# NIOCORP DEVELOPMENTS LTD (NB) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from NIOCORP DEVELOPMENTS LTD's 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1512228/000153949722001510/n2574_x36-10k.htm
Accession: 0001539497-22-001510
Filing date: 2022-09-06
Report date: 2022-06-30
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/NB/
All MD&A years: /company/NB/mda/
Previous year: /company/NB/mda/fy2021/ (FY 2021)
Next year: /company/NB/mda/fy2023/ (FY 2023)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 Annual
Report on Form 10-K. Discussions related to fiscal year 2021 performance as compared to fiscal 2020 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 June 30, 2021.

 42

Summary
of Consolidated Financial and Operating Performance

[[GREPCENT_TABLE]]
[["","","","For the year ended June 30,"],["","","","2022","","","2021","","2020"],["","","","($000)"],["Operating expenses","","","","$","7,796","","","$","4,092","","","$","3,432"],["Net loss","","","","9,929","","","4,390","","","4,001"],["Net loss per share (basic and diluted)","","","","0.04","","","0.02","","","0.02"]]
[[/GREPCENT_TABLE]]

The
Company’s net loss increased to $9.9 million for fiscal year 2022 from $4.4 million for fiscal year 2021. This increased
net loss in fiscal year 2022 as compared to fiscal year 2021 is primarily due to increased exploration expenditures associated
with process development costs and rare earth review costs, as well increased non-cash costs of our fiscal year 2022 Option grants,
which were fully vested and expensed on the grant dates.

The
Company had no revenues during the fiscal years presented below. Operating expenses incurred related primarily to performing exploration
and feasibility study related activities, as well as the activities necessary to support corporate and shareholder duties and
are detailed in the following table.

Results
of Operations

[[GREPCENT_TABLE]]
[["","","","","","","","For the year ended June 30,"],["","","","2022","","","2021","","","2020"],["","","","","","","","($000)"],["Operating expenses:"],["Employee related costs","","","$","2,150","","","$","1,655","","","$","1,376"],["Professional fees","","","","684","","","","386","","","","327"],["Exploration expenditures","","","","3,309","","","","1,056","","","","1,201"],["Other operating expenses","","","","1,653","","","","995","","","","528"],["Total operating expenses","","","","7,796","","","","4,092","","","","3,432"],["Other income","","","","-","","","","(208",")","","","-"],["Loss on extinguishment","","","","-","","","","163","","","","-"],["Change in financial instrument fair value","","","","-","","","","(32",")","","","38"],["Foreign exchange loss (gain)","","","","221","","","","(729",")","","","179"],["Interest expense","","","","1,906","","","","1,113","","","","354"],["Loss (gain) on equity securities","","","","6","","","","(9",")","","","(2",")"],["Income tax benefit","","","","-","","","","-","","","","-"],["Net Loss","","","$","9,929","","","$","4,390","","","$","4,001"]]
[[/GREPCENT_TABLE]]

Significant
items affecting operating expenses are noted below:

Employee
related costs for fiscal year 2022 increased as compared to fiscal year 2021 primarily due to increased share-based compensation
costs which primarily reflected the impact of increased Common Share values on the fair value calculations in the Black-Scholes
model, as well as the number of Options granted.

Professional
fees increased in fiscal year 2022 as compared to fiscal year 2021, primarily due to the timing of legal services related
to SEC filings, including our shelf registration statement on Form S-3 filed in November 2021.

Exploration
expenditures increased in fiscal year 2022 as compared to fiscal year 2021 reflecting work performed in fiscal year 2022 to
advance the development of a demonstration-scale test plant to verify process improvement efforts as well as to potentially incorporate
REEs into our planned production. Fiscal year 2021 expenditures primarily related to the ongoing personnel costs, as well as ongoing
engineering and metallurgical projects and project advancement activities.

 43

Other
operating expenses include investor relations, general office expenditures, equity offering and proxy expenditures, board-related
expenditures, and other miscellaneous costs. These costs increased in fiscal year 2022 as compared to fiscal year 2021 primarily
due to increased financial advisory fees and investor relations fees associated with our ongoing financing efforts. In addition,
share-based compensation for directors and other advisors increased in fiscal year 2022 as compared to fiscal year 2021 due to
increased share-based compensation costs, which primarily reflected the impact of increased Common Share values in the Black Scholes
model. Options issued in both periods were fully vested upon issuance and expensed on the grant date.

Other
significant items impacting the change in the Company’s net loss are noted below:

Other
income for fiscal year 2021 represents the one-time forgiveness of the Company’s U.S. Small Business Administration
Loan, which occurred on November 18, 2020.

Loss
on extinguishment for fiscal year 2021 represents the one-time loss incurred in connection with the December 18, 2020, conversion
of the Nordmin Note.

Foreign
exchange (gain) loss is primarily due to changes in the U.S. dollar against the Canadian dollar rate as applied to U.S. dollar-denominated
debt instruments which are carried on the Canadian parent company books, and the fiscal year 2022 loss reflected the impacts of
a strengthened U.S. dollar to Canadian dollar, whereas the fiscal year 2021 gain primarily reflects the impact of a weakened U.
S. dollar.

Interest
expense increased in fiscal year 2022 as compared to fiscal year 2021 primarily due to the accretion of the Nordmin Note,
which was issued in December 2020, as well as accretion of the Lind III Convertible Security, which was issued in February 2021.

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. While we believe we will be able to secure additional private placement financings
in the future, 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 June 30, 2022, the Company had cash of $5.3 million and working capital of $2.0 million, compared to cash of $7.3 million and
working capital of $3.4 million on June 30, 2021. The slight decline in working capital surplus for fiscal year 2022 is due to
the timing of cash inflows from financing activities and warrant exercises, as discussed below under “Financing Activities,”
and was partially offset by exploration-related expenditures and general corporate overhead expenditures.

We
expect that the Company will operate at a loss for the foreseeable future. The Company’s current planned operational needs
are approximately $9.5 million through June 30, 2023, inclusive of the repayment of amounts outstanding under the Smith Credit
Agreement which is due on June 30, 2023.

In addition to outstanding accounts payable and short-term liabilities, our average monthly expenditures
through June 30, 2023 are expected to be approximately $550 per month where approximately $295 is for corporate overhead, lease
extensions and estimated costs related to securing financing necessary for advancement of the Elk Creek Project. Approximately
$255 per month is planned for expenditures relating to the advancement of the Elk Creek Project by ECRC. The Company’s ability
to continue operations and fund our current work plan is dependent on management’s ability to secure additional financing.

 44

The
Company anticipates that it may not have sufficient cash to continue to fund basic operations for the next twelve months, and
additional funds totaling $3.5 million to $4.5 million are likely to be necessary to continue advancing the project in the areas
of financing, permitting, and detailed engineering. Management is actively pursuing such additional sources of debt and equity
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.

Elk
Creek property and lease commitments are $8 through June 30, 2023, exclusive of costs incurred to exercise our current land and
mineral right option agreements, which expire at various times between December 2024 and May 2040. To maintain its currently held
properties and fund its currently anticipated general and administrative costs and planned exploration and development activities
at the Elk Creek Project for the fiscal year ending June 30, 2023, the Company will likely require additional financing during
the current fiscal year. Should such financing not be available in that timeframe, we will be required to reduce our activities
and will not be able to carry out all our presently planned activities at the Elk Creek Project.

We
currently have no further material 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 June 30, 2022, disclose that substantial doubt exists as to our ability to continue in business. The financial
statements included in this Annual Report on Form 10-K have been prepared under the assumption that we will continue as a going
concern. As defined under S-K 1300, we are a development stage issuer, and we have incurred losses since our inception. The Company
anticipates that it may not have sufficient cash, including warrant exercises subsequent to June 30, 2022, to continue to fund
basic operations for the next twelve months, therefore, additional funds are likely to be necessary to continue advancing the
project in the areas of financing, permitting, and detailed engineering. While the COVID-19 pandemic did negatively impact our
ability to obtain project financing during fiscal years 2021 and 2022, 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. In addition, recent worldwide events have created general global economic uncertainty as
well as uncertainty in capital markets, supply chain disruptions, increased interest rates, and the potential for geographic recessions.
We believe that the going concern uncertainty cannot be alleviated with confidence until the Company has entered into a business
climate where funding of its planned ongoing operating activities is secured.

We
have no exposure to any asset-backed commercial paper. Other than cash held by our subsidiaries for their immediate operating
needs in Colorado and Nebraska, all of our cash reserves are on deposit with major U.S. and Canadian chartered banks. We do not
believe that the credit, liquidity, or market risks with respect thereto have increased as a result of the current market conditions.
However, in order to achieve greater security for the preservation of our capital, we have, of necessity, been required to accept
lower rates of interest, which has also lowered our potential interest income.

 45

Operating
Activities

During
the year ended June 30, 2022, the Company’s operating activities consumed $6.2 million of cash (2021: $4.7 million). The
cash used in operating activities for fiscal year 2022 reflects the Company’s funding of losses of $9.9 million, partially
offset by non-cash adjustments and changes in working capital items. Overall, fiscal year 2022 operational outflows were higher
than fiscal year 2021 due primarily to increased exploration expenditures. Going forward, the Company’s working capital
requirements are expected to increase substantially in connection with the development of the Elk Creek Project.

Investing
Activities

During
the year ended June 30, 2022, the Company’s investing activities consumed $16 of cash (2021: $6.3 million). The cash used
in investing activities for fiscal year 2021 reflects the Company’s purchase of the land and mineral rights discussed above
under Part I., Item 2, “Properties - Other Elk Creek Project Activities.”

Financing
Activities

Net
cash provided by financing activities was $4.3 million in fiscal year 2022 (2021: $18.1 million). This decrease in financing inflows
primarily reflect the timing of cash inflows from the Lind III Agreement, private placements, and warrant exercises during the
respective fiscal years.

The
following is a discussion of significant financing transactions for fiscal year 2022:

[[GREPCENT_TABLE]]
[["","\u25cf","On June 30, 2022, the Company closed a non-brokered private placement (the \u201cJune 2022 Private Placement\u201d) of units (the \u201cUnits\u201d) of the Company. A total of 4,981,035 Units were issued at a price per 2022 Unit of C$0.96, for total gross proceeds to the Company of approximately C$4.8 million. Each Unit consists of one Common Share and one common share purchase warrant (\u201cJune 2022 Warrant\u201d). Each June 2022 Warrant entitles the holder to acquire one Common Share at a price of C$1.10 at any time prior to July 1, 2024. Proceeds of the June 2022 Private Placement will be used for continued advancement of the Company\u2019s Elk Creek Critical Minerals Project and for working capital and general corporate purposes. The Company paid cash commissions of C$62 and 65,100 warrants (the \u201cFinder Warrants\u201d), having the same terms as the June 2022 Warrants, to finders outside of the United States. The Finder Warrants were valued at C$18 using a risk-free rate of 3.2%, expected volatility of 64% and expected life of two years."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","On July 23, 2021, the Company repaid $358 to Mr. Smith, representing a partial principal repayment of $318 on the Smith Credit Agreement plus accrued interest."]]
[[/GREPCENT_TABLE]]

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 Elk Creek Project. Any quoted market for the Common Shares may be subject to market trends generally,
notwithstanding any potential success of the Company in creating revenue, cash flows, or earnings, and any depression of the trading
price of the Company’s Common Shares could impact its ability to obtain equity financing on acceptable terms.

 46

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 Elk Creek
Project will require substantial additional capital resources. This includes near-term funding and, ultimately, long-term funding
(including debt and equity financing) for Elk Creek Project construction and other costs.

Debt
Covenants

The
Lind III 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 C$2.0 million, and which have not been
satisfied on time or within 90 days of invoice, or have become prematurely payable as a result of its default or breach. In addition,
The Smith Credit Agreement contains financial and non-financial covenants customary for a facility of its size and nature. The
Company was in compliance with these covenants as of June 30, 2022.

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 June 30, 2022 and 2021, we had accrued $48 and $48, respectively, related
to estimated environmental obligations.

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 3 to the
Consolidated Financial Statements.

Critical
Accounting Estimates and Recent Accounting Pronouncements

Our significant accounting
policies are described in Note 3 to the Consolidated Financial Statements included in this Annual Report on Form 10-K. As
described in Note 3, we are required to make estimates and assumptions that affect the reported amounts and related disclosures
of assets, liabilities, revenue, and expenses. Our estimates are based on our experience and our interpretation of economic, political,
regulatory, and other factors that affect our business prospects. Many of the inputs into our estimation process are subject to
uncertainty over time and therefore, actual results may differ significantly from our estimates. Note 3 also discloses recent accounting
pronouncements applicable to the Company.

 We
believe that our most critical accounting estimates are related to the carrying value of our long term assets; accounting for
income taxes; and valuation of deferred tax assets, as they require us to make assumptions that are highly uncertain at the time
the accounting estimates are made and changes in them are reasonably likely to occur from period to period. Management has discussed
the development and selection of these critical accounting estimates with the Audit Committee of our board of directors, and the
Audit Committee has reviewed the disclosures presented below. In addition, there are other items within our financial statements
that require estimation, but are not deemed to be critical. However, changes in estimates used in these and other items could
have a material impact on our financial statements.

 47

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. Key inputs 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. Many of these inputs are subjective and are subject to uncertainty over time. 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, measured
by the amount by which the carrying amount of the assets exceeds the fair value of the assets. 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.

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 U.S. and other tax jurisdictions based on our estimate of whether, and the extent to which,
additional taxes will be due. We adjust these reserves in light of changing facts and circumstances; however, due to the complexity
of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current
estimate. If our estimate of tax liabilities proves to be different than the ultimate assessment, an additional expense or benefit
would result. We recognize interest and penalties, if any, related to unrecognized tax benefits in Income tax benefit (expense).
In certain jurisdictions, we must pay a portion of the disputed amount to the local government in order to formally appeal
the assessment. Such payment is recorded as a receivable if we believe the amount is ultimately recoverable.

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.

 48

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 September 6, 2022, is set out below, on a fully diluted basis.

[[GREPCENT_TABLE]]
[["","Common Shares Outstanding (fully diluted)"],["Common Shares","278,127,688"],["Stock options1","14,464,000"],["Warrants1","18,516,253"],["Convertible Debt2","2,533,300"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","1","Each exercisable into one Common Share"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","2","Represents Common Shares issuable on conversion of aggregate outstanding principal amounts of $1.6 million of convertible debt as of September 6, 2022, assuming a market price per Common Share of $0.74 on that date."]]
[[/GREPCENT_TABLE]]