ITEM 1. FINANCIAL STATEMENTS
Contents
NioCorp Developments Ltd.
Condensed Consolidated
Balance Sheets
(expressed in thousands of U.S. dollars, except share data)
(unaudited)
|
|
As of
|
|
|
Note
|
|
September 30,
2016
|
|
June 30,
2016
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
$
|
1,724
|
|
|
$
|
4,412
|
|
Restricted cash
|
|
|
4
|
|
|
|
500
|
|
|
|
-
|
|
Receivables
|
|
|
|
|
|
|
5
|
|
|
|
5
|
|
Prepaid expenses
|
|
|
|
|
|
|
66
|
|
|
|
101
|
|
Total current assets
|
|
|
|
|
|
|
2,295
|
|
|
|
4,518
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
65
|
|
|
|
65
|
|
Available for sale securities at fair value
|
|
|
|
|
|
|
43
|
|
|
|
32
|
|
Equipment
|
|
|
|
|
|
|
12
|
|
|
|
14
|
|
Mineral interests
|
|
|
|
|
|
|
10,617
|
|
|
|
10,617
|
|
Total assets
|
|
|
|
|
|
$
|
13,032
|
|
|
$
|
15,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
$
|
1,740
|
|
|
$
|
1,256
|
|
Related party loan
|
|
|
7
|
|
|
|
1,000
|
|
|
|
1,000
|
|
Total current liabilities
|
|
|
|
|
|
|
2,740
|
|
|
|
2,256
|
|
Convertible debt
|
|
|
5
|
|
|
|
6,279
|
|
|
|
6,466
|
|
Derivative liability, convertible debt
|
|
|
5
|
|
|
|
247
|
|
|
|
330
|
|
Total liabilities
|
|
|
|
|
|
|
9,266
|
|
|
|
9,052
|
|
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, unlimited shares authorized; shares outstanding: 180,598,219 and 180,467,990, respectively
|
|
|
6
|
|
|
|
58,465
|
|
|
|
58,401
|
|
Additional paid-in capital
|
|
|
|
|
|
|
8,847
|
|
|
|
8,630
|
|
Accumulated deficit
|
|
|
|
|
|
|
(62,997
|
)
|
|
|
(60,222
|
)
|
Accumulated other comprehensive loss
|
|
|
|
|
|
|
(549
|
)
|
|
|
(615
|
)
|
Total equity
|
|
|
|
|
|
|
3,766
|
|
|
|
6,194
|
|
Total liabilities and equity
|
|
|
|
|
|
$
|
13,032
|
|
|
$
|
15,246
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements
NioCorp Developments Ltd.
Condensed Consolidated
Statement 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
|
|
2016
|
|
2015
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
|
|
|
|
|
|
$
|
-
|
|
|
$
|
64
|
|
Depreciation
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
Employee related costs
|
|
|
|
|
|
|
540
|
|
|
|
338
|
|
Finance costs
|
|
|
|
|
|
|
-
|
|
|
|
12
|
|
Professional fees
|
|
|
|
|
|
|
333
|
|
|
|
33
|
|
Exploration expenditures
|
|
|
8
|
|
|
|
1,970
|
|
|
|
1,964
|
|
Other operating expenses
|
|
|
|
|
|
|
135
|
|
|
|
226
|
|
Total operating expenses
|
|
|
|
|
|
|
2,980
|
|
|
|
2,639
|
|
Change in financial instrument fair value
|
|
|
5
|
|
|
|
(296
|
)
|
|
|
(29
|
)
|
Foreign exchange loss
|
|
|
|
|
|
|
33
|
|
|
|
150
|
|
Interest expense
|
|
|
|
|
|
|
69
|
|
|
|
53
|
|
Gain on available for sale securities
|
|
|
|
|
|
|
(11
|
)
|
|
|
(6
|
)
|
Loss before income taxes
|
|
|
|
|
|
|
2,775
|
|
|
|
2,807
|
|
Income tax benefit
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
|
|
|
|
$
|
2,775
|
|
|
$
|
2,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
$
|
2,775
|
|
|
$
|
2,807
|
|
Other comprehensive gain:
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting currency translation
|
|
|
|
|
|
|
(66
|
)
|
|
|
(234
|
)
|
Total comprehensive loss
|
|
|
|
|
|
$
|
2,709
|
|
|
$
|
2,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share, basic and diluted
|
|
|
|
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
180,530,068
|
|
|
|
157,599,039
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements
NioCorp Developments Ltd.
Condensed Consolidated
Statement of Cash Flows
(expressed in thousands of U.S. dollars) (unaudited)
|
For the three months ended
September 30,
|
|
2016
|
|
2015
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Total loss for the period
|
|
$
|
(2,775
|
)
|
|
$
|
(2,807
|
)
|
Adjustments for:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
2
|
|
|
|
2
|
|
Change in financial instrument fair value
|
|
|
(296
|
)
|
|
|
(29
|
)
|
Unrealized gain on available-for-sale investments
|
|
|
(11
|
)
|
|
|
(6
|
)
|
Accretion of convertible debt
|
|
|
46
|
|
|
|
-
|
|
Foreign exchange loss
|
|
|
124
|
|
|
|
279
|
|
Share-based compensation
|
|
|
218
|
|
|
|
57
|
|
|
|
|
(2,692
|
)
|
|
|
(2,504
|
)
|
Change in non-cash working capital items:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
-
|
|
|
|
(1
|
)
|
Prepaid expenses
|
|
|
34
|
|
|
|
11
|
|
Accounts payable and accrued liabilities
|
|
|
411
|
|
|
|
336
|
|
Net cash used in operating activities
|
|
|
(2,247
|
)
|
|
|
(2,158
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Restricted cash funding
|
|
|
(500
|
)
|
|
|
-
|
|
Acquisition of equipment
|
|
|
-
|
|
|
|
(2
|
)
|
Net cash used in investing activities
|
|
|
(500
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from issuance of capital stock
|
|
|
64
|
|
|
|
901
|
|
Issuance of convertible debt, net of issuance costs
|
|
|
-
|
|
|
|
654
|
|
Related party debt draws
|
|
|
-
|
|
|
|
500
|
|
Net cash provided by financing activities
|
|
|
64
|
|
|
|
2,055
|
|
Exchange rate effect on cash
|
|
|
(5
|
)
|
|
|
(112
|
)
|
Change in cash during the period
|
|
|
(2,688
|
)
|
|
|
(217
|
)
|
Cash, beginning of period
|
|
|
4,412
|
|
|
|
753
|
|
Cash, end of period
|
|
$
|
1,724
|
|
|
$
|
536
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Amounts paid for interest
|
|
$
|
16
|
|
|
$
|
-
|
|
Amounts paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Non-cash financing transaction
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying notes are an integral
part of these condensed consolidated financial statements
NioCorp Developments Ltd.
Condensed Consolidated
Statements of Shareholders’ Equity
(expressed in thousands of U.S. dollars, except share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Shares
|
|
|
Common
|
|
|
Paid-in
|
|
|
|
|
|
Comprehensive
|
|
|
|
|
|
|
Outstanding
|
|
|
Stock
|
|
|
Capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, July 1, 2015
|
|
|
156,420,334
|
|
|
$
|
47,617
|
|
|
$
|
7,250
|
|
|
$
|
(48,814
|
)
|
|
$
|
(1,042
|
)
|
|
$
|
5,011
|
|
Exercise of warrants
|
|
|
12,549,309
|
|
|
|
5,838
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,838
|
|
Exercise of options
|
|
|
1,415,000
|
|
|
|
405
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
405
|
|
Fair value of broker warrants granted
|
|
|
-
|
|
|
|
-
|
|
|
|
15
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15
|
|
Fair value of Lind Warrants granted
|
|
|
-
|
|
|
|
-
|
|
|
|
620
|
|
|
|
-
|
|
|
|
-
|
|
|
|
620
|
|
Private placement - January 2016
|
|
|
9,074,835
|
|
|
|
3,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,750
|
|
Debt conversions
|
|
|
1,008,512
|
|
|
|
638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
638
|
|
Share issuance costs
|
|
|
-
|
|
|
|
(151
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(151
|
)
|
Fair value of stock options exercised
|
|
|
-
|
|
|
|
304
|
|
|
|
(304
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
1,049
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,049
|
|
Reporting currency presentation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
427
|
|
|
|
427
|
|
Loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,408
|
)
|
|
|
-
|
|
|
|
(11,408
|
)
|
Balance, June 30, 2016
|
|
|
180,467,990
|
|
|
$
|
58,401
|
|
|
$
|
8,630
|
|
|
$
|
(60,222
|
)
|
|
$
|
(615
|
)
|
|
$
|
6,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of warrants
|
|
|
130,229
|
|
|
|
64
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
64
|
|
Share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
217
|
|
|
|
-
|
|
|
|
-
|
|
|
|
217
|
|
Reporting currency presentation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
66
|
|
|
|
66
|
|
Loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,775
|
)
|
|
|
-
|
|
|
|
(2,775
|
)
|
Balance, September 30, 2016
|
|
|
180,598,219
|
|
|
$
|
58,465
|
|
|
$
|
8,847
|
|
|
$
|
(62,997
|
)
|
|
$
|
(549
|
)
|
|
$
|
3,766
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
September 30, 2016
(expressed in thousands of U.S. dollars, unless otherwise stated)
(unaudited)
|
1.
|
DESCRIPTION OF BUSINESS
|
NioCorp Developments Ltd. (the “Company”)
was incorporated on February 27, 1987 under the laws of the Province of British Columbia and currently operates in one reportable
operating segment consisting of exploration and development of mineral deposits in North America, specifically, the Elk Creek Niobium/Scandium/Titanium
property (the “Elk Creek Project”) located in Southeastern Nebraska.
These financial statements have been prepared
on a going concern basis that contemplates the realization of assets and discharge of liabilities at their carrying values in the
normal course of business for the foreseeable future. These financial statements do not reflect any adjustments that may be necessary
if the Company is unable to continue as a going concern.
The Company currently earns no operating
revenues and will require additional capital in order to advance the Elk Creek Project. The Company’s ability to continue
as a going concern is uncertain and is dependent upon the generation of profits from mineral properties, obtaining additional financing
and maintaining continued support from its shareholders and creditors.
|
a)
|
Basis of Preparation and Consolidation
|
The accompanying unaudited interim
condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles
of the United States of America (“US GAAP”) and the rules and regulations of the Securities and Exchange Commission
(“SEC”). The interim condensed consolidated financial statements include the consolidated accounts of the Company and
its wholly-owned subsidiaries with all significant intercompany transactions eliminated. The accounting policies followed in preparing
these consolidated interim financial statements are those used by the Company as set out in the audited consolidated financial
statements for the year ended June 30, 2016.
In the opinion of management,
all adjustments considered necessary (including reclassifications and normal recurring adjustments) to present fairly the financial
position, results of operations and cash flows at September 30, 2016 and for all periods presented, have been included in these
interim condensed consolidated financial statements. Certain information and footnote disclosures normally included in the consolidated
financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such SEC rules and regulations.
These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial
statements for the year ended June 30, 2016. The interim results are not necessarily indicative of results for the full year ending
June 30, 2017, or future operating periods.
|
b)
|
Recent Accounting Standards
|
In February 2016, the FASB issued
Accounting Standard Update (“ASU”) 2016-02, Leases. The standard requires that a lessee recognize on the balance sheet
assets and liabilities for leases with lease terms of more than twelve months. The recognition, measurement, and presentation of
expenses and cash flows arising from a lease have not significantly changed from the previous GAAP. The standard is effective for
fiscal years beginning after December 15, 2018, including interim periods within such fiscal year, with early adoption permitted.
The Company is currently assessing the impact, if any, of implementing this guidance on its consolidated financial position, results
of operations and liquidity.
In May 2014, the FASB issued ASU 2014-09, Revenue
from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements of FASB
Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition and most industry-specific guidance. ASU 2014-09
requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. This ASU
provides alternative methods of retrospective adoption and is effective for fiscal years, and interim periods within those years,
beginning after December 15, 2017. Early adoption would be permitted but not before annual periods beginning after December 15,
2016. The Company is currently assessing the potential impact of adopting this ASU on its consolidated financial statements and
related disclosures.
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
September 30, 2016
(expressed in thousands of U.S. dollars, unless otherwise stated)
(unaudited)
In August 2014, the FASB issued
ASU 2014-15, Presentation of Financial Statements – Going Concern. The new standard requires management of public and private
companies to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern and, if
so, disclose that fact. Management will also be required to evaluate and disclose whether its plans alleviate that doubt. The new
standard is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after
December 15, 2016. Adoption of the new guidance is not expected to have a material impact on the financial statement presentation
of the Company.
The preparation of consolidated
financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of expenses during the reporting period. The Company regularly evaluates estimates and assumptions related
to the deferred income tax asset valuations and share-based compensation. The Company bases its estimates and assumptions on current
facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results
of which form the basis for making judgments about the other sources. The actual results experienced by the Company may differ
materially and adversely from the Company’s estimates. To the extent there are material differences between estimates and
the actual results, future results of operations will be affected.
The Company incurred a loss of $2,775
for the three months ended September 30, 2016 (2015 - $2,807), and has an accumulated deficit of $62,997 as of September 30, 2016.
In addition, the Company has a working capital deficiency of $445 as of September 30, 2016. These factors indicate the existence
of a material uncertainty that raises substantial doubt about the Company's ability to continue as a going concern.
The Company’s ability to continue
operations and fund its expenditures is dependent on Management’s ability to secure additional financing. Management is actively
pursuing such additional sources of financing, and while it has been successful in doing so in the past, there can be no assurance
it will be able to do so in the future. These consolidated financial statements do not give effect to any adjustments required
to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those
reflected in the accompanying financial statements.
Restricted cash represents amounts held in escrow to secure
payment of feasibility study work. On October 5, 2016, $235 of these funds were released back to the Company. Under the terms of
the escrow agreement, the balance of $265 will be drawn against outstanding accounts payable once certain project milestones are
met.
|
|
As of
|
|
|
|
September 30,
2016
|
|
|
June 30,
2016
|
|
Convertible Notes
|
|
$
|
501
|
|
|
$
|
475
|
|
Convertible Security
|
|
|
5,778
|
|
|
|
5,991
|
|
|
|
$
|
6,279
|
|
|
$
|
6,466
|
|
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
September 30, 2016
(expressed in thousands of U.S. dollars, unless otherwise stated)
(unaudited)
Convertible Notes
Changes in the Notes balance are comprised
of the following:
|
|
Convertible Notes
|
|
Balance, June 30, 2016
|
|
$
|
475
|
|
Accreted interest, net of interest paid
|
|
|
26
|
|
Balance, September 30, 2016
|
|
$
|
501
|
|
The changes in the derivative liability
related to the conversion feature are as follows:
|
|
Derivative
Liability
|
|
Balance, June 30, 2016
|
|
$
|
330
|
|
Change in fair value of derivative liability
|
|
|
(83
|
)
|
Balance, September 30, 2016
|
|
$
|
247
|
|
Lind Partners Convertible Security
Funding
Changes in the Convertible Security balance
are comprised of the following:
|
|
Convertible Security
|
|
Opening balance
|
|
$
|
5,991
|
|
Conversions
|
|
|
-
|
|
Change in fair market value
|
|
|
(213
|
)
|
Balance, September 30, 2016
|
|
$
|
5,778
|
|
The Convertible Security contains financial
and non-financial covenants customary for a facility of this size and nature, and includes a financial covenant defining an event
of default as all present and future liabilities of the Company or any of its subsidiaries, exclusive of related party loans, for
an amount or amounts exceeding $2,000, and which have not been satisfied on time or within 90 days of invoice, or have become prematurely
payable as a result of its default or breach. The Company was in compliance as of September 30, 2016.
The Company has a rolling stock
option plan (the “Plan”) whereby the Company may grant stock options to executive officers and directors, employees,
and consultants at an exercise price to be determined by the board of directors, provided the exercise price is not lower than
the market value on the date of grant. The Plan provides for the issuance of up to 10% of the Company’s issued common shares
as at the date of grant with each stock option having a maximum term of five years. The board of directors has the exclusive power
over the granting of options and their vesting provisions.
Stock option transactions are
summarized as follows:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise Price
(C$)
|
|
Balance, June 30, 2016
|
|
|
11,465,000
|
|
|
$
|
0.69
|
|
Granted
|
|
|
710,000
|
|
|
|
0.96
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Cancelled/expired
|
|
|
-
|
|
|
|
-
|
|
Balance, September 30, 2016
|
|
|
12,175,000
|
|
|
$
|
0.71
|
|
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
September 30, 2016
(expressed in thousands of U.S. dollars, unless otherwise stated)
(unaudited)
The following table summarizes
the information and assumptions used to determine option costs for the three-month period ended September 30, 2016:
Fair value per option granted during the period (C$)
|
|
$
|
0.50
|
|
Risk-free interest rate
|
|
|
0.75
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
Expected stock price volatility (historical basis)
|
|
|
97.2
|
%
|
Expected option life in years
|
|
|
2.15
|
|
The following table summarizes
information about stock options outstanding at September 30, 2016:
Exercise
price
(C$)
|
|
|
Expiry date
|
|
Number
outstanding
|
|
|
Aggregate
Intrinsic Value
(C$000s)
|
|
|
Number
exercisable
|
|
|
Aggregate
Intrinsic Value
(C$000s)
|
|
$
|
0.50
|
|
|
May 9, 2017
|
|
|
370,000
|
|
|
$
|
115
|
|
|
|
370,000
|
|
|
$
|
115
|
|
$
|
0.62
|
|
|
January 19, 2021
|
|
|
5,575,000
|
|
|
|
1,059
|
|
|
|
2,787,500
|
|
|
|
530
|
|
$
|
0.65
|
|
|
May 20, 2017
|
|
|
50,000
|
|
|
|
8
|
|
|
|
50,000
|
|
|
|
8
|
|
$
|
0.65
|
|
|
July 28, 2017
|
|
|
1,250,000
|
|
|
|
200
|
|
|
|
1,250,000
|
|
|
|
200
|
|
$
|
0.76
|
|
|
September 2, 2017
|
|
|
500,000
|
|
|
|
25
|
|
|
|
500,000
|
|
|
|
25
|
|
$
|
0.80
|
|
|
December 22, 2017
|
|
|
3,220,000
|
|
|
|
32
|
|
|
|
3,220,000
|
|
|
|
32
|
|
$
|
0.94
|
|
|
April 28, 2018
|
|
|
500,000
|
|
|
|
-
|
|
|
|
375,000
|
|
|
|
-
|
|
$
|
0.96
|
|
|
July 21, 2021
|
|
|
710,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance September 30, 2016
|
|
|
12,175,000
|
|
|
$
|
1,439
|
|
|
|
8,552,500
|
|
|
$
|
910
|
|
The aggregate intrinsic value
in the preceding table represents the total intrinsic value, based on the Company’s closing stock price of C$0.81 as of September
30, 2016, which would have been received by the option holders had all option holders exercised their options as of that date.
The total number of in-the-money options vested and exercisable as of September 30, 2016 was 8,177,500.
As of September 30, 2016, there
was $380 of unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Plan. The
cost is expected to be recognized over a weighted average period of approximately 1.25 years.
Warrant transactions are summarized
as follows:
|
|
|
Warrants
|
|
|
Weighted average
exercise price (C$)
|
|
Balance June 30, 2016
|
|
|
|
22,733,685
|
|
|
$
|
0.74
|
|
Granted
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
|
(130,229
|
)
|
|
|
0.65
|
|
Expired
|
|
|
|
-
|
|
|
|
-
|
|
Balance, September 30, 2016
|
|
|
|
22,603,456
|
|
|
$
|
0.74
|
|
|
|
|
|
|
|
|
|
|
|
|
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
September 30, 2016
(expressed in thousands of U.S. dollars, unless otherwise stated)
(unaudited)
At September 30, 2016, the Company has
outstanding exercisable warrants, as follows:
Number
|
|
|
Exercise
Price
(C$)
|
|
|
Expiry Date
|
|
7,431,261
|
|
|
$
|
0.65
|
|
|
November 10, 2016
|
|
182,910
|
|
|
|
0.85
|
|
|
February 27, 2017
|
|
2,714,000
|
|
|
|
1.00
|
|
|
February 27, 2017
|
|
3,125,000
|
|
|
|
0.72
|
|
|
December 22, 2018
|
|
9,150,285
|
|
|
|
0.75
|
|
|
January 19, 2019
|
|
22,603,456
|
|
|
|
|
|
|
|
|
7.
|
RELATED PARTY TRANSACTIONS AND BALANCES
|
Related party loan represents the amount
outstanding on a loan with Mark Smith, Chief Executive Officer and Executive Chairman of NioCorp. The loan is due June 17, 2017,
bears an interest rate of 10%, is secured by the Company’s assets pursuant to a concurrently executed general security agreement,
and is subject to both a 2.5% establishment fee and 2.5% prepayment fee. As of September 30, 2016, accounts payable and accrued
liabilities included interest payable to Mr. Smith of $80.
|
8.
|
Exploration Expenditures
|
|
|
For the three months
ended September 30,
|
|
|
|
2016
|
|
|
2015
|
|
Technical studies and engineering
|
|
$
|
519
|
|
|
$
|
1,416
|
|
Field management and other
|
|
|
234
|
|
|
|
168
|
|
Drilling
|
|
|
-
|
|
|
|
281
|
|
Metallurgical development
|
|
|
1,190
|
|
|
|
85
|
|
Geologists and field staff
|
|
|
27
|
|
|
|
14
|
|
Total
|
|
$
|
1,970
|
|
|
$
|
1,964
|
|
|
9.
|
Fair Value Measurements
|
The Company measures the fair value of
financial assets and liabilities based on US GAAP guidance which defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements.
The Company classifies financial assets
and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables or other financial liabilities
depending on their nature. Financial assets and financial liabilities are recognized at fair value on their initial recognition.
Financial assets and liabilities classified
as held-for-trading are measured at fair value, with gains and losses recognized in net income. Financial assets classified as
held-to-maturity, loans and receivables, and financial liabilities other than those classified as held-for-trading are measured
at amortized cost, using the effective interest method of amortization. Financial assets classified as available-for-sale are measured
at fair value, with unrealized gains and losses being recognized in income.
Financial instruments including receivables,
accounts payable and accrued liabilities, and related party loans are carried at amortized cost, which management believes approximates
fair value due to the short-term nature of these instruments.
NioCorp Developments Ltd.
Notes to the Condensed Consolidated Financial Statements
September 30, 2016
(expressed in thousands of U.S. dollars, unless otherwise stated)
(unaudited)
The following table presents information
about the assets and liabilities that are measured at fair value on a recurring basis as at September 30, 2016 and June 30, 2016,
and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general,
fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical instruments. Fair values
determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates, and yield curves. Fair
values determined by Level 3 inputs are unobservable data points for the financial instrument, and included situations where there
is little, if any, market activity for the instrument:
|
|
As of September 30, 2016
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,724
|
|
|
$
|
1,724
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Available for sale securities
|
|
|
43
|
|
|
|
43
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
1,767
|
|
|
$
|
1,767
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
$
|
5,778
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,778
|
|
Derivative liability, convertible debt
|
|
|
247
|
|
|
|
-
|
|
|
|
-
|
|
|
|
247
|
|
|
|
$
|
6,025
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,025
|
|
|
|
As of June 30, 2016
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,412
|
|
|
$
|
4,412
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Available for sale securities
|
|
|
32
|
|
|
|
32
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
4,444
|
|
|
$
|
4,444
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
$
|
5,991
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,991
|
|
Derivative liability, convertible debt
|
|
|
330
|
|
|
|
-
|
|
|
|
-
|
|
|
|
330
|
|
|
|
$
|
6,321
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,321
|
|
The Company measures the fair market value
of the Level 3 components using the Black-Scholes model and discounted cash flows, as appropriate. These models are prepared by
a third party and take into account management's best estimate of the conversion price of the stock, an estimate of the expected
time to conversion, an estimate of the stock's volatility, and the risk-free rate of return expected for an instrument with a term
equal to the duration of the convertible debt.
The following table sets forth a reconciliation
of changes in the fair value of the Company's convertible debt components classified as Level 3 in the fair value hierarchy:
Beginning balance
|
|
$
|
6,321
|
|
Conversions to equity
|
|
|
-
|
|
Realized and unrealized losses
|
|
|
(296
|
)
|
Ending balance
|
|
$
|
6,025
|
|
ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis
should be read in conjunction our unaudited condensed interim consolidated financial statements as at and for the three months
ended September 30, 2016 and the related notes thereto, which have been prepared in accordance with generally accepted accounting
principles in the United States (“U.S. GAAP”). This discussion and analysis contains forward-looking statements
and forward-looking information that involve risks, uncertainties and assumptions. Our actual results may differ materially from
those anticipated in these forward-looking statements and information as a result of many factors, including, but not limited to,
those set forth elsewhere in this Quarterly Report on Form 10-Q. See section heading “Note Regarding Forward-Looking Statements”
below.
All currency amounts are stated in thousands
of U.S. dollars unless noted otherwise.
As used in this report, unless the context otherwise indicates,
references to “we,” “our,” the “Company,” “NioCorp” and “us” refer
to NioCorp Developments Ltd. and its subsidiaries collectively.
Note Regarding Forward Looking Statements
This Quarterly Report
on Form 10-Q and the exhibits attached hereto contain “forward-looking statements” within the
meaning of Section 27A of the Securities Act and Section 21E of the United States Exchange Act of 1934, as amended, and “forward-looking
information” within the meaning of applicable Canadian securities legislation, collectively “forward-looking statements”.
Such forward-looking statements concern our anticipated results and developments in the operations of the Company in future periods,
planned exploration activities, the adequacy of the Company’s financial resources and other events or conditions that may
occur in the future. Forward-looking statements are frequently, but not always, identified by words such as “expects,”
“anticipates,” “believes,” “intends,” “estimates,” “potential,” “possible”
and similar expressions, or statements that events, conditions or results “will,” “may,” “could”
or “should” (or the negative and grammatical variations of any of these terms) occur or be achieved. Any statements
that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions,
or future events or performance (often, but not always, using words or phrases such as “expects” or “does not
expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”,
“estimates” or “intends”, or stating that certain actions, events or results “may”, “could”,
“would”, “might” or “will” be taken, occur or be achieved) are not statements of historical
fact and may be forward-looking statements. Such forward-looking statements reflect the Company’s current views with respect
to future events and are subject to certain known and unknown risks, uncertainties and assumptions. Many factors could cause actual
results, performance or achievements to be materially different from any future results, performance or achievements that may be
expressed or implied by such forward-looking statements, including, among others, risks related to:
|
·
|
risks
related to our ability to operate as a going concern;
|
|
·
|
risks
related to our requirement of significant additional capital;
|
|
·
|
risks
related to our limited operating history;
|
|
·
|
risks
related to our history of losses;
|
|
·
|
risks
related to cost increases for our exploration and, if warranted, development projects;
|
|
·
|
risks
related to our properties being in the exploration stage;
|
|
·
|
risks
related to mineral exploration and production activities;
|
|
·
|
risks
related to our lack of mineral production from our properties;
|
|
·
|
risks
related to estimates of mineral resources;
|
|
·
|
risks
related to changes in mineral resource estimates;
|
|
·
|
risks
related to differences in United States and Canadian reserve and resource reporting;
|
|
·
|
risks
related to our exploration activities being unsuccessful;
|
|
·
|
risks
related to our ability to obtain permits and licenses for production;
|
|
·
|
risks
related to government and environmental regulations that may increase our costs of doing business or restrict our operations;
|
|
·
|
risks
related to proposed legislation that may significantly affect the mining industry;
|
|
·
|
risks
related to land reclamation requirements;
|
|
·
|
risks
related to competition in the mining industry;
|
|
·
|
risks
related to equipment and supply shortages;
|
|
·
|
risks
related to current and future joint ventures and partnerships;
|
|
·
|
risks
related to our ability to attract qualified management;
|
|
·
|
risks
related to the ability to enforce judgment against certain of our Directors;
|
|
·
|
risks
related to currency fluctuations;
|
|
·
|
risks
related to claims on the title to our properties;
|
|
·
|
risks
related to surface access on our properties;
|
|
·
|
risks
related to potential future litigation;
|
|
·
|
risks
related to our lack of insurance covering all our operations;
|
|
·
|
risks
related to our status as a “passive foreign investment company” under US federal tax code;
|
|
·
|
risks
related to the Common Shares, including price volatility, lack of dividend payments, dilution and penny stock rules; and
|
|
·
|
risks
related to our debt.
|
Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein.
This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. Forward-looking
statements are statements about the future and are inherently uncertain, and actual achievements of the Company or other future
events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties
and other factors, including without limitation those discussed under the heading “Risk Factors” of our Registration
Statement on Form S-1, as filed with the SEC on September 2, 2016, as amended September 22, 2016, which are incorporated herein
by reference, as well as other factors described elsewhere in this report and the Company’s other reports filed with the
SEC.
The Company’s forward-looking statements
contained in this Quarterly Report on Form 10-Q are based on the beliefs, expectations and opinions of management as of the date
of this report. The Company does not assume any obligation to update forward-looking statements if circumstances or management’s
beliefs, expectations or opinions should change, except as required by law. For the reasons set forth above, investors should not
attribute undue certainty to or place undue reliance on forward-looking statement
Company Overview
NioCorp is developing the Elk Creek Project,
located in southeast Nebraska. The Elk Creek Project is an advanced Niobium/Scandium/Titanium exploration project. Niobium is used
to produce HSLA steel, which is a lighter, stronger steel used in automotive, structural, and pipeline applications. Scandium can
be combined with Aluminum to make an alloy with increased strength and improved corrosion resistance. Scandium also is a critical
component of advanced solid oxide fuel cells. Titanium is a key component of pigments used in paper, paint, and plastics, and is
also used for aerospace applications, armor, and medical implants.
Our primary business strategy is to advance
our Elk Creek Project to commercial production. We are focused on obtaining additional funds to carry out our near-term planned
work programs and complete a feasibility study for the Elk Creek Project followed by project construction, commissioning and operations.
Subject to delivering a positive feasibility study for the Elk Creek Project, we intend to secure the project financing necessary
to complete the development and construction of the Elk Creek Project.
Emerging Growth Company Status
We qualify as an “emerging growth
company” as defined in Section 101 of the Jumpstart our Business Startups Act (“JOBS Act”) as we do not have
more than $1.0 billion in annual gross revenue and did not have such amount as of June 30, 2016, being the last day of our 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 $1.0 billion or (ii) we issue more
than $1.0 billion in non-convertible debt in a three-year period. We will lose our status as an emerging growth company if at any
time we are deemed to be a large accelerated filer. We will lose our status as an emerging growth company on the last day of our
fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective
registration statement.
As an emerging growth company under the
JOBS Act, we have elected to opt out of the extended transition period for complying with new or revised standards pursuant to
Section 107(b) of the Act. The election is irrevocable.
As an emerging growth company, we are exempt
from Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section 14A(a) and (b) of the Securities Exchange Act of 1934. Such sections
are provided below:
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Section 404(b) of the Sarbanes-Oxley Act of 2002 requires a public company’s auditor to attest to, and report on, management's assessment of its internal controls.
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Sections 14A(a) and (b) of the Securities and Exchange Act, implemented by Section 951 of the Dodd-Frank Act, require companies to hold shareholder advisory votes on executive compensation and golden parachute compensation.
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As long as we qualify as an emerging growth
company, we will not be required to comply with the requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section
14A (a) and (b) of the Securities Exchange Act of 1934.
Recent Corporate Events
On July 1, 2016, we appointed Neal Shah
as our Chief Financial Officer. Mr. Shah had served as our Interim Chief Financial Officer since April of 2015. Prior to that,
he was our Vice President of Finance.
On July 13, 2016, we announced that the
first sample of scandium material had been produced from our Elk Creek, Nebraska resource. The sample was produced during the on-going
bench testing and optimization program of the company’s scandium recovery operations at SGS in Lakefield, Ontario. The scandium
precipitate was produced through a process that is a precursor to the commercial process that will make higher-purity commercial
grade scandium trioxide.
On September 8, 2016, we announced the
successful completion of a Jurisdictional Determination (JD) process with the US Army Core of Engineers (ACOE) for the Elk Creek
Project. The JD issued by the ACOE identifies wetlands and streams within the Elk Creek Project’s footprint that are considered
Waters of the US (WOTUS) and are therefore regulated under the federal Clean Water Act. The Elk Creek Project, as laid out in the
Company’s October 15 Preliminary Economic Assessment (PEA), was designed to minimize impacts on WOTUS wetlands and streams.
The JD reinforced our belief that there are no WOTUS wetlands and streams in the immediate footprint of the Elk Creek Project’s
mine infrastructure and surface production facilities.
On September 9, 2016, we announced that
the former Lt. Governor of Nebraska, Lavon Heidemann, had joined the NioCorp team as a Business Development Consultant. Mr. Heidemann,
who farms near the site of NioCorp’s Elk Creek Project, will assist NioCorp on a consulting basis in various aspects of moving
the Elk Creek Superalloy Materials Project to commercial operation. Mr. Heidemann’s primary focus will be on developing business
opportunities and the support infrastructure in the Southeast Nebraska area for NioCorp’s proposed project.
Financial and Operating Results
The Company continues to expense all expenditures
when incurred, with the exception of equipment, which is capitalized. The Company has no revenues from mining operations. Operating
expenses incurred related primarily to performing exploration activities, as well as the activities necessary to support corporate
and shareholder duties, and are detailed in the following table.
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For the three
months ended
September 30,
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2016
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2015
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Operating expenses:
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|
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Consulting
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$
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-
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$
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64
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Depreciation
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2
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2
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Employee-related costs
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540
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338
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Finance costs
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-
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12
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Professional fees
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333
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33
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Exploration expenditures
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1,970
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1,964
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Other operating expenses
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135
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226
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Total operating expenses
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2,980
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2,639
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|
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Change in financial instrument fair value
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(296
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)
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(29
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Foreign exchange loss
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33
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150
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Interest expense
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69
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53
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(Gain) on available for sale securities
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(11
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)
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(6
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)
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Income tax expense
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-
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-
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Net Loss
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$
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2,775
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$
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2,807
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Overall, the increase in operating
expenses is primarily related to professional fees incurred in connection with the Company’s initial registration statement
with the Securities and Exchange Commission. The Company expects that professional fees through the remainder of the fiscal year
will continue to be higher than historical periods as the Company transitions to being a reporting issuer with the United States
Securities and Exchange Commission.
Other significant items affecting
operating expenses are noted below:
Employee related costs
increased
primarily due to increased share-based compensation costs reflecting the timing and amount of stock option grants, as well as the
impact of additional headquarters personnel costs to support increased financing efforts and general operational activities.
Exploration expenditures
increased slightly, reflecting the timing of expenditures at the Elk Creek Project. 2016 expenditures primarily related to
project engineering and metallurgical bench and pilot plant testwork in support of our feasibility study, while 2015 costs were
directed towards engineering costs in support of the Preliminary Economic Assessment studies that were completed that year. The
Company expects exploration spending levels to remain in line with first quarter spending through the completion of the feasibility
study. The following table provides additional details on exploration expense by period:
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Three months ended
September 30,
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2016
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2015
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Technical studies and engineering
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$
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519
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$
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1,416
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Field management and other
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234
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168
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Drilling, sampling and assaying
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-
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281
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Metallurgical
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1,190
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85
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Geologists and field staff
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27
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14
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Total
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$
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1,970
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$
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1,964
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Other operating expenses
include investor relations, general office expenditures, stock and proxy expenditures and other miscellaneous costs. The decline
in expenditures was related to financing-related costs incurred in 2015.
Other
significant items impacting the change in the Company’s net loss are noted below
:
Change in financial instrument
fair value
represents non-cash changes in the market value of the Convertible Security, which is carried at Fair value, as
well as changes in the market value of the derivative liability component of the Notes.
Foreign exchange (gain) loss
is primarily due to changes in the United States dollar (“USD”) against the Canadian dollar (“CAD”), and
reflects the timing of foreign currency transactions and subsequent changes in exchange rates. The impacts in both periods primarily
relates to the USD-denominated Convertible Security, which is recorded on the Canadian parent company books.
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 and the exercise of incentive stock options and share purchase warrants. We believe that we will be
able to secure additional private placements financings in the future, although we cannot predict the size or pricing of any such
financings. In addition, we can raise funds through the sale of interests in our mineral properties, although current market conditions
have substantially reduced the number of potential buyers/acquirers of any such interest(s). This situation is unlikely to change
until such time as we can develop a bankable feasibility study. When acquiring an interest in mineral properties through purchase
or option we will sometimes issue Common Shares to the vendor or optionee of the property as partial or full consideration for
the property interest in order to conserve our cash.
As of September 30, 2016, the Company had
cash of $1.7 million and a working capital deficiency of $0.4 million, compared to cash of $4.4 million and working capital of
$2.3 million on June 30, 2016. This change in working capital is the result of our continued work towards completion of a feasibility
study for the Elk Creek Project, primarily related to project engineering and metallurgical development.
We expect that the Company will operate
at a loss for the foreseeable future. The Company’s current planned operational needs are $6.7 million until June 30, 2017.
Burn rate averages to approximately $745 per month where approximately $275 is for administrative purposes and approximately $470
is for planned exploration expenditures related to the completion of the feasibility study, permitting efforts, and third party
consultants until June 30, 2017. We currently have sufficient cash on hand to meet these planned expenditures for approximately
the next two to three months (December 2016 - January 2017). The Company’s ability to continue operations and fund our current
work plan is dependent on management’s ability to secure additional financing on or prior to December 2016. The Company anticipates
that it will need to raise of minimum of $3.2 to $6.2 million to continue planned operations for the next twelve months. Management
is actively pursuing such additional sources of debt and equity financing, and while it has been successful in doing so in the
past, there can be no assurance it will be able to do so in the future.
Exploration expenditure commitments (for
example, lease payments) are $125 until June 30, 2017 and planned exploration and development activities are approximately $3.8
million until June 30, 2017. To maintain its currently held properties and fund its currently anticipated general and administrative
costs and planned exploration and development activities at the Elk Creek Project for the fiscal year ending June 30, 2017, the
Company will require additional financing during 2016-2017. Should such financing not be available in that time-frame, we will
be required to reduce our activities and will not be able to carry out all of our presently planned exploration and development
activities at the Elk Creek Project on its currently anticipated scheduling.
We currently have no further funding commitments
or arrangements for additional financing at this time (other than the potential exercise of options and warrants) and there is
no assurance that we will be able to obtain additional financing on acceptable terms, if at all. There is significant uncertainty
that we will be able to secure any additional financing in the current equity markets. The quantity of funds to be raised and the
terms of any proposed equity financing that may be undertaken will be negotiated by management as opportunities to raise funds
arise. Specific plans related to the use of proceeds will be devised once financing has been completed and management knows what
funds will be available for these purposes. Management intends to pursue funding sources of both debt and equity financing, including
but not limited to the issuance of equity securities in the form of common shares, warrants, subscription receipts or any combination
thereof in units of the Company pursuant to private placements to accredited investors or pursuant to equity lines of credit or
public offerings in the form of underwritten offerings, at-the-market offerings, registered direct offerings or other forms of
equity financing and public or private issuances of debt securities including secured and unsecured convertible debt instruments
or secured debt project financing. Management does not currently know the terms pursuant to which such financings may be completed
in the future, but any such financings will be negotiated at arms-length. Future financings involving the issuance of equity securities
or derivatives thereof will likely be completed at a discount to the then current market price of the Company’s securities
and will likely be dilutive to current shareholders.
The audit opinion and notes that accompany
our financial statements for the year ended June 30, 2016, disclose a “going concern” qualification to our ability
to continue in business. The accompanying financial statements have been prepared under the assumption that we will continue as
a going concern. We are an exploration stage company and we have incurred losses since our inception. We do not have sufficient
cash to fund normal operations and meet debt obligations for the next 12 months without deferring payment on certain current liabilities
and raising additional funds. We believe that the going concern condition cannot be removed with confidence until the Company has
entered into a business climate where funding of its planned ongoing operating activities is secured.
We have no exposure to any asset-backed
commercial paper. Other than cash held by its subsidiaries for their immediate operating needs in Colorado and Nebraska, all of
our cash reserves are on deposit with major United States and Canadian chartered banks. We do not believe that the credit, liquidity
or market risks with respect thereto have increased as a result of the current market conditions. However, in order to achieve
greater security for the preservation of its capital, we have, of necessity, been required to accept lower rates of interest, which
has also lowered our potential interest income.
Operating Activities
During the three months ended September
30, 2016, the Company's operating activities consumed $2.2 million of cash (2015: $2.1 million). The cash used in operating activities
for 2016 reflects the Company's funding of losses of $2.7 million offset by minor non-cash adjustments and changes in non-cash
working capital items. Overall, operational outflows were consistent between the periods. Going forward, the Company’s working
capital requirements are expected to increase substantially in connection the development of the Elk Creek Project.
Cash Flow Considerations
As of September 30, 2016, the Company had
cash of $1.7 million and working capital deficiency of $0.4 million, compared to cash of $4.4 million and working capital of $2.3
million on June 30, 2016. This change in working capital is the result of our continued work towards completion of a feasibility
study for the Elk Creek Project, primarily related to project engineering and metallurgical development.
The Company has historically relied upon
equity financings to satisfy its capital requirements and will continue to depend heavily upon equity capital to finance its activities.
The Company may pursue debt financing in the medium term if it is able to procure such financing on terms more favorable than available
equity financing, however there can be no assurance the Company will be able to obtain any required financing in the future on
acceptable terms.
The Company has limited financial resources
compared to its proposed expenditures, no source of operating income and no assurance that additional funding will be available
to it for current or future projects, although the Company has been successful in the past in financing its activities through
the sale of equity securities.
The ability of the Company to arrange additional
financing in the future will depend, in part, on the prevailing capital market conditions and its success in developing the Elk
Creek Project. Any quoted market for the Company's shares may be subject to market trends generally, notwithstanding any potential
success of the Company in creating revenue, cash flows or earnings, and any depression of the trading price of the Company’s
Common Shares could impact its ability to obtain equity financing on acceptable terms.
Historically, the Company has used net
proceeds from issuances of Common Shares to provide sufficient funds to meet its near-term exploration and development plans and
other contractual obligations when due. However, further development and construction of the Elk Creek Project will require substantial
additional capital resources. This includes near-term funding and, ultimately, funding for project construction and other costs.
See “
Financing
” above for greater detail on the Company’s recent equity financings and discussion of arrangements
related to possible future debt financing(s).
Contractual Obligations
There have been no material changes to
our contractual obligations
discussed in “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” under the heading “Tabular Disclosure of Contractual
Obligations”
as of June 30, 2016 in our registration statement on Form S-1 (333-213451) filed on September 2, 2016,
as amended September 22, 2016.
Off Balance Sheet Arrangements
The Company has no off balance sheet arrangements.
Critical Accounting Policies
There have been no material changes in
our critical accounting policies
discussed in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Critical Accounting Policies”
as of June 30, 2016 in our registration statement on Form S-1 (333-213451) filed on September 2, 2016, as amended September 22,
2016.
Certain U.S. Federal Income Tax Considerations
The Company has been a “passive foreign
investment company” (“PFIC”) as defined under Section 1297 of the U.S. Internal Revenue Code of 1986, as amended,
in recent years and expects to continue to be a PFIC in the future. Current and prospective United States shareholders should consult
their tax advisors as to the tax consequences of PFIC classification and the U.S. federal tax treatment of PFICs. Additional information
on this matter is included in the Company’s registration statement on Form S-1 (333-213451) filed on September 2, 2016, as
amended September 22, 2016, under the heading “Certain United States Federal Income Tax Considerations.”