NIOCORP DEVELOPMENTS LTD. The following Management's Discussion and Analysis ("MD&A") provides information
that management believes is relevant to an assessment and understanding of the
consolidated financial condition and results of operations of NioCorp and
subsidiaries. This item should be read in conjunction with our Consolidated
Financial Statements and the notes thereto included in this Form 10-K.
Discussions related to fiscal 2019 performance as compared to fiscal 2018
performance can be found in Item 7., "Management's Discussion and Analysis of
Consolidated Financial Condition and Results of Operations" of the Company's
Annual Report on Form 10-K for the year ended
Summary of Consolidated Financial and Operating Performance
For the year ended June 30,
2020 2019 2018
($ 000 )
Operating expenses $ 3,432 $ 6,436 $ 6,035
Net loss 4,001 7,336 8,497
Net loss per share (basic and diluted) 0.02 0.03 0.04
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The Company's net loss decreased to
During the fiscal years ended
Results of Operations (dollars in thousands)
For the year ended
June 30,
2020 2019 2018
Operating expenses:
Employee related costs $ 1,376 $ 1,557 $ 2,133
Professional fees 327 315 661
Exploration expenditures 1,201 3,144 2,136
Other operating expenses 528 1,420 1,105
Total operating expenses 3,432 6,436 6,035
Change in financial instrument fair value 38 630 1,902
Foreign exchange loss (gain) 179 (3 ) 174
Interest expense 354 266 375
(Gain) loss on equity securities (2) 7 11
Income tax benefit - - -
Net Loss $ 4,001 $ 7,336 $ 8,497 Significant items affecting operating expenses are noted below:
Employee related costs for fiscal 2020 declined slightly as compared to fiscal 2019 primarily due to decreased share-based compensation costs reflecting the timing of Option issuances and the corresponding vesting periods, as well as the number of Options granted and associated fair value calculations, partially offset by the impacts of 2020 employee salary adjustments.
Exploration expenditures decreased in fiscal 2020 as compared to fiscal 2019 reflecting work performed in 2019 to complete the 2019 Elk Creek Feasibility Study, as well as costs incurred to develop the detailed engineering necessary to support the Air Permit application. Fiscal 2020 expenditures primarily related to the ongoing personnel costs, as well as permitting and project advancement activities.
Other operating expenses include investor relations, general office expenditures, stock and proxy expenditures and other miscellaneous costs. Costs decreased in fiscal 2020 as compared to fiscal 2019 primarily due to the 2019 expensing of previously deferred financing costs in conjunction with the release of the 2019 Elk Creek Feasibility Study, declines in share-based compensation costs for board members reflecting the timing of Option issuances and the corresponding vesting periods, and overall declines in Investor Relations expenses.
Other significant items impacting the change in the Company's net loss are noted below:
Change in financial instrument fair value primarily represents non-cash changes in the periodic market value of the Convertible Security, which is carried at fair value, as well as changes in the market value of the derivative liability component of the Notes. Higher costs in fiscal 2019, as compared to fiscal 2020, reflect the recognition of accrued interest and initial fair market valuations of additional Lind advances in that period.
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Foreign exchange (gain) loss is primarily due to changes in the
Interest expense increased in fiscal 2020 as compared to fiscal 2019 due to the increased principal amounts outstanding under the Current Smith Loans.
Liquidity and Capital Resources
We have no revenue generating operations from which we can internally generate funds. To date, our ongoing operations have been financed by the sale of our equity securities by way of private placements, convertible securities issuances, and the exercise of incentive stock options and share purchase warrants. We believe that we will be able to secure additional private placement financings in the future, although we cannot predict the size or pricing of any such financings. In addition, we may raise funds through the sale of interests in our mineral properties, although current market conditions and the impacts of the COVID-19 pandemic have reduced the number of potential buyers/acquirers of any such interests.
As of
We expect that the Company will operate at a loss for the foreseeable future.
The Company's current planned operational needs are approximately
The Company anticipates that it may need to raise
Elk Creek Property lease commitments are
On
On
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On
We currently have no further funding commitments or arrangements for additional financing at this time (other than the potential exercise of options and warrants) and there is no assurance that we will be able to obtain additional financing on acceptable terms, if at all. There is significant uncertainty that we will be able to secure any additional financing in the current equity or debt markets. The quantity of funds to be raised and the terms of any proposed equity or debt financing that may be undertaken will be negotiated by management as opportunities to raise funds arise. Management intends to pursue funding sources of both debt and equity financing, including but not limited to the issuance of equity securities in the form of Common Shares, warrants, subscription receipts, or any combination thereof in units of the Company pursuant to private placements to accredited investors or pursuant to equity lines of credit or public offerings in the form of underwritten/brokered offerings, at-the-market offerings, registered direct offerings, or other forms of equity financing and public or private issuances of debt securities including secured and unsecured convertible debt instruments or secured debt project financing. Management does not currently know the terms pursuant to which such financings may be completed in the future, but any such financings will be negotiated at arm's-length. Future financings involving the issuance of equity securities or derivatives thereof will likely be completed at a discount to the then-current market price of the Company's securities and will likely be dilutive to current shareholders.
Based on the conditions described within, management has concluded and the audit
opinion and notes that accompany our financial statements for the year ended
We have no exposure to any asset-backed commercial paper. Other than cash held
by our subsidiaries for their immediate operating needs in
Operating Activities
During the year ended
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Financing Activities
Net cash provided by financing activities was
Cash Flow Considerations
The Company has historically relied upon equity financings, and to a lesser degree, debt financings, to satisfy its capital requirements and will continue to depend heavily upon equity capital to finance its activities. The Company may pursue debt financing in the medium term if it is able to procure such financing on terms more favorable than available equity financing; however, there can be no assurance the Company will be able to obtain any required financing in the future on acceptable terms.
The Company has limited financial resources compared to its proposed expenditures, no source of operating income, and no assurance that additional funding will be available to it for current or future projects, although the Company has been successful in the past in financing its activities through the sale of equity securities.
The ability of the Company to arrange additional financing in the future will
depend, in part, on the prevailing capital market conditions and its success in
developing the
Historically, the Company has used net proceeds from issuances of Common Shares
to provide sufficient funds to meet its near-term exploration and development
plans and other contractual obligations when due. However, further development
and construction of the
Debt Covenants
The Convertible Security contains financial and non-financial covenants
customary for a facility of this size and nature, and includes a financial
covenant defining an event of default as all present and future liabilities of
the Company or any of its subsidiaries, exclusive of related party loans, for an
amount or amounts exceeding
Contractual Obligations Our contractual obligations atJune 30, 2020 , are summarized as follows (amounts in thousands): Payments due by period Less than 1-3 4-5 After 5 Total 1 year years years years Debt$ 5,937 $ 5,588 1$ 349 2 $ - $ - Operating leases 155 73 38 13 31
Total contractual obligations
(1) Amounts represent principal of
(2) Amounts represent principal of
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
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Environmental
Our mining and exploration activities are subject to various federal and state
laws and regulations governing the protection of the environment. We have made,
and expect to make in the future, expenditures to comply with such laws and
regulations, but cannot predict the full amount of such future expenditures. As
of
Forward-Looking Statements
The foregoing discussion and analysis, as well as certain information contained elsewhere in this Annual Report on Form 10-K, contain "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and are intended to be covered by the safe harbor created thereby. See the discussion in "Forward-Looking Statements" in Item 1., "Business."
Accounting Developments
For a discussion of Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements, see Note 2 to the Consolidated Financial Statements.
Critical Accounting Policies
Listed below are the accounting policies that we believe are critical to our
financial statements due to the degree of uncertainty regarding the estimates or
assumptions involved and the magnitude of the asset, liability, revenue or
expense being reported. Our discussion of financial condition and results of
operations is based upon the information reported in our Consolidated Financial
Statements. The preparation of these Consolidated Financial Statements in
conformity with
Carrying Value of Long-Lived Assets
The recoverability of the carrying values of mineral properties is dependent upon economic reserves being discovered or developed on the properties, permitting, financing, start-up, and commercial production from, or the sale/lease of, or other strategic transactions related to these properties. Development and/or start-up of a project will depend on, among other things, management's ability to raise sufficient capital for these purposes. We assess the carrying cost of our mineral properties for impairment whenever information or circumstances indicate the potential for impairment. This would include events and circumstances such as our inability to obtain all the necessary permits, changes in the legal status of our mineral properties, government actions, the results of exploration activities and technical evaluations and changes in economic conditions, including the price of commodities or input prices. Such evaluations compare estimated future net cash flows with our carrying costs and future obligations on an undiscounted basis. If it is determined that the estimated future undiscounted cash flows are less than the carrying value of the property, an impairment loss will be recorded. Where estimates of future net cash flows are not determinable and where other conditions indicate the potential for impairment, management uses available market information and/or third-party valuation experts to assess if the carrying value can be recovered and to estimate fair value.
We review and evaluate our long-lived assets, other than mineral properties, for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. An impairment loss is measured and recorded based on the estimated fair value of the long-lived assets being tested for impairment and their carrying amounts.
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Derivative Instruments
All financial instruments that meet the definition of a derivative are recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded in the Statements of Consolidated Operations. Management applies judgment in estimating the fair value of instruments that are highly sensitive to assumptions such as commodity prices, market volatilities, foreign currency exchange rates and interest rates. Variations in these factors could materially affect amounts credited or charged to earnings to reflect the changes in fair value of derivatives.
Income Taxes
We account for income taxes using the liability method, recognizing certain temporary differences between the financial reporting basis of our liabilities and assets and the related income tax basis for such liabilities and assets. This method generates a net deferred income tax liability or asset, as measured by the statutory tax rates in effect. We derive our deferred income tax expense or benefit by recording the change in the net deferred income tax liability or asset balance for the year. With respect to the earnings we derive from the operations of our consolidated subsidiaries, in those situations where the earnings are indefinitely reinvested, no deferred taxes have been provided on the unremitted earnings (including the excess of the carrying value of the net equity of such entities for financial reporting purposes over the tax basis of such equity) of our consolidated subsidiaries.
We are subject to reviews of our income tax filings and other tax payments, and
disputes can arise with the taxing authorities over the interpretation of its
contracts or laws. We recognize and record potential tax liabilities and record
tax liabilities for anticipated tax audit issues in the
Valuation of Deferred Tax Assets
Our deferred income tax assets include certain future tax benefits. We record a valuation allowance against any portion of those deferred income tax assets when we believe, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized. We review the likelihood that we will realize the benefit of our deferred tax assets and therefore the need for valuation allowances on a quarterly basis, or more frequently if events indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset is considered, along with all other available positive and negative evidence.
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Other
The Company has one class of shares, being Common Shares. A summary of
outstanding shares, share options, warrants, and convertible debt option as of
Common Shares
Outstanding
(fully diluted)
Common Shares 238,035,090
Stock options1 19,129,409
Warrants1 10,156,093
Convertible Notes2 1,069,773
1 Each exercisable into one Common Share
2 Represents estimated maximum Common Shares convertible pursuant to the
Company's private placement of convertible debentures which closed
2015. Actual Common Shares issued may be impacted by the
Canadian dollar exchange rate, accrued interest payable and current trading
price of the Company's Common Shares at conversion date.
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