NIOCORP DEVELOPMENTS LTD current report, 25 September 2022

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Business Context and Reporting Period

Company: NioCorp Developments Ltd. (NioCorp)

Filing Type: Form 8-K (Current Report)

Date of Report: September 25, 2022

Event: Entry into a Material Definitive Agreement for a business combination with GX Acquisition Corp. II (GXII). The transaction involves a series of mergers and share exchanges intended to make GXII a subsidiary of NioCorp, with NioCorp Common Shares expected to trade on the Nasdaq Stock Market following the closing.

Key Financial Metrics and Transaction Terms

This filing details a proposed transaction rather than reporting historical operating results. Key financial terms and conditions include:

  • Exchange Ratio: Each GXII Class A Share held by public shareholders will be converted into 11.1829212 NioCorp Common Shares.
  • Warrant Conversion: Existing GXII warrants will convert to NioCorp warrants, with the number of shares subject to each warrant multiplied by 11.1829212 and the exercise price adjusted accordingly.
  • Reverse Stock Split: NioCorp and GXII will effectuate a reverse stock split at a ratio to be mutually agreed upon following the Second Merger.
  • Liquidity Conditions: Closing requires NioCorp and its subsidiaries to have at least $5,000,001 in net tangible assets and receive cash equal to or greater than $15,000,000 in connection with the transaction.
  • Executive Compensation: New employment agreements were signed for three executives with annual base salaries ranging from $220,000 to $260,000, plus potential bonuses and severance packages.

Note: The filing text does not provide current revenue, profit, cash flow, or debt figures for NioCorp or GXII.

Material Changes and Transaction Structure

The primary material change is the execution of the Business Combination Agreement. The transaction structure involves:

  1. First Merger: Merger Sub merges with GXII; GXII survives.
  2. Exchange: NioCorp purchases First Merger Class A Shares in exchange for NioCorp Common Shares.
  3. Second Merger: Elk Creek Resources Corporation (ECRC) merges with GXII; GXII survives as a subsidiary of an Intermediate Holdco.
  4. Shareholder Approval: The transaction requires approval from both NioCorp and GXII shareholders.
  5. Expected Closing: Anticipated to occur in the first quarter of 2023.

Guidance, Risks, and Contingencies

Outlook and Guidance: NioCorp anticipates listing its common shares and warrants on Nasdaq. The company expects the transaction to provide capital for the Elk Creek Project, though specific financial projections are not detailed in this filing. Forward-looking statements regarding the Elk Creek Project include expectations of producing niobium, scandium, and titanium.

Termination Fees and Risks:

  • Base Termination Fee: NioCorp must pay GXII $15,000,000 if the agreement is terminated due to a Superior Proposal, a change in NioCorp Board recommendation, or a material breach of solicitation covenants.
  • Intentional Breach Fee: NioCorp must pay $25,000,000 if terminated due to a willful material breach by NioCorp or failure to close within five business days after conditions are satisfied.
  • Expense Reimbursement: NioCorp may be required to pay up to $5,000,000 in documented out-of-pocket expenses to GXII and the Sponsor upon certain terminations.
  • Key Risks: Risks include failure to obtain shareholder or regulatory approvals, high redemption rates by GXII public shareholders reducing available cash, inability to secure additional financing, and operational risks related to the Elk Creek Project (e.g., commodity price fluctuations, permitting, and construction delays).

Investor Verification Checklist

  • Verify the final exchange ratio and the specific reverse stock split ratio once mutually agreed upon.
  • Confirm the amount of cash remaining in the GXII trust account after shareholder redemptions to ensure the $15,000,000 closing condition is met.
  • Review the upcoming Joint Proxy Statement/Prospectus (Form S-4) for detailed financial statements and risk factors.
  • Monitor the status of Nasdaq and TSX listing approvals for NioCorp Common Shares and Warrants.
  • Assess the impact of the termination fees ($15M and $25M) on NioCorp's liquidity in the event of a deal failure.
  • Verify the execution of definitive agreements for the convertible debenture and standby equity purchase facility with Yorkville Advisors Global, LP.