NOTE 7. DERIVATIVE LIABILITIES

6 Months Ended

May 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

NOTE 7. DERIVATIVE LIABILITIES

Convertible notes – Embedded derivative

The conversion price of the Notes is denominated in U.S. dollars, a currency different from the functional currency of the parent Company. Therefore, an embedded derivative liability is recorded at fair value and re-measured each period with the movement being recorded as a gain or loss in Net income (loss). Pursuant to the terms and indenture governing the Notes, holders had the opportunity to require the Company to purchase for cash all or a portion of their Notes (“Put Option”) on May 1, 2013. The fair value of the embedded derivative prior to the expiry of the Put Option was composed of the conversion feature of the Note and the Put Option.  The conversion feature on the remaining Notes is valued using the Black-Scholes pricing model and is considered a Level 3 financial instrument in the fair value hierarchy as the value model has significant unobservable inputs.  

	Six months ended May 31,
	2014			2013
Balance – beginning of period	$	83		$	17,934
Repurchases of Notes		—			(14,804	)
Gain on embedded derivative liabilities for the period		(25	)		(2,853	)
Balance – end of period	$	58		$	277

Warrants – Derivative

The Company’s functional currency is the Canadian dollar and it had issued and outstanding warrants with an exercise price denominated in U.S. dollars.  The Company determined that such warrants with an exercise price denominated in a currency that is different from the entity’s functional currency were classified as a derivative liability based on the evaluation of the warrants’ settlement provisions, and carried at their fair value.  Any changes in the fair value from period to period have been recorded as a gain or loss in net income (loss).

In the first quarter of 2013, all of NOVAGOLD’s remaining warrants were exercised and the Company realized a loss on derivative liability of $2,461 for the year ended November 30, 2013.