NioCorp Developments Ltd. — Form 10-Q Summary
Reporting period: Three and nine months ended March 31, 2020 (fiscal 2020 third quarter), filed May 11, 2020. The request metadata labels the period “2019 Q3,” but the filing itself reports March 31, 2020. Amounts below are in U.S. dollars; financial statement amounts are in thousands unless noted.
Business context and financial performance
NioCorp is an exploration-stage company developing the Elk Creek niobium, scandium and titanium project in Nebraska. It had no operating revenue and expects to incur losses while pursuing financing, permitting and project development.
| Metric | Three months ended Mar. 31, 2020 | Nine months ended Mar. 31, 2020 | Comparable 2019 period |
|---|---|---|---|
| Revenue | None | None | None |
| Operating expenses | $817 | $2,710 | $1,587 / $4,803 |
| Net loss | $1,262 | $3,343 | $1,519 / $5,723 |
| Loss per share, basic and diluted | $0.00 | $0.01 | $0.01 / $0.03 |
| Cash used in operating activities | $(2,172) for nine months | $(3,134) for nine months |
No revenue-based margins are meaningful because the company had no operating revenue. The nine-month loss narrowed year over year, primarily alongside lower exploration spending and employee-related costs. Foreign-exchange losses were $359 for the nine months, versus $73 in 2019; fair-value changes in financial instruments were a $39 loss versus a $633 loss in 2019.
Financial position and liquidity
- At March 31, 2020, cash was $48, compared with $357 at June 30, 2019. Total assets were $10,706 and total liabilities were $7,666; shareholders’ equity was $3,040.
- Working capital deficit was $7,616, compared with $4,800 at June 30, 2019. Accumulated deficit was $94,028.
- Current liabilities included $3,450 of accounts payable and accrued liabilities, $3,345 of related-party loans and $838 of current convertible debt and related security. The company reported no long-term convertible debt at March 31.
- During the nine months, related-party credit-facility advances from CEO Mark Smith were $1,865; the outstanding principal was $2,345, in addition to $1,000 outstanding under a separate Smith loan. The loans bear 10% interest and are secured by company assets.
- Operating cash outflow was partly funded by $1,865 in related-party debt drawdowns. There were no proceeds from stock issuance in the nine-month period; $980 of convertible securities was converted into shares.
Changes, outlook and material risks
- Operating expenses for the nine months fell to $2,710 from $4,803. Exploration expenditures declined to $971 from $2,863, reflecting reduced technical studies and engineering work after prior-year feasibility-study and air-permit efforts.
- Management estimated planned operational needs of approximately $8 million through June 30, 2020, and said it may need to raise $11–$12 million to fund planned operations for the next 12 months. It had no further financing commitments at the filing date and warned that financing might not be available on acceptable terms.
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern. Management said it lacks sufficient cash for normal operations and debt obligations for the next 12 months without deferring certain liabilities and raising additional funds.
- COVID-19 had curtailed travel and created uncertainty around funding, permitting, engineering, contractor and project timelines. Management could not reasonably estimate the pandemic’s full effect and warned that insufficient financing could require reduced activities.
- After quarter-end, the Smith credit-facility limit was increased to $3.0 million. The company subsequently drew $125 and $150, leaving approximately $0.4 million available. A subsidiary also received a $196 Paycheck Protection Program loan at 1% interest; eligibility remained subject to interpretation, and forgiveness was not assured.
- The Nebraska air-permit application had progressed to a formal public-comment period, expected to close May 18, 2020. Project construction and significant work remain contingent on obtaining sufficient financing. The company also reported a non-binding letter of intent with a U.S. steel producer interested in purchasing up to 25% of planned ferroniobium production for the first 10 years; this is not a binding sales commitment.
- Additional risks include project financing and dilution, permitting and land access, commodity prices, foreign exchange, secured-creditor covenants, and the possibility of delays or increased costs. No material legal proceedings or off-balance-sheet arrangements were reported.
Important facts for investors to verify
- Current cash needs, financing availability, and the company’s ability to address the disclosed going-concern uncertainty.
- Outstanding secured related-party borrowing, facility availability, interest and fees, and any covenant or repayment developments.
- PPP loan eligibility and any forgiveness decision or repayment requirement.
- Status of the air permit, land-option extensions, project engineering and financing milestones.
- Whether the steel-producer letter of intent becomes a binding offtake agreement, including its final terms.
- Potential dilution from future equity financing and outstanding options, warrants and convertible securities.