NIOCORP DEVELOPMENTS LTD 10-Q

ITEM 1. FINANCIAL STATEMENTS Contents Page Condensed consolidated balance sheets as of September 30, 2021 and June 30, 2021 (unaudited) 2 Condensed consolidated statements of operations and comprehensive loss for the three months ended September 30, 2021 and 2020 (unaudited) 3 Condensed consolidated statements of cash flows for the three months ended September 30, 2021 and 2020 (unaudited) 4 Condensed consolidated statements of shareholders’ equity for the three months ended September 30, 2021 and 2020 (unaudited) 5 Notes to condensed consolidated financial statements (unaudited) 6 – 12 1 NioCorp Developments Ltd. Condensed Consolidated Balance Sheets (expressed in thousands of U.S. dollars, except share data) (unaudited) As of Note September 30, 2021 June 30, 2021 ASSETS Current Cash $ 5,868 $ 7,317 Prepaid expenses and other 294 24 Total current assets 6,162 7,341 Non-current Deposits 35 35 Investment in equity securities 14 16 Right-of-use assets 141 156 Land and buildings, net 852 837 Mineral interests 16,085 16,085 Total assets $ 23,289 $ 24,470 LIABILITIES Current Accounts payable and accrued liabilities 4 $ 310 $ 408 Related party loan 7 2,000 2,318 Convertible debt 5 396 1,123 Operating lease liability 9 72 69 Total current liabilities 2,778 3,918 Non-current Convertible debt, net of current 5 6,599 6,784 Operating lease liability 9 86 105 Total liabilities 9,463 10,807 SHAREHOLDERS’ EQUITY Common stock, unlimited shares authorized; shares outstanding: 259,118,369 at September 30, 2021 and 256,379,931 at June 30, 2021 6 115,896 113,882 Accumulated deficit ( 101,036 ) ( 99,076 ) Accumulated other comprehensive loss ( 1,034 ) ( 1,143 ) Total shareholders’ equity 13,826 13,663 Total liabilities and equity $ 23,289 $ 24,470 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 NioCorp Developments Ltd. Condensed Consolidated Statements of Operations and Comprehensive Loss (expressed in thousands of U.S. dollars, except share and per share data) (unaudited) For the three months ended September 30, Note 2021 2020 Operating expenses Employee related costs $ 319 $ 319 Professional fees 90 108 Exploration expenditures 8 621 225 Other operating expenses 226 411 Total operating expenses 1,256 1,063 Change in financial instrument fair value - ( 34 ) Foreign exchange loss (gain) 210 ( 101 ) Interest expense 492 127 Other loss (gain) on equity securities 2 ( 2 ) Loss before income taxes 1,960 1,053 Income tax benefit - - Net loss 3 $ 1,960 $ 1,053 Other comprehensive loss: Net loss $ 1,960 $ 1,053 Other comprehensive loss: Reporting currency translation 109 130 Total comprehensive loss $ 2,069 $ 1,183 Loss per common share, basic and diluted $ 0.01 $ 0.00 Weighted average common shares outstanding 258,023,048 236,870,066 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 NioCorp Developments Ltd. Condensed Consolidated Statements of Cash Flows (expressed in thousands of U.S. dollars) (unaudited) For the three months ended September 30, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES Total loss for the period $ ( 1,960 ) $ ( 1,053 ) Non-cash elements included in net loss: Change in financial instrument fair value - ( 34 ) Unrealized loss (gain) on equity securities 2 ( 2 ) Accretion of convertible debt 438 - Noncash lease expense ( 1 ) ( 1 ) Depreciation 1 - Foreign exchange loss (gain) 273 ( 100 ) Share-based compensation - 304 ( 1,247 ) ( 886 ) Change in working capital items: Prepaid expenses ( 270 ) ( 28 ) Accounts payable and accrued liabilities ( 92 ) ( 195 ) Net cash used in operating activities ( 1,609 ) ( 1,109 ) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of land and buildings ( 16 ) - Net cash used in financing activities ( 16 ) - CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of capital stock 664 1,381 Loan repayments - ( 33 ) Related party debt repayments ( 318 ) - Net cash provided by financing activities 346 1,348 Exchange rate effect on cash and cash equivalents ( 170 ) ( 4 ) Change in cash and cash equivalents during period ( 1,449 ) 235 Cash and cash equivalents, beginning of period 7,317 307 Cash and cash equivalent, end of period $ 5,868 $ 542 Supplemental cash flow information: Amounts paid for interest $ 40 $ 19 Amounts paid for income taxes - - Non-cash financing transactions Conversions of debt for common shares $ 1,350 $ 38 Recognition of operating lease liabilities - 231 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 NioCorp Developments Ltd. Condensed Consolidated Statements of Shareholders’ Equity (expressed in thousands of U.S. dollars, except for Common Shares outstanding) (unaudited) For the three months ended September 30, 2021 and 2020 Common Shares Outstanding Common Stock Deficit Accumulated Other Comprehensive Loss Total Balance, June 30, 2020 235,925,684 $ 97,682 $ ( 94,686 ) $ ( 355 ) $ 2,641 Exercise of warrants 2,468,521 1,351 - - 1,351 Exercise of options 209,117 30 - - 30 Debt conversions 64,298 38 - - 38 Share issuance costs - ( 1 ) - - ( 1 ) Share-based compensation - 304 - - 304 Reporting currency presentation - - - ( 130 ) ( 130 ) Loss for the period - - ( 1,053 ) - ( 1,053 ) Balance, September 30, 2020 238,667,620 $ 99,404 $ ( 95,739 ) $ ( 485 ) $ 3,180 Balance, June 30, 2021 256,379,931 $ 113,882 $ ( 99,076 ) $ ( 1,143 ) $ 13,663 Exercise of warrants 871,750 543 - - 543 Exercise of options 282,702 121 - - 121 Debt conversions 1,583,986 1,350 - - 1,350 Reporting currency presentation - - - 109 109 Loss for the period - - ( 1,960 ) - ( 1,960 ) Balance, September 30, 2021 259,118,369 $ 115,896 $ ( 101,036 ) $ ( 1,034 ) $ 13,826 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 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. DESCRIPTION OF BUSINESS NioCorp Developments Ltd. (“NioCorp” or the “Company”) was incorporated on February 27, 1987, under the laws of the Province of British Columbia and currently operates in one reportable operating segment consisting of exploration and development of mineral deposits in North America, specifically, the Elk Creek Niobium/Scandium/Titanium property (the “Elk Creek Project”) located in southeastern Nebraska. These financial statements have been prepared on a going concern basis that contemplates the realization of assets and discharge of liabilities at their carrying values in the normal course of business for the foreseeable future. These financial statements do not reflect any adjustments that may be necessary if the Company is unable to continue as a going concern. The Company currently earns no operating revenues and will require additional capital in order to advance the Elk Creek Project to construction and commercial operation. 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. 2. BASIS OF PREPARATION a) Basis of Preparation and Consolidation The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles of the United States of America (“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. 6 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. c) Use of Estimates 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. 3. GOING CONCERN ISSUES 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 7 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 5. CONVERTIBLE DEBT 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$0.01 change in the fair value of one Common Share, the total shares the Company would be obligated to issue would change by approximately 5,000 shares . 8 NioCorp Developments Ltd. Notes to the Condensed Consolidated Financial Statements September 30, 2021 (expressed in thousands of U.S. dollars, except per share amounts or as otherwise stated) (unaudited) 6. COMMON STOCK a) Stock Options Schedule of stock option Number of Options Weighted Average Exercise Price Balance, June 30, 2021 15,965,000 C$ 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 $0 of unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Option plans. b) Warrants Schedule of warrant transactions Warrants Weighted Average Exercise Price Balance June 30, 2021 14,341,868 C$ 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 9 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 9. Leases 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 10 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. 11 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 $ - $ - 12