What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-01-26 compared with 2021-01-27 · 127 added, 357 removed, 631 unchanged (43% of the section changed)

5 unchanged sentences

and its subsidiaries (together, the Company) as of November 30, 2021 and 2020, and the related consolidated statements of loss and comprehensive loss, cash flows and equity for each of the three years in the period ended November 30, 2021, including the related notes (collectively referred to as the consolidated financial statements).

We also have audited the Company's internal control over financial reporting as of November 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited the Company's internal control over financial reporting as of November 30, 2021, based on criteria established in Internal Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of November 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended November 30, 2021 in conformity with accounting principles generally accepted in the United States of America.

2 unchanged sentences

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting.

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Report of Management on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

17 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

1 unchanged sentence

Recognition of the contingent note receivable

As described in Notes 2, 4 and 15 to the consolidated financial statements, on July 27, 2018, the Company completed the sale of its 50% interest in the Galore Creek Partnership and its 40% interest in the Copper Canyon mineral property (“the sale”).

As part of the consideration for the sale, the Company received a $75 million note (the “contingent note receivable”), which is contingent upon the approval of a Galore Creek project construction plan by the owner(s).

 The Company had not assigned a value to the contingent note receivable as management determined that Galore Creek project construction approval was not probable as of the closing of the Galore Creek sale.

Management’s determination did not change as of November 30, 2020. 

As described in Notes 2 and 4 to the consolidated financial statements, on July 27, 2018, the Company sold its interest in the Galore Creek project (the sale).

As part of the consideration for the sale, the Company received a $75 million note (the contingent note receivable), which is contingent upon the approval of a Galore Creek project construction plan by the owner(s).

The Company has not assigned a value to the contingent note receivable as management determined that Galore Creek project construction approval was not probable as of the closing of the Galore Creek sale or in subsequent periods.

Management’s assessment did not change as of November 30, 2021.

The contingent note will be recognized when, in management’s judgment, it is probable that the payment will occur, and that the amount recorded will not reverse in future periods.

The principal considerations for our determination that performing procedures relating to the recognition of the contingent note receivable is a critical audit matter are that there was judgment made by management when determining if recognition was required, which in turn led to a high degree of subjectivity in performing audit procedures to evaluate management’s determination of the probability of whether a construction plan will be approved.

The principal considerations for our determination that performing procedures relating to the recognition of the contingent note receivable is a critical audit matter are the judgment by management when determining if recognition was required, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures and evaluating management’s assessment of the probability of whether a Galore Creek project construction plan will be approved.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s process of assessing the basis for recognizing the contingent note receivable.

These procedures also included evaluating how management formulated their judgment as to the likelihood of the owner(s) of the project approving the Galore Greek project construction plan.

These procedures included testing the effectiveness of controls relating to management’s assessment of the basis for recognizing the contingent note receivable.

These procedures also included, among others, evaluating the reasonableness of management’s assessment regarding the probability of the owner(s) of the project approving the Galore Creek project construction plan.

This included considering both publicly available information and the latest annual progress report provided by the owner(s) of the project to the Company under the terms of the sale agreement.

(signed) PricewaterhouseCoopers LLP

/s/ PricewaterhouseCoopers LLP

Chartered Professional Accountants

27 unchanged sentences

Accrued payroll and related benefits

Income taxes payable

Lease obligations (Note 8)

Other liabilities

Other liabilities (Note 9)

Current liabilities

2 unchanged sentences

109,801  

Lease obligations (Note 8)

Deferred income taxes (Note 14)

Other liabilities (Note 9)

Total liabilities

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/s/ Gregory A.

Lang           

/s/ Anthony P.

5 unchanged sentences

General and administrative (Note 12)

$ 18,735  

$ 16,321  

$ 18,493  

Equity loss - Donlin Gold (Note 5)

14,502  

10,491  

33,237  

26,812  

27,291  

Loss from operations

( 33,237 )  

( 26,812 )  

Interest expense on promissory note (Note 7)

( 6,014 )  

( 7,286 )  

Accretion of notes receivable (Note 4)

Other income, net (Note 13)

Loss before income taxes and other items

( 34,345 )  

( 26,483 )  

Income tax recovery (expense) (Note 14)

( 1,278 )  

Net loss from continuing operations

( 33,564 )  

( 27,761 )  

Net loss from discontinued operations, net of tax (Note 15)

( 33,564 )  

( 27,761 )  

Other income (expense), net (Note 14)

Loss before income taxes

Income tax (expense) recovery (Note 15)

Other comprehensive income (loss):

Foreign currency translation adjustments

Reclassification of cumulative translation adjustment included in net loss from discontinued operations (Note 15)

Unrealized holding gain (loss) on marketable securities during period net of $ nil , $ nil and $ 128 tax recovery, respectively

Reclassification adjustment for losses on marketable securities included in net loss from continuing operations (Note 13)

Comprehensive loss

$ ( 32,632 )  

$ ( 27,713 )  

$ ( 131,068 )

Net loss per common share –

basic and diluted

Continuing operations

$ ( 0.10 )  

$ ( 0.09 )  

Discontinued operations

$ ( 0.10 )  

$ ( 0.09 )  

Weighted average shares outstanding

Basic and diluted (thousands)

329,269  

325,785  

322,487  

The accompanying notes are an integral part of these consolidated financial statements.

NOVAGOLD RESOURCES INC.

CONSOLID ATED STATEMENTS OF CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOWS

(US dollars in thousands)

1 unchanged sentence

Operating activities:

$ ( 33,564 )  

$ ( 27,761 )  

$ ( 112,765 )

Equity loss –

Donlin Gold (Note 5)

14,502  

10,491  

Share-based compensation (Note 12)

Interest expense on promissory note (Note 7)

Net loss from discontinued operations, net of tax (Note 15)

81,299  

Accretion of notes receivable (Note 4)

( 3,337 )  

( 3,220 )  

Deferred income tax (recovery) expense (Note 14)

( 751 )  

Share-based compensation

Interest expense on promissory note

Remediation expense

Foreign exchange loss (gain)

( 20 )  

Accretion of notes receivable

Change in fair value of marketable securities

( 431 )  

( 93 )  

Gain on sale of mineral property

Deferred income tax (recovery) expense

Other operating adjustments

Net change in operating assets and liabilities (Note 17)

( 135 )  

Net cash used in operating activities of continuing operations

( 10,020 )  

( 6,127 )  

Net cash used in operating activities

Investing activities:

Proceeds from term deposits

81,000  

219,000  

62,000  

Purchases of term deposits

( 61,000 )  

( 154,000 )  

Proceeds from note receivable

Funding of Donlin Gold

( 15,276 )  

( 11,122 )  

( 17 )  

Net cash provided from (used in) investing activities of continuing operations

53,861  

Net cash provided from (used in) investing activities of discontinued operations (Note 15)

102,448  

Net cash provided from (used in) investing activities

53,861  

Proceeds from sale of mineral property

Net cash provided from investing activities

Financing activities:

Withholding tax on share-based compensation

( 1,652 )  

( 1,197 )  

Net cash used in financing activities of continuing operations

( 1,652 )  

( 1,197 )  

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Net change in cash and cash equivalents

( 6,643 )  

46,545  

Cash and cash equivalents at beginning of period

67,549  

21,004  

27,954  

Cash and cash equivalents at end of period

$ 60,906  

$ 67,549  

$ 21,004  

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

The accompanying notes are an integral part of these consolidated financial statements.

NOVAGOLD RESOURCES INC.

CO NSOLIDATED STATEMENTS OF EQUITY

CONSOLIDATED STATEMENTS OF EQUITY

(US dollars and shares in thousands)

7 unchanged sentences

$ 160,688  

Cumulative-effect adjustment of adopting ASU No.

( 378 )  

Share-based compensation

Deferred share units (DSUs) settled in shares

Performance share units (PSUs) settled in shares

( 2,737 )  

DSUs settled in shares

( 120 )  

Stock options exercised

( 7,855 )  

Withholding tax on PSUs

( 1,197 )  

Other comprehensive loss

( 27,761 )  

Other comprehensive income

November 30, 2019

5 unchanged sentences

$ 137,954  

Cumulative-effect adjustment of adopting ASU No.

( 378 )  

Share-based compensation

Performance share units (PSUs) settled in shares

( 2,737 )  

DSUs settled in shares

PSUs settled in shares

( 1,026 )  

39 unchanged sentences

The Company’s principal asset is a 50 % interest in the Donlin Gold project in Alaska, USA.

The Donlin Gold project is owned and operated by Donlin Gold LLC, a limited liability company that is owned equally by wholly-owned subsidiaries of NOVAGOLD and Barrick Gold Corporation (“Barrick”).

The Donlin Gold project is owned and operated by Donlin Gold LLC (“Donlin Gold”), a limited liability company that is owned equally by wholly-owned subsidiaries of NOVAGOLD and Barrick Gold Corporation (“Barrick”).

NOTE 2 –

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Dollar amounts are in thousands, except for per share amounts.

Foreign c urrency

Foreign currency

The functional currency for NOVAGOLD RESOURCES INC.

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The term deposits are not traded in an active market.

Discontinued o perations

The Company reports the results of operations of a business as discontinued operations if a disposal represents a strategic shift that has (or will have) a major effect on the Company’s operations and financial results when the business is classified as held for sale.

The results of discontinued operations are reported in Net income (loss) from discontinued operations , net of tax in the accompanying Consolidated Statements of Operations for current and prior periods, including any gain or loss recognized on closing or adjustment of the carrying amount to fair value less cost to sell.

On July 27, 2018, the Company completed the sale of its 50 % interest in the Galore Creek Partnership (GCP) and its 40 % interest in the Copper Canyon mineral property in British Columbia, Canada (collectively referred to herein as “Galore Creek”).

As a result, the Company presents Galore Creek as a discontinued operation for all periods presented.

Accordingly, the Consolidated Statements of Loss and Comprehensive Loss and Cash Flows have been reclassified to present Galore Creek as a discontinued operation for all periods presented, and the amounts presented in these notes relate only to continuing operations unless otherwise noted.

For additional information regarding discontinued operations, see Note 15.

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

Contingent note receivable

4 unchanged sentences

Investments in unconsolidated ventures over which the Company has the ability to exercise significant influence, but does not control, are accounted for under the equity method and include the Company’s investment in the Donlin Gold project.

The Company identified Donlin Gold LLC as a Variable Interest Entity (VIE) as the entity is dependent on funding from its owners.

The Company identified Donlin Gold as a Variable Interest Entity (VIE) as the entity is dependent on funding from its owners.

All funding, ownership, voting rights, and power to exercise control is shared equally on a 50/50 basis between the owners of the VIE.

Therefore, the Company has determined that it is not the primary beneficiary of the VIE.

The Company’s maximum exposure to loss is its equity investment in Donlin Gold LLC.

The Company’s maximum exposure to loss is its equity investment in Donlin Gold.

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

The equity method is a basis of accounting for investments whereby the investment is initially recorded at cost and the carrying value is adjusted thereafter to include the investor’s pro rata share of post-acquisition earnings or losses of the investee, as computed by the consolidation method.

1 unchanged sentence

Profit distributions received or receivable from an investee reduce the carrying value of the investment.

Donlin Gold LLC is a non-publicly traded equity investee owning an exploration and development project.

Therefore, the Company assesses whether there has been a potential impairment triggering event for other-than-temporary impairment by testing the underlying assets of the equity investee for recoverability and assessing whether there has been a change in the development plan or strategy for the project.

Donlin Gold is a non-publicly traded equity investee owning an exploration and development project.

Therefore, the Company assesses whether there has been a potential triggering event for other-than-temporary impairment by assessing the underlying assets of the equity investee for recoverability and assessing whether there has been a change in the development plan or strategy for the project.

If the underlying assets are not recoverable, the Company will record an impairment charge equal to the difference between the carrying amount of the investee and its fair value.

15 unchanged sentences

Only those securities or other contracts that result in a reduction in earnings per share are included in the calculation.

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

Recently adopted accounting pronouncements

In February 2016, Accounting Standards Update (“ASU”) No.

2016 - 02 was issued which, together with subsequent amendments, is included in ASC 842, Leases.

The standard was issued to increase transparency and comparability among organizations by requiring the recognition of right-of-use ("ROU") assets and lease liabilities on the balance sheet for all leases with an initial term greater than one year.

Certain qualitative and quantitative disclosures are also required.

On December 1, 2019, the Company adopted this standard using the modified retrospective approach with the effective date as of the date of initial application.

Consequently, results for the year ended November 30, 2020 are presented under ASC Topic 842.

No prior period amounts were adjusted and continue to be reported in accordance with previous lease guidance, ASC Topic 840, Leases.

All leases were reassessed under the new standard including lease identification, lease classification, and initial direct costs in relation to its leases in effect as of December 1, 2019.

The Company also elected the practical expedients allowing:

i) the use of hindsight in determining the lease term and assessing impairment of ROU assets based on all facts and circumstances through the effective date of the new standard;

ii) the short-term lease recognition exemption whereby ROU assets and lease liabilities will not be recognized for leasing arrangements with terms less than one year;

and iii) to combine lease and non-lease components and expense variable payments as rent/lease expense in the period incurred.

Adoption of the new standard resulted in recording an operating lease ROU asset and operating lease liability of approximately $ 399 on our Consolidated Balance Sheet as of December 1, 2019.

Adoption of the standard did not have an impact on the Company’s beginning accumulated deficit, results from operations or cash flows.

For required qualitative and quantitative disclosures related to leasing arrangements beginning in the period of adoption, see Note 8.

Changes to the Company’s accounting policy as a result of adoption are discussed below.

The Company reviews all contracts and determines if the arrangement represents or contains a lease, at inception.

Operating leases are included in 

Other non-current assets  and 

Other current  and 

non-current liabilities  in the Consolidated Balance Sheets. The Company does not have any finance leases.

Operating lease ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

The Company uses its estimated incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments.

The operating lease ROU asset also includes any upfront lease payments made and excludes lease incentives and initial direct costs incurred.

The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Leases with a term of 12 months or less are not recorded on the balance sheet.

The Company’s lease agreements do not contain any residual value guarantees.

Recently is sued accounting pronouncements

Fair Value Disclosure Requirements

In August 2018, ASU No.

In August 2018, Accounting Standards Update (“ASU”) No.

2018 - 13 was issued to modify and enhance the disclosure requirements for fair value measurements.

This update is effective in fiscal years, including interim periods, beginning after December 1, 2020.

Adoption of this guidance is not expected to significantly impact the Company’s note disclosures.

The Company adopted this standard on December 1, 2020.

Adoption of this guidance did not impact the Company’s note disclosures.

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

NOTE 3 –

2 unchanged sentences

The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer.

The Chief Executive Officer considers the business from a geographic perspective considering the performance of our investments in the Donlin Gold project in Alaska, USA (Note 5 ) and, prior to its disposal on July 27, 2018, the Galore Creek project in British Columbia, Canada (Note 15 ).

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

The Chief Executive Officer considers the business from a geographic perspective considering the performance of our investments in the Donlin Gold project in Alaska, USA (Note 5 ).

NOTE 4 –

NOTES RECEIVABLE

The Company has notes receivable from Newmont Corporation (“Newmont”) including a $ 75,000 note receivable upon the earlier of the completion of a new Galore Creek project pre-feasibility study or July 27, 2021, and a $ 25,000 note receivable upon the earlier of the completion of a Galore Creek project feasibility study or July 27, 2023.

On closing of the Galore Creek sale, management estimated the fair value of the $ 75,000 and $ 25,000 notes receivable at $ 88,398 , assuming payments in three and five years, respectively, at a discount rate of 3.6 % based on quoted market values for Newmont debt with a similar term.

The carrying values of the notes receivable are being accreted to $75,000 and $25,000 over three and five years, respectively.

As of November 30, 2020, the carrying value of the notes receivable was $ 96,016 including $ 7,618 of accumulated accretion.

A contingent note for $75,000 is receivable upon approval of a Galore Creek project construction plan by the owner(s).

No value was assigned to the final $75,000 contingent note receivable.

Management determined that Galore Creek project construction approval was not probable as of the closing of the Galore Creek sale.

Management’s assessment did not change as of November 30, 2020.

Changes in the Company’s Notes receivable are summarized as follows:

4 unchanged sentences

$ 92,679  

Fair value of notes receivable

$ 89,459  

Accretion of notes receivable

Payment received

( 75,000 )  

Balance –

12 unchanged sentences

$ 96,016  

On July 27, 2018, the Company sold its interest in the Galore Creek project to a subsidiary of Newmont Corporation (“Newmont”) for cash proceeds of $ 100,000 , a $ 75,000 note due upon the earlier of the completion of a Galore Creek pre-feasibility study or July 27, 2021, a $ 25,000 note due upon the earlier of the completion of a Galore Creek feasibility study or July 27, 2023, and a contingent note for $ 75,000 due upon approval of a Galore Creek project construction plan by the owner(s).

The Company received $ 75,000 from Newmont on July 27, 2021.

As of November 30, 2021, the carrying value of the $ 25,000 note was $ 23,572 including $ 2,556 of accumulated accretion.

The carrying value of the note is being accreted to $ 25,000 over five years at a discount rate of 3.6 % based on quoted market values for Newmont debt with a similar term.

A contingent note for $ 75,000 is due upon approval of a Galore Creek project construction plan by the owner(s).

No value was assigned to the final $ 75,000 contingent note.

The Company determined that Galore Creek project construction approval was not probable as of the closing of the Galore Creek sale.

The Company’s assessment did not change as of November 30, 2021.

Minas San Roque

On November 3, 2021, the Company sold its 49 % interest in the Minas San Roque project in Argentina to Marifil S.A., a subsidiary of International Iconic Gold Mines Ltd.

(“Iconic”) for cash proceeds of C$250 upon closing, a C$750 note receivable due on November 1, 2022, and a C$1,000 note receivable due on November 1, 2023.

The notes are guaranteed by Iconic.

On closing, the Company determined the fair value of the notes was nil.

The Company’s assessment did not change as of November 30, 2021.

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

NOTE 5 –

INVESTMENT IN DONLIN GOLD

The Donlin Gold project is owned and operated by Donlin Gold LLC, a limited liability company in which wholly-owned subsidiaries of NOVAGOLD and Barrick each own a 50 % interest.

Donlin Gold LLC has a board of four directors, with two directors selected by Barrick and two directors selected by the Company.

All significant decisions related to Donlin Gold LLC require the approval of at least a majority of the Donlin Gold LLC board members.

Changes in the Company’s I nvestment in Donlin Gold are summarized as follows:

The Donlin Gold project is owned and operated by Donlin Gold, a limited liability company in which wholly-owned subsidiaries of NOVAGOLD and Barrick each own a 50 % interest.

Donlin Gold has a board of four directors, with two directors selected by Barrick and two directors selected by the Company.

All significant decisions related to Donlin Gold require the approval of at least a majority of the Donlin Gold board members.

Changes in the Company’s Investment in Donlin Gold are summarized as follows:

Years ended November 30,

1 unchanged sentence

beginning of period

$ 1,840  

$ 1,209  

$ 1,100  

Share of losses:

Mineral property expenditures

( 14,339 )  

( 10,434 )  

( 163 )  

( 57 )  

( 14,502 )  

( 10,491 )  

15,276  

11,122  

Balance –

end of period

$ 2,614  

$ 1,840  

$ 1,209  

The following amounts represent the Company’s 50% share of the assets and liabilities of Donlin Gold LLC.

Donlin Gold LLC capitalized the initial contribution of the Donlin Gold property as Non-current assets:

The following amounts represent the Company’s 50% share of the assets and liabilities of Donlin Gold.

Donlin Gold capitalized the initial contribution of the Donlin Gold property as Non-current assets:

Mineral property with a carrying value of $ 64,000 , resulting in a higher carrying value of the mineral property than that of the Company.

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

As of November 30,

1 unchanged sentence

Cash, prepaid expenses, and other receivables

$ 2,654  

$ 3,115  

Non-current assets:

2 unchanged sentences

Mineral property

32,615  

32,692  

Current liabilities:

Accounts payable, accrued liabilities and lease obligations

( 1,271 )  

Non-current liabilities:

Reclamation and lease obligations

( 723 )  

$ 34,614  

$ 33,840  

NOTE 6 –

2 unchanged sentences

Accounts and interest receivable

$ 1,100  

Prepaid expenses

$ 1,869  

$ 1,790  

Other long-term assets:

Marketable equity securities

$ 1,402  

Right-of-use assets

Office equipment

$ 2,036  

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

NOTE 7 –

2 unchanged sentences

prime plus 2 %.

The promissory note resulted from the agreement that led to the formation of Donlin Gold LLC, where the Company agreed to reimburse Barrick for a portion of their expenditures incurred from April 1, 2006 to November 30, 2007.

The promissory note and accrued interest are payable from 85 % of the Company’s share of revenue from future mine production or from any net proceeds resulting from a reduction of the Company’s interest in Donlin Gold LLC.

The promissory note resulted from the agreement that led to the formation of Donlin Gold, where the Company agreed to reimburse Barrick for a portion of their expenditures incurred from April 1, 2006 to November 30, 2007.

The carrying value of the promissory note approximates fair value.

3 unchanged sentences

beginning of period

$ 103,787  

$ 96,501  

$ 90,040  

Interest expense on promissory note

1 unchanged sentence

end of period

$ 109,801  

$ 103,787  

$ 96,501  

NOTE 8 –

3 unchanged sentences

These optional periods have not been considered in the determination of ROU assets or lease liabilities associated with these leases as management did not consider it reasonably certain it would exercise the options.

The Company performed evaluations of its contracts and determined each of its identified leases are operating leases.

Certain of our leases include payments that vary based on the Company’s level of usage and operations.

These variable payments are not included within ROU assets and lease liabilities in the Consolidated Balance Sheets.

Additionally, short-term leases, which have an initial term of 12 months or less, are not recorded in the Consolidated Balance Sheets.

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

Lease expenses are included in General and administrative expense –

Office expense on the Consolidated Statements of Loss and include the following components for the year ended November 30, 2020:

Office expense on the Consolidated Statements of Loss and include the following components:

Years ended November 30,

Operating lease cost

1 unchanged sentence

Short-term lease cost

On February 1, 2020, the Company recorded a new operating lease obligation of $ 380 arising from obtaining ROU assets.

Future minimum lease payments under non-cancellable operating leases as of November 30, 2021, were as follows:

1 unchanged sentence

imputed interest

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

Other information regarding leases for the year ended November 30, 2021 includes the following:

Years ended November 30,

Cash paid for operating leases

Variable lease cost

Short-term lease cost

Right-of-use assets obtained in exchange for lease liabilities

4 unchanged sentences

NOTE 9 –

OTHER LIABILITIES

As of November 30,

Other current liabilities:

Remediation liabilities

Lease obligations

Income taxes payable

Other long-term liabilities:

Remediation liabilities

Lease obligations

NOTE 10 –

SHARE CAPITAL

17 unchanged sentences

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The Company’s financial instruments consist of cash and cash equivalents, term deposits, accounts receivable, and accounts payable and accrued liabilities.

The fair value of the Company’s financial instruments approximates their carrying value due to the short‐term nature of their maturity.

The Company’s financial instruments initially measured at fair value and then held at amortized cost include cash and cash equivalents, term deposits, accounts receivable, and accounts payable and accrued liabilities.

The Company’s marketable equity securities are valued using quoted market prices in active markets and as such are classified within Level 1 of the fair value hierarchy.

7 unchanged sentences

Share-based compensation (Note 13)

$ 7,057  

$ 6,176  

$ 7,727  

Salaries and benefits

2 unchanged sentences

Corporate communications and regulatory

$ 18,735  

$ 16,321  

$ 18,493  

NOTE 13 –

3 unchanged sentences

As of November 

30, 2020, 27.3 million common shares were available for future share incentive plan awards under all three plans.

30, 2021, 29,399,000 common shares were available for future share incentive plan awards under all three plans.

The Company recognized share-based compensation expense (see Note 12 - General and administrative ) as follows:

33 unchanged sentences

$ 16,318  

$ 56,113  

Vested and exercisable as of November 30, 2021

56 unchanged sentences

$ 2,855  

$ 1,607  

Withholding tax paid on PSUs vested

5 unchanged sentences

The Company granted 25,957 , 21,602 and 35,851 DSUs to Directors with a weighted-average grant day fair value of $ 8.86 , $ 9.07 , and $ 4.40 per DSU during 2021, 2020 and 2019, respectively.

The Company issued nil, 31,721 and 98,160 common shares under the DSU plan in 2020, 2019 and 2018, respectively.

The Company issued nil, nil, and 31,721 common shares under the DSU plan in 2021, 2020 and 2019, respectively.

As of November 30, 2021, there were 306,321 DSUs outstanding.

3 unchanged sentences

Interest income

$ 1,744  

$ 4,190  

$ 1,998  

Change in fair market value of marketable securities

Foreign exchange gain (loss)

( 606 )  

Other gain (loss)

$ 1,569  

$ 4,395  

$ 1,751  

Foreign exchange (loss) gain

Remediation expense

NOTE 15 –

The British Columbia provincial corporate tax rate increased from 11 % to 12 % commencing January 1, 2018, resulting in an increase in the Company’s statutory tax rate to 26.92 % in 2018, and to 27 % in 2019 onward.

tax reform enacted on December 22, 2017 ( the “Act”), allows a Section 250 deduction amounting to 37.5 % of the U.S.

entity’s foreign derived intangible income (FDII) for the fiscal year ended November 30, 2020.

The Company’s U.S.

entities will be filing on a consolidated basis for the fiscal year ending November 30, 2020.

Since the U.S.

consolidated group is in a taxable loss position there is no FDII deduction allowed and no corresponding tax savings.

The Company’s statutory tax rate is 27 % and is expected to remain at this amount until 2024.

NOVAGOLD RESOURCES INC.

1 unchanged sentence

(US dollars in thousands, except per share)

The Act also includes other provisions including the limitations on the use of future losses, repeal of the Alternative Minimum Tax regime, and the introduction of a base erosion and anti-abuse tax.

These provisions are not expected to have immediate effect on the Company.

Given the significant complexity of the Act, further implications of the Act may be identified in future periods.

The Company’s Income tax (recovery) expense consisted of:

4 unchanged sentences

( 751 )  

Income tax (recovery) expense

Income tax expense (recovery)

$ ( 781 )  

19 unchanged sentences

Non-deductible expenditures

Foreign accrual property income (FAPI)

Foreign accrual property income

Effect of consolidated return for U.S.

subsidiaries  

( 751 )  

1 unchanged sentence

( 323 )  

Effect of statutory tax rate change

73,135  

Change in valuation allowance on deferred tax assets

24 unchanged sentences

Unrealized loss on investments

Asset retirement obligation

279,762  

3 unchanged sentences

Deferred income tax liabilities:

Investment tax credit

Notes receivable

4 unchanged sentences

Net deferred income tax assets (liabilities)

These amounts reflect the classification and presentation that is reported for each tax jurisdiction in which the Company operates.

Net deferred income tax assets and liabilities consist of:

As of November 30,

Non-current deferred income tax assets

Non-current deferred income tax liabilities

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

Net operating losses available to offset future taxable income are as follows:

22 unchanged sentences

$ 156,003  

Under the U.S.

tax reform, net operating losses arising in tax years ending after December 31, 2017 can be carried over to each taxable year following the tax year of loss (indefinitely).

net operating losses arising in tax years ending after December 31, 2017 can be carried over to each taxable year following the tax year of loss (indefinitely).

The Company has capital loss carry-forwards of approximately $ 377,550 ( November 30, 2020:

8 unchanged sentences

tax losses related to NOVAGOLD Resources Alaska Inc.

and its investment in Donlin Gold LLC for the prior three -year periods prior to the change in control may be subject to limitation under Section 

and its investment in Donlin Gold for the prior three -year periods prior to the change in control may be subject to limitation under Section 

Accordingly, the Company’s ability to use these losses may be limited or they may expire un-utilized.

Losses incurred to date may be further limited if a subsequent change in control occurs.

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax asset.

2 unchanged sentences

On the basis of this evaluation, as of November 30, 2021, a valuation allowance of $ 278,790 ( November 30, 2020:

$ 260,920 ), inclusive of valuation allowance for investment tax credits has been recorded in order to measure only the portion of the deferred tax asset that more likely than not will be realized.

$ 271,016 ), has been recorded in order to measure only the portion of the deferred tax asset that more likely than not will be realized.

The amount of the deferred tax asset considered realizable;

10 unchanged sentences

30, 2021, are 2017 to 2021 in Canada and 2018 to 2021 in the United States.

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

NOTE 16 –

DISCONTINUED OPERATIONS

Galore Creek transaction

On July 27, 2018, the Company completed the sale of its 50 % interest in the Galore Creek assets to Newmont.

The Company received $ 100,000 on closing;

a note for $ 75,000 receivable upon the earlier of the completion of a new Galore Creek project pre-feasibility study or July 27, 2021;

a note for $ 25,000 receivable upon the earlier of the completion of a Galore Creek project feasibility study or July 27, 2023;

and an additional note for $ 75,000 is receivable upon the approval of a Galore Creek project construction plan by the owner(s).

The Company has no remaining interest in Galore Creek.

The details of our Net loss from discontinued operations, net of tax for the year ended November 30, 2018 are set forth below:

Equity loss –

Income tax expense

Galore Creek operations, net of tax

Loss on sale of Galore Creek, net of tax

For the year ended November 30, 2018, the Company recognized a L oss on sale of Galore Creek, net of tax , calculated as follows:

Cash consideration received on closing

$ 100,000  

Refund of reclamation deposits

Less closing costs

104,176  

Fair value of notes receivable (Note 5)

88,398  

192,574  

Less book values:

Investment in GCP

Copper Canyon mineral property

Reclamation deposits

Reclassification of cumulative foreign currency translation adjustments

13,776  

Deferred income tax recovery

11,465  

Other comprehensive income (loss) for the year ended November 30, 2018 was not impacted by discontinued operations as Galore Creek did not have any Other comprehensive income (loss) .

The details of our Net cash provided from (used in) investing activities of discontinued operations for the year ended November 30, 2018 are set forth below:

Funding of Galore Creek Partnership

Net cash proceeds received

99,279  

Reclamation deposits

$ 102,448  

NOTE 16 –

RELATED PARTY TRANSACTIONS

The Company provided technical services to Donlin Gold LLC for $ 658 in 2018.

The Company did not provide technical services to Donlin Gold LLC in 2020 or 2019.

As of November 30, 2020, the Company has accounts receivable from Donlin Gold LLC of $ 6 ( November 30, 2019:

$nil ) included in Other current assets .

NOVAGOLD RESOURCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(US dollars in thousands, except per share)

As of November 30, 2021, the Company has accounts receivable from Donlin Gold of nil ( November 30, 2020:

$ 6 ) included in Other current assets .

NOTE 17 –

2 unchanged sentences

Changes in operating assets and liabilities:

$ ( 65 )  

Accounts payable and accrued liabilities

( 137 )  

Accrued payroll and related benefits

( 402 )  

$ ( 135 )  

NOTE 18 –

6 unchanged sentences

Income taxes paid

Non-cash i nvesting a ctivities

During 2018, the Company recorded a non-cash increase to long-term notes receivable of $ 88,398 as a portion of the proceeds received on the sale of the Galore Creek assets (Note 4 ).

NOTE 1 9 –

UNAUDITED SUPPLEMENTARY DATA

Quarterly data

The following is a summary of selected quarterly financial information (unaudited):

Loss from operations

$ ( 6,282 )  

$ ( 8,087 )  

$ ( 10,895 )  

$ ( 6,595 )  

$ ( 7,233 )  

$ ( 12,736 )  

Net loss per common share, basic and diluted

$ ( 0.02 )  

$ ( 0.04 )  

Loss from operations

$ ( 5,663 )  

$ ( 6,413 )  

$ ( 7,216 )  

$ ( 6,323 )  

$ ( 5,515 )  

$ ( 8,056 )  

Net loss per common share, basic and diluted

$ ( 0.02 )  

NOVAGOLD RESOURCES INC.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data