equity conversion | 207 | — |
(a) | Amounts are restated. See Note 3 for more information. |
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)outstanding) (unaudited)
Common Shares Outstanding |
Common Stock | Additional Paid-in Capital |
Deficit | Accumulated Other Comprehensive Loss |
Total | |||||||||||||||||||
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 | 7,346,421 | 4,103 | — | — | — | 4,103 | ||||||||||||||||||
Share issuance costs | — | (181 | ) | — | — | — | (181 | ) | ||||||||||||||||
Fair value of stock options exercised | — | 34 | (34 | ) | — | — | — | |||||||||||||||||
Share-based payments | — | — | 1,471 | — | — | 1,471 | ||||||||||||||||||
Reporting currency presentation | — | — | — | — | 9 | 9 | ||||||||||||||||||
Loss for the year | — | — | — | (14,630 | ) | — | (14,630 | ) | ||||||||||||||||
Balance, June 30, 2017 | 198,776,337 | $ | 68,029 | $ | 10,320 | $ | (74,852 | ) | $ | (606 | ) | $ | 2,891 | |||||||||||
Exercise of options | 10,091 | 5 | — | — | — | 5 | ||||||||||||||||||
Fair value of broker warrants granted | — | — | 41 | — | — | 41 | ||||||||||||||||||
Fair value of Lind warrants granted | — | — | 127 | — | — | 127 | ||||||||||||||||||
Private placements - July 2017 | 2,962,500 | 1,540 | — | — | — | 1,540 | ||||||||||||||||||
Private placement – September 2017 | 415,747 | 207 | 207 | |||||||||||||||||||||
Debt conversions | 6,696,590 | 3,030 | — | — | — | 3,030 | ||||||||||||||||||
Share issuance costs | — | (230 | ) | — | — | — | (230 | ) | ||||||||||||||||
Fair value of stock options exercised | — | 2 | (2 | ) | — | — | — | |||||||||||||||||
Share-based payments | — | — | 1,113 | — | — | 1,113 | ||||||||||||||||||
Reporting currency presentation | — | — | — | — | (258 | ) | (258 | ) | ||||||||||||||||
Loss for the period | — | — | — | (3,773 | ) | — | (3,773 | ) | ||||||||||||||||
Balance, December 31, 2017 | 208,861,265 | $ | 72,583 | $ | 11,599 | $ | (78,625 | ) | $ | (864 | ) | $ | 4,693 |
For the three months ended September 30, 2022 and 2021 | ||||||||||||||||||||
Common Shares Outstanding (b) | Common Shares | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||
Balance, June 30, 2021 | 25,637,993 | $ | 113,882 | $ | (99,510 | ) | $ | (1,159 | ) | $ | 13,213 | |||||||||
Exercise of warrants | 87,175 | 543 | - | - | 543 | |||||||||||||||
Exercise of options | 28,270 | 121 | - | - | 121 | |||||||||||||||
Debt conversions | 158,398 | 1,350 | - | - | 1,350 | |||||||||||||||
Reporting currency translation | - | - | - | 124 | 124 | |||||||||||||||
Loss for the period | - | - | (2,088 | ) | - | (2,088 | ) | |||||||||||||
Balance, September 30, 2021 | 25,911,836 | $ | 115,896 | $ | (101,598 | ) | $ | (1,035 | ) | $ | 13,263 | |||||||||
Balance, June 30, 2022 | 27,667,060 | $ | 129,055 | $ | (110,397 | ) | $ | (993 | ) | $ | 17,665 | |||||||||
Debt conversions | 272,262 | 1,650 | - | - | 1,650 | |||||||||||||||
Share issuance costs | - | (21 | ) | - | - | (21 | ) | |||||||||||||
Reporting currency translation | - | - | - | (5 | ) | (5 | ) | |||||||||||||
Loss for the period, as restated (a) | - | - | (3,877 | ) | - | (3,877 | ) | |||||||||||||
Balance, September 30, 2022, as restated (a) | 27,939,322 | $ | 130,684 | $ | (114,274 | ) | $ | (998 | ) | $ | 15,412 |
(a) | Amounts are restated. See Note 3 for more information. |
(b) | Amounts are restated to give retroactive effect to the Reverse Stock Split. See Note 2d for more information. |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
December 31, 2017
September 30, 2022
(expressed in thousands of U.S. dollars, unlessexcept 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 consolidated financial statements have been prepared on a going concern basis that contemplates the realization of assets and discharge of liabilities at their carrying values in the normal course of business for the foreseeable future. These financial statements do not reflect any adjustments that may be necessary if the Company is unable to continue as a going concern.
The Company currently earns no operating revenues and will require additional capital in order to advance the Elk Creek Project. The Company’sProject to construction and commercial operation. As further discussed in Note 4, these matters raised substantial doubt about the Company's ability to continue as a going concern, is uncertain and the Company is dependent upon the generation of profits from mineral properties, obtaining additional financing and maintaining continued support from its shareholders and creditors.
2. | BASIS OF PREPARATION |
a) | Basis of Preparation and Consolidation |
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles of the United States of America (“USU.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). The interim condensed consolidated financial statements include the consolidated accounts of the Company and its wholly-ownedwholly owned subsidiaries with all significant intercompany transactions eliminated. The accounting policies followed in preparing these interim condensed consolidated financial statements are those used by the Company as set out in the audited consolidated financial statements for the year ended June 30, 2017.2022. Certain transactions include reference to Canadian dollars (“C$”) where applicable.
In the opinion of Management,management, all adjustments considered necessary (including reclassifications and normal recurring adjustments) to present fairlyfor a fair statement of the financial position, results of operations, and cash flows at December 31, 2017,September 30, 2022, 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 USU.S. GAAP have been condensed or omitted pursuant to appropriate SEC rules and regulations. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended June 30, 2017.2022. The interim results are not necessarily indicative of results for the full year ending June 30, 2018,2023, or future operating periods.
b) | Recent Accounting Standards |
Issued and Adopted
In March 2016,August 2020, the Financial Accounting Standards Board (“FASB”(the “FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting. The amendmentsNo. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), which simplifies the accounting for convertible instruments. ASU 2020-06 removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. Either a modified retrospective method of transition or a fully retrospective method of transition is permissible for the adoption of this standard. ASU require, among other things, that all income tax effects of awards be recognized in the income statement when the awards vest or are settled. The ASU also allows for an employer to repurchase more of an employee’s shares than it can today for tax withholding purposes without triggering liability accounting, and it allows for a policy election to account for forfeitures as they occur. The amendments in this ASU are2020-06 is effective for fiscal years beginning after December 15, 2016,2021, including interim periods within those fiscal years. WeThe Company adopted this guidance duringASU 2020-06 on July 1, 2022, with no material effect on the quarter ended Company’s current financial position, results of operations or financial statement disclosures.
6
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
September 30, 2017. The adoption2022
(expressed in thousands of this ASU had no material impacts on our financial statement resultsU.S. dollars, except per share amounts or disclosures.as otherwise stated) (unaudited)
Issued and Not Effective
From time to time, new accounting pronouncements are issued by the FASB that are adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards did not or will not have a material impact on the Company’s consolidated financial statements upon adoption.
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars, unless otherwise stated) (unaudited)
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company will apply the provisions of the update to potential future acquisitions occurring after the effective date.
In February 2016, the FASB issued ASU 2016-02, Leases. The standard requires that a lessee recognize on the balance sheet assets and liabilities for leases with lease terms of more than twelve months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease have not significantly changed from the previous US GAAP. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within such fiscal year, with early adoption permitted. The Company is currently assessing the impact, if any, of implementing this guidance on its consolidated financial position, results of operations, and liquidity.
c) | Use of Estimates |
The preparation of consolidated financial statements in conformity with USU.S. GAAP requires Managementmanagement 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.
d) | Basic and Diluted Earnings per Share |
On March 17, 2023, the Company effected a reverse stock split (the “Reverse Stock Split”) of its common shares, without par value (“Common Shares”), on the basis of one (1) post-Reverse Stock Split Common Share for every ten (10) pre-Reverse Stock Split Common Shares issued and outstanding, with any fractional shares resulting from the Reverse Stock Split rounded down to the nearest whole share. All references to share and per share amounts (excluding authorized shares), as well as Option and Warrant (each as defined below) amounts and exercise prices, in the condensed consolidated financial statements and accompanying notes have also been restated to give retroactive effect to the Reverse Stock Split.
For the three months ended September 30, | ||||||||
Excluded potentially dilutive securities (1): | 2022 | 2021 | ||||||
Options | 1,446,400 | 1,522,500 | ||||||
Warrants | 1,851,625 | 1,347,011 | ||||||
Convertible debt | 103,000 | 1,474,400 | ||||||
Total potential dilutive securities | 3,401,025 | 4,343,911 |
(1) | The number of shares is based on the maximum number of shares issuable on exercise or conversion of the related securities as of the period end. Such amounts have not been adjusted for the treasury stock method or weighted average outstanding calculations as required if the securities were dilutive. |
3. | RESTATEMENT |
On February 16, 2021, the Company entered into a Convertible Security Funding Agreement (as amended by Amendment #1 to the Convertible Security Funding Agreement dated December 2, 2021, the “CSFA”) with Lind Global Asset Management III, LLC (“Lind”), pursuant to which the Company issued a convertible security to Lind (the “Lind III Convertible Security”). Pursuant to the CSFA, Lind had certain consent and participation rights applicable in connection with the Transaction (as defined below) and the proposed financing transactions with Yorkville Advisors Global, LP (“Yorkville”), each as described in Note 13. On September 25, 2022, the Company and Lind entered into a Waiver and Consent Agreement (the “Lind Consent”), which included the following principal terms: (i) the consent of Lind to the Transaction and the proposed financing transactions with Yorkville,
7
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
September 30, 2022
(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
including all actions taken by NioCorp as set out in the Business Combination Agreement to permit the completion of the Transaction; (ii) the consent of Lind to NioCorp’s expected cross-listing to The Nasdaq Stock Market LLC (“Nasdaq”) and the consolidation of the Common Shares in order to meet the minimum listing requirements thereof; (iii) the waiver of Lind of its participation right for up to 15% of the total offering in the proposed standby equity purchase agreement between NioCorp and Yorkville; and (iv) the waiver of Lind of certain restrictive covenants in the CSFA.
As consideration for entering into the Lind Consent, Lind received, amongst other things: (i) the right to receive a payment of $500, which would be reduced to $200 if the Transaction has not been consummated on or before April 30, 2023 (collectively, the “Consent Payment”); (ii) an extension of its existing participation rights under the CSFA in future financings of NioCorp for a further two-year period, subject to certain exceptions as well as an extension of such participation rights beyond the additional two-year period if Yorkville or any affiliate is a party to any such applicable transaction; and (iii) the right to receive additional Warrants (the “Contingent Consent Warrants”) if on the date that is 18 months following consummation of the Transaction, the closing trading price of the Common Shares on the Toronto Stock Exchange (the “TSX”) or such other stock exchange on which such shares may then be listed, is less than C$10.00, subject to adjustments. The number of Contingent Consent Warrants to be issued, if any, is based on the Canadian dollar equivalent (based on the then current Canadian to US dollar exchange rate as reported by Bloomberg, LP) of $5,000 divided by the five-day volume weighted average price of the Common Shares on the date of issuance. Further, the number of Contingent Consent Warrants issued will be proportionately adjusted based on the percentage of Warrants currently held by Lind that are exercised, if any, prior to the issuance of any Contingent Consent Warrants. The Lind Consent was signed as an amendment to the existing CSFA.
The Company originally accounted for both the Consent Payment and Contingent Consent Warrants as contingencies under Accounting Standards Codification (“ASC”) Topic 450: Contingencies.
The identification of the need for the restatement arose during the Company’s quarterly close for the quarter ended March 31, 2023. Pursuant to these procedures, the Audit Committee, in consultation with the Company’s management, determined that the Lind Consent should have been evaluated under ASC 470 – Debt (“ASC 470”), which requires an evaluation of the contract amendment under ASC 470 debt modification guidance.
The Company performed a comparison of the discounted cash flows of the Lind III Convertible Security pursuant to the original CSFA and pursuant to the CSFA as amended by the Lind Consent and determined that a debt extinguishment loss of $201 had occurred. Further, ASC 470 requires that the minimum estimated Consent Payment of $200 also be included in the calculation of the gain or loss on debt extinguishment. The Company also evaluated the Contingent Consent Warrant feature included in the Lind Consent and determined that the Contingent Consent Warrants meet the criteria to be considered separate, freestanding instruments, should be accounted for as a liability under ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), and should be booked at fair value on the date of the Lind Consent, with subsequent changes in valuation recorded as a non-operating gain or loss in the statement of operations. The following table summarizes the components of the initial loss on debt extinguishment:
8
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
September 30, 2022
(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
Schedule Of Extinguishment Of Debt
Amount | ||||
Minimum Consent Payment at inception | $ | 200 | ||
Loss on debt extinguishment | 201 | |||
Initial fair value of Contingent Consent Warrants | 1,221 | |||
Initial loss on debt extinguishment | $ | 1,622 |
Changes in the fair value of the Contingent Consent Warrants are presented below:
Amount | ||||
Initial valuation, September 25, 2022 | $ | 1,221 | ||
Change in valuation | (257 | ) | ||
Valuation at September 30, 2022 | $ | 964 |
The Contingent Consent Warrants are classified as a Level 3 financial instrument and were valued utilizing a Monte Carlo simulation pricing model, which calculates multiple potential outcomes for future share prices based on historic volatility of the Common Shares to determine the probability of issuance at 18 months following the applicable valuation date and to determine the value of the Contingent Consent Warrants. The following table discloses the primary inputs into the Monte Carlo model at each valuation date, and the probability of issuance calculated by the model.
Key Valuation Input | September 25, 2022 | September 30, 2022 | ||||||
Share price on valuation date | $ | 7.82 | $ | 10.40 | ||||
Volatility | 62.4 | % | 63.4 | % | ||||
Risk free rate | 3.93 | % | 4.04 | % | ||||
Probability of issuance | 59.4 | % | 45.5 | % |
The loss on debt extinguishment is presented as a non-operating expense in the Company’s condensed consolidated statements of operations and comprehensive loss. This change in accounting also resulted in a decrease in the amount of accretion to be recognized over the remaining life of the Lind III Convertible Security. Accretion expenses are disclosed as a part of interest expense, which is not included as a component of operating costs.
This correction to the Company’s condensed consolidated statements of operations and comprehensive loss also impacts the Company’s condensed consolidated balance sheet, condensed consolidated statements of shareholders’ equity, and certain notes to the condensed consolidated financial statements for the three months ended September 30, 2022 as illustrated in the tables below. This correction does not impact the condensed consolidated statements of cash flows besides offsetting adjustments between net loss, accretion of convertible debt, and loss on debt extinguishment within the cash flows from operating activities section.
Restatement Impacts to the Condensed Consolidated Balance Sheet (unaudited)
As of September 30, 2022
As Previously Reported | Restatement Impacts | Restated | ||||||||||
Deferred transaction costs | $ | 2,809 | $ | (200 | ) | $ | 2,609 | |||||
Total assets | 23,246 | (200 | ) | 23,046 | ||||||||
Convertible debt | 755 | 159 | 914 | |||||||||
Total current liabilities | 6,511 | 159 | 6,670 | |||||||||
Warrant liability | - | 964 | 964 | |||||||||
Total liabilities | 6,511 | 1,123 | 7,634 | |||||||||
Accumulated deficit | (112,951 | ) | (1,323 | ) | (114,274 | ) | ||||||
Total shareholders’ equity | 16,735 | (1,323 | ) | 15,412 | ||||||||
Total liabilities and equity | 23,246 | (200 | ) | 23,046 |
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
September 30, 2022
(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
Restatement Impacts to the Condensed Consolidated Statement of Operations and Comprehensive Loss (unaudited)
For the Three Months Ended September 30, 2022
As Previously Reported | Restatement Impacts | Restated | |||||||||||
Interest expense | $ | 300 | $ | (42 | ) | $ | 258 | ||||||
Loss on debt extinguishment | - | 1,622 | 1,622 | ||||||||||
Change in fair value of warrant liability | - | (257 | ) | (257 | ) | ||||||||
Loss before income taxes | 2,554 | 1,323 | 3,877 | ||||||||||
Net loss | 2,554 | 1,323 | 3,877 | ||||||||||
Total comprehensive loss | 2,559 | 1,323 | 3,882 | ||||||||||
Loss per share | $ | 0.09 | $ | 0.05 | $ | 0.14 | |||||||
Weighted average shares outstanding | 27,792,631 | - |
Restatement Impacts to the Condensed Consolidated Statement of Cash Flows (unaudited)
For the Three Months Ended September 30, 2022
As Previously Reported | Restatement Impacts | Restated | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
Net loss for the period | $ | (2,554 | ) | $ | (1,323 | ) | $ | (3,877 | ) | |||
Accretion of convertible debt | 236 | (42 | ) | 194 | ||||||||
Loss on debt extinguishment | - | 1,622 | 1,622 | |||||||||
Change in fair value of warrant liability | - | (257 | ) | (257 | ) |
Restatement Impacts to the Condensed Consolidated Statement of Shareholders’ Equity (unaudited)
As of September 30, 2022
Common Shares | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total | |||||||||||||
As Previously Reported | ||||||||||||||||
Balance, June 30, 2022 | $ | 129,055 | $ | (110,397 | ) | $ | (993 | ) | $ | 17,665 | ||||||
Debt conversions | 1,650 | - | - | 1,650 | ||||||||||||
Share issuance costs | (21 | ) | - | - | (21 | ) | ||||||||||
Reporting currency translation | - | - | (5 | ) | (5 | ) | ||||||||||
Loss for the period | - | (2,554 | ) | - | (2,554 | ) | ||||||||||
Balance, September 30, 2022 | $ | 130,684 | $ | (112,951 | ) | $ | (998 | ) | $ | 16,735 | ||||||
Restatement Impacts | ||||||||||||||||
Balance, June 30, 2022 | $ | - | $ | - | $ | - | $ | - | ||||||||
Loss for the period | - | (1,323 | ) | - | (1,323 | ) | ||||||||||
Balance, September 30, 2022 | $ | - | $ | (1,323 | ) | $ | - | $ | (1,323 | ) | ||||||
As Adjusted | ||||||||||||||||
Balance, June 30, 2022 | $ | 129,055 | $ | (110,397 | ) | $ | (993 | ) | $ | 17,665 | ||||||
Debt conversions | 1,650 | - | - | 1,650 | ||||||||||||
Share issuance costs | (21 | ) | - | - | (21 | ) | ||||||||||
Reporting currency translation | - | - | (5 | ) | (5 | ) | ||||||||||
Loss for the period, as restated | - | (3,877 | ) | - | (3,877 | ) | ||||||||||
Balance, September 30, 2022, as restated | $ | 130,684 | $ | (114,274 | ) | $ | (998 | ) | $ | 15,412 |
As previously reported, the Company restated its consolidated balance sheets as of June 30, 2022 and 2021, and consolidated statements of operations and comprehensive income, equity and cash flows for the years ended June 30, 2022 and 2021. In addition, the restatement impacted the first, second and third quarters of our fiscal year ended June 30, 2022. The summarized restatement impacts for the comparable interim period in fiscal year 2022 are presented below. The restatement corrects errors related to the accounting for the unamortized deferred financing costs and debt discounts upon extinguishments of debt related to debt conversions.
10
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
September 30, 2022
(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
Restatement Impacts to the Condensed Consolidated Statement of Operations and Comprehensive Loss (unaudited)
For the Three Months Ended September 30, 2021
As Previously Reported | Restatement Impacts | Restated | ||||||||||
Foreign exchange loss | $ | 210 | $ | 15 | $ | 225 | ||||||
Interest expense | 492 | 113 | 605 | |||||||||
Loss before income taxes | 1,960 | 128 | 2,088 | |||||||||
Net loss | 1,960 | 128 | 2,088 | |||||||||
Reporting currency translation | (109 | ) | (15 | ) | (124 | ) | ||||||
Total comprehensive loss | 1,851 | 113 | 1,964 | |||||||||
Loss per share | $ | 0.08 | $ | - | $ | 0.08 | ||||||
Weighted average shares outstanding | 25,802,304 | - |
Restatement Impacts to the Condensed Consolidated Statement of Cash Flows (unaudited)
For the Three Months Ended September 30, 2021
As Previously Reported | Restatement Impacts | Restated | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
Total loss for the period | $ | (1,960 | ) | $ | (128 | ) | $ | (2,088 | ) | |||
Accretion of convertible debt | 438 | 113 | 551 | |||||||||
Foreign exchange loss | 273 | 15 | 288 |
Restatement Impacts to the Condensed Consolidated Statement of Shareholders' Equity (unaudited)
For the Three Months Ended September 30, 2021
As Previously Reported | Restatement Impacts | Restated | ||||||||||
June 30, 2021 opening balance adjustments: | ||||||||||||
Deficit | $ | (99,076 | ) | $ | (434 | ) | $ | (99,510 | ) | |||
Accumulated other comprehensive loss | (1,143 | ) | (16 | ) | (1,159 | ) | ||||||
Total Shareholders’ equity | 13,663 | (450 | ) | 13,213 | ||||||||
Activity adjustments: | ||||||||||||
Loss for the period | (1,960 | ) | (128 | ) | (2,088 | ) | ||||||
Reporting currency translation | 109 | 15 | 124 | |||||||||
September 30, 2021 ending balance adjustments: | ||||||||||||
Deficit | (101,036 | ) | (562 | ) | (101,598 | ) | ||||||
Accumulated other comprehensive loss | (1,034 | ) | (1 | ) | (1,035 | ) | ||||||
Total equity | 13,826 | (563 | ) | 13,263 |
Certain prior year amounts have been reclassified to conform to fiscal 2018 presentation and these reclassifications had no effect on the reported results of operations or net equity as previously disclosed.
GOING CONCERN ISSUES |
The Company incurred a loss of $3,773$3,877 for the sixthree months ended December 31, 2017 (2016September 30, 2022 (2021 - $6,322),$2,088) and had a working capital deficit of $3,289 and an accumulated deficit of $4,370 and $78,625, respectively,$114,274 as of December 31, 2017.September 30, 2022. As a development stage issuer, the Company has not yet commenced its mining operations and accordingly does not generate any revenue. As of September 30, 2022, the Company had cash of $3,192 which may not be sufficient to fund normal operations for the next twelve months without deferring payment on certain liabilities or raising additional funds. In addition, the Company will be required to raise additional funds for construction and commencement of operations. These factors indicate the existence of a material uncertainty that raisesraise substantial doubt about the Company’sCompany's ability to continue as a going concern.
11
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
September 30, 2022
(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
The Company’s ability to continue operations and fund its expenditures, which have historically averaged approximately $1,265 per quarter over the preceding three-year period, is dependent on Management’smanagement’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. Other than the proposed business combination and potential financing packages discussed in Note 13, the Company did not have any further funding commitments or arrangements for additional financing as of September 30, 2022. These consolidated financial statements do not give effect to any adjustments required to realize itsthe Company’s assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying financial statements.
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 and subsequent COVID-19 variants. In addition, recent worldwide events have created general global economic uncertainty as well as uncertainty in capital markets, supply chain disruptions, increased interest rates, and the potential for geographic recessions. We believe this could have an adverse impact on our ability to obtain financing, development plans, results of operations, financial position, and cash flows during the current fiscal year. The full extent to which these events and our precautionary measures may continue to impact our business will depend on future developments, which continue to be highly uncertain and cannot be predicted at this time.
5. | DEFERRED TRANSACTION COSTS |
The Company has deferred third-party costs, including legal fees, other professional and consulting fees, and due diligence fees, incurred in connection with the proposed transaction discussed in Note 13. These costs are deferred until closing, at which time a portion of the costs will be recorded against convertible debt to be entered into in connection with the proposed transaction, with the remainder treated as a reduction to the value of Common Shares issued.
6. | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
Schedule of account payable and accrued liabilities
As of | ||||||||||||
Note | September 30, 2022 | June 30, 2022 | ||||||||||
Accounts payable, trade | $ | 2,904 | $ | 115 | ||||||||
Accounts payable accruals | 467 | 654 | ||||||||||
Consent accrual | 13 | 200 | - | |||||||||
Interest payable to related party | 9 | 51 | - | |||||||||
Other accruals | 48 | 48 | ||||||||||
Total accounts payable and accrued liabilities | $ | 3,670 | $ | 817 |
Restricted cash represents amounts heldChanges in escrow to secure payment of work related to the Company’s Elk Creek Feasibility Study. Under the terms of the escrow agreement, the balance of $265 was drawn against outstanding accounts payable during the quarter ended September 30, 2017.Lind III Convertible Security are as follows:
Lind III Convertible Security | ||||
(Restated) | ||||
Balance, June 30, 2022 | $ | 2,169 | ||
Accretion expense | 194 | |||
Fair value increase due to debt extinguishment | 201 | |||
Conversions | (1,650 | ) | ||
Balance, September 30, 2022 | $ | 914 |
12
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
December 31, 2017
September 30, 2022
(expressed in thousands of U.S. dollars, unlessexcept per share amounts or as otherwise stated) (unaudited)
Other current assets include legal and other professional fees associated with obtaining project debt financing for the Elk Creek Project. Amounts will be deferred until funding is completed, at which time the balance will become a direct deduction from the related debt liability.
As of | ||||||||
December 31, 2017 | June 30, 2017 | |||||||
Convertible debt, current portion | $ | 667 | $ | 2,161 | ||||
Noncurrent: | ||||||||
Convertible notes | $ | — | $ | 592 | ||||
Convertible security | 1,609 | 1,304 | ||||||
$ | 1,609 | $ | 1,896 |
Convertible Security Funding
Changes in the Lind Partners Asset Management IV, LLC (“Lind”) convertible security (the “Convertible Security”) balance are comprised of the following:
Convertible Security | ||||
Balance, June 30, 2017 | $ | 3,465 | ||
Additional debt drawdown | 1,000 | |||
Conversions, at fair value | (3,030 | ) | ||
Change in fair market value | 174 | |||
Balance, December 31, 2017 | $ | 1,609 |
On August 10, 2017, Lind provided notice to the Company of its election to advance an additional $1.0 million in funding (the “Initial Convertible Security Increase”) under the convertible security (the ‘Initial Convertible Security”) pursuant to its right under the Convertible Security Funding Agreement, dated December 14, 2015, between the Company and Lind (the “Lind Agreement”). As a result, upon payment of the additional $1,000 in funding by Lind to the Company, the face value of the Initial Convertible Security was increased by $1,200 ($1,000 in additional funding plus implied interest), and the Company issued Warrants to Lind, as follows:
Black Scholes pricing model inputs | ||||||||||||||||||||||||||||
Funding Date | Face Value1 | Warrants Issued2 | Issue Price3 | Warrant Expiry Date | Risk-free rate | Yield | Volatility | Expected Life | ||||||||||||||||||||
August 15, 2017 | $ | 300 | 260,483 | C$0.73 | August 15, 2020 | 1.23 | % | 0 | % | 49.6 | % | 3 years | ||||||||||||||||
September 28, 2017 | 300 | 283,413 | C$0.66 | September 28, 2020 | 1.23 | % | 0 | % | 47.7 | % | 3 years | |||||||||||||||||
October 31, 2017 | 300 | 308,901 | C$0.62 | October 31, 2020 | 1.59 | % | 0 | % | 47.0 | % | 3 years | |||||||||||||||||
December 6, 2017 | 300 | 355,132 | C$0.54 | December 6, 2020 | 1.59 | % | 0 | % | 48.9 | % | 3 years | |||||||||||||||||
Total | $ | 1,200 | 1,207,929 |
The Initial Convertible Security is convertible into Common Shares of the Company (Common Shares”) at a conversion price equal to 85% of the volume weighted average trading price (“Volume Weighted Average Price”) of the Common Shares (in Canadian dollars) on the Toronto Stock Exchange (the “TSX”) for the five consecutive trading days immediately prior to the date on which Lind provides the Company with notice of its intention to convert an amount of the Initial Convertible Security from time to time. During the six-month period ended December 31, 2017, $2,425 principal amount of the Initial Convertible Security was converted into 6,696,590 Common Shares.
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
December 31, 2017
(expressed in thousands
Based on the Company’s closing Common Share price of U.S. dollars, unless otherwise stated) (unaudited)
TheC$ as of September 30, 2022, conversion of the remaining Lind III Convertible Security contains financial and non-financial covenants customary for a facilityundiscounted face value of its size and nature, and includes a financial covenant defining an event$815 (including accrued interest) would require the issuance of default as all present and future liabilities of the Company or any of its subsidiaries, exclusive of related party loans, for an amount or amounts exceeding $2,000 and which have not been satisfied on time or within 90 days of invoice, or have become prematurely payable as a result of its default or breach. The Company was in compliance with these covenants as of December 31, 2017.
Convertible Notes
Changesapproximately Common Shares. For each C$0.10 change in the Company’s outstanding convertible promissory notes (the “Convertible Notes”) balance are comprisedfair value of one Common Share, the following:total Common Shares the Company would be obligated to issue would change by approximately 800 shares.
Convertible Notes | ||||
Balance, June 30, 2017 | $ | 592 | ||
Accreted interest, net of interest paid | 75 | |||
Balance, December 31, 2017 | $ | 667 |
Derivative Liability | ||||
Balance, June 30, 2017 | $ | 82 | ||
Change in fair value of derivative liability | (— | ) | ||
Balance, December 31, 2017 | $ | 82 |
COMMON |
a) |
On July 26, 2017, the Company closed a brokered private placement (the “July 2017 Private Placement”)Schedule of units (the “Units”) of the Company. Under the July 2017 Private Placement, a total of 2,962,500 Units were issued at C$0.65 per Unit, for total gross proceeds to the Company of approximately C$1,926. Each Unit issued pursuant to the July 2017 Private Placement consists of one Common Share and one warrant of the Company (“Warrant”). Each Warrant entitles the holder thereof to purchase one additional Common Share at a price of C$0.79 until July 26, 2021.stock option
Number of Options | Weighted Average Exercise Price | |||||||
Balance, June 30, 2022 | 1,446,400 | C$ | 8.30 | |||||
Granted | - | - | ||||||
Exercised | - | - | ||||||
Cancelled/expired | - | - | ||||||
Balance, September 30, 2022 | 1,446,400 | C$ | 8.30 |
Proceeds of the July 2017 Private Placement were used for general working capital purposes and to continue to advance the Company’s Elk Creek Project.
On September 5, 2017, the Company entered into a shares-for-debt agreement with Northcott Capital Limited (“Northcott”) whereby NioCorp issued 415,747 Common Shares to settle a debt of C$253,606 owed to Northcott for past and prospective services through December 2017. Northcott manages NioCorp’s current effort to assemble a debt financing package as part of the Company’s overall Elk Creek Project financing effort. The shares issued to Northcott were priced at C$0.61 per share, which represents a 10% premium over the five-day Volume Weighted Average Price of the Common Shares of C$0.5571 as of the date of the agreement.
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars, unless otherwise stated) (unaudited)
On November 9, 2017, the Company’s shareholders voted to approve a new Long-Term Incentive Plan (the “Long-Term Incentive Plan”) and the granting of incentive securities thereunder until November 9, 2020. Under the Long-Term Incentive Plan, the Company’s Board of Directors (the “Board”) may, in its discretion from time to time, grant Options and share units (in the form of RSUs and PSUs) to directors, employees and certain other service providers (as defined in the Long-Term Incentive Plan) of the Company and affiliated entities selected by the Board.
Subject to adjustment as described in the Long-Term Incentive Plan, the aggregate number of Common Shares that may be reserved for issuance to participants under the Long-Term Incentive Plan, together with all other security -based compensation arrangements of the Company, including with respect to Options outstanding under the Company’s 2016 Incentive Stock Option Plan, may not exceed 10% of the issued and outstanding Common Shares from time to time, and the Common Shares reserved for issuance upon settlement of share units shall not exceed 5% of the issued and outstanding Common Shares from time to time. The Long-Term Incentive Plan limits the maximum number of Common Shares issued to insiders (as defined under TSX rules for this purpose) within any one-year period, or issuable to insiders at any time, in the aggregate, under all security -based compensation arrangements (including the Long-Term Incentive Plan) to 10% of the then issued and outstanding Common Shares. The Long-Term Incentive Plan also limits the aggregate number of Common Shares that may be reserved for issuance to any one participant under the Long-Term Incentive Plan, together with all other security -based compensation arrangements of the Company, to 5% of the then issued and outstanding Common Shares (on a non-diluted basis). Under the Long-Term Incentive Plan, Options and share units granted to non-employee directors, together with all other equity awards, are limited to an annual equity award value of C$150 per non-employee director. The total value of Options issuable to a non-employee director in a one-year period is limited to C$100. Further, and subject to the adjustment provisions of the Long-Term Incentive Plan, the aggregate number of Common Shares actually issued or transferred by the Company upon the exercise of incentive stock options will not exceed 20,451,895 Common Shares.
The Board has the exclusive power over the granting, amendment, administration or settlement of any award.
Stock option transactions are summarized as follows:
Number of Options | Weighted Average Exercise Price (C$) | |||||||
Balance, June 30, 2017 | 16,605,000 | $ | 0.73 | |||||
Issued | 3,925,000 | 0.47 | ||||||
Exercised | (10,091 | ) | 0.62 | |||||
Cancelled/expired | (4,470,000 | ) | 0.75 | |||||
Balance, December 31, 2017 | 16,049,909 | $ | 0.66 |
The following table summarizes information about stock optionsOptions outstanding at December 31, 2017:September 30, 2022:
Exercise price (C$) | Expiry date | Number outstanding | Aggregate Intrinsic Value (C$000s) | Number exercisable | Aggregate Intrinsic Value (C$000s) | |||||||||||||||
$ | 0.47 | November 9, 2022 | 3,925,000 | $ | 1,060 | 3,925,000 | $ | 1,060 | ||||||||||||
$ | 0.62 | January 19, 2021 | 5,264,909 | 632 | 5,264,909 | 632 | ||||||||||||||
$ | 0.76 | March 6, 2022 | 5,650,000 | — | 2,825,000 | — | ||||||||||||||
$ | 0.94 | April 28, 2018 | 400,000 | — | 400,000 | — | ||||||||||||||
$ | 0.94 | April 28, 2019 | 100,000 | — | 100,000 | — | ||||||||||||||
$ | 0.94 | July 21, 2021 | 710,000 | — | 532,500 | — | ||||||||||||||
Balance December 31, 2017 | 16,049,909 | $ | 1,692 | 13,047,409 | $ | 1,692 |
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
December 31, 2017
(expressed in thousands of U.S. dollars, unless otherwise stated) (unaudited)
Exercise Price | Expiry Date | Number Outstanding | Aggregate Intrinsic Value | Number Exercisable | Aggregate Intrinsic Value | |||||||||||||||
C$ | 4.70 | November 9, 2022 | 280,400 | C$ | 2,692 | 280,400 | C$ | 2,692 | ||||||||||||
C$ | 8.40 | September 18, 2023 | 105,000 | 619 | 105,000 | 619 | ||||||||||||||
C$ | 5.40 | November 15, 2023 | 378,500 | 3,369 | 378,500 | 3,369 | ||||||||||||||
C$ | 7.50 | December 14, 2023 | 182,500 | 1,241 | 182,500 | 1,241 | ||||||||||||||
C$ | 7.50 | December 16, 2023 | 52,500 | 357 | 52,500 | 357 | ||||||||||||||
C$ | 13.60 | December 17, 2024 | 397,500 | 278 | 397,500 | 278 | ||||||||||||||
C$ | 11.00 | May 30, 2025 | 50,000 | 165 | 50,000 | 165 | ||||||||||||||
1,446,400 | C$ | 8,721 | 1,446,400 | C$ | 8,721 |
The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on the Company’s closing Common Share price of C$0.74 as of December 31, 2017,September 30, 2022, that would have been received by the optionOption holders had all optionOption holders exercised their optionsOptions as of that date. The total number ofThere were no in-the-money optionsOptions vested and exercisable as of December 31, 2017 was 9,189,909. The total intrinsic value of options exercised during the six months ended December 31, 2017 was nil.
September 30, 2022. As of December 31, 2017,September 30, 2022, there was $247$ of unrecognized compensation cost related to unvested share-based compensation arrangements granted under the 2016 Incentive Stock Option Plan. The cost is expected to be recognized over a remaining weighted average period of approximately 0.7 years.plans.
Warrants |
Schedule of warrant transactions
Warrant transactions are summarized as follows:
Number of Warrants | Weighted Average Exercise Price | |||||||
Balance, June 30, 2022 | 1,851,624 | C$ | 11.60 | |||||
Granted | - | - | ||||||
Exercised | - | - | ||||||
Cancelled/expired | - | - | ||||||
Balance, September 30, 2022 | 1,851,624 | C$ | 11.60 |
Warrants | Weighted average exercise price (C$) | |||||||
Balance June 30, 2017 | 20,609,086 | $ | 0.79 | |||||
Granted | 4,362,991 | 0. 75 | ||||||
Balance, December 31, 2017 | 24,972,077 | $ | 0. 78 |
As discussed above under Note 6, the Company granted 1,207,929 Warrants to Lind in connection with the funding of the Convertible Security Increase. As discussed above under Note 7a, the Company granted 2,962,500 Warrants and 192,562 Broker Warrants in conjunction with the July 2017 Private Placement.
At December 31, 2017, the Company has outstanding exercisable Warrants, as follows:
Number | Exercise Price (C$) | Expiry Date | ||||||
355,132 | 0.54 | December 6, 2020 | ||||||
308,901 | 0.62 | October 31, 2020 | ||||||
283,413 | 0.66 | September 28, 2020 | ||||||
3,125,000 | 0.72 | December 22, 2018 | ||||||
260,483 | 0.73 | August 15, 2020 | ||||||
9,150,285 | 0.75 | January 19, 2019 | ||||||
3,155,062 | 0.79 | July 26, 2021 | ||||||
3,860,800 | 0.85 | February 14, 2020 | ||||||
3,043,024 | 0.85 | February 21, 2020 | ||||||
539,307 | 0.85 | February 28, 2020 | ||||||
890,670 | 0.90 | March 31, 2020 | ||||||
24,972,077 |
The Company has a loan with Mark Smith, President, Chief Executive Officer (“CEO”) and Executive Chairman of NioCorp (the “Original Smith Loan”), that bears an interest rate of 10%, is secured by the Company’s assets pursuant to a concurrently executed general security agreement (the “General Security Agreement”), and is subject to both a 2.5% establishment fee and 2.5% prepayment fee. The principal amount outstanding under the Original Smith Loan is $1,000, and is due on June 17, 2018.
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
December 31, 2017
September 30, 2022
(expressed in thousands of U.S. dollars, unlessexcept per share amounts or as otherwise stated) (unaudited)
At September 30, 2022, the Company had outstanding exercisable Warrants, as follows:
Number | Exercise Price | Expiry Date | |||||
50,000 | C$ | 8.00 | December 18, 2022 | ||||
441,211 | C$ | 16.30 | May 10, 2023 | ||||
504,613 | C$ | 11.00 | June 30, 2024 | ||||
855,800 | C$ | 9.70 | February 19, 2025 | ||||
1,851,624 |
The Company has a
9. | RELATED PARTY TRANSACTIONS AND BALANCES |
Borrowings under the non-revolving credit facility agreement (the “Credit���Smith Credit Facility”) in the amountwith Mark Smith, Chief Executive Officer, President, and Executive Chairman of $2,000 with Mr. Smith. The Credit Facility bears anNioCorp, bear interest at a rate of 10%10% and drawdowns from the Smith Credit Facility are subject to a 2.5%2.5% establishment fee. Amounts outstanding under the Smith Credit Facility are secured by all of the Company’s assets pursuant to the General Security Agreement.a general security agreement. The Smith Credit Facility contains financial and non-financial covenants customary for a facility of its size and nature andnature. The maturity date for the Smith Credit Facility is due on June 16, 2018. During the quarter ended December 31, 2017, Mr. Smith advanced an additional $180 to the Company under the Credit Facility. 30, 2023.
As of December 31, 2017,September 30, 2022, the principal amount outstanding under the Smith Credit Facility is $355was $2,000 and accounts payable and accrued liabilities includedas of September 30, 2022, include accrued interest of $51payable and loan establishment fees payable to Mr.under the Smith Credit Facility.
10. | EXPLORATION EXPENDITURES |
Schedule of $176.exploration expenditures
For the Three Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Technical studies and engineering | $ | 141 | $ | 50 | ||||
Field management and other | 154 | 124 | ||||||
Metallurgical development | 993 | 436 | ||||||
Geologists and field staff | - | 11 | ||||||
Total | $ | 1,288 | $ | 621 |
On June 20, 2016,
11. | LEASES |
The Company incurred lease costs as follows:
For the Three Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Operating Lease Cost: | ||||||||
Fixed rent expense | $ | 21 | $ | 21 | ||||
Variable rent expense | 3 | 2 | ||||||
Short term lease cost | 2 | 5 | ||||||
Sublease income | (6 | ) | (5 | ) | ||||
Net lease cost – other operating expense | 20 | 23 |
14
NioCorp Developments Ltd.
Notes to the Company announced a joint development agreement (the “Development Agreement”) with IBC Advanced Alloys Corp. (“IBC”) to investigate and develop applications for scandium-containing alloys for multiple downstream markets. In addition to his management dutiesCondensed Consolidated Financial Statements
September 30, 2022
(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
The maturities of lease liabilities are as follows at NioCorp, Mark Smith is also the Chairman of the IBC Board of Directors. Under the terms of the Development Agreement, each party bears its own costs incurred in development efforts. During the quarter ended December 31, 2017 the company supplied IBC with a small quantity of Scandium Trioxide which was used to manufacture several aluminum-scandium alloy ingots. The ingots, representing a range of scandium content, will undergo chemical analysis and other metallurgical testing to confirm the microstructure and performance of the alloys.September 30, 2022:
Fiscal Year Lease Maturities | ||||
Total lease payments – through September 2023 | $ | 93 | ||
Less portion of payments representing interest | (7 | ) | ||
Present value of lease payments – current lease liability | $ | 86 |
For the three months ended December 31, | For the six months ended December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Technical studies and engineering | $ | 59 | $ | 1,551 | $ | 454 | $ | 1,988 | ||||||||
Field management and other | 132 | 399 | 342 | 633 | ||||||||||||
Metallurgical development | 89 | 419 | 172 | 1,691 | ||||||||||||
Geologists and field staff | 23 | 28 | 48 | 55 | ||||||||||||
Total | $ | 303 | $ | 2,397 | $ | 1,016 | $ | 4,367 |
On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “Act”), which took effect on January 1, 2018. Some notable provisions of the Act include a reduction of the corporate income tax rate from 35% to 21%, 100% bonus depreciation for certain capital expenditures, and a change from a worldwide system with deferral to a territorial tax system, which includes a one-time toll charge on certain undistributed earnings of non-U.S. subsidiaries. The Company does not expect any material impacts of this new legislation on its consolidated financial statements.
The Company measures the fair value of financial assets and liabilities based on USU.S. GAAP guidance which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
The Company classifies financial assets and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables, or other financial liabilities depending on their nature. Financial assets and financial liabilities are recognized at fair value on their initial recognition.
Financial assets and liabilities classified as held-for-trading are measured at fair value, with gains and losses recognized in net income. Financial assets classified as held-to-maturity, loans and receivables, and financial liabilities other than those classified as held-for-trading are measured at amortized cost, using the effective interest method of amortization. Financial assets classified as available-for-sale, including investments in equity securities, are measured at fair value, with unrealized gains and losses being recognized in income.
|
Financial instruments including receivables, accounts payable and accrued liabilities, and related party loans are carried at amortized cost, which Managementmanagement believes approximates fair value due to the short-term nature of these instruments.
The following table presentstables present information about the assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2017September 30, 2022, and June 30, 2017,2022, respectively, and indicatesindicate 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:instrument.
Schedule of fair values determined by level 3 inputs are unobservable data
As of September 30, 2022 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 3,192 | $ | 3,192 | $ | - | $ | - | ||||||||
Equity securities | 10 | 10 | - | - | ||||||||||||
Total | $ | 3,202 | $ | 3,202 | $ | - | $ | - | ||||||||
Liabilities: | ||||||||||||||||
Warrant Liability | $ | 964 | $ | - | $ | - | $ | 964 |
As of December 31, 2017 | As of June 30, 2022 | |||||||||||||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 80 | $ | 80 | $ | — | $ | — | $ | 5,280 | $ | 5,280 | $ | - | $ | - | ||||||||||||||||
Available-for-sale securities | 17 | 17 | — | — | ||||||||||||||||||||||||||||
Equity securities | 10 | 10 | - | - | ||||||||||||||||||||||||||||
Total | $ | 97 | $ | 97 | $ | — | $ | — | $ | 5,290 | $ | 5,290 | $ | - | $ | - | ||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Convertible debt | $ | 1,609 | $ | — | $ | — | $ | 1,609 | ||||||||||||||||||||||||
Derivative liability, convertible debt | 82 | — | — | 82 | ||||||||||||||||||||||||||||
Total | $ | 1,691 | $ | — | $ | — | $ | 1,691 |
As of June 30, 2017 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 238 | $ | 238 | $ | — | $ | — | ||||||||
Restricted cash | 265 | 265 | — | — | ||||||||||||
Available-for-sale securities | 23 | 23 | — | — | ||||||||||||
Total | $ | 526 | $ | 526 | $ | — | $ | — | ||||||||
Liabilities: | ||||||||||||||||
Convertible debt | $ | 3,465 | $ | — | $ | — | $ | 3,465 | ||||||||
Derivative liability, convertible debt | 82 | — | — | 82 | ||||||||||||
Total | $ | 3,547 | $ | — | $ | — | $ | 3,547 |
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
September 30, 2022
(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
The Company measures theLind III Convertible Security discussed in Note 7 was initially recorded at fair market value, of thewhich represented a nonrecurring fair value measurement using a Level 3 components usinginput. At September 30, 2022, 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 theestimated fair value of this instrument approximated carrying value given that the instrument was adjusted to fair value on September 25, 2022 and has a short remaining life until maturity.
13. | PROPOSED TRANSACTION |
On September 25, 2022, the Company, GX Acquisition Corp. II, a Delaware corporation (“GXII”), and Big Red Merger Sub Ltd (“Merger Sub”), a Delaware corporation incorporated in September 2022, and a direct, wholly owned subsidiary of the Company, entered into a business combination agreement (the “Business Combination Agreement”). Pursuant to the Business Combination Agreement, as the result of a series of transactions, GXII will become a subsidiary of the Company (as successor by merger to the Company’s convertible debt components classified as Level 3subsidiary, Elk Creek Resources Corporation, a Delaware corporation (“ECRC”)), with the pre-combination public shareholders of GXII receiving Common Shares based on a fixed exchange ratio of 1.11829212 (the “Exchange Ratio”) Common Shares for each GXII Class A common share held and not redeemed, and the GXII founders receiving shares in GXII (as successor by merger to ECRC) based on the fair value hierarchy:
Balance, June 30, 2017 | $ | 3,547 | ||
Additional debt drawdown | 1,000 | |||
Conversions to equity | (3,030 | ) | ||
Realized and unrealized gains | 174 | |||
Balance, December 31, 2017 | $ | 1,691 |
|
12. Subsequent events
Exchange Ratio. Pursuant to notice provided by Lindthe Business Combination Agreement, after closing, the GXII founders will have the right to exchange such shares for Common Shares on a one-for-one basis under certain conditions. Pursuant to the Business Combination Agreement, the Company of its election to advance an additional $2,500 in fundingwill also assume the obligations under the Initial Convertible Securityissued and outstanding GXII warrants, which will be converted into warrants exercisable into Common Shares following closing of the Transaction. The Business Combination Agreement contemplates that the Company will undertake a reverse stock split of the Common Shares at the time of close in connection with an expected cross-listing to the Nasdaq Stock Market (“Nasdaq”). In addition, pursuant to the Business Combination Agreement, post-closing, the Company’s Board will include two directors from pre-combination GXII. The transactions contemplated by the Business Combination Agreement and the Lindancillary agreements thereto are referred to collectively as the “Transaction.”
As currently structured, the Business Combination Agreement (the “Second Tranche Increase”), Lind fundedis expected to be accounted for as a recapitalization in accordance with U.S. GAAP. Under this method of accounting, GXII will be treated as the full $2,500 Second Tranche Increase“acquired” company for financial reporting purposes. Accordingly, the transaction is treated as the equivalent of February 7, 2018. Upon paymentNioCorp issuing Common Shares for the net assets of the full $2,500GXII, accompanied by a recapitalization. The net assets of GXII will be stated at historical cost, with no goodwill or other intangible assets recorded.
In addition, in funding by Lind to the Company, the face amount of the Initial Convertible Security was increased by $3,000 ($2,500 in additional funding and $500 in implied interest amount). In connection with the funding,entry into the Business Combination Agreement, the Company issued Common Share purchase warrants (the ‘Second Tranche Warrants”announced the signing of non-binding letters of intent (“LOIs”) for two separate financing packages with Yorkville. Subject to Lind as follows:
Funding Date | Face Value1 | Warrants Issued | Issue Price2 | Warrant Expiry Date | |
January 30, 2018 | $ | 1,800 | 1,546,882 | C$0.72 | January 30, 2021 |
February 5, 2018 | 600 | 529,344 | C$0.70 | February 5, 2021 | |
February 7, 2018 | 600 | 541,435 | C$0.69 | February 7, 2021 |
In addition,entering into definitive agreements, these financings could provide the termsCompany with access to up to an additional $81.0 million to help advance the Elk Creek Project. The financings contemplated by the LOIs include $16.0 million in convertible debentures that are expected to be funded at the closing of the Lind Agreement, as amended, provide for additional funding of up to $2,000 as part of the second tranche,Transaction, and subject to certain conditions, for total gross proceeds tolimitations can be repaid by the Company of upin either cash or Common Shares, and a standby equity purchase facility pursuant to $4,500.
In January 2018, Mark Smith advanced an additional $125 in funding underwhich the existing Credit Facility withCompany will have the Company. This funding isability to require Yorkville, subject to the same termsconditions set out in the definitive agreements, to purchase up to $65.0 million of its Common Shares.
The proposed Transaction is expected to close in the first calendar quarter of 2023, subject to the satisfaction or waiver of certain customary closing conditions contained in the Business Combination Agreement, including, among other things, (i) obtaining required approvals of the Transaction and conditionsrelated matters by the respective shareholders of NioCorp and GXII, (ii) the effectiveness of the registration statement on Form S-4 that the Company originally filed on November 7, 2022, (iii) receipt of approval for listing on Nasdaq of the NioCorp Common Shares to be issued in connection with the Transaction, (iv) receipt of approval for listing on Nasdaq of the NioCorp warrants to be issued in exchange for the GXII warrants that NioCorp has agreed to assume, (v) receipt of approval from the TSX with respect to the issuance and listing of the NioCorp Common Shares issuable in connection with the Transaction, (vi) that NioCorp and its subsidiaries (including GXII, as successor by merger to ECRC) will have at least $5.000001 million of net tangible assets upon the prior drawdowns underconsummation of the Credit FacilityTransaction, after giving effect to any redemptions by GXII public stockholders and after payment of underwriters’ fees or commissions, (vii) that, at closing, NioCorp and its subsidiaries (including GXII, as successor by merger to ECRC) will be used for general corporate purposes.have received cash in an amount equal to or greater than $15.0 million,
16
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
September 30, 2022
(expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
subject to certain adjustments, and (viii) the absence of any injunctions enjoining or prohibiting the consummation of the Business Combination Agreement. The proposed additional financings contemplated by the LOIs will also be subject to the approval of the TSX and the Company’s shareholders.
17
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, 2017September 30, 2022, and the related notes thereto, which have been prepared in accordance with generally accepted accounting principles in the United States (“USU.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 “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.
Restatement of Previously Issued Financial Statements
This Management’s Discussion and Analysis of Financial Condition and Results of Operations has been amended and restated to give effect to the restatement of our unaudited interim condensed consolidated financial statements as of and for the three months ended September 30, 2022, as more fully described in Note 3 to the Condensed Consolidated Financial Statements entitled “Restatement.” For further detail regarding the Restatement, see “Explanatory Note” and Item 4, “Controls and Procedures.”
Note Regarding Forward LookingForward-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 have been based upon our current business and operating plans, as approved by the Company’s Board of Directors, and may include statements regarding our cash and other funding requirements and timing and sources thereof; results of feasibility studies; the accuracy of mineral resource and reserve estimates and assumptions on which they are based; the results of economic assessments and exploration activities; and current market conditions and project development plans, and the Transaction (as defined below). The material assumptions used to develop the forward-looking statements and forward-looking information included in this Quarterly Report on Form 10-Q include: our expectations of mineral prices; our forecasts and expected cash flows; our projected capital and operating costs; accuracy of mineral resource estimates and resource modeling and feasibility study results; expectations regarding mining and metallurgical recoveries; timing and reliability of sampling and assay data; anticipated political and social conditions; expected national and local government policies, including legal reforms; successful advancement of the Company’s required permitting processes; and the ability to successfully raise additional capital; NioCorp and GXII (as defined below) being able to receive all required regulatory, third-party and shareholder approvals for the proposed Transaction; the amount of redemptions by GXII public stockholders; the execution of definitive agreements relating to the convertible debenture transaction and the standby equity purchase facility contemplated by the term sheets with Yorkville (as defined below); and other current estimates and assumptions regarding the proposed Transaction and its benefits.
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
18
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 Business:
● | 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 the restatement of our consolidated financial statements as of and for the fiscal years ended June 30, 2022 and 2021 and the interim periods ended September 30, 2021, December 31, 2021 and March 31, 2022 and the impact of such restatement on our future financial statements and other financial measures; | |
● | risks related to the material weakness in our internal control over financial reporting, our efforts to remediate such material weakness and the timing of remediation; | |
● | risks related to cost increases for our exploration and, if warranted, development projects; |
● | risks related to | |
● | risks related to equipment and supply shortages; | |
● | risks related to current and future offtake agreements, joint ventures, and partnerships; | |
● | risks related to our ability to attract qualified management; | |
● | risks related to the effects of the COVID-19 pandemic or other global health crises on our business plans, financial condition and liquidity; and | |
● | risks related to the ability to enforce judgment against certain of our directors. |
Risks Related to Mining and Exploration:
● | risks related to estimates of mineral resources and reserves; |
● | 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 | |
● | risks related to the estimation of mineral resources and mineral reserves; |
● | risks related to changes in mineral resource and reserve estimates; |
● | risks related to | |
● | risks related to the management of the water balance at our Elk Creek Project; | |
● | risks related to claims on the title to our properties; | |
● | risks related to potential future litigation; and |
● | risks related to our |
Risks Related to Government Regulations:
● | risks related to our ability to obtain or renew 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 | |
● | risks related to the impacts of climate change, as well as actions taken or required by governments related to strengthening resilience in the face of potential impacts from climate change; and |
● | risks related to land reclamation |
Risks Related to Our Debt:
● | risks related to covenants contained in agreements with our secured creditors that may affect our assets; and |
● |
risks related to the |
Risks Related to Our Common Shares:
● | risks related to |
● | risks related to |
Risks Related to the Proposed Transaction
● | risks related to |
● | risks related to the occurrence of any event, change or other circumstances that could give rise to the termination of the Business Combination Agreement (as defined below) and/or payment of the termination fees; |
● | risks related to the outcome of any legal proceedings that may be instituted against NioCorp or GXII following announcement of the Business Combination Agreement and the Transaction; |
● | risks related to the inability to complete the Transaction due to, among other things, the failure to obtain NioCorp shareholder approval or GXII stockholder approval or the execution of definitive agreements relating to the convertible debenture transaction and the standby equity purchase facility contemplated by the term sheets with Yorkville; |
● | the risk that the announcement and consummation of the Transaction disrupts NioCorp’s current plans; |
● | risks relating to the ability to recognize the anticipated benefits of the Transaction; |
● | risks relating to unexpected costs related to the Transaction; and |
● | the risks that the consummation of the Transaction is substantially delayed or does not occur, including prior to the date on which GXII is required to liquidate under the terms of its charter documents. |
New Risks in this Form 10-Q/A:
● | risks related to the restatement of our consolidated financial statements as of and for the three months ended September 30, 2022 and the impact of such restatement on our future financial statements and other financial measures; and |
● | risks related to the additional material weaknesses in our internal control over financial reporting as of September 30, 2022 identified by management subsequent to the filing of the Original Form 10-Q, our efforts to remediate such material weaknesses and the timing of remediation. |
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-K10-K/A for the fiscal year ended June 30, 2017,2022, as well as other factors described elsewhere in this report and the Company’s other reports filed with the SEC.Securities and Exchange Commission (“SEC”).
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The Company’s forward-looking statements contained in this Quarterly Report on Form 10-Q are based on the beliefs, expectations, and opinions of Managementmanagement as of the date of this report. The Company does not assume any obligation to update forward-looking statements if circumstances or Management’smanagement’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 ComplianceQualified Person
Scott Honan, M.Sc., SME-RM, a qualified person as defined by National Instrument 43-101 - Standards of Disclosure for Mineral Projects, has supervised the preparation of theAll technical and scientific and technical information that forms the basis for the Elk Creek Project disclosureincluded in this Quarterly Report on Form 10-Q derived from the June 2022 Elk Creek Project feasibility study prepared by qualified persons (within the meaning of both National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) and subpart 1300 of Regulation S-K (“S-K 1300”), as applicable) has been reviewed and approved the disclosure in this Quarterly Report on Form 10-Q related thereto.by Scott Honan, M.Sc., SME-RM, NioCorp’s Chief Operating Officer. Mr. Honan is not independent of the Company,a “Qualified Person” as hesuch term is the Vice President, Business Development. For additional information on the Elk Creek Project, including information relating to exploration, data verification, the mineral resource estimates and the mineral reserve estimates, see the Reviseddefined in NI 43-101 Technical Report (the “Revised Elk Creek Feasibility Study”), dated December 15, 2017, which is available under NioCorp’s profile on the Canadian Securities Administrators website at www.sedar.com (“SEDAR”).and S-K 1300.
Company Overview
NioCorp is developing the Elk Creek Project, located in southeast Nebraska. The Elk Creek Project is an advanced Niobium (Nb)/(“Nb”), Scandium (Sc)/(“Sc”) and Titanium (Ti) exploration project.(“Ti”) development stage property. The Company is evaluating the potential to produce several Rare Earth byproducts from the Elk Creek Project. Niobium is used to produce various superalloys that are extensively used in high performance aircraft and jet turbines. It also is used in High-Strength, Low-Alloy (“HSLA”) steel, a stronger steel used in automotive,automobiles, bridges, structural systems, buildings, pipelines, and other applications that generally increases strength and/or reduces the weight, of those applications, which can result in environmental benefits, including reduced fuel consumption and material usage and fewer air emissions. Scandium can be combined with aluminum to make super-high-performancehigh-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. Rare Earths are critical to electrification and decarbonization initiatives and can be used to manufacture the strongest permanent magnets commercially available.
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 and construction of the Elk Creek Project. With
Recent Corporate Events
On September 25, 2022, the recent filingCompany, GXII, and Merger Sub, entered into the Business Combination Agreement. Pursuant to the Business Combination Agreement, as the result of a series of transactions, GXII will become a subsidiary of the Revised Elk Creek Feasibility Study (see “Elk Creek Project Update,” below)Company (as successor by merger to the Company’s subsidiary, ECRC), wewith the pre-combination public shareholders of GXII receiving Common Shares based on the Exchange Ratio of 1.11829212 Common Shares for each GXII Class A common share held and not redeemed, and the GXII founders receiving shares in GXII (as successor by merger to ECRC) based on the Exchange Ratio. Pursuant to the Business Combination Agreement, after closing, the GXII founders will have the right to exchange such shares for Common Shares on a one-for-one basis under certain conditions. Pursuant to the Business Combination Agreement, the Company will also assume the obligations under the issued and outstanding GXII warrants, which will be converted into warrants exercisable into Common Shares following closing of the Transaction. The Business Combination Agreement contemplates that the Company will undertake a reverse stock split of the Common Shares at the time of close in connection with an expected cross-listing to Nasdaq. In addition, pursuant to the Business Combination Agreement, post-closing, the Company’s Board will include two directors from pre-combination GXII. The transactions contemplated by the Business Combination Agreement and the ancillary agreements thereto are currently workingreferred to obtaincollectively as the “Transaction.”
The business combination pursuant to the Business Combination Agreement will be accounted for as a recapitalization in accordance with U.S. GAAP. Under this method of accounting, GXII will be treated as the “acquired” company for financial reporting purposes. Accordingly, the transaction is treated as the equivalent of
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NioCorp issuing Common Shares for the net assets of GXII, accompanied by a recapitalization. The net assets of GXII will be stated at historical cost, with no goodwill or other intangible assets recorded.
In addition, in connection with the entry into the Business Combination Agreement, the Company announced the signing of non-binding LOIs for two separate financing necessarypackages with Yorkville. Subject to entering into definitive agreements, these financings could provide the Company with access to up to an additional $81.0 million to help advance the Elk Creek Project. The financings contemplated by the LOIs include $16.0 million in convertible debentures that are expected to be funded at the closing of the Transaction, and subject to certain limitations can be repaid by the Company in either cash or Common Shares, and a standby equity purchase facility pursuant to which the Company will have the ability to require Yorkville, subject to the conditions set out in the definitive agreements, to purchase up to $65.0 million of its Common Shares.
The proposed Transaction is expected to close in the first calendar quarter of 2023, subject to the satisfaction or waiver of certain customary closing conditions contained in the Business Combination Agreement, including, among other things, (i) obtaining required approvals of the Transaction and related matters by the respective shareholders of NioCorp and GXII, (ii) the effectiveness of the registration statement on Form S-4 that the Company originally filed on November 7, 2022, (iii) receipt of approval for listing on Nasdaq of the NioCorp Common Shares to be issued in connection with the Transaction, (iv) receipt of approval for listing on Nasdaq of the NioCorp warrants to be issued in exchange for the GXII warrants that NioCorp has agreed to assume, (v) receipt of approval from the Toronto Stock Exchange (the “TSX”) with respect to the issuance and listing of the NioCorp Common Shares issuable in connection with the Transaction, (vi) that NioCorp and its subsidiaries (including GXII, as successor by merger to ECRC) will have at least $5.000001 million of net tangible assets upon the consummation of the Transaction, after giving effect to any redemptions by GXII public stockholders and after payment of underwriters’ fees or commissions, (vii) that, at closing, NioCorp and its subsidiaries (including GXII, as successor by merger to ECRC) will have received cash in an amount equal to or greater than $15.0 million, subject to certain adjustments, and (viii) the absence of any injunctions enjoining or prohibiting the consummation of the Business Combination Agreement. The proposed additional financings contemplated by the LOIs will also be subject to the approval of the TSX and the Company’s shareholders.
Final proceeds will depend upon redemption rates of current GXII shareholders at the consummation of the proposed Transaction. In connection with the closing of the Transaction, a significant number of GXII shareholders may exercise their redemption rights. See Part II, Item 1A, “Risk Factors—If the Transaction is consummated, the combined company may not realize all or any of the anticipated benefits expected as a result of the Transaction.”
Elk Creek Project to construction and operations, as well as conducting permitting and other related activities at andUpdate
On September 6, 2022, the Company announced that it filed with the SEC a Technical Report Summary (“TRS”) based on the Company’s 2022 Feasibility Study for the Elk Creek Critical Minerals Project.
Emerging Growth Company Status
We qualify as an “emerging growth company” as defined in Section 101 The TRS was filed with the SEC to comply with Item 601(b)(96) and S-K 1300, which regulates disclosure of the Jumpstart our Business Startups Act (“JOBS Act”) as we do not have more than $1.07 billion in annual gross revenueMineral Resources and did not have such amount as of June 30, 2017, 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 SharesMineral Reserves. A companion Technical Report for Canadian purposes, pursuant to an effective registration statement.National Instrument 43-101 (“NI 43-101”), was filed by NioCorp on SEDAR on June 28, 2022. The technical data and economic conclusions of these reports are substantively identical, with minor differences between the reports resulting only from the respective disclosure requirements of S-K 1300 and NI 43-101.
As an emerging growth company underOn September 6, 2022, the JOBS Act, we have electedCompany announced that its demonstration-scale processing plant (the “demonstration plant”) in Quebec, Canada had commenced a three-tonne sample of representative ore from the Elk Creek Project. The demonstration plant project is intended to opt outdemonstrate that the Company can extract and separate rare earth elements from ore that NioCorp expects to mine from the Project site, subject to receipt of the extended transition periodnecessary project financing, and that its simplified process for complying with new or revised standards pursuant to Section 107(b) of the JOBS Act. potentially producing niobium, scandium, and titanium is technically and economically feasible.
The election is irrevocable.demonstration plant will process Elk Creek ore samples in three phases.
As an emerging growth company, we are exempt from Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section 14A(a) and (b) of the Exchange Act. Such sections are described below:
● |
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● | Phase 3 is designed to demonstrate the technical viability of separating high-purity versions of several target magnetic rare earth products from Elk Creek ore samples, as well as confirming previously achieved high recovery rates for high-purity Scandium trioxide. |
As long as we qualify as an emerging growth company, weThe potential magnetic rare earth products include Neodymium-Praseodymium (“NdPr”) oxide, Dysprosium oxide, and Terbium oxide. NioCorp will not be requiredutilize conventional solvent extraction (“SX”) technology to comply withtest a rare earth separation approach developed by NioCorp and L3 Process Innovation (“L3”).
On October 25, 2022, the requirementsCompany announced that its demonstration plant had completed demonstrating its planned process for removing calcium and magnesium from ore obtained from the Elk Creek Project. This positive result, which is part of Section 404(b)Phase I operations of the Sarbanes-Oxley Actdemonstration plant, is a key milestone in NioCorp’s proposed optimization of 2002its process flow sheet for the Project, which was designed by L3 and Section 14A (a)NioCorp.
The well-known and (b)time-tested process NioCorp is employing to remove calcium and magnesium carbonates from the ore using thermal treatment and leaching is part of the Exchange Act.demonstration plant’s Phase I flowsheet. This step operated successfully, and the removed calcium and magnesium were produced at demonstration scale as a mixed calcium and magnesium carbonate. Removing carbonate minerals in this fashion is expected to reduce the size of the follow-on planned production steps and make them more efficient. Characterization of the calcium and magnesium carbonate from the completed demonstration plant production runs has demonstrated very low levels of impurities, and an overall 99% purity of the mixed calcium-magnesium carbonate. Phase I demonstration plant operations will continue with calcination and a ramp-up of leaching operations as testwork and assembly of Phase II and Phase III of the demonstration plant’s planned operations proceed in parallel.
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Other Activities
Recent Corporate Events
Long-termOur long-term financing efforts continued during the quarter ended December 31, 2017, with principal activities focused on outreach to and discussions with several potential sources of project funding, as well as completingSeptember 30, 2022, including the technical due diligence review (the “technical review”) ofproposed Transaction, discussed above. As funds become available through the Company’s recently released Revised Elk Creek Feasibility Study by RPM Global USA, Inc. on behalf of a potential debt financing syndicate. The technical review is projectedfundraising efforts, we expect to be completed inundertake the quarter ending March 31, 2018. The technical review will provide an independent analysisfollowing activities:
● | Continuation of the Company’s efforts to secure federal, state and local permits; | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
● | Continued evaluation of the potential to produce Rare Earth products; | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
● | Negotiation and completion of offtake agreements for the remaining uncommitted production from the project; | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
● | Negotiation and
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Financial and Operating Results
Three months ended Significant items affecting operating expenses are noted below:
Professional feesincreased
Exploration expenditures Other operating expensesinclude investor relations, general office expenditures, equity offering and proxy expenditures, board-related expenditures and other miscellaneous costs. These costs increased in 2022 as compared to 2021 primarily due to Other significant items impacting the change in the Company’s net loss are noted below:
Change in fair value 24
Foreign exchange
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, As of We expect that the Company will operate at a loss for the foreseeable future. The Company’s current planned The Company anticipates that it Elk Creek On September 25, 2022, the Company, GXII and Merger Sub entered into the Business Combination Agreement. The NioCorp Board considered a number of factors as generally supporting its decision to enter into the Business Combination Agreement, including, but not limited to, the following material factors:
Except as set forth above,
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. 27
Operating Activities During the Financing Activities Financing inflows were Cash Flow Considerations The Company has historically relied upon debt and equity financings 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,
Warrants
We apply relevant accounting guidance for warrants to purchase our stock based on the nature of the relationship with the counterparty. For warrants issued to investors or lenders in exchange for cash or other financial assets, we follow guidance issued within ASC 480, Distinguishing Liabilities from Equity, and ASC Topic 815, Derivatives and Hedging, (“ASC 815”) to assist in the determination of whether the warrants should be classified as liabilities or equity. The fair value of warrants is estimated using Black Scholes modeling or Monte Carlo modeling, depending on the settlement features embedded in the warrant. Inputs under both models include inputs such as NioCorp’s Common Share price, the risk-free interest rate, the expected term, the volatility, and the dividend rate. Warrants that are determined to require liability classifications are measured at fair value upon issuance and are subsequently remeasured to their then fair value at each subsequent reporting period with changes in fair value recorded in current earnings. Warrants that are determined to require equity classifications are measured at fair value upon issuance and are not subsequently remeasured unless they are required to be reclassified. Certain U.S. Federal Income Tax Considerations
28 Company’s Annual Report on Form Other The Company has one class of shares, being Common Shares. A summary of outstanding shares, share options, warrants, and convertible debt option as of November 14, 2022, is set out below, on a fully-diluted basis.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest rate risk The Company’s exposure to changes in market interest rates, relates primarily to the Company’s earned interest income on cash deposits and short-term investments. The Company maintains a balance between the liquidity of cash assets and the interest rate return thereon. The carrying amount of financial assets, net of any provisions for losses, represents the Company’s maximum exposure to credit risk. Foreign currency exchange risk The Commodity price risk The Company is exposed to commodity price risk related to the elements associated with the Elk Creek Project. A significant decrease in the global demand for these elements may have a material adverse effect on our business. The Elk Creek Project is not in production, and the Company does not currently hold any commodity derivative positions. ITEM 4. CONTROLS AND PROCEDURES Disclosure Controls and Procedures (Restated) At the end of the period covered by this Quarterly Report on Form 10-Q for the quarter ended 29 controls and procedures were not effective due to the material weakness in internal control over financial reporting relating to the Company’s controls over accounting for non-routine transactions described below. Subsequent to that evaluation, the Company identified an additional error, requiring the restatement of the Company’s condensed consolidated financial statements as of and for the three months ended September 30, 2022, which was partially caused by the same material weakness in internal control over financial reporting that management had concluded existed as of September 30, 2022 at the time the Original Form 10-Q was filed. In addition, subsequent to the evaluation of the effectiveness of the design and operations of our disclosure controls and procedures conducted at the end of the period covered by this Quarterly Report, management concluded that two other material weaknesses in internal control over financial reporting existed as of September 30, 2022, as described below. As a result, the CEO and CFO have The Company’s disclosure controls and procedures have been designed to ensure that: (i) information required to be disclosed by us in reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to
Material Weaknesses in Internal Control over Financing Reporting Existing as of September 30, 2022
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. Our management concluded that the previously disclosed material weakness relating to the Company’s controls over the accounting for non-routine transactions continued to exist as of September 30, 2022. Specifically, such controls were not adequately designed to ensure the consideration of all related relevant accounting guidance when such transactions were recorded. As disclosed in the Company’s Amendment No. 1 on Form 10-K/A to its Annual Report on Form 10-K for the fiscal year ended June 30, 2022, and in the Original Form 10-Q, this material weakness resulted in the restatement of the Company’s consolidated financial statements as of and for the fiscal years ended June 30, 2022 and 2021 and the interim periods ended September 30, 2021, December 31, 2021, and March 31, 2022. The Company identified an additional error during the quarter ended March 31, 2023 relating to the accounting treatment of the Lind Consent. The error required the restatement of the Company’s condensed consolidated financial statements as of and for the three months ended September 30, 2022, as discussed in Note 3. The Company determined that the error was partially caused by the same material weakness that existed as of June 30, 2022, and that was determined to exist as of September 30, 2022 at the time the Original Form 10-Q was filed. Therefore, the material weakness continued to exist as of September 30, 2022. In addition to the material weakness discussed above, our management concluded that two other material weaknesses in internal control over financial reporting existed as of September 30, 2022. A cumulative listing of our material weaknesses is disclosed below:
Additionally, these material weaknesses could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or timely detected. Remediation Plan for the Material Weaknesses To address our material weaknesses that were determined to exist as of September 30, 2022, we are currently devising a detailed plan to address each individual material weakness identified, as well as the overall monitoring process, including the following:
The process of designing and maintaining effective internal control over financial reporting is a continuous effort that requires management to anticipate and react to changes in our business, economic and regulatory environments and to expend significant resources. As we continue to evaluate our internal control over financial reporting, we may take additional actions to remediate the material weaknesses or modify the remediation actions described above. While we continue to devote significant time and attention to these remediation efforts, the material weaknesses will not be considered remediated until management completes the design and implementation of the actions described above and the controls operate for a sufficient period of time, and management has concluded, through testing, that these controls are effective. Changes in Internal Control over Financial Reporting
We know of no material, active, or pending legal proceedings against the Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers, or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
The information set forth in this Quarterly Report on Form 10-Q, including without limitation, the risk factors presented below, updates and should be read in conjunction with, the risk factors and information disclosed in the Company’s Annual Report on Form 10-K/A for the fiscal year ended June 30, 2022. Failure to consummate the Transaction could negatively impact the price of our Common Shares and have a material adverse effect on our results of operations, cash flows and financial position. The consummation of the Transaction is subject to the satisfaction or waiver of certain customary closing conditions contained in the Business Combination Agreement, including, among other things, (i) obtaining required approvals of the Transaction and related matters by the respective shareholders of NioCorp and GXII, (ii) the effectiveness of the registration statement on Form S-4, (iii) receipt of approval for listing on Nasdaq of the NioCorp Common Shares to be issued in connection with the Transaction, (iv) receipt of approval for listing on Nasdaq of the Warrants assumed from GXII, (v) receipt of approval from the TSX with respect to the issuance and listing of the NioCorp Common Shares issuable in connection with the Transaction, (vi) that NioCorp and its subsidiaries (including GXII, as successor by merger to ECRC) will have at least $5.000001 million of net tangible assets upon the consummation of the Transaction, after giving effect to any redemptions by GXII public stockholders and after payment of underwriters’ fees or commissions, (vii) that, at closing, NioCorp and its subsidiaries (including GXII, as successor by merger to ECRC) will have received cash in an amount equal to or greater than $15.0 million, subject to certain adjustments, and (viii) the absence of any injunctions enjoining or prohibiting the consummation of the Business Combination Agreement. Many of the conditions to completion of the Transaction pursuant to the Business Combination Agreement are not within NioCorp’s or GXII’s control, and we cannot predict with any certainty when these conditions will be satisfied, if at all. Although NioCorp and GXII are working to complete the Transaction, satisfying the conditions to and completion of the Transaction may take longer, and could cost more, than we expect. For example, the requirements for obtaining the required stock exchange clearances and approvals could delay the completion of the Transaction for a period of time or prevent it from occurring. Any delay in completing the Transaction within the expected timeframe may adversely affect the benefits that we expect to achieve from the Transaction. If any of these conditions are not satisfied or waived, it is possible that the Business Combination Agreement may be terminated and the Transaction may not be completed. If the Transaction is not completed for any reason, including as a result of NioCorp’s shareholders or GXII’s stockholders failing to approve the applicable proposals or the Business Combination Agreement is otherwise terminated, our ongoing business may be materially adversely affected and, without realizing any of the benefits of having completed the Transaction, we would be subject to a number of risks, including the following:
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If the Transaction is not completed, any of the risks described above may materialize and they may have a material adverse effect on our results of operations, cash flows, financial position and the price of our Common Shares. If the Transaction is consummated, the combined company may not realize all or any of the anticipated benefits expected as a result of the Transaction. The success of the Transaction, if consummated, will depend, in part, on the combined company’s ability to realize the anticipated benefits expected from the Transaction. In particular, a significant number of GXII shareholders may exercise their redemption rights in connection with the closing of the Transaction. In addition, the Business Combination Agreement does not make the consummation of the Transaction conditional on the entry into definitive documentation and consummation of the financing transactions contemplated by the LOIs with Yorkville, and there is no assurance that such financing transactions will be consummated. As a result, even if the minimum cash and net tangible asset conditions to closing set forth in the Business Combination Agreement are satisfied and the Transaction is consummated, after giving effect to (i) payments made to GXII stockholders who properly exercise their redemption rights and (ii) payments for potential taxes and certain expenses incurred by NioCorp and GXII in connection with the Transaction, to the extent not otherwise paid prior to the closing, the combined company may have less net cash proceeds available for general corporate purposes than anticipated. In addition, the listing of NioCorp’s Common Shares on Nasdaq may not provide the anticipated benefits of broader access to capital and financing alternatives or otherwise enhance NioCorp’s public profile. If the combined company is not successful in realizing these anticipated benefits, including the anticipated benefits of listing NioCorp’s Common Shares on the Nasdaq and the anticipated acceleration of financing efforts to advance, complete construction and commence operation of the Elk Creek Project, such consequences may adversely affect the combined company’s results of operations, cash flows, financial position and the price of our Common Shares. We may not be able to negotiate definitive documentation related to the Yorkville financings and may not otherwise be able to consummate the financing transactions contemplated thereby, which could have a material adverse effect on the Company. We may not be able to negotiate definitive agreements relating to the convertible debenture transaction and the standby equity purchase facility contemplated by the LOIs with Yorkville, which could cause NioCorp and GXII to encounter difficulties in completing the Transaction with financing terms as favorable as anticipated or at all. In addition, if the Yorkville financings are not completed, there can be no assurance that we will be able to find an investor of equal interest as Yorkville or a party that would be willing to consummate a transaction on terms as favorable as those contemplated by the LOIs. Failure by NioCorp to have access to financing on the terms and conditions as favorable as those contemplated by the LOIs may be materially adverse to NioCorp. 32 New Risk Factors in this Form 10-Q/A The Company recently determined additional material weaknesses in its internal control over financial reporting existed as of September 30, 2022. If not remediated, the Company’s failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in its financial statements and a failure to meet its reporting and financial obligations, each of which could have a material adverse effect on the Company’s financial condition and the trading price of the Common Shares. Our management has determined that additional material weaknesses in its internal control over financial reporting existed as of September 30, 2022. Specifically, these additional material weaknesses relate to management’s control over the design and maintenance of an effective control environment and its monitoring controls over the timely remediation of identified internal control weaknesses. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. As discussed in Item Part I, Item 4, “Controls and Procedures,” of this Quarterly Report on Form 10-Q, the Company’s management has assessed the effectiveness of its disclosure controls and procedures and concluded that they were not effective as of September 30, 2022. The Company is committed to remediating its material weaknesses as promptly as possible. Management is in the process of implementing its remediation plan. However, there can be no assurance as to when the material weaknesses will be remediated or that additional material weaknesses will not arise in the future. If the Company is unable to maintain effective internal control over financial reporting, its ability to record, process and report financial information timely and accurately could be adversely affected, which could subject the Company to litigation or investigations, require management resources, increase costs, negatively affect investor confidence and adversely impact the trading price of the Common Shares. We may face litigation and other risks as a result of the Restatement and the material weaknesses in our internal control over financial reporting. We previously identified a material weakness in our internal control over financial reporting that resulted in the restatement of our consolidated financial statements as of and for the fiscal years ended June 30, 2022 and 2021 and the interim periods ended September 30, 2021, December 31, 2021 and March 31, 2022. Subsequent to the filing of the Original Form 10-Q, we identified an additional error, requiring the restatement of the Company’s condensed consolidated financial statements as of and for the three months ended September 30, 2022, which was partially caused by the same material weakness in internal control over financial reporting. In addition, subsequent to the filing of the Original Form 10-Q, management concluded that two additional material weaknesses in internal control over financial reporting existed as of September 30, 2022. As a result of such material weaknesses, the Restatement and other matters raised or that may in the future be raised by the SEC or the Canadian securities regulators, we face potential for litigation or other disputes, which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the Restatement and the material weaknesses in our internal control over financial reporting and the preparation of our financial statements. As of the date of this Form 10-Q/A, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could adversely affect our business, financial condition and results of operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following Common Shares were issued pursuant to Section 3(a)(9) of the Securities Act, in connection with the voluntary conversion of a portion of the amount outstanding under the Lind III Convertible Security and based upon representations and warranties of Lind in connection therewith.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURES Pursuant to Section 1503(a) of the Dodd-Frank Act, issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose specified information about mine health and safety in their periodic reports. These reporting requirements are based on the safety and health requirements applicable to mines under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”) which is administered by the U.S. Department of Labor’s Mine Safety and Health Administration (“MSHA”). During the three-month period ended None. 33
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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 thereunto duly authorized. NIOCORP DEVELOPMENTS LTD. (Registrant)
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