NIOCORP DEVELOPMENTS LTD
For the period ended Mar 31, 2024. Filed May 2, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 2, 2024
Extracted filing text, with the paragraph anchors used by the comparison.
See the whole filing, with its images and exhibitsContents
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
At the end of the period covered by this Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, an evaluation was carried out under the supervision of and with the participation of our management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act). Based on that evaluation, the CEO and the CFO have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial reporting described below.
The Company’s disclosure controls and procedures have been designed to ensure that: (i) information required to be disclosed by us in reports that we file or submit to the SEC under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including the CEO and the CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.
Management does not expect that our disclosure controls and procedures will prevent all error and all fraud. The effectiveness of our or any system of disclosure controls and procedures, however well designed and operated, can provide only reasonable assurance that the objectives of the system will be met and is subject to certain limitations, including the exercise of judgment in designing, implementing, and evaluating controls and procedures and the assumptions used in identifying the likelihood of future events.
Material Weaknesses in Internal Control over Financing Reporting Existing as of March 31, 2024
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
Management concluded that the material weaknesses disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023 continued to exist as of March 31, 2024. Specifically, management concluded that the following material weaknesses exist as of March 31, 2024:
| ● | Control Environment: Management did not design and maintain an effective control environment based on the criteria established by the Committee of Sponsoring Organizations Integrated Framework (2013) (“COSO Framework”). Specifically, the Company does not have sufficient personnel with the appropriate levels of knowledge, experience, and training in accounting and internal control over financial reporting commensurate with the complexity of the Company’s business. This material weakness contributed to additional material weaknesses related to the Company’s control activities as further described below. |
| ● | Risk Assessment: Management did not design and maintain effective controls over the risk assessment process. Specifically, management does not have a formal process to identify, update, and assess risks due to changes in the Company’s business practices, including entering into increasingly complex transactions that could significantly impact the design and operation of the Company’s control activities. |
| ● | Control Activities: Management did not design and maintain effective controls, including management review controls, related to non-routine transactions. Specifically, management did not maintain effective controls over monitoring and assessing the work of third-party specialists, including the evaluation of the appropriateness of accounting conclusions that has resulted in misstatements. In addition, the Company did not design and maintain effective controls related to the evaluation of certain inputs and assumptions used to estimate the fair value of instruments and features associated with complex debt and equity transactions. Finally, management did not have policies and procedures for the reconsideration of existing agreements when infrequent transactions occur. |
| ● | Monitoring Activities: Management did not design and maintain effective monitoring controls to support timely evaluation of remediation of identified internal control deficiencies. |
As previously disclosed, these material weaknesses were initially identified at various points during the fiscal year ended June 30, 2023, in connection with the Company’s normal quarterly close and review procedures, and certain of these material weaknesses resulted in errors that required the restatement of Company’s consolidated financial statements as of and for the fiscal years ended June 30, 2022 and 2021, as well as the restatement of the Company’s condensed consolidated financial statements as of and for the interim periods ended September 30, 2021, December 31, 2021, March 31, 2022, September 30, 2022 and December 31, 2022. Additionally, these material weaknesses could result in a misstatement of the account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or timely detected.
Remediation Plan for the Material Weaknesses
To address our material weaknesses existing as of March 31, 2024, we have implemented a detailed plan to address each individual material weakness identified, as well as the overall monitoring process, including the following:
| ● | In order to remediate the material weaknesses relating to the Company’s control environment and risk assessment process, the following control procedures are in the process of being implemented: |
| ○ | In consultation with our third-party advisors, we have developed and are in the process of implementing a technical accounting policy that provides for separation of the analysis and review of identified accounting issues from the detailed review steps to be performed by the Corporate Controller, which is being tested and evaluated for effectiveness. Initially, this policy includes transactions related to warrants, convertible debt, debt modifications, and earnout share liabilities. This policy will be maintained to ensure that additional non-routine transactions identified in our normal course of business (as discussed below), are included in the review process. |
| ○ | We have developed and are in the process of implementing a non-routine transactions policy to ensure the timely identification, analysis, and monitoring of the potential non-routine transactions, which is being tested and evaluated for effectiveness. Further, the policy provides for third-party assistance, as needed, in the review of U.S. GAAP issues related to the proposed transaction. |
| ● | In order to remediate the material weakness relating to the Company’s controls activities, we have tested and are in the process of implementing the technical accounting policy discussed above to ensure the completeness and accuracy of identifying and adequately assessing the assumptions utilized in the valuation analysis of complex financial instruments, which is being tested and evaluated for effectiveness. In addition, we have engaged third-party consultants with the relevant background and expertise to perform the appropriate complex valuation analyses under the control and oversight of Company personnel. |
| ● | In order to remediate the material weakness relating to the Company’s controls over monitoring activities, we have developed and are in the process of implementing enhanced controls over our financial statement close and reporting process, which are being tested and evaluated for effectiveness, and designing and implementing additional closing steps to review, manage, and monitor our progress towards the remediation of internal control deficiencies and material weaknesses, including periodic reporting of progress to the Audit Committee. |
The process of designing and maintaining effective internal control over financial reporting is a continuous effort that requires management to anticipate and react to changes in our business, economic and regulatory environments and to expend significant resources. As we continue to evaluate our internal control over financial reporting, we may take additional actions to remediate the material weaknesses or modify the remediation actions described above.
While we continue to devote significant time and attention to these remediation efforts, the material weaknesses will not be considered remediated until management completes the design and implementation of the actions described above and the controls operate for a sufficient period of time, and management has concluded, through testing, that these controls are effective.
Changes in Internal Control over Financial Reporting
Other than as discussed above, there have been no changes in the Company’s internal control over financial reporting during the three months ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.