Note 6 - Proposed Transaction |
9 Months Ended |
|---|---|
Aug. 31, 2026 | |
| Notes to Financial Statements | |
| Business Combination [Text Block] |
NOTE 6 – PROPOSED TRANSACTION
On July 21, 2026, the Company, Paulson and New NOVAGOLD entered into an arrangement agreement (the “Arrangement Agreement”), pursuant to which New NOVAGOLD agreed to acquire all issued and outstanding common shares of the Company by way of a statutory plan of arrangement under Division 5 Part 9 of the Business Corporations Act (British Columbia) (the “Arrangement”), whereby each common share of the Company (other than any common share held by New NOVAGOLD and any common shares in respect of which a Company shareholder has validly exercised its dissent rights) will be exchanged for one share of voting common stock of New NOVAGOLD, par value $0.001.
In connection with the Arrangement, on July 21, 2026, New NOVAGOLD and Paulson Advisers entered into a Contribution Agreement (the “Contribution Agreement”). Under the terms of the Contribution Agreement, substantially concurrently with, but immediately prior to, the consummation of the Arrangement, Paulson Advisers will cause its applicable affiliates to contribute all of their equity interests in DGH and DGH II (which hold, directly and indirectly, the remaining 40% ownership interest in Donlin Gold not held by NOVAGOLD prior to such contribution) to New NOVAGOLD in exchange for shares of voting common stock and non-voting common stock of New NOVAGOLD, which number of New NOVAGOLD shares will be determined based on a 10% discount to the equity value of Paulson’s 40% ownership interest in Donlin Gold, implied by the equity value of NOVAGOLD based on the 10-day volume weighted average price of the NOVAGOLD common shares as of July 21, 2026.
New NOVAGOLD and Paulson also entered into an Investor Rights Agreement (the “Investor Rights Agreement”) on July 21, 2026, which sets forth, among other things, Paulson’s rights and obligations with respect to New NOVAGOLD following the consummation of the Arrangement, and a Master Implementation Agreement with NOVAGOLD and NGRA (the “Master Implementation Agreement” and, together with the Arrangement Agreement, the Contribution Agreement and the Investor Rights Agreement, the “Transaction Agreements”), which sets forth, among other things, certain of the parties’ rights and obligations with respect to, and the sequencing of, the transactions contemplated by the Transaction Agreements (collectively, the “Transactions”).
New NOVAGOLD was incorporated on July 21, 2026 under the laws of the State of Delaware under the name “NovaGold Corporation”. Upon its incorporation, New NOVAGOLD was authorized to issue two shares of common stock, each having a par value of $0.001. Each of NOVAGOLD and Paulson Advisers LLC subscribed for and received one common share of New NOVAGOLD. New NOVAGOLD was incorporated for the purpose of consummating the Transactions.
Pursuant to the Transaction Agreements, upon the consummation of the Transactions, New NOVAGOLD will become the parent company of NOVAGOLD and its subsidiaries and will own, directly and indirectly, 100% of Donlin Gold. The Transactions are expected to close in the fourth calendar quarter of 2026 and upon closing, New NOVAGOLD will effectively be a continuation of the Company. Completion of the Transactions is subject to, among other things, approval by the Company’s shareholders, court approval, regulatory and stock exchange approvals and the satisfaction of customary closing conditions.
The Company evaluated its interest in New NOVAGOLD and determined that New NOVAGOLD is a VIE established to facilitate the proposed Transactions, with the significant transaction steps largely predetermined at formation and currently has no substantive operations or employees (other than in connection with the Transactions). Accordingly, despite NOVAGOLD and Paulson Advisers LLC having equal governance rights over New NOVAGOLD, the Company consolidated New NOVAGOLD into its Condensed Consolidated Interim Financial Statements from the date of formation and all intercompany transactions and balances with New NOVAGOLD were eliminated on consolidation.
As of August 31, 2026, the Transactions had not yet been completed. Accordingly, the Company continues to account for its 60% ownership interest in Donlin Gold under the equity method as described in Note 5. No accounting effects related to the potential acquisition of Paulson’s 40% interest in Donlin Gold have been recognized in the Company’s Condensed Consolidated Interim Financial Statements as of August 31, 2026. |