| SIGNIFICANT ACCOUNTING POLICIES | 3. SIGNIFICANT
ACCOUNTING POLICIES
a) Development
Stage Issuer The
Company is considered to be a development stage issuer under Subpart 1300 of Regulation S-K of the United States Securities Act
of 1933, as amended (“S-K 1300”), and it devotes substantially all of its efforts to acquiring and exploring mining
interests that management believes should eventually provide sufficient net profits to sustain the Company’s existence.
Until such interests are engaged in commercial production, the Company will continue to seek additional funding to support the
completion of its exploration and development activities. The Company’s activities are subject to significant risks and
uncertainties, including its ability to secure sufficient funding to continue operations, to obtain proven and probable reserves,
to comply with industry regulations and obtain permits necessary for development of the Elk Creek Project, as well as environmental
risks and market conditions.
b) Cash
and Cash Equivalents Cash
and cash equivalents include cash on hand, cash in banks, investments in certificates of deposit with original maturities of
90 days or less, and money market funds. The Company maintains the majority of its cash balances with two financial
institutions. Accounts at banks in the United States (“U.S.”) are insured by the Federal Deposit Insurance
Corporation (“FDIC”) up to $250, while accounts at banks in Canada are insured by the Canada Deposit Insurance
Corporation (“CDIC”) up to C$100. At June 30, 2023 and 2022, the Company had $1,717 and $4,721 in excess of the
FDIC and CDIC insured limits, respectively.
c) Foreign
Currency Translation Functional
and reporting currency Items
included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic
environment in which the entity operates (“the functional currency”). The
reporting currency for these consolidated financial statements is U.S. dollars. Change
in functional currency Prior
to March 17, 2023, the Company’s functional currency was the Canadian dollar. The Company re-assessed its functional
currency and determined that on March 17, 2023, its functional currency changed from the Canadian dollar to the U.S. dollar
based on significant changes in economic facts and circumstances in our organization. The change in functional currency was
accounted for prospectively from March 17, 2023 and prior-period consolidated financial statements were not restated for
the change in functional currency. For
both monetary and non-monetary assets and liabilities, translated balances as of March 17, 2023 became the new accounting basis.
The exchange rate on the date of change became the historical rate at which non-monetary assets and liabilities were translated
in subsequent periods. There was no effect on the cumulative translation adjustment on the consolidated basis. Previously recorded
cumulative translation adjustments were not reversed. The
functional currency for the Company’s Canadian subsidiary, 0896800 BC Ltd., which has no independent operations from its
parent, also changed from the Canadian dollar to the U.S. dollar. The functional currency for Elk Creek Resources Corp. remains
as the U.S. dollar. Transactions
in foreign currency Transactions
made in a currency other than the functional currency are remeasured to the functional currency at exchange rates at the dates
of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are remeasured to
the functional currency at the exchange rate at that date and non-monetary assets and liabilities are remeasured at historical
rates. Foreign currency translation gains and losses are included in profit or loss. Translation
to reporting currency Translation
gains and losses from the application of the U.S. dollar as the reporting currency for all periods prior to March 17, 2023 (when
the Canadian dollar was the functional currency) are included as part of cumulative currency translation adjustment, which is
reported as a component of shareholders’ equity under accumulated other comprehensive loss.
d) Mineral
Properties Mineral
property acquisition costs, including indirectly related acquisition costs, are capitalized when incurred. Acquisition costs include
cash consideration and the fair market value of Common Shares issued as consideration. Properties acquired under option agreements,
whereby payments are made at the sole discretion of the Company, are capitalized as mineral property acquisition costs at such
time as the payments are made. Exploration costs are expensed as incurred. When it is determined that a mining deposit can be
economically and legally extracted or produced based on established proven and probable reserves under S-K 1300, and the Board
of Directors has approved the commencement of formal development activities, development costs related to such reserves and incurred
after such board approval will be considered for capitalization. The establishment of proven and probable reserves is based on
results of feasibility studies, which indicate whether a property is economically feasible. Upon commencement of commercial production,
capitalized costs will be amortized over their estimated useful lives or units of production, whichever is a more reliable measure.
Capitalized amounts relating to a property that is abandoned or otherwise considered uneconomic for the foreseeable future are
written off. 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. There was no impairment recorded to mineral properties as of
June 30, 2023 or 2022, respectively.
e) Long
Lived Assets Long-lived
assets, other than mineral properties, held and used by the Company are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability
of long-lived assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets.
If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount
of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount
or fair value less costs to sell. There was no impairment recorded to long-lived assets as of June 30, 2023 or 2022, respectively.
f) Leases Under
Accounting Standards Codification (“ASC”) 842, “Leases,” we determine if a contractual arrangement is,
or contains, a lease at the inception date. Right-of-use (“ROU”) assets and liabilities related to operating leases
are separately reported in the consolidated balance sheets. The Company currently has no finance leases. ROU
assets and lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments
over the lease term. When the rate implicit to the lease cannot be readily determined, we utilize our incremental borrowing rate
in determining the present value of the future lease payments. The incremental borrowing rate is derived from information available
at the lease commencement date and represents the rate of interest that a lessee would have to pay to borrow an amount equal to
the lease payments on a collateralized basis over a similar term in a similar economic environment. Operating lease ROU assets
also include any cumulative prepaid or accrued rent when the lease payments are uneven throughout the lease term. The ROU assets
and lease liabilities may include options to extend or terminate the lease when it is reasonably certain that we will exercise
that option. Lease
liabilities are increased by interest and reduced by payments each period, and the ROU asset is amortized over the lease term.
For operating leases, interest on the lease liability and the amortization of the ROU asset result in straight-line rent expense
over the lease term. Variable lease expenses are recorded when incurred.
g) Warrants We
apply relevant accounting guidance for warrants to purchase our stock based on the nature of the relationship with the counterparty.
For warrants issued to investors or lenders in exchange for cash or other financial assets, we follow guidance issued within ASC
480, Distinguishing Liabilities from Equity, and ASC Topic 815, Derivatives and Hedging, (“ASC 815”) to assist in
the determination of whether the warrants should be classified as liabilities or equity. The fair value of warrants is estimated
using Black Scholes modeling or Monte Carlo modeling, depending on the settlement features embedded in the warrant. Inputs under
both models include inputs such as NioCorp’s Common Share price, the risk-free interest rate, the expected term, the volatility,
and the dividend rate. Warrants that are determined to require liability classifications are measured at fair value upon issuance
and are subsequently remeasured to their then fair value at each subsequent reporting period with changes in fair value recorded
in current earnings. Warrants that are determined to require equity classifications measured at fair value upon issuance and are
not subsequently remeasured unless they are required to be reclassified.
h) Earnout
Shares Earnout
Shares are classified as a liability due to failure to meet the equity classification criteria under ASC 815-40. The fair value
of the Earnout Shares on the date of issuance and on each measurement date is estimated using a Monte Carlo simulation methodology,
which includes inputs such as NioCorp’s Common Share price, the risk-free interest rate, the expected term, the implied
volatility underlying the Company’s Public Warrants, the dividend rate, the conversion price, and the number of Earnout
Shares outstanding. Assumptions used in the model are subjective and require significant judgment.
i) Financial
Instruments The
Company’s financial instruments consist of cash and cash equivalents, receivables, equity securities, accounts payable and accrued liabilities,
convertible debt and the related party loan. It is management’s opinion that the Company is not exposed to significant interest,
currency or credit risks arising from its financial instruments. The fair values of these instruments approximate their carrying
value unless otherwise noted.
j) Concentration
of Credit Risk The
financial instrument which potentially subjects the Company to credit risk is cash and cash equivalents, The Company holds investments
or maintains available cash primarily in two commercial banks located in Vancouver, British Columbia and Santa Clara, California.
As part of its cash management process, the Company regularly monitors the relative credit standing of these institutions.
k) Asset
Retirement Obligation The
Company is subject to various government laws and regulations relating to environmental disturbances caused by exploration and
evaluation activities. The estimated costs associated with environmental remediation obligations are accrued in the period in
which the liability is incurred if it is reasonably estimable or known. Until such time that a project life is established, the
Company records the corresponding cost as an exploration stage expense and has accrued $ 48 48 Future
reclamation and environmental-related expenditures are difficult to estimate in many circumstances due to the early-stage nature
of the Elk Creek Project, the uncertainties associated with defining the nature and extent of environmental disturbance, the application
of laws and regulations by regulatory authorities and changes in reclamation or remediation technology. The Company periodically
reviews accrued liabilities for such reclamation and remediation costs as evidence indicating that the liabilities have potentially
changed becomes available. Changes in estimates are reflected in the consolidated statement of operations and comprehensive loss in the period an estimate
is revised.
l) Income
Taxes Income
taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25, “Income Taxes – Recognition.”
m) Reverse
Stock Split On
March 17, 2023, the Company effected a reverse stock split (the “Reverse Stock Split”) on the basis of one (1) post-Reverse
Stock Split Common Share for every ten (10) pre-Reverse Stock Split Common Shares issued and outstanding, with any fractional
shares resulting from the Reverse Stock Split rounded down to the nearest whole share. Immediately after the Reverse Stock Split,
there were 30,000,442 Common Shares issued and outstanding. All references to share and per share amounts (excluding authorized
shares) in the consolidated financial statements and accompanying notes have been retroactively restated to reflect the Reverse
Stock Split.
n) Redeemable
Noncontrolling Interest Redeemable
Noncontrolling Interest refers to non-controlling interest associated with the Vested Shares that are redeemable upon the occurrence
of an event that is not solely within the Company’s control and is reported in the mezzanine section between total liabilities
and shareholders’ deficit, as temporary equity in the Company’s consolidated balance sheets. The
Company’s non-controlling interest is redeemable at fair value, and no adjustment to the earnings per share numerator is
required because redemption at fair value is not considered an economic distribution different from other common stockholders.
o) Basic
and Diluted Per Share Disclosure Basic
earnings (loss) per share represents net earnings (loss) attributable to common shareholders divided by the weighted
average number of Common Shares outstanding during the period. The Company considers Vested Shares and Released Earnout
Shares (each as defined in Note 10), to be participating securities, requiring the use of the two-class method. Diluted
earnings (loss) per share represents net earnings (loss) attributable to common shareholders divided by the weighted average
number of Common Shares outstanding, inclusive of the dilutive impact of all potentially dilutive securities outstanding
during the period, as applicable. The
Company utilizes the weighted average method to determine the impact of changes in a participating security on the calculation
of loss per share. The following table sets forth the computation of the Company’s basic and diluted net loss per share
attributable to common shareholders:
For
the year ended June 30,
2023 2022 2021
Net
loss $ 40,308 $ 10,887 $ 4,824
Adjust:
Net loss attributable to noncontrolling interest (251 ) - -
Net
loss available to participating securities 40,057 10,887 4,824
Net
loss attributable to Vested Shares (1,528 ) - -
Net
loss attributed to common shareholders - basic and diluted $ 38,529 $ 10,887 $ 4,824
Denominator:
Weighted
average shares outstanding – basic and diluted 28,705,840 26,373,722 24,196,711
Loss
per Common Share outstanding – basic and diluted $ 1.34 $0.41 $0.20 The following shares underlying options, warrants, and outstanding convertible debt were antidilutive
due to a net loss in the periods presented and, therefore, were excluded from the dilutive securities computation for the years
ended June 30, 2023 and 2022, as indicated below. Schedule of excluded from the dilutive securities
For
the year ended June 30,
2023 2022 2021
Excluded
potentially dilutive securities (1)(2)
Options
1,541,500 1,446,400 1,596,500
Warrants 18,816,304 1,851,622 1,434,186
Convertible
debt 2,871,660 415,200 1,455,700
Total
potentially dilutive securities 23,229,464 3,713,222 4,486,386
(1) The
number of shares is based on the maximum number of shares issuable on exercise or conversion of the related securities as
of the period end. Such amounts have not been adjusted for the treasury stock method or weighted average outstanding
calculations as required if the securities were dilutive.
(2) Earnout
Shares (as defined below) are excluded as the vesting terms were not met as of the end of the reporting period.
p) Share
Based Compensation The
Company grants stock options to directors, officers, employees, and business advisors. Option terms and vesting conditions
are at the discretion of the Board of Directors. Prior to March 21, 2023, the option exercise price was equal to the closing
market price on The Toronto Stock Exchange (the “TSX”) on the day preceding the date of grant. Effective March
21, 2023, the option exercise price is equal to the closing market price on the Nasdaq Stock Market LLC
(“Nasdaq”) on the day preceding the date of the grant. The
Company estimates the fair value of stock options using the Black-Scholes option pricing model. The Company recognizes forfeitures
as they occur.
q) Recent
Accounting Standards Issued
and Adopted In
August 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“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 adopted ASU 2020-06 on July 1, 2022, with no material effect on the Company’s current financial
position, results of operations or financial statement disclosures. Issued
and Not Effective 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.
r) Revision of Financial Statements (Unaudited) During the
fourth quarter of fiscal year 2023, the Company determined that it had used an incorrect strike price while valuing the Private
Warrants (as defined below in Note 11c) at both the March 17, 2023, issuance date and as of March 31, 2023. This resulted in an
overstatement of other operating expenses, at fair value, and an understatement of change in fair value of warrant liabilities
in condensed consolidated statement of operations and comprehensive loss for both the three- and nine-month periods ended March
31, 2023. In addition, warrant liabilities, at fair value and accumulated deficit were overstated and understated, respectively,
as of March 31, 2023. The Company determined that
these errors were immaterial to the previously issued consolidated financial statements, and as such no restatement was necessary.
Periods not presented herein will be revised, as applicable, in future filings. The effects
of the revision on the previously issued consolidated financial statements are as follows: Revision Impacts to the Condensed Consolidated
Balance Sheet (unaudited) As of March 31, 2023 Revision Impacts to the Condensed Consolidated Balance Sheet (unaudited) As
of March 31, 2023
As Previously Revision Revised
Warrant liabilities, at fair value $ 5,303 $ (665 ) $ 4,638
Total liabilities 34,735 (665 ) 34,070
Accumulated deficit (146,046 ) 665 (145,381 )
Total shareholders’ deficit (12,512 ) 665 (11,847 ) Revision Impacts to the Condensed Consolidated
Statement of Operations and Comprehensive Loss (unaudited) For the Three Months Ended March 31,
2023 Revision Impacts to
the Condensed Consolidated Statement of Operations and Comprehensive Loss (unaudited) For
the Three & Nine Months Ended March 31,
2023
As Previously Revision Revised
Other operating expense $ 26,220 $ (861 ) $ 25,359
Total operating expenses 29,192 (861 ) 28,331
Change in fair value of warrant liability 784 196 980
Loss before income taxes 29,621 (665 ) 28,956
Net loss 29,435 (665 ) 28,770
Net loss attributable to the Company 29,343 (665 ) 28,678
Total comprehensive loss 29,323 (665 ) 28,658
Comprehensive loss attributable to the Company 29,231 (665 ) 28,566
Loss per common share, basic and diluted $ 1.00 $ (0.02 ) $ 0.98 Revision Impacts to the Condensed Consolidated
Statement of Operations and Comprehensive Loss (unaudited) For the Nine Months Ended March 31,
2023
As
Previously Revision Revised
Other operating expense $ 26,888 $ (861 ) $ 26,027
Total operating expenses 33,475 (861 ) 32,614
Change in fair value of warrant liability 868 196 1,064
Loss before income taxes 35,927 (665 ) 35,262
Net loss 35,741 (665 ) 35,076
Net loss attributable to the Company 35,649 (665 ) 34,984
Total comprehensive loss 35,659 (665 ) 34,994
Comprehensive loss attributable to the Company 35,567 (665 ) 34,902
Loss per common share, basic and diluted $ 1.26 $ (0.02 ) $ 1.24 Revision Impacts to the Condensed Consolidated
Statement of Cash Flows (unaudited) For the Nine Months Ended March 31,
2023 Revision Impacts to the Condensed
Consolidated Statement of Cash Flows (unaudited) For the Nine Months Ended March 31, 2023
As Previously Revision Revised
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (35,741 ) $ 665 $ (35,076 )
Initial valuation of warrants 3,848 (861 ) 2,987
Change in fair value of warrants 868 196 1,064 |
