In
May 2014, 100,000 common shares were issued for the exercise of options with an
exercise price of CDN$0.40 per share, for cash proceeds of $36,726
(CDN$40,000).
On
February 3, 2014, we granted 60,000 stock options eligible for purchase 60,000
common shares at a price of US$0.99 per share for a period of five years. Som
Dahal was granted 60,000 shares. The grants were approved in the Stock Option
Plan by shareholders on June 17, 2013. Issuer relied upon Section 2.24 of
National Instrument 45-106.
On
January 10, 2014, we granted 345,000 stock options eligible for purchase
345,000 common shares at a price of US$1.08 per share for a period of five
years. 11 purchasers were granted 345,000 shares, including: Wendy Ahearn,
David Levy, Evangeline Parsons, Liz Provini, Helen Rudich, David Rutkin, Tom
Scarpa, Rich Topel, Pat Zubil, Ted Zubil and Brian Zucker. The grants were approved
in the Stock Option Plan by shareholders on June 17, 2013. Issuer relied upon
Section 2.24 of National Instrument 45-106.
On
January 7, 2014, and March 9, 2014 the Company issued a total 100,000 shares of
common stock for cash proceeds of $62, in connection with exercise of 100,000
warrants that had an exercise price of $0.62
On
January 6, 2014, the Company issued 70,913 shares of common stock for cash
proceeds of $66,644 (CND $70,913) in connection with exercise of 70,913
warrants that had an exercise price of CND $1.00.
In
December 2013, the Company issued 150,000 shares of common stock for cash
proceeds of $93,000 USD in connection with exercise of 150,000 warrants that
had an exercise price of USD $0.62 per share.
During
October through November 2013, the Company issued 225,000 shares of common
stock for cash proceeds of $96,246 (CND $90,000) in connection with exercise of
225,000 options that had an exercise price of CND $0.40.
During
October, through December 2013, the Company issued 655,530 shares of common
stock for cash proceeds of $484,414 (CND $452,977) in connection with exercise
of 655,530 warrants that had an exercise price between CND $0.40 and CND $1.00
per share.
On
August 20, 2013, The Company completed a private placement of 6,290,740 shares
at a price of $0.50 per share for gross proceeds of $3,145,370. Each unit
comprised one common share and one share purchase warrant, with each whole
warrant exercisable at a price of USD$0.62 per share and expiring August 20,
2016. The Company paid finders fees of $82,022 for the financing. A total of
59,850 finders warrants were issued.
In
April 2013, the Company issued 25,000 shares of common stock for cash proceeds
of $10,694 (CND $10,000) in connection with exercise of 25,000 warrants that
had an exercise price of CND $0.40.
In
January 2013, the Company issued 168,000 shares of common stock for cash
proceeds of $161,693 (CND $151,200) in connection with exercise of 168,000
warrants that had an exercise price of CND $0.90.
On
July 20, 2012, The Company completed a private placement of 4,166,700 units at
a price of CDN $0.60 per unit generating aggregate gross proceeds of $2,478,020
(CDN$2,500,000). Each unit comprised one common share and one share purchase
warrant, with each whole warrant exercisable at a price of CDN$0.90 per share
until July 20, 2014. In the event that the Companys common shares close at
over CDN$1.60 for 20 consecutive trading days, the warrants will be subject to
accelerated conversion within 30 days notice of the Company disseminating a
press release providing notice of that circumstance. Finders fees were paid on
a portion of the financing, such that an aggregate of $102,815 was paid in cash
and 22,516 finders warrants were issued, having the same terms as the warrants
forming part of the units and 152,000 finders unit warrants were issued
exercisable to acquire units on the same terms as the units issued in the
financing at an exercise price of CDN$0.60 per unit for until July 20, 2014. An
additional 152,000 finders warrants were issued with an exercise price of
CDN$0.90 until July 20, 2014.
On
August 16, 2013 the Company granted 400,000 stock options to a consultant. The
options vest immediately. The options are exercisable at CDN$0.59 and expire
August 16, 2016.
On
July 31, 2013 the Company granted 100,000 stock options to two consultants. The
options vest 50% in six month, and 50% in eighteen months thereafter.
On
June 3, 2013 the Company granted 25,000 stock options to an employee. The
options vest 50% on September 3, 2013 and 50% on September 3, 2014. The options
are exercisable at CDN$0.83 and expire June 4, 2018.
31
On
June 1, 2013 the Company granted 100,000 stock options to an employee. The
options vest 25% immediately, and 25% every three months thereafter. The
options are exercisable at CDN$0.79 and expire June 1, 2016.
On
April 5, 2013 the Company granted 40,000 stock options to an employee. The
options vest immediately at the grant date. The options are exercisable at
CDN$0.71 and expire April 5, 2018.
On
January 4, 2013 the Company granted 20,000 stock options to an employee. The
options vest immediately at the grant date. The options are exercisable at
CDN$0.80 and expire January 4, 2018.
On
December 20, 2012 the Company granted 80,000 stock options to employees. 50% of
the options vest six months following the grant date and the remaining 18 months
from the grant date.
On
December 20, 2012 the Company granted 272,000 stock options to employees and
consultants of the Company which vested immediately. The options are
exercisable at CDN$0.80 and expire December 20, 2017.
On
April 17, 2012, the Company granted 120,000 stock options to employees. 50% of
the options vested on October 17, 2012 and the remaining vest on October 17,
2013. The options are exercisable at CDN$0.51 and expire on April 17, 2017.
On
August 16, 2012, the Company granted 200,000 stock options to an employee. 50%
of the options vest six months following the grant date and the remaining in
twelve months from the grant date. The options are exercisable at CDN$1.11 and
expire September 4, 2017.
On
February 8, 2011, the Company granted 2,190,000 stock options to directors,
employees and consultants. The options vest over a three year period, and are
exercisable at CDN$0.97 expiring in five years. During fiscal year
2012 117,000 of the options were forfeited.
Selling and Marketing Expenses
The
Company currently has not recognized any revenue, as it is still in the
development stage for many of its applications. The Company plans to have its
black silicon technology available to the solar industry in the next 20-26
months; Natcore will not need a direct sales force in the foreseeable future.
Natcore will market its technology though the industry with its current
management staff.As the company moved through the proof of concept phase and closer
to commercialization for the Companys applications, it began making more
presentations to manufacturers and potential customers as well as equipment
builders who would adapt existing machinery to accommodate Natcores process.
General and Administrative
Expenses
Natcores
general and administrative expenses consist primarily of costs associated with
marketing activities, outside professional fees, travel costs, facilities costs
and other corporate expenses.The Companys professional and consulting fees for
the quarter ended March 31, 2016 increased approximately $42,000 over the prior
year quarter resulting from increased costs relating to patents and accounting,and
legal fees and the Company using additional consultants for marketing purposes. For the quarter ended March 31, 2016 the
Companys depreciation decreased from the prior year quarter due to assets
becoming fully amortized. For the quarter ended March 31, 2016 the Companys
stock-based compensation increased by approximately $402,000 due to options
being issued in the 2016 quarter that vested immediately. See schedule above
which summarize changes by expense line for the Companys operating expenses.Natcores wages
and salaries expenses consist of compensation costs for management, finance and
other administrative personnel, these costs also include payroll taxes and
benefits associated with its personnel functions. For the quarter ended March
31, 2016 compared to the prior year, the changes in wages and salaries expense
versus the prior quarter decreased approximately $36,000 due to a lower
headcount. This increase was a result of wage increases.
Research and Development Expenses
Natcores
research and development expenses consisted of all expenses incurred in
research and development activities, including compensation associated with its
research staff. The Companys increase in R & D expense of approximately
$25,000 over the prior year quarter ended were primarily due to timing.
Other Income (Expense)
Other
income (expense) primarily consists of gains and losses related to Natcores investment
activities from its cash equivalent investments and the change in the
derivative liability.The primary reasons for the change in the derivative
liability were a result of non-cash revaluations of the Companys derivative
liabilities resulting from additional warrants being issued in 2016 and an
increase in the Companys stock price at March 31, 2016 compared to March 31,
2015.
32
Operating (Loss)
Natcore
currently does not have any sales revenue, consequently it has generated only
operating losses. Natcores operating expenses consist of general and
administrative expenses, wages and salaries expenses, research and development
expenses, depreciation and amortization costs and stock-based compensation
expenses discussed above.
Critical Accounting Policies and Estimates
Statement of compliance with
International Financial Reporting Standards
The
consolidated financial statements of the Company, as provided in this
prospectus, have been prepared in accordance with International Financial
Reporting Standards (IFRS) issued by the International Accounting Standards
Board (IASB) and interpreted by the International Financial Reporting
Interpretations Committee (IFRIC).
As
a result of the Accounting Standards Board of Canadas decision to adopt IFRS
for publicly accountable entities for financial reporting periods beginning on
or after January 1, 2011, the Company adopted IFRS for the 2011 and 2010 annual
financial statements. The December 31, 2010 financial statements were restated
to conform to IFRS.
Since
Natcore began preparing its financial statements in accordance with IFRS,
having reviewed significant transactions and compared them to United States
generally accepted accounting principles (GAAP), Natcore concluded that there are no
material differences that would impact the users of the accompanying financial
statements other than terminology and headings.
Basis of preparation
The
consolidated financial statements of the Company have been prepared on an
accrual basis and are based on historical costs, modified where applicable. The
consolidated financial statements are presented in United States dollars unless
otherwise noted.
Consolidation
The
consolidated financial statements include the accounts of the Company and its
controlled entities. Details of controlled entities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
owned*
|
|
|
|
|
|
|
|
|
|
Jurisdiction
of incorporation
|
|
March 31,
2016
(unaudited)
|
|
December
31, 2015
|
|
|
|
|
|
|
|
|
|
Natcore Technology, Inc.
|
|
United
States
|
|
|
100
|
%
|
100
|
%
|
Newcyte, Incorporated
|
|
United
States
|
|
|
100
|
%
|
100
|
%
|
Vanguard Solar, Inc.
|
|
United
States
|
|
|
100
|
%
|
100
|
%
|
Natcore Asia Technology,
Limited
|
|
Hong
Kong
|
|
|
100
|
%
|
100
|
%
|
|
|
|
|
|
|
|
|
|
__________________
|
*Percentage of voting power is in proportion
to ownership.
|
|
Inter-company balances are
eliminated on consolidation.
|
Significant accounting judgments,
estimates and assumptions
The
preparation of consolidated financial statements in accordance with IFRS
requires the Company to make estimates and assumptions concerning the future.
The Companys management reviews these estimates and underlying assumptions on
an ongoing basis, based on experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.
Revisions to estimates are adjusted for prospectively in the period in which
the estimates are revised.
Estimates
and assumptions where there is significant risk of material adjustments to
assets and liabilities in future accounting periods include the useful lives of
equipment, impairment considerations for equipment and intangible assets,
determination of fair value for stock-based compensation and other share-based
payments, valuations and assumptions used to determine deferred income taxes
and the fair value of financial instruments.
33
Foreign currency translation
The
functional currency of each of the Companys entities is measured using the
currency of the primary economic environment in which that entity operates. The
consolidated financial statements are presented in United States dollars, which
is the functional currency of the Company and its subsidiaries.
Transactions and balances
Foreign
currency transactions are translated into functional currency using the
exchange rates prevailing at the date of the transaction. Foreign currency
monetary items are translated at the period-end exchange rate. Non-monetary
items measured at historical cost continue to be carried at the exchange rate
at the date of the transaction. Non-monetary items measured at fair value are
reported at the exchange rate at the date when fair values were determined.
Exchange
differences arising on the translation of monetary items or on settlement of
monetary items are recognized in profit or loss in the statement of
comprehensive loss in the period in which they arise, except where deferred in
equity as a qualifying cash flow or net investment hedge.
Exchange
differences arising on the translation of non-monetary items are recognized in
other comprehensive loss in the statement of comprehensive loss to the extent
that gains and losses arising on those non-monetary items are also recognized
in other comprehensive loss. Where the non-monetary gain or loss is recognized
in profit or loss, the exchange component is also recognized in profit or loss.
The
financial results and position of foreign operations whose functional currency
is different from the Companys presentation currency are translated as
follows:
|
|
|
|
|
assets
and liabilities are translated at period-end exchange rates prevailing at
that reporting date; and
|
|
|
|
|
|
income
and expenses are translated at average exchange rates for the period.
|
Intangible assets
Intangible
assets acquired separately
Intangible
assets with finite useful lives that are acquired separately are carried at
cost less accumulated amortization and accumulated impairment losses.
Amortization is recognized on a straight-line basis over their estimated useful
lives. The estimated useful life and amortization method are reviewed at the
end of each reporting period, with the effect of any changes in estimate being
accounted for on a prospective basis. Intangible assets with indefinite useful
lives that are acquired separately are carried at cost less accumulated
impairment losses.
Internally-generated
intangible assets - Research and development expenditure
Expenditure
on research activities is recognized as an expense in the period in which it is
incurred. An internally-generated intangible asset arising from development (or
from the development phase of an internal project) is recognized if, and only
if, all of the following have been demonstrated:
|
|
|
|
1.
|
The technical feasibility
of completing the intangible asset so that it will be available for use or
sale;
|
|
|
|
|
2.
|
The intention to complete
the intangible asset and use or sell it;
|
|
|
|
|
3.
|
The ability to use or sell
the intangible asset;
|
|
|
|
|
4.
|
How the intangible asset
will generate probable future economic benefits;
|
|
|
|
|
5.
|
The availability of
adequate technical, financial and other resources to complete the development
and to use or sell the intangible asset; and
|
|
|
|
|
6.
|
The ability to measure
reliably the expenditure attributable to the intangible asset during its
development.
|
The
amount initially recognized for internally-generated intangible assets is the
sum of the expenditure incurred from the date when the intangible asset first
meets the recognition criteria listed above. Where no internally-generated
intangible asset can be recognized, development expenditure is recognized in
loss in the period in which it is incurred.
Subsequent
to initial recognition, internally-generated intangible assets are reported at
cost less accumulated amortization and accumulated impairment losses, on the
same basis as intangible assets that are acquired separately.
34
As
of March 31, 2016 and December 31, 2015, the Company has not recognized any
internally-generated intangible assets.
Share-based payments
The
Company operates a stock option plan. Share-based payments to employees are
measured at the fair value of the instruments issued and amortized over the
vesting periods. Share-based payments to non-employees are measured at the fair
value of goods or services received or the fair value of the equity instruments
issued, if it is determined the fair value of the goods or services cannot be
reliably measured, and are recorded at the date the goods or services are
received. The corresponding amount is recorded to the share-based payment
reserve. The fair value of options is determined using the BlackScholes Option
Pricing Model. The number of shares and options expected to vest is reviewed
and adjusted at the end of each reporting period such that the amount
recognized for services received as consideration for the equity instruments granted
shall be based on the number of equity instruments that eventually vest.
Financial instruments
The
Company classifies its financial instruments in the following categories: at
fair value through profit or loss, loans and receivables, held-to-maturity
investments, available-for-sale and financial liabilities. The classification
depends on the purpose for which the financial instruments were acquired.
Management determines the classification of its financial instruments at
initial recognition.
Financial
assets are classified at fair value through profit or loss when they are either
held for trading for the purpose of short-term profit taking, derivatives not
held for hedging purposes, or when they are designated as such to avoid an
accounting mismatch or to enable performance evaluation where a group of
financial assets is managed by key management personnel on a fair value basis
in accordance with a documented risk management or investment strategy. Such
assets are subsequently measured at fair value with changes in carrying value
being included in profit or loss.
Loans
and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market and are subsequently measured
at amortized cost. They are included in current assets, except for maturities
greater than 12 months after the end of the reporting period. These are
classified as non-current assets.
Held-to-maturity
investments are non-derivative financial assets that have fixed maturities and
fixed or determinable payments, and it is the Companys intention to hold these
investments to maturity. They are subsequently measured at amortized cost.
Held-to-maturity investments are included in non-current assets, except for
those which are expected to mature within 12 months after the end of the
reporting period.
Available-for-sale
financial assets are non-derivative financial assets that are designated as
available-for-sale or are not suitable to be classified as financial assets at
fair value through profit or loss, loans and receivables or held-to-maturity
investments and are subsequently measured at fair value. These are included in
current assets. Unrealized gains and losses are recognized in other
comprehensive loss, except for impairment losses and foreign exchange gains and
losses.
Non-derivative
financial liabilities (excluding financial guarantees) are subsequently
measured at amortized cost. Derivative financial liabilities are classified at
fair value through profit and loss and are subsequently measured at fair value
with changes in carrying value being included in profit or loss.
Regular
purchases and sales of financial assets are recognized on the trade-date the
date on which the Company commits to purchase the asset.
Financial
assets are derecognized when the rights to receive cash flows from the
investments have expired or have been transferred and the Company has
transferred substantially all risks and rewards of ownership.
At
each reporting date, the Company assesses whether there is objective evidence
that a financial instrument has been impaired. In the case of
available-for-sale financial instruments, a significant and prolonged decline
in the value of the instrument is considered to determine whether an impairment
has arisen.
Impairment of long-lived assets
The
carrying amount of the Companys long-lived assets (which include equipment and
intangible assets) is reviewed at each reporting date to determine whether
there is any indication of impairment. If such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent
of the impairment loss. An impairment loss is recognized whenever the carrying
amount of an asset or its cash generating unit exceeds its recoverable amount.
Impairment losses are recognized in the statement of comprehensive loss.
35
The
recoverable amount of assets is the greater of an assets fair value less cost
to sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that
reflects the current market assessments of the time value of money and the
risks specific to the asset. For an asset that does not generate cash inflows
largely independent of those from other assets, the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
An
impairment loss is only reversed if there is an indication that the impairment
loss may no longer exist and there has been a change in the estimates used to
determine the recoverable amount, however, not to an amount higher than the
carrying amount that would have been determined had no impairment loss been
recognized in previous years.
Assets
that have an indefinite useful life are not subject to amortization and are
tested annually for impairment.
Cash and cash equivalents
Cash
and cash equivalents include cash on hand, deposits held at call with banks and
other short-term highly liquid investments with original maturities of three
months or less.
Income taxes
Current income tax:
Current
income tax assets and liabilities for the current period are measured at the
amount expected to be recovered from, or paid to the taxation authorities. The
tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted, at the reporting date, in the countries where the
Company operates and generates taxable income.
Current
income tax relating to items recognized directly in other comprehensive loss or
equity is recognized in other comprehensive loss or equity and not in profit or
loss. Management periodically evaluates positions taken in the tax returns with
respect to situations in which applicable tax regulations are subject to
interpretation and establishes provisions where appropriate.
Deferred income tax:
Deferred
income tax is provided using the asset and liability method on temporary
differences at the reporting date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
The
carrying amount of deferred income tax assets is reviewed at the end of each
reporting period and recognized only to the extent that it is probable that
sufficient taxable profit will be available to allow all or part of the
deferred income tax asset to be utilized.
Deferred
income tax assets and liabilities are measured at the tax rates that are
expected to apply to the year when the asset is realized or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.
Deferred
income tax assets and deferred income tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current income
tax liabilities and the deferred income taxes relate to the same taxable entity
and the same taxation authority.
Equipment
Equipment
is stated at historical cost less accumulated depreciation and accumulated
impairment losses.
Subsequent
costs are included in the assets carrying amount or recognized as a separate
asset, as appropriate, only when it is probable that future economic benefits
associated with the item will flow to the Company and the cost of the item can
be measured reliably. The carrying amount of the replaced part is derecognized.
All other repairs and maintenance are charged to the statement of comprehensive
loss during the financial period in which they are incurred.
36
Gains
and losses on disposals are determined by comparing the proceeds with the
carrying amount and are recognized in profit or loss.
Depreciation
and amortization are calculated on a straight-line method to write off the cost
of the assets to their residual values over their estimated useful lives.
Liquidity and Capital Resources
The
Company is exposed in varying degrees to a variety of financial instrument
related risks. The Board of Directors approves and monitors the risk management
processes, inclusive of documented investment policies, counterparty limits,
and controlling and reporting structures. The type of risk exposure and the way
in which such exposure is managed is provided as follows:
Credit
risk
Credit
risk is the risk that one party to a financial instrument will fail to
discharge an obligation and cause the other party to incur a financial loss.
The Companys primary exposure to credit risk is on its cash held in bank
accounts. The majority of cash is deposited in bank accounts held with major
banks in Canada and the United States. As most of the Companys cash is held by
two banks there is a concentration of credit risk. This risk is managed by
using major banks that are high credit quality financial institutions as
determined by rating agencies. The Companys exposure to credit risk on its
receivables is considered minimal as the balances are not significant.
Liquidity
risk
Liquidity
risk is the risk that the Company will not be able to meet its financial
obligations as they fall due. The Company has a planning and budgeting process
in place to help determine the funds required to support the Companys normal
operating requirements on an ongoing basis. The Company ensures that there are
sufficient funds to meet its short-term business requirements, taking into
account its anticipated cash flows from operations and its holdings of cash and
cash equivalents.
Historically,
the Companys sole source of funding has been the issuance of equity securities
for cash, primarily through private placements. The Companys access to
financing is always uncertain. There can be no assurance of continued access to
significant equity funding. All of the Companys non-derivative financial
liabilities are due within one year.
The
following is an analysis of the contractual maturities of the Companys
non-derivative financial liabilities as at March 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Within one
year
|
|
Between
one
and five years
|
|
More than
five years
|
|
|
|
|
|
|
|
|
|
Trade payables and accrued
liabilities
|
|
$
|
726,854
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
exchange risk
Foreign
currency risk is the risk that the fair values of future cash flows of a
financial instrument will fluctuate because they are denominated in currencies
that differ from the respective functional currency. The Company does not hedge
its exposure to fluctuations in foreign exchange rates.
The
following is an analysis of the United States dollar equivalent of financial
assets and liabilities that are denominated in Canadian dollars:
|
|
|
|
|
|
|
|
|
|
March 31,
2016 (unaudited)
|
|
|
December
31, 2015
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
428,021
|
|
$
|
295,019
|
|
|
|
|
|
|
|
|
|
Based
on the above net exposures, a 1% change in the Canadian dollar to United States
dollar exchange rate would impact the Companys net loss by $4,280 and $2,905
at March 31, 2016 and December 31, 2015, respectively
37
Interest
rate risk
Interest
rate risk is the risk that the fair value of future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. The
Company is exposed to interest rate risk on its cash equivalents as these
instruments have original maturities of three months or less and are therefore
exposed to interest rate fluctuations on renewal. A 1% change in market
interest rates would have an impact on the Companys net loss of approximately
$1,000.
Capital Management
The
Companys policy is to maintain a strong capital base so as to maintain
investor and creditor confidence and to sustain future development of the
business. The capital structure of the Company consists of equity, comprising
share capital, net of accumulated deficit. There were no changes in the
Companys approach to capital management during the period. The Company is not
subject to any externally imposed capital requirements.
Fair Value
The
fair value of the Companys financial assets and liabilities approximates the
carrying amount. Financial instruments measured at fair value are classified
into one of three levels in the fair value hierarchy according to the relative
reliability of the inputs used to estimate the fair values. The three levels of
the fair value hierarchy are:
|
|
|
Level 1 Unadjusted
quoted prices in active markets for identical assets or liabilities;
|
|
|
|
Level 2 Inputs other
than quoted prices that are observable for the asset or liability either
directly or indirectly; and
|
|
|
|
Level 3 Inputs that are
not based on observable market data.
|
Financial
liabilities measured at fair value at December 31, 2015 and2014 consisted of
the derivative financial liability, which is measured using level 3 inputs.
Classification of financial instruments
Financial
assets included in the statement of financial position are as follows:
|
|
|
|
|
|
|
|
Current Assets:
|
|
March 31, 2016
(unaudited)
|
|
December 31, 2015
|
|
|
|
|
|
|
|
Cash, cash equivalents
and receivables
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
587,636
|
|
$
|
521 521
|
|
Subscription receivable
on share issuance
|
|
|
|
|
|
18,174
|
|
|
|
|
|
|
|
|
|
|
|
$
|
587,636
|
|
$
|
539,695
|
|
|
|
|
|
|
|
|
|
_____________________
*The Goods and Services (GST) receivable is comprised of input taxes the
Company has been charged by vendors on purchases of goods and services obtained
in Canada. The Company is entitled to a refund of these input taxes from the
Canada Revenue Agency, which is receives on a quarterly basis.
Financial
liabilities included in the statement of financial position are as follows:
|
|
|
|
|
|
|
|
|
|
March 31, 2016
(unaudited)
|
|
December 31,
2015
|
|
|
|
|
|
|
|
Non-derivative financial
liabilities:
|
|
|
|
|
|
|
|
Trade payables
|
|
$
|
726,854
|
|
$
|
749,985
|
|
Derivative liabilities
|
|
|
|
|
|
|
|
Derivative financial
liability warrants
|
|
|
2,992,304
|
|
|
1,135,157
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,719,158
|
|
$
|
1,885,142
|
|
|
|
|
|
|
|
|
|
38
Cash Flows
The
following table summarizes the Companys cash flows by activity and cash on hand
for the three months ended March 31, 2016 and the year ended December 31, 2015:
|
|
|
|
|
|
|
|
Activity
|
|
Three
Months Ended March 31, 2016
(Unaudited)
|
|
Year Ended
December 31, 2015
(Audited)
|
|
|
|
|
|
|
|
Net cash used in
operatingactivities
|
|
|
(610,144
|
)
|
|
(2,588,345
|
)
|
Net cash used in
investingactivities
|
|
|
(1,295
|
)
|
|
(27,185
|
)
|
Net cash provided by
financingactivities
|
|
|
677,554
|
|
|
2,588,664
|
|
|
|
|
|
|
|
|
|
Net increase (decrease)
incash
|
|
|
66,115
|
|
|
(26,866
|
)
|
Cash at the beginning of
theperiod
|
|
|
521,521
|
|
|
548,387
|
|
|
|
|
|
|
|
|
|
Cash at the end of
theperiod
|
|
|
587,636
|
|
|
521,521
|
|
|
|
|
|
|
|
|
|
The
Company reported working capital (deficit) of ($3,003,800) as of March 31, 2016
and ($1,186,488) at December 31, 2015. At March 31, 2016, the Company had cash
of $587,636 compared to cash of $521,521 as of December 31, 2015. The increase
of $66,115 for the three months ended March 31, 2016 is the result of a net
loss for operational expenses and cash paid for equipment which are offset by
proceeds of issuances of common stock shares in 2016. The Company anticipates
its current cash and cash equivalents will be sufficient to fund operations for
the next six months and is currently pursuing additional financing
alternatives, including completing another private placement, to fund
operations beyond one year.
Current
assets excluding cash and cash equivalents at March 31, 2016 consisted of
receivables of $3,145 and prepaid expenses of $124,577.
Current
liabilities at March 31, 2016 consisted of accounts payable and accrued
liabilities of $726,854 and the derivative financial liability of $2,992,304.
The
Company may continue to have capital requirements in excess of its currently
available resources. In the event the Companys plans change, its assumptions
change or prove inaccurate, or its capital resources in addition to projected
cash flow, if any, prove to be insufficient to fund operations, the Company may
be required to seek additional financing. There can be no assurance that the
Company will have sufficient financing to meet its future capital requirements
or that additional financing will be available on terms acceptable to the
Company in the future.
Commitments
Employment
Agreement
The Company
has an agreement (the Employment Agreement) dated October 1, 2007, and
amended July 31, 2008, with an officer of the Company under which the Company
pays a fee for employee services at a base salary of $220,000 per annum. On
April 30, 2010, the Board of Directors passed a resolution to increase this to
$250,000 per annum and on May 13, 2011 passed a resolution to increase this to
$275,000 per annum. The employee is entitled to receive options under the terms
and conditions of the Companys stock option plan. The employee will serve as
the President and Chief Executive Officer of the Company. On April 5, 2012, the
employment agreement was extended for an additional two years under the same terms.
On April 5, 2014 the employment agreement was extended for an additional three
years under the same terms.
The
employee has the right, upon 30 days notice, to terminate the Employment
Agreement. The Company may terminate the Employment Agreement on 10 days
notice if for cause or on 60 days notice if without cause. Should the Company
terminate the contract without cause, it is obligated to pay the employee an
amount equal to three months base salary.
License
Agreement
On
March 31, 2004 the Company entered into a License Agreement with Rice
University under which the University is entitled to receive: (i) 2% of the
Companys adjusted gross sales as defined in the License Agreement, and (ii) 2%
of the adjusted gross sales of any sublicense as defined in the License
Agreement.
39
Upon
effectiveness of the agreement, the University also received common shares that
corresponded to 10% of the Companys outstanding capital stock on that date. To
date, the Company has not generated any revenue; as such, the University has
yet to receive compensation from the terms of the License Agreement. As per the
agreement, the University was initially issued 1,000 shares at par value.
Later, the Company subsidiary split its stock 555 to 1. As such, the University
was issued a new certificate for 555,556 Natcore Delaware shares on October 5,
2007. Additionally, pursuant to the Companys acquisition agreement regarding
Syracuse Capital Group, the Company allowed shareholders to convert their Natcore
Delaware shares into Syracuse shares at a ratio of 1 to 1.1. As a result, the
University was issued 611,112 Syracuse shares, which eventually became the
Companys current shares after the corresponding name change. The License
Agreement gives the Company an exclusive license to a certain United States
patent and the related technology for low temperature growth of inorganic
materials from solution using catalyzed growth and re-growth. The U.S.
Provisional Patent Application for Method for Low Temperature Growth of
Inorganic Materials from Solution using Growth and Re-Growth was filed on
November 19, 2002 under Serial No. 60/427,392.
The
following milestones were set forth in the preceding License Agreement. It was
stipulated that first round funding would be secured within six months after
the agreement was signed. Additionally, a milestone was set to award product
development contract within nine months. Specifically, the milestone states
that Phase 1, which involves the demonstration of film growth on large area
wafers and the improvement of purity, should be completed in seven months. In
addition, Phase 2, which involves the development of multiple wafer, high
throughput process within two and a half years. Milestone 3 dictates that second
round funding should be secured within two and a half years. Finally,
milestones 4 and 5 detail certain staffing requirements. Milestone 4 requires
that a Director of Product Development and Manufacturing, three in-house
R&D staff and two business/operations managers, on the premise that money
is available. Milestone 5 requires that a product qualification program be
initiated within two and a half years, in which Natcore R&D personnel would
be located on-site at performing organization. In turn, the qualification
program should be completed within three years. While Milestones 1, 2 and 3
have been met, the milestones in all the license agreements with Rice
University are considered best efforts projected to be achieved within the
business and economic environment at the time they were formulated and are
eligible to be renegotiated at any time.
Sponsored
Research Agreement
On
September 1, 2009, the Company has entered into a sponsored research agreement
with Rice University to develop thin films incorporating silicon quantum dots.
The initial term of the agreement is one year and the proposed budget is
$100,000. Both the term and the funding can be extended by mutual agreement. As
of the date of this filing the agreement has not been extended and no money has
been paid to Rice University beyond the original $100,000.
China Joint
Venture
On
June 22, 2010 the Company formed a joint venture (Natcore Technology (Zhuzhou)
Co., Ltd.) with a consortium in China to develop and manufacture film-growth
equipment and materials using the Companys proprietary Liquid Phase Deposition
technology licensed from Rice University. Natcore Technology (Zhuzhou) Co.,
Ltd. will be 55% owned by the Company, with the Zhuzhou Hi-Tech Industrial
Development Zone and a Chinese firm that is currently a producer of polysilicon
and a manufacturer of industrial equipment used in the solar industry
(together, the Chinese Partnership) holding the remaining 45% ownership
position. Natcore Technology (Zhuzhou) Co., Ltd. will be funded by an initial
$3 million investment consisting of $500,000 contributed by the Company and
$2,500,000 contributed by the Chinese Partnership. Natcore Technology (Zhuzhou)
Co., Ltd. will have the exclusive right to develop, manufacture and sell AR
film-growth equipment in China, and a five-year exclusive right to manufacture
such equipment for sale outside of China. The Companys Board of Directors has
not approved funding for the joint venture consequently no funding has been
made, the joint venture has not taken place as of this filing.
Research
and Development Facility
On
June 1, 2013, the Company entered into a new two year lease for its research
and development facility in Rochester, New York, pursuant to which the Company
agreed topay a base rent of $103,596 per year in monthly installments of
$8,633. The lease was set to expire on June 30, 2015. On June 26, 2015, the
Company extended the lease from July 1, 2015 to June 30, 2017 at a base rent of
$105,212 per year in monthly installments of $8,768.
Administrative
Office Lease
On
August 1, 2013, the Company entered into a new three year lease agreement for
its administrative office. The Company will pay a base rent of $22,000 per year
in monthly installments of $1,833. After year one the annual rent will increase
3% for each year of the lease, the lease expires on July 31, 2016. The Company
is in negotiations to extend this lease agreement.
40
Patent
License Agreement
On
December 12, 2011 the Company entered into a Patent License Agreement with the
National Renewable Energy Laboratory (NREL) to use certain licensed patents
for technologies for creating a black silicon antireflection layer integrated
into high efficiency solar cells. The patents include: Nanoparticle-Based
Etching of Silicon Surfaces under Patent Application No. 8,075,792;
Anti-reflection Etching of Silicon Surfaces Catalyzed with Ionic Metal
Solutions under Application No. 12/053,445; Wet-Chemical Systems and Methods
for Producing Black Silicon Substrates under Application No. PCT/US10/56417;
Forming High-Efficiency Silicon Solar Cells Using Density-Graded
Anti-Reflection Surfaces under Application No. 12/797,590; Efficient Black
Silicon Photovoltaic Devices with Enhanced Blue Response under Application No.
PCT/US11/27479; and Copper-Assisted, Anti-Reflection Etching of Silicon
Surfaces under Application No. 13/423,745. The Company agrees to pay a running
royalty of two and one half percent (2.5%) on all Net Sales of Licensed
Products (excluding Licensed Chemicals) sold by or on behalf of Licensee. The
Company also agrees to pay an annual running royalty of ten percent (10%) of
Net Sales of Licensed Chemicals sold by or on behalf of Licensee.Should the
running royalty not achieve $25,000, then the Company would have to pay the
difference up to $25,000. The License Agreement estimates that the Companys
estimated contribution is $100,000 a year. NRELs estimated in-kind
contribution is $50,000, conditioned on available funding. While neither party
will have an obligation to continue performance of its work at a contribution
in excess of the estimated amount, each party shall provide at least thirty
days notice if complete performance will exceed the estimated costs.
The
License Agreement was amended on July 27, 2012 in order to modify a section of
the License pertaining to Licensed Intellectual Property. The modification
entailed the specific titles and application numbers of the licensed patents.
The License Agreement was further amended on January 30, 2014 to delete and
replace Exhibit C, 2) Market Milestones.
The
License Agreement gives the Company an exclusive license to the aforementioned
patents for the development of a commercial manufacturing process for both
multicrystalline and monocrystalline solar cells that combines the Companys
passivation technology.All patent license agreements are for the duration of
the life of the patent as established by the USPTO when the patent is granted.
The
License Agreement is subject to early termination. Either the Company or NREL
has the right to terminate the License Agreement with cause and without
judicial resolution upon written notice to the other in the case of a breach of
the License Agreement. The Company shall provide NREL will sufficient advance
funds to maintain approximately 90-day advance of funds during the entire
period of work. No work shall begin before the receipt of a sufficient
cash-advance. If the Company fails to provide the necessary advance funds is
cause for termination by NREL. Further, the License Agreement shall terminate
automatically upon a final adjudication of invalidity, unenforceability, or the
extinguishment of all Licensed Patents, for any reason. In addition, NREL may
terminate the License Agreement if the Company fails to satisfy the
requirements set forth in Exhibit B and C of the License Agreement, attempts to
transfer the Companys rights under the License Agreement or the Company
becomes a party to a Bankruptcy proceeding. Exhibit B outlines the financial
considerations of the License Agreement: specifically concerning the Fields of
Use, the Upfront Fee of $20,000, the Continuous Royalty Rate Structure due by
the Company, the Subleasing Royalties due by potential Sub-Licensees, and
states the minimum annual payment must be at least $25,000.Exhibit C outlines
the technical and marketing milestones pursuant to this agreement.
Specifically, the agreement also outlines certain market milestones for the
parties. The first milestone stipulates the achievement of cumulative Net Sales
of Licensed Products in excess of $1 million on or before December 1, 2014.
This milestone has not been met by the company. Milestones for cumulative Net
Sales of Licensed Products in excess of $2 million and $3 million are set for
December 1, 2015 and December 1, 2016, respectively. The Company believes,
based on conversation with representatives from NREL, that all such milestones
are eligible for renegotiation as desired by the Company. The License Agreement
shall automatically terminate if the Company attempts to pledge its rights
under the License Agreement as collateral to a third party. The Company may
terminate the License Agreement upon sixty days prior notice to NREL provided
that all outstanding fees, reimbursements and royalties (as detailed in the
License Agreement) are satisfied.
In
March 2012, the Company opened its Research and Development Center (the
R&D Center) in Rochester, NY. The R&D Center enables Natcore to
develop applications based on the companys proprietary liquid phase deposition
technology. On June 1, 2013, the Company entered into a new two year lease for
its research and development facility in Rochester, New York. The Company will
pay a base rent of $103,596 per year in monthly installments of $8,633. The
lease was set to expire on June 30, 2015. On June 26, 2015, the Company
extended the lease from July 1, 2015 to June 30, 2017 at a base rent of
$105,212 per year in monthly installments of $8,768.
41
Depiction
of Contractual Obligations
Tabular disclosure of Contractual Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments by
periods as of
March31, 2016
(unaudited)
|
|
|
|
|
|
|
|
Total
|
|
less than 1 year
|
|
1 - 3 years
|
|
3 - 5 years
|
|
> 5 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease
|
|
$
|
139,299
|
|
$
|
112,995
|
|
$
|
26,304
|
|
|
|
|
|
|
|
Contract payments obligations
|
|
|
175,000
|
|
|
50,000
|
|
|
50,000
|
|
|
50,000
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
314,299
|
|
$
|
162,995
|
|
$
|
76,304
|
|
$
|
50,000
|
|
$
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type
|
|
Description of Commitment
|
|
Amount
|
|
Exhibit
|
|
|
|
|
|
|
|
Employment Agreement
|
|
President and CEOs employment
agreement
|
|
$275,000/year plus stock options,
|
|
10.1
|
|
|
|
|
|
|
|
License Agreement & Amendments
|
|
Gives Company exclusive license
from Rice University for certain patents.
|
|
2% Companys adjusted Gross Sales
under License and Sublicense agreement
|
|
10.2, 10.3
|
|
|
|
|
|
|
|
Sponsored Research Agreement &
Amendments
|
|
Rice University to develop
products.
|
|
$100,000/year
|
|
10.4, 10.5
|
|
|
|
|
|
|
|
Research & Development
Facility Lease
|
|
Two (2) year renewable lease for
facility beginning June 1, 2013 and expiring June 30, 2015
|
|
$103,596/year
|
|
10.6, 10.7
|
|
|
|
|
|
|
|
Administrative Office Lease
|
|
Three (3) year lease beginning
August 1, 2013 and expiring on July 31, 2016
|
|
$22,000 per year with a 3%
increase each year
|
|
10.15
|
|
|
|
|
|
|
|
Exclusive Patent License
Agreement& Amendments
|
|
Agreement to use certain licensed
patents. Agreement with National Renewable Energy Laboratory for exclusive
use of patent.
|
|
$25,000 per annum plus royalties
|
|
10.8, 10.9, 10.10
|
|
|
|
|
|
|
|
Cooperative Research and
Development Agreement
|
|
Agreement to develop a commercial
manufacturing process for both multicrystalline and monocrystalline solar
cells
|
|
$100,000 initial contribution
|
|
10.11
|
|
|
|
|
|
|
|
China Joint Venture
|
|
Agreement to develop and
manufacture film-growth equipment and materials
|
|
Not Applicable at this time
|
|
10.12, 10.13
|
Related
party transactions and balances
As
of March 31, 2016 and December 31, 2015 there was $204,060 and $204,060,
respectively, owed to directors, officers, and companies controlled by
directors that has been included in trade payables and accrued liabilities.
Key Management Personnel Compensation
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2016
(unaudited)
|
|
Year Ended
December 31,
2015
|
|
|
|
|
|
|
|
Administrative fees
|
|
$
|
15,000
|
|
$
|
60,000
|
|
Consulting
|
|
|
|
|
|
100,200
|
|
Wages and benefits
|
|
|
104,698
|
|
|
558,320
|
|
|
|
|
|
|
|
|
|
|
|
$
|
119,698
|
|
$
|
718,520
|
|
|
|
|
|
|
|
|
|
Quantitative and Qualitative Disclosure about
Market Risk
Natcore
is exposed to market risks arising from its normal business activities. These
market risks, which are beyond the Companys control, principally involve the possibility
that changes in interest rates, exchange rates or commodity prices will
adversely affect the value of its financial assets and liabilities or future
cash flows and earnings. Market risk is the potential loss arising from adverse
changes in market rates and prices.
42
Impact of Inflation and Currency Fluctuations
Because
the majority of Natcores revenue is paid in or linked to the U.S. dollar,
Natcore believes that inflation and fluctuation in the CAD/dollar exchange rate
has limited effect on its results of operations. However, a portion of the cost
of its Canadian operations, mainly personnel, is incurred in CAD. Because some
of Natcores costs are in CAD, inflation in CAD/dollar exchange rate
fluctuations does have some impact on the Companys expenses and, as a result,
on its net income. Natcores CAD costs, as expressed in dollars, are influenced
by the extent to which any increase in the rate of inflation in Canada is not
offset, or is offset on a delayed basis, by a devaluation of the CAD in
relation to the dollar.
Natcore
does not engage in any hedging or other transactions intended to manage risks
relating to foreign currency exchange rate or interest rate fluctuations.
However, Natcore may in the future undertake hedging or other similar
transactions or invest in market risk-sensitive instruments if its management
determines that it is necessary or advisable to offset these risks.