ITEM
1. FINANCIAL STATEMENTS
Contents
NioCorp
Developments Ltd.
Condensed
Consolidated Balance Sheets
(expressed
in thousands of U.S. dollars, except share data) (unaudited)
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As of
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Note
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September
30,
2021
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June
30,
2021
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ASSETS
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Current
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Cash
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$
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5,868
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$
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7,317
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Prepaid
expenses and other
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294
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24
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Total
current assets
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6,162
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7,341
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Non-current
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Deposits
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35
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35
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Investment
in equity securities
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14
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16
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Right-of-use
assets
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141
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156
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Land
and buildings, net
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852
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837
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Mineral
interests
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16,085
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16,085
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Total
assets
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$
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23,289
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$
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24,470
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LIABILITIES
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Current
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Accounts
payable and accrued liabilities
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4
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$
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310
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$
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408
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Related
party loan
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7
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2,000
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2,318
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Convertible
debt
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5
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396
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1,123
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Operating
lease liability
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9
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72
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69
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Total
current liabilities
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2,778
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3,918
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Non-current
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Convertible
debt, net of current
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5
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6,599
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6,784
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Operating
lease liability
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9
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86
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105
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Total
liabilities
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9,463
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10,807
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SHAREHOLDERS’
EQUITY
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Common
stock, unlimited shares authorized; shares outstanding: 259,118,369 at September 30, 2021 and 256,379,931 at June 30, 2021
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6
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115,896
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113,882
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Accumulated
deficit
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(101,036
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(99,076
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Accumulated
other comprehensive loss
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(1,034
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)
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(1,143
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Total
shareholders’ equity
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13,826
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13,663
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Total
liabilities and equity
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$
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23,289
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$
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24,470
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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)
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For the
three months ended
September 30,
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Note
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2021
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2020
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Operating expenses
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Employee
related costs
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$
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319
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$
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319
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Professional
fees
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90
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108
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Exploration
expenditures
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8
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621
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225
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Other
operating expenses
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226
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411
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Total
operating expenses
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1,256
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1,063
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Change
in financial instrument fair value
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-
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(34
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Foreign
exchange loss (gain)
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210
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(101
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Interest
expense
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492
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127
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Other
loss (gain) on equity securities
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2
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(2
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Income
tax benefit
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-
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-
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Net
loss
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3
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$
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1,960
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$
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1,053
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Other comprehensive
loss:
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Net
loss
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$
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1,960
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$
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1,053
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Other
comprehensive loss:
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Reporting
currency translation
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109
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130
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Total
comprehensive loss
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$
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2,069
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$
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1,183
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Loss
per common share, basic and diluted
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$
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0.01
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$
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0.00
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Weighted
average common shares outstanding
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258,023,048
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236,870,066
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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)
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For
the three months
ended September 30,
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2021
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2020
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CASH
FLOWS FROM OPERATING ACTIVITIES
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Total
loss for the period
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$
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(1,960
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$
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(1,053
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Non-cash
elements included in net loss:
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Change
in financial instrument fair value
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-
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(34
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Unrealized
loss (gain) on equity securities
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2
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(2
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Accretion
of convertible debt
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438
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-
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Noncash
lease expense
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(1
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(1
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Depreciation
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1
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-
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Foreign
exchange loss (gain)
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273
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(100
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Share-based
compensation
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-
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304
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(1,247
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(886
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Change
in working capital items:
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Prepaid
expenses
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(270
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(28
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Accounts
payable and accrued liabilities
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(92
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(195
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Net
cash used in operating activities
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(1,609
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(1,109
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CASH
FLOWS FROM INVESTING ACTIVITIES
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Acquisition
of land and buildings
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(16
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)
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-
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Net
cash used in financing activities
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(16
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-
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CASH
FLOWS FROM FINANCING ACTIVITIES
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Proceeds
from issuance of capital stock
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664
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1,381
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Loan
repayments
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-
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(33
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Related
party debt repayments
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(318
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)
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-
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Net
cash provided by financing activities
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346
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1,348
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Exchange
rate effect on cash and cash equivalents
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(170
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)
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(4
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Change
in cash and cash equivalents during period
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(1,449
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235
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Cash
and cash equivalents, beginning of period
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7,317
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307
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Cash
and cash equivalent, end of period
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$
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5,868
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$
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542
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Supplemental
cash flow information:
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Amounts
paid for interest
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$
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40
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$
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19
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Amounts
paid for income taxes
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-
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-
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Non-cash
financing transactions
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Conversions
of debt for common shares
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$
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1,350
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$
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38
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Recognition
of operating lease liabilities
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-
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231
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The
accompanying notes are an integral part of these condensed consolidated financial statements.
NioCorp
Developments Ltd.
Condensed
Consolidated Statements of Shareholders’ Equity
(expressed
in thousands of U.S. dollars, except for Common Shares outstanding) (unaudited)
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For
the three months ended September 30, 2021 and 2020
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Common
Shares Outstanding
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Common
Stock
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Deficit
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Accumulated
Other Comprehensive Loss
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Total
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Balance,
June 30, 2020
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235,925,684
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$
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97,682
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$
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(94,686
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)
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$
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(355
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)
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$
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2,641
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Exercise
of warrants
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2,468,521
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1,351
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-
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-
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1,351
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Exercise
of options
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209,117
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30
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-
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-
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30
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Debt
conversions
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64,298
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38
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-
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-
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38
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Share
issuance costs
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-
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(1
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-
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-
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(1
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)
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Share-based
compensation
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-
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|
304
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-
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-
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304
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Reporting
currency presentation
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-
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-
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-
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(130
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)
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(130
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)
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Loss
for the period
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-
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-
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(1,053
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)
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-
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(1,053
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)
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Balance,
September 30, 2020
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238,667,620
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$
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99,404
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$
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(95,739
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)
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$
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(485
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)
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$
|
3,180
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Balance,
June 30, 2021
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256,379,931
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$
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113,882
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$
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(99,076
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)
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$
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(1,143
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)
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$
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13,663
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Exercise
of warrants
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871,750
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|
543
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-
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-
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|
543
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Exercise
of options
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282,702
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|
121
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|
|
-
|
|
|
|
-
|
|
|
|
121
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Debt
conversions
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|
1,583,986
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|
|
|
1,350
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|
|
-
|
|
|
|
-
|
|
|
|
1,350
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|
Reporting
currency presentation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
109
|
|
|
|
109
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Loss
for the period
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|
-
|
|
|
|
-
|
|
|
|
(1,960
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)
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|
|
-
|
|
|
|
(1,960
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)
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Balance,
September 30, 2021
|
|
|
259,118,369
|
|
|
$
|
115,896
|
|
|
$
|
(101,036
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)
|
|
$
|
(1,034
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)
|
|
$
|
13,826
|
|
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, 2021
(expressed
in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
1.
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DESCRIPTION OF BUSINESS
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NioCorp
Developments Ltd. (“NioCorp” or the “Company”) was incorporated on February 27, 1987, under the laws of
the Province of British Columbia and currently operates in one reportable operating segment consisting of exploration and development
of mineral deposits in North America, specifically, the Elk Creek Niobium/Scandium/Titanium property (the “Elk Creek Project”)
located in southeastern Nebraska.
These
financial statements have been prepared on a going concern basis that contemplates the realization of assets and discharge of
liabilities at their carrying values in the normal course of business for the foreseeable future. These financial statements do
not reflect any adjustments that may be necessary if the Company is unable to continue as a going concern.
The
Company currently earns no operating revenues and will require additional capital in order to advance the Elk Creek Project to
construction and commercial operation. As further discussed in Note 3, the Company’s ability to continue as a going concern
is uncertain and is dependent upon obtaining sufficient financing, the generation of profits from mineral properties, and maintaining
continued support from its shareholders and creditors.
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a)
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Basis of Preparation
and Consolidation
|
The
accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted
accounting principles of the United States of America (“US GAAP”) and the rules and regulations of the Securities
and Exchange Commission (“SEC”). The interim condensed consolidated financial statements include the consolidated
accounts of the Company and its wholly owned subsidiaries with all significant intercompany transactions eliminated. The accounting
policies followed in preparing these interim condensed consolidated financial statements are those used by the Company as set
out in the audited consolidated financial statements for the year ended June 30, 2021.
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, 2021, and for all periods presented,
have been included in these interim condensed consolidated financial statements. Certain information and footnote disclosures
normally included in the consolidated financial statements prepared in accordance with US GAAP have been condensed or omitted
pursuant to appropriate SEC rules and regulations. These interim condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements for the year ended June 30, 2021. The interim results are not necessarily
indicative of results for the full year ending June 30, 2022, or future operating periods.
During
fiscal year 2021 the Company combined the presentation of Additional Paid in Capital into the Common Stock line item in Shareholders’
Equity on the consolidated balance sheets. This presentation change was made as the Company’s common shares are issued at
no par value (“Common Shares”), and the fiscal year 2020 presentations were changed to conform with the current period
presentation.
|
b)
|
Recent Accounting
Standards
|
Issued
and Adopted
In
December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update 2019-12, “Income
Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 removes certain
exceptions to the general principles in ASC Topic 740. ASU 2019-12 is effective for public entities for fiscal years beginning
after December 15, 2020, with early adoption permitted. The Company adopted ASU 2019-12 on July 1, 2021, with no material effect
on the Company’ s current financial position, results of operations or financial statement disclosures.
NioCorp
Developments Ltd.
Notes
to the Condensed Consolidated Financial Statements
September
30, 2021
(expressed
in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
Issued
and Not Effective
In
August 2020, the FASB issued ASU No. 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 2020-06 is effective for fiscal years beginning after December
15, 2021, including interim periods within those fiscal years. The Company is currently evaluating the potential impact of the
new guidance on our financial statements.
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.
The
preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of expenses during the reporting period. The Company regularly evaluates
estimates and assumptions related to the deferred income tax asset valuations, convertible debt valuations, and share-based compensation.
The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes
to be reasonable under the circumstances, the results of which form the basis for making judgments about the other sources. The
actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent
there are material differences between estimates and the actual results, future results of operations will be affected.
The
Company incurred a loss of $1,960 for the three months ended September 30, 2021 (2020 - $1,053) and had an accumulated deficit
of $101,036 as of September 30, 2021. As an exploration stage entity, the Company has not yet commenced its mining operations
and accordingly does not generate any revenue. As of September 30, 2021, the Company had cash of $5,868, which may not be sufficient
to fund normal operations and meet debt obligations for the next twelve months without deferring payment on certain current liabilities
and raising additional funds. In addition, the Company will be required to raise additional funds for construction and commencement
of operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The
Company’s ability to continue operations and fund its expenditures, which have historically averaged approximately $1,050 per quarter,
is dependent on management’s ability to secure additional financing. Management is actively pursuing additional sources
of financing, and while it has been successful in doing so in the past, there can be no assurance it will be able to do so in
the future. The Company did not have any further funding commitments or arrangements for additional financing as of September
30, 2021. These consolidated financial statements do not give effect to any adjustments required to realize the 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. The full extent to which the COVID-19 pandemic
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, including, but not limited to, the duration and geographic spread of the pandemic,
its severity, the actions to contain the virus or treat its impact, future spikes of COVID-19 infections resulting in additional
preventative
NioCorp
Developments Ltd.
Notes
to the Condensed Consolidated Financial Statements
September
30, 2021
(expressed
in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
measures to contain or mitigate the spread of the virus, the effectiveness, distribution and acceptance of COVID-19
vaccines, including the vaccines’ efficacy against emerging COVID-19 variants, and how quickly and to what extent normal
economic and operating conditions can resume. 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.
4.
|
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
Schedule of account payable and accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
Note
|
|
|
September
30,
2021
|
|
|
June
30,
2021
|
|
Accounts payable,
trade
|
|
|
|
|
|
$
|
103
|
|
|
$
|
163
|
|
Interest payable to related party
|
|
|
7
|
|
|
|
53
|
|
|
|
40
|
|
Other
accruals
|
|
|
|
|
|
|
154
|
|
|
|
205
|
|
Total accounts payable
and accrued liabilities
|
|
|
|
|
|
$
|
310
|
|
|
$
|
408
|
|
Schedule
of convertible debt
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
September
30,
2021
|
|
|
June
30,
2021
|
|
Current Portion
|
|
|
|
|
|
|
|
|
Nordmin Note
|
|
$
|
396
|
|
|
$
|
1,123
|
|
Non-Current Portion
|
|
|
|
|
|
|
|
|
Lind
III Convertible Security
|
|
$
|
6,599
|
|
|
$
|
6,784
|
|
Changes
in the convertible security (the “Lind III Convertible Security”) issued to Lind Global Asset Management III, LLC,
and the convertible note issued to Nordmin Engineering Ltd. (the “Nordmin Note”), are as follows:
|
|
Lind
III Convertible Security
|
|
|
|
Nordmin
Note
|
|
Balance,
June 30, 2021
|
|
$
|
6,784
|
|
|
$
|
1,123
|
|
Accretion
expense
|
|
|
415
|
|
|
|
23
|
|
Conversions
|
|
|
(600
|
)
|
|
|
(750
|
)
|
Balance,
September 30, 2021
|
|
$
|
6,599
|
|
|
$
|
396
|
|
Based
on the closing price of the Company’s common shares (“Common Shares”) of C$1.00 per common share Common share
as of September 30, 2021, conversion of the remaining Lind III Convertible Security balance, including accrued interest, would
require the issuance of approximately 14,239,000 Common Shares. For each C$0.01 change in the fair value of one Common Share,
the total shares the Company would be obligated to issue would change by approximately 144,000 shares.
Based
on the Company’s closing Common Share price of C$1.00 per Common Share as of September 30, 2021, conversion of the remaining
Nordmin Note balance would require the issuance of 505,000 Common Shares. For each C$0.01 change in the fair value of one Common
Share, the total shares the Company would be obligated to issue would change by approximately 5,000 shares.
NioCorp
Developments Ltd.
Notes
to the Condensed Consolidated Financial Statements
September
30, 2021
(expressed
in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
Schedule of stock option
|
|
Number
of Options
|
|
|
Weighted
Average Exercise Price
|
|
Balance, June 30, 2021
|
|
|
15,965,000
|
|
|
C$
|
0.65
|
|
Exercised
|
|
|
(282,702
|
)
|
|
|
0.81
|
|
Cancelled/expired
|
|
|
(457,298
|
)
|
|
|
0.94
|
|
Balance,
September 30, 2021
|
|
|
15,225,000
|
|
|
C$
|
0.64
|
|
|
|
|
|
|
|
|
|
|
The
following table summarizes information about options to purchase Common Shares (“Options”) outstanding at September
30, 2021:
Exercise
Price
|
|
|
Expiry
Date
|
|
Number
Outstanding
|
|
|
Aggregate
Intrinsic Value
|
|
|
Number
Exercisable
|
|
|
Aggregate
Intrinsic Value
|
|
C$
|
0.76
|
|
|
March
6, 2022
|
|
|
4,500,000
|
|
|
C$
|
1,080
|
|
|
|
4,500,000
|
|
|
C$
|
1,080
|
|
C$
|
0.47
|
|
|
November 9, 2022
|
|
|
3,205,000
|
|
|
|
1,699
|
|
|
|
3,205,000
|
|
|
|
1,699
|
|
C$
|
0.84
|
|
|
September 18, 2023
|
|
|
1,050,000
|
|
|
|
168
|
|
|
|
1,050,000
|
|
|
|
168
|
|
C$
|
0.54
|
|
|
November
15, 2023
|
|
|
4,120,000
|
|
|
|
1,895
|
|
|
|
4,120,000
|
|
|
|
1,895
|
|
C$
|
0.75
|
|
|
December
14, 2023
|
|
|
1,825,000
|
|
|
|
456
|
|
|
|
1,825,000
|
|
|
|
456
|
|
C$
|
0.75
|
|
|
December
16, 2023
|
|
|
525,000
|
|
|
|
131
|
|
|
|
525,000
|
|
|
|
131
|
|
|
|
|
|
|
|
|
15,225,000
|
|
|
C$
|
5,429
|
|
|
|
15,225,000
|
|
|
C$
|
5,429
|
|
The
aggregate intrinsic value in the preceding table represents the total intrinsic value, based on the Company’s closing Common
Share price of C$1.00 as of September 30, 2021, that would have been received by the Option holders had all Option holders exercised
their Options as of that date. The total number of in-the-money Options vested and exercisable as of September 30, 2021, was 15,225,000.
As of September 30, 2021, there was $0 of unrecognized compensation cost related to unvested share-based compensation arrangements
granted under the Option plans.
Schedule of warrant transactions
|
|
Warrants
|
|
|
Weighted
Average Exercise Price
|
|
Balance June 30, 2021
|
|
|
14,341,868
|
|
|
C$
|
1.16
|
|
Exercised
|
|
|
(871,750
|
)
|
|
|
0.78
|
|
Balance,
September 30, 2021
|
|
|
13,470,118
|
|
|
C$
|
1.18
|
|
|
|
|
|
|
|
|
|
|
|
|
At
September 30, 2021, the Company had outstanding exercisable Common Share purchase warrants (“Warrants”), as follows:
|
Number
|
|
|
Exercise
Price
|
|
|
Expiry
Date
|
|
500,000
|
|
|
C$
|
0.80
|
|
|
December
18, 2022
|
|
4,412,118
|
|
|
C$
|
1.63
|
|
|
May
10, 2023
|
|
8,558,000
|
|
|
C$
|
0.97
|
|
|
February
19, 2025
|
|
13,470,118
|
|
|
|
|
|
|
|
NioCorp
Developments Ltd.
Notes
to the Condensed Consolidated Financial Statements
September
30, 2021
(expressed
in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
7.
|
RELATED
PARTY TRANSACTIONS AND BALANCES
|
Borrowings
under the non-revolving credit facility agreement (the “Smith Credit Facility”) with Mark Smith, Chief Executive
Officer, President, and Executive Chairman of NioCorp, bear interest at a rate of 10%
and drawdowns from the Smith Credit Facility are subject to a 2.5% establishment fee.
Amounts outstanding under the Smith Credit Facility are secured by all of the Company’s assets pursuant to a general
security agreement. The Smith Credit Facility contains financial and non-financial covenants customary for a facility of its
size and nature. As of September 30, 2021, the principal amount outstanding under the Smith Credit Facility was $2,000.
On
July 23, 2021, the Company paid Mr. Smith $40 related to accrued interest through June 30, 2021. Accounts payable and accrued
liabilities as of September 30, 2021, include accrued interest of $53 payable under the Smith Credit Facility.
8.
|
Exploration
Expenditures
|
|
|
For
the Three Months
Ended September 30,
|
|
|
|
2021
|
|
|
2020
|
|
Technical
studies and engineering
|
|
$
|
50
|
|
|
$
|
-
|
|
Field
management and other
|
|
|
124
|
|
|
|
182
|
|
Metallurgical
development
|
|
|
436
|
|
|
|
43
|
|
Geologists
and field staff
|
|
|
11
|
|
|
|
-
|
|
Total
|
|
$
|
621
|
|
|
$
|
225
|
|
The
Company incurred lease costs as follows:
|
|
|
|
|
|
|
|
|
|
|
For
the three months
ended September 30,
|
|
|
|
2021
|
|
|
|
2020
|
|
Operating
Lease Cost:
|
|
|
|
|
|
|
|
|
Fixed
rent expense
|
|
$
|
21
|
|
|
$
|
$29
|
|
Variable
rent expense
|
|
|
2
|
|
|
|
2
|
|
Short
term lease cost
|
|
|
5
|
|
|
|
3
|
|
Sublease
income
|
|
|
(5
|
)
|
|
|
(6
|
)
|
Net
lease cost
|
|
|
23
|
|
|
|
28
|
|
Lease
cost – other operating expense
|
|
|
23
|
|
|
|
22
|
|
Lease
cost – exploration expenditures
|
|
|
-
|
|
|
|
6
|
|
Net
lease cost
|
|
$
|
$23
|
|
|
$
|
$28
|
|
|
|
|
|
|
|
|
|
|
|
NioCorp
Developments Ltd.
Notes
to the Condensed Consolidated Financial Statements
September
30, 2021
(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 September 30, 2021:
|
|
Fiscal Year Lease Maturities
|
|
2021
|
|
$
|
68
|
|
2022
|
|
|
92
|
|
2023
and thereafter
|
|
|
23
|
|
Total
lease payments
|
|
|
183
|
|
Less
portion of payments representing interest
|
|
|
(25
|
)
|
Present
value of lease payments
|
|
|
158
|
|
Less
current portion of lease liability
|
|
|
(72
|
)
|
Noncurrent
lease liability
|
|
$
|
86
|
|
10.
|
Fair
Value Measurements
|
The
Company measures the fair value of financial assets and liabilities based on US GAAP guidance which defines fair value, establishes
a framework for measuring fair value, and expands disclosures about fair value measurements.
The
Company classifies financial assets and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables,
or other financial liabilities depending on their nature. Financial assets and financial liabilities are recognized at fair value
on their initial recognition.
Financial
assets and liabilities classified as held-for-trading are measured at fair value, with gains and losses recognized in net income.
Financial assets classified as held-to-maturity, loans and receivables, and financial liabilities other than those classified
as held-for-trading are measured at amortized cost, using the effective interest method of amortization. Financial assets classified
as available-for-sale are measured at fair value, with unrealized gains and losses being recognized in income.
Financial
instruments including receivables, accounts payable and accrued liabilities, and related party loans are carried at amortized
cost, which management believes approximates fair value due to the short-term nature of these instruments.
The
following tables present information about the assets and liabilities that are measured at fair value on a recurring basis as
of September 30, 2021, and June 30, 2021, respectively, and indicate the fair value hierarchy of the valuation techniques the
Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted)
in active markets for identical instruments. Fair values determined by Level 2 inputs utilize data points that are observable,
such as quoted prices, interest rates, and yield curves. Fair values determined by Level 3 inputs are unobservable data points
for the financial instrument and include situations where there is little, if any, market activity for the instrument.
NioCorp
Developments Ltd.
Notes
to the Condensed Consolidated Financial Statements
September
30, 2021
(expressed
in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited)
Schedule of fair values determined by level 3 inputs are unobservable data
|
|
As of
September 30, 2021
|
|
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
$
|
5,868
|
|
|
$
|
5,868
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Equity
securities
|
|
|
14
|
|
|
|
14
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
5,882
|
|
|
$
|
5,882
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
As of
June 30, 2021
|
|
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
$
|
7,317
|
|
|
$
|
7,317
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Equity
securities
|
|
|
16
|
|
|
|
16
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
7,333
|
|
|
$
|
7,333
|
|
|
$
|
-
|
|
|
$
|
-
|
|
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 months ended September 30, 2021, and the related notes thereto, which have been prepared in accordance
with generally accepted accounting principles in the United States (“US GAAP”). This discussion and analysis
contains forward-looking statements and forward-looking information that involve risks, uncertainties, and assumptions. Our actual
results may differ materially from those anticipated in these forward-looking statements and information as a result of many factors,
including, but not limited to, those set forth elsewhere in this Quarterly Report on Form 10-Q. See “Note Regarding Forward-Looking
Statements” below.
All
currency amounts are stated in thousands of U.S. dollars unless noted otherwise.
As
used in this report, unless the context otherwise indicates, references to “we,” “our,” the “Company,”
“NioCorp,” and “us” refer to NioCorp Developments Ltd. and its subsidiaries, collectively.
Note
Regarding Forward Looking Statements
This
Quarterly Report on Form 10-Q and the exhibits attached hereto contain “forward-looking statements” within the meaning
of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and “forward-looking information” within the meaning
of applicable Canadian securities legislation (collectively, “forward-looking statements”). Such forward-looking statements
concern our anticipated results and developments in the operations of the Company in future periods, planned exploration activities,
the adequacy of the Company’s financial resources, and other events or conditions that may occur in the future. Forward-looking
statements are frequently, but not always, identified by words such as “expects,” “anticipates,” “believes,”
“intends,” “estimates,” “potential,” “possible,” and similar expressions, or statements
that events, conditions, or results “will,” “may,” “could,” or “should” (or the
negative and grammatical variations of any of these terms) occur or be achieved. Any statements that express or involve discussions
with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, or future events or performance
(often, but not always, using words or phrases such as “expects” or “does not expect,” “is expected,”
“anticipates” or “does not anticipate,” “plans,” “estimates,” or “intends,”
or stating that certain actions, events, or results “may,” “could,” “would,” “might,”
or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements.
Such forward-looking statements reflect the Company’s current views with respect to future events and are subject to certain
known and unknown risks, uncertainties, and assumptions. Many factors could cause actual results, performance, or achievements
to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking
statements, including, among others, risks related to the following:
|
●
|
risks related to
our ability to operate as a going concern;
|
|
●
|
risks related to
our requirement of significant additional capital;
|
|
●
|
risks related to
our limited operating history;
|
|
●
|
risks related to
changes in economic valuations of the Elk Creek Project, such as net present value calculations, changes or disruptions in
the securities markets;
|
|
●
|
risks related to
our history of losses;
|
|
●
|
risks related to
cost increases for our exploration and, if warranted, development projects;
|
|
●
|
risks related to
feasibility study results;
|
|
●
|
risks related to
mineral exploration and production activities;
|
|
●
|
risks related to
our lack of mineral production from our properties;
|
|
●
|
risks related to
the results of our metallurgical testing;
|
|
●
|
risks related
to the establishment of a reserve and resource for rare earth elements and the development of a viable recovery process for
rare earth elements;
|
|
●
|
risks related to
the price volatility of commodities;
|
|
●
|
risks related to
estimates of mineral resources and reserves;
|
|
●
|
risks related to
changes in mineral resource and reserve estimates;
|
|
●
|
risks related to
differences in U.S. and Canadian reserve and resource reporting;
|
|
●
|
risks related to
our exploration activities being unsuccessful;
|
|
●
|
risks related to
our ability to obtain permits and licenses for production;
|
|
●
|
risks related
to government and environmental regulations that may increase our costs of doing business or restrict our operations;
|
|
●
|
risks related
to proposed legislation that may significantly affect the mining industry;
|
|
●
|
risks related
to land reclamation requirements;
|
|
●
|
risks related
to competition in the mining industry;
|
|
●
|
risks related
to the management of the water balance at our Elk Creek Project;
|
|
●
|
risks related
to equipment and supply shortages;
|
|
●
|
risks related
to current and future joint ventures and partnerships;
|
|
●
|
risks related
to our ability to attract qualified management;
|
|
●
|
risks related
to the ability to enforce judgment against certain of our Directors;
|
|
●
|
risks related
to claims on the title to our properties;
|
|
●
|
risks related
to surface access on our properties;
|
|
●
|
risks related
to potential future litigation;
|
|
●
|
risks related
to our lack of insurance covering all our operations;
|
|
●
|
risks related
to the need for resilience in the face of potential impacts from climate change;
|
|
●
|
risks related
to a disruption in, or failure of, our information technology (“IT”) systems, including those related to cybersecurity;
|
|
●
|
risks related
to covenants contained in agreements with our secured creditors that may affect our assets;
|
|
●
|
risks related
to the extent to which our level of indebtedness may impair our ability to obtain additional financing;
|
|
●
|
risks related
to our status as a “passive foreign investment company” under the U.S. Internal Revenue Code of 1986, as amended;
|
|
●
|
risks related
to our Common Shares, including price volatility, lack of dividend payments, dilution and penny stock rules;
|
|
●
|
risks related
to our status as an “emerging growth company” and the impact of related reduced reporting requirements on our
ability to attract investors; and
|
|
●
|
risks related
to the effects of the COVID-19 pandemic on our business plans, financial condition and liquidity.
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Should
one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may
vary materially from those described herein. This list is not exhaustive of the factors that may affect any of the Company’s
forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and actual
achievements of the Company or other future events or conditions may differ materially from those reflected in the forward-looking
statements due to a variety of risks, uncertainties, and other factors, including without limitation those discussed under the
heading “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, as well as other
factors described elsewhere in this report and the Company’s other reports filed with the Securities and Exchange Commission
(“SEC”).
The
Company’s forward-looking statements contained in this Quarterly Report on Form 10-Q are based on the beliefs, expectations,
and opinions of management as of the date of this report. The Company does not assume any obligation to update forward-looking
statements if circumstances or management’s beliefs, expectations, or opinions should change, except as required by law.
For the reasons set forth above, investors should not attribute undue certainty to, or place undue reliance on, forward-looking
statements.
National
Instrument 43-101 Compliance
Scott
Honan, M.Sc., SME-RM, a qualified person as defined by National Instrument 43-101 - Standards of Disclosure for Mineral Projects
(“NI 43-101”), has supervised the preparation of the scientific and technical information that forms the basis for
the Elk Creek Project disclosure in this Quarterly Report on Form 10-Q and has approved the disclosure in this Quarterly Report
on Form 10-Q related thereto. Mr. Honan is not independent of the Company, as he is the Chief Operating Officer. Additional information
on the updated Feasibility Study for the Elk Creek Project (the “2019 Feasibility Study”) is available in our NI 43-101
Technical Report, issued May 29, 2019, which is available under NioCorp’s profile on the Canadian Administrators website
at www.sedar.com and on our website at www.niocorp.com/wp-content/uploads/180001_FINAL_43-101_FS_NioCorp_AS_FILED.pdf.
Company
Overview
NioCorp
is developing the Elk Creek Project, located in southeast Nebraska. The Elk Creek Project is an advanced Niobium (“Nb”)/Scandium
(“Sc”)/Titanium (“Ti”) exploration project. Niobium is used to produce various superalloys that are extensively
used in high performance aircraft and jet turbines. It also is used in High-Strength, Low-Alloy (“HSLA”) steel, a
stronger steel used in automobiles, bridges, structural systems, buildings, pipelines, and other applications that generally increases
strength and/or reduces weight, which can result in environmental benefits, including reduced fuel consumption and material usage
and fewer air emissions. Scandium can be combined with aluminum to make high-performance alloys with increased strength and improved
corrosion resistance. Scandium also is a critical component of advanced solid oxide fuel cells, an environmentally preferred technology
for high-reliability, distributed electricity generation. Titanium is a component of various superalloys and other applications
that are used for aerospace applications, weapons systems, protective armor, medical implants and many others. It also is used
in pigments for paper, paint, and plastics.
Our
primary business strategy is to advance our Elk Creek Project to commercial production. We are focused on obtaining additional
funds to carry out our near-term planned work programs associated with securing the project financing necessary to complete mine
development, construction, commissioning, and operation of the Elk Creek Project.
Emerging
Growth Company Status
We
qualify as an “emerging growth company” as defined in Section 101 of the Jumpstart our Business Startups Act (“JOBs
Act”) as we did not have more than $1.07 billion in annual gross revenue during our most recently completed fiscal year.
We
will lose our status as an emerging growth company on June 30, 2022, which is the fiscal year following the fifth anniversary
of the date of the first sale of Common Shares pursuant to an effective registration statement.
As
an emerging growth company under the JOBS Act, we have elected to opt out of the extended transition period for complying with
new or revised standards pursuant to Section 107(b) of the JOBS Act. The election is irrevocable.
As
an emerging growth company, we are exempt from Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section 14A(a) and (b) of
the Exchange Act. Such sections are described below:
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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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●
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Sections 14A(a)
and (b) of the Exchange Act, implemented by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of
2010 (the “Dodd-Frank Act”), require companies to hold shareholder advisory votes on executive compensation and
golden parachute compensation.
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Because
we will lose our status as an emerging growth company as of June 30, 2022, we will become subject to Section 14A(a) and (b) of
the Exchange Act beginning next fiscal year. However, notwithstanding the loss of our status as an emerging growth company, we
will continue to be exempt from Section 404(b) of the Sarbanes-Oxley Act of 2002 for so long as we are neither a “large
accelerated filer” nor an “accelerated filer” as those terms are defined in Rule 12b-2 under the Exchange Act.
COVID-19
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 COVID-19 pandemic. The full extent to which the COVID-19 pandemic 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, including, but not limited to, the duration and geographic spread of the pandemic, its severity, the actions to
contain the virus or treat its impact, future spikes of COVID-19 infections resulting in additional preventative measures to contain
or mitigate the spread of the virus, the effectiveness, distribution and acceptance of COVID-19 vaccines, including the vaccines’
efficacy against emerging COVID-19 variants, and how quickly and to what extent normal economic and operating conditions can
resume.
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. As a result of the COVID-19 pandemic, the Company is following, and will
continue to follow, social distancing, health and safety protocol, business-related social gathering restrictions, and other similar
guidelines promulgated by both Colorado and Nebraska governmental officials.
The
COVID-19 pandemic continues to create uncertainty with regards to overall project funding timelines and has heightened the risk
that we may be unable to secure sufficient additional capital, including but not limited to equity and debt offerings, to fund
future expenditures or to maintain our liquidity. It is also possible that the COVID-19 pandemic could further adversely affect
our business plans, results of operations, financial condition or liquidity in the future. The impact of the COVID-19 pandemic
is fluid and continues to evolve, and therefore, we cannot currently predict the extent to which our business plans, results of
operations, financial condition or liquidity will ultimately be impacted.
Recent
Corporate Events
On
August 30, 2021, the Company joined with a group of rare earth industry players to urge the U.S. Congress to approve bipartisan
legislation in order to provide tax incentives for U.S. manufacturing of permanent rare earth magnets.
Elk
Creek Project Update
On
August 9, 2021, the Company announced the completion of the first phase of testing of Elk Creek Project ore samples using High-Pressure
Grinding Rolls (“HPGR”) technology. Testing confirmed that the ore that NioCorp expects to mine from the Elk Creek
Project site, subject to receipt of necessary funding, can be successfully processed using HPGR technology, an energy efficient
and low-emission alternative for reducing the size of the ore to enable the recovery of niobium, scandium, titanium, and potential
rare earth elements (“REEs”).
On
August 11, 2021, the Company announced completion of the first stage of metallurgical testing that is designed to optimize the
Elk Creek flowsheet and evaluate the potential integration of rare earth recovery to the Elk Creek Project
The
metallurgical work was conducted by Salt Lake City-based L3 Process Development (“L3”), which has worked with NioCorp
over the past several years on the development and optimization of NioCorp’s planned metallurgical processing facility for
the Elk Creek Project.
This
new metallurgical testing program is the next step in NioCorp’s goal of implementing the optimization recommendations in
the 2019 Feasibility Study for the production of niobium, scandium, and titanium, as well as to demonstrate the potential extraction
and recovery of REEs from the ore that NioCorp expects to mine from the Elk Creek Project site, subject to receipt of necessary
project funding. L3’s testing recently achieved success by demonstrating, at the bench scale, (1) process alternatives to
hydrochloric acid (“HCl”) leach in NioCorp’s planned hydrometallurgical plant, and (2) the ability to selectively
reject non-pay metals in the ore samples, including calcium, magnesium, and iron. This selective rejection would facilitate efficient
extraction of all pay metals, including REEs.
L3’s
process optimization work also includes extensive efforts to re-use and recycle key reagents from NioCorp’s planned hydrometallurgical
plant, which further NioCorp’s goal of maximizing the environmentally efficient operation of the Elk Creek mine and processing
facility, following the receipt of necessary project funding and construction of the mine and processing facility. We expect that
L3’s work will continue in the coming quarters and will include the construction and subsequent operation of a small-scale
demonstration plant at their lab facility in Quebec.
On
September 9, 2021, the Company announced that it will analyze historic drilling core samples from the Elk Creek deposit in southeast
Nebraska in order to compile sufficient data with the aim of publishing an updated Mineral Resource for the Elk Creek Project
that includes individual REEs grades and tonnage that may exist in the deposit. The focus of this effort is within the boundaries
of the current Mineral Resource. The Company’s REE initiative was launched in response to intense interest by governments,
shareholders, and industrial consumers around the world for additional sources of rare earths beyond current suppliers.
On
October 4, 2021, the Company announced that elemental analysis of more than 1,000 historic drill core samples from the Elk Creek
Project to ascertain concentrations of REEs and other elements had commenced at Activation Laboratories Ltd.’s facility
in Ancaster, Ontario. Results from this analysis, along with previous assays, may support an update to the Project’s Mineral
Resource to include individual REE grades and tonnage.
On
October 6, 2021, the Company’s senior management team hosted a large group of investors at the Elk Creek Project site for
a tour, briefing, and question and answer session.
During
the quarter ended September 30, 2021, NioCorp completed an engagement with Cementation US, Inc. (“Cementation”) to
provide a detailed cost estimate for the engineering associated with the temporary and permanent construction associated with
the Elk Creek Project’s underground mine, along with a series of technical reviews and optimization studies around key elements
of the existing mine design. Should project financing be obtained, this work will accelerate Cementation’s ability to mobilize
and commence mine construction and may result in cost savings during project execution should Cementation’s optimization
recommendations be adopted by the Company.
Other
Activities
Our
long-term financing efforts continued during the quarter ended September 30, 2021. However, as noted above under “COVID-19,”
the COVID-19 pandemic has created uncertainty and continues to impact processes related to the Company’s efforts to
obtain project financing. As funds become available through the Company’s fundraising efforts, we expect to undertake the
following activities:
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Continuation of
the Company’s efforts to secure federal, state and local permits;
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Continued evaluation
of the potential to produce rare earth products;
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Negotiation and
completion of engineering, procurement and construction agreements;
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Completion of the
final detailed engineering for the underground portion of the Elk Creek Project;
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Initiation and completion
of the final detailed engineering for surface project facilities;
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Construction of
natural gas and electrical infrastructure under existing agreements to serve the Elk Creek Project site;
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Completion of water
supply agreements and related infrastructure to deliver fresh water to the project site;
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Initiation of revised mine
groundwater investigation and control activities;
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Initiation of long-lead equipment procurement
activities; and
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Construction and operation of a small-scale
demonstration plant to address process recommendations contained in the 2019 Feasibility Study and REE unit operations.
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Financial
and Operating Results
The
Company has no revenues from mining operations. Operating expenses incurred related primarily to performing exploration activities,
as well as the activities necessary to support corporate and shareholder duties and are detailed in the following table.
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For the
Three Months
Ended September 30,
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2021
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2020
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Operating expenses
|
|
|
|
|
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Employee-related
costs
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$
|
319
|
|
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$
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319
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|
Professional fees
|
|
|
90
|
|
|
|
108
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|
Exploration expenditures
|
|
|
621
|
|
|
|
225
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Other
operating expenses
|
|
|
226
|
|
|
|
411
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Total operating
expenses
|
|
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1,256
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|
|
|
1,063
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Change in financial
instrument fair value
|
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-
|
|
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|
(34
|
)
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Foreign exchange loss
(gain)
|
|
|
210
|
|
|
|
(101
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)
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Interest expense
|
|
|
492
|
|
|
|
127
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|
Loss (gain) on equity
securities
|
|
|
2
|
|
|
|
(2
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)
|
Income
tax expense
|
|
|
-
|
|
|
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-
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Net Loss
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|
$
|
1,960
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|
$
|
1,053
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Three
months ended September 30, 2021 compared to three months ended September 30, 2020
Significant
items affecting operating expenses are noted below:
Professional
fees declined slightly in 2021 as compared to 2020, primarily due to the timing of legal services and tax preparation costs.
Exploration
expenditures increased in 2021 as compared to 2020, reflecting costs incurred in connection with process optimization and
REE assay analysis activities.
Other
operating expenses include investor relations, general office expenditures, equity offering and proxy expenditures, board-related
expenditures and other miscellaneous costs. These costs decreased in 2021 as compared to 2020 primarily due to director options
issued in 2020, which were fully vested and expensed on the grant date, offset slightly by increased financial advisory fees incurred
in 2021.
Other
significant items impacting the change in the Company’s net loss are noted below:
Foreign
exchange (gain) loss is primarily due to changes in the U.S. dollar against the Canadian dollar and reflects the timing of
foreign currency transactions, primarily U.S. dollar-based related party loans, and subsequent changes in exchange rates, and
the loss during 2021 as compared to a gain in 2020 is due to an increase in the U.S. dollar relative to the Canadian dollar in
2021, and a decrease in the U.S. dollar relative to the Canadian dollar in 2020.
Interest
expense increased in 2021 as compared to 2020 primarily due to the accretion of the Nordmin Note, which was issued in December
2020, as well as accretion of the Lind III Convertible Security, which was issued in February 2021.
Liquidity
and Capital Resources
We
have no revenue generating operations from which we can internally generate funds. To date, our ongoing operations have been financed
by the sale of our equity securities by way of private placements, convertible securities issuances, the exercise of incentive
stock options and share purchase warrants, and related party loans. While the COVID-19 pandemic has created uncertainty with respect
to overall project funding timelines, we believe that we will be able to secure additional private placement financings in the
future, although we cannot predict the timing, size, or pricing of any such financings. In addition, we could raise funds through
the sale of interests in our mineral properties, although current market conditions and the impacts of the COVID-19 pandemic have
substantially reduced the number of potential buyers/acquirers of any such interests. However, we cannot provide any assurances
that we will be able to be successful in raising such funds.
As
of September 30, 2021, the Company had cash of $5.9 million and a working capital surplus of $3.4 million, compared to cash of
$7.3 million and working capital surplus of $3.4 million on June 30, 2021.
We
expect that the Company will operate at a loss for the foreseeable future. The Company’s current planned operational needs
are approximately $5.3 million until June 30, 2022. In addition to outstanding accounts payable and short-term liabilities, our
average monthly expenditures are approximately $340 per month where approximately $250 is for corporate overhead and estimated
costs related to securing financing necessary for advancement of the Elk Creek Project. Approximately $90 per month is planned
for expenditures relating to the advancement of Elk Creek Project by NioCorp’s wholly owned subsidiary, Elk Creek Resources
Corp. The Company’s ability to continue operations and fund our current work plan is dependent on management’s ability
to secure additional financing.
The
Company anticipates that it may not have sufficient cash to continue to fund basic operations for the next twelve months, and
additional funds totaling $0.5 million to $1.0 million are likely to be necessary to continue advancing
the project in the areas
of financing, permitting, and detailed engineering. Management is actively pursuing such additional sources of debt and equity
financing, and while it has been successful in doing so in the past, there can be no assurance it will be able to do so in the
future.
Elk
Creek property lease commitments are $15 until June 30, 2022. To maintain our currently held properties and fund our currently
anticipated general and administrative costs and planned exploration and development activities at the Elk Creek Project for the
fiscal year ending June 30, 2022, the Company will likely require additional financing during the current fiscal year. Should
such financing not be available in that timeframe, we will be required to reduce our activities and will not be able to carry
out all our presently planned activities at the Elk Creek Project.
We
currently have no further funding commitments or arrangements for additional financing at this time, other than the potential
exercise of options and warrants, and there is no assurance that we will be able to obtain additional financing on acceptable
terms, if at all. There is significant uncertainty that we will be able to secure any additional financing in the current equity
or debt markets. The quantity of funds to be raised and the terms of any proposed equity or debt financing that may be undertaken
will be negotiated by management as opportunities to raise funds arise. Management is currently pursuing funding sources of both
debt and equity financing, including but not limited to the issuance of equity securities in the form of Common Shares, Warrants,
subscription receipts, or any combination thereof in units of the Company pursuant to private placements to accredited investors
or pursuant to equity lines of credit or public offerings in the form of underwritten/brokered offerings, at-the-market offerings,
registered direct offerings, or other forms of equity financing and public or private issuances of debt securities including secured
and unsecured convertible debt instruments or secured debt project financing. Management does not currently know the terms pursuant
to which such financings may be completed in the future, but any such financings will be negotiated at arm’s length. Future
financings involving the issuance of equity securities or derivatives thereof will likely be completed at a discount to the then-current
market price of the Company’s securities and will likely be dilutive to current shareholders.
Based
on the conditions described within, management has concluded and the audit opinion and notes that accompany our financial statements
for the year ended June 30, 2021, disclose that substantial doubt exists as to our ability to continue in business. The financial
statements included in this Quarterly Report on Form 10-Q have been prepared under the assumption that we will continue as a going
concern. We are an exploration stage company and we have incurred losses since our inception. We may not have sufficient cash
to fund normal operations and meet debt obligations for the next twelve months without deferring payment on certain current liabilities
and raising additional funds. The continuing COVID-19 pandemic has resulted in business travel restrictions and capital market
disruptions, and this has had an adverse impact on our ability to obtain financing, development plans, results of operations,
financial position, and cash flows during the current fiscal year. We believe that the going concern uncertainty cannot be alleviated
with confidence until the Company has entered into a business climate where funding of its planned ongoing operating activities
is secured. Therefore, these factors raise substantial doubt as to our ability to continue as a going concern.
We
have no exposure to any asset-backed commercial paper. Other than cash held by our subsidiaries for their immediate operating
needs in Colorado and Nebraska, all of our cash reserves are on deposit with major United States and Canadian chartered banks.
We do not believe that the credit, liquidity, or market risks with respect thereto have increased as a result of the current market
conditions. However, in order to achieve greater security for the preservation of our capital, we have, of necessity, been required
to accept lower rates of interest, which has also lowered our potential interest income.
Operating
Activities
During
the three months ended September 30, 2021, the Company’s operating activities consumed $1.6 million of cash (2020: $1.1
million). The cash used in operating activities for the three months ended September 30, 2021, reflects the Company’s funding
of losses of $2.0 million, partially offset by the accretion of convertible debt, other non-cash transactions and a $0.3 million
increase in prepaid expenses. Overall, operational outflows during the three months ended September 30, 2021, increased from the
corresponding period of 2020 due to an increase in spending at the Elk Creek Project and a prepayment related to planned process
optimization testing. Going forward, the Company’s working capital requirements are expected to increase substantially in
connection with the development of the Elk Creek Project.
Financing
Activities
Financing
inflows were $0.3 million during the three months ended September 30, 2021, as compared to $1.3 million during the corresponding
period in 2020, primarily reflecting the timing of warrant and option exercises during the comparative periods.
Cash
Flow Considerations
As
noted above under “COVID-19,” the COVID-19 pandemic has created uncertainty with respect to overall project
funding timelines. The Company has historically relied upon debt and equity financings to finance its activities. The Company
may pursue additional debt and/or equity financing in the medium term; however, there can be no assurance the Company will be
able to obtain any required financing in the future on acceptable terms.
The
Company has limited financial resources compared to its proposed expenditures, no source of operating income, and no assurance
that additional funding will be available to it for current or future projects, although the Company has been successful in the
past in financing its activities through the sale of equity securities.
The
ability of the Company to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions,
including the impacts of the COVID-19 pandemic on the timing and availability of funding, and its success in developing the Elk
Creek Project. Any quoted market for the Common Shares may be subject to market trends generally, notwithstanding any potential
success of the Company in creating revenue, cash flows, or earnings, and any depression of the trading price of the Common Shares
could impact its ability to obtain equity financing on acceptable terms.
Historically,
the Company has used net proceeds from issuances of Common Shares to provide sufficient funds to meet its near-term exploration
and development plans and other contractual obligations when due. However, development and construction of the Elk Creek Project
will require substantial additional capital resources. This includes near-term funding and, ultimately, funding for Elk Creek
Project construction and other costs. See “Liquidity and Capital Resources” above for the Company’s discussion
of arrangements related to possible future financings.
Contractual
Obligations
There
have been no material changes to our contractual obligations discussed in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” under the heading “Contractual Obligations” as of June 30, 2021,
in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.
Off-Balance
Sheet Arrangements
The
Company has no off-balance sheet arrangements.
Critical
Accounting Policies
There
have been no material changes in our critical accounting policies discussed in “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” under the heading “Critical Accounting Policies” as of June
30, 2021, in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.
Certain
U.S. Federal Income Tax Considerations
The
Company has been a “passive foreign investment company” (“PFIC”) as defined under Section 1297 of the
U.S. Internal Revenue Code of 1986, as amended, in recent years and expects to continue to be a PFIC in the future. Current and
prospective United States shareholders should consult their tax advisors as to the tax consequences of PFIC classification and
the U.S. federal tax treatment of PFICs. Additional information on this matter is included in the “Risk Factors” section
of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021, under the heading “Risks Related
to the Common Shares.”
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 5, 2021, is set out below, on a fully-diluted basis.
|
Common
Shares Outstanding
(fully diluted)
|
Common
Shares
|
261,480,164
|
Stock
options1
|
15,025,000
|
Warrants1
|
13,470,118
|
Convertible
Debt2
|
12,205,882
|
1
|
Each
exercisable into one Common Share
|
2
|
Represents
Common Shares issuable on conversion of aggregate outstanding principal amounts of US$8.5
million of convertible debt as of November 5, 2021, assuming a market price per Common Share
of $0.80 on that date.
|