NioCorp Developments Ltd. — Form 10-Q Summary
Reporting period: Three months ended September 30, 2016 (fiscal Q1 2017); filed November 14, 2016. Unless otherwise stated, amounts are in thousands of U.S. dollars. NioCorp is an exploration and development company advancing the Elk Creek niobium, scandium and titanium project in Nebraska. It had no operating revenue.
Financial performance and position
- Revenue and profitability: No mining revenue. Net loss was $2,775, compared with $2,807 in the prior-year quarter; basic and diluted loss per share was $0.02 in both periods. Total operating expenses were $2,980, up from $2,639. Margins are not meaningful without revenue.
- Expenses and unusual items: Exploration spending was $1,970, broadly flat year over year ($1,964). Metallurgical development rose to $1,190 from $85, while technical studies and engineering declined to $519 from $1,416. Professional fees increased to $333 from $33, primarily due to SEC registration and reporting costs. A favorable, noncash $296 change in financial-instrument fair value helped offset expenses; foreign-exchange loss was $33 versus $150.
- Cash flow: Operating activities used $2,247, compared with $2,158 in the prior-year quarter. Investing activities used $500, including funding restricted escrow cash. Financing provided $64 from share issuance. Cash declined by $2,688 to $1,724.
- Liquidity: At September 30, cash was $1,724, restricted cash $500, and working capital was negative $445. At June 30, cash was $4,412 and working capital was positive $2,256. Total assets were $13,032 and total liabilities were $9,266.
- Debt and equity: Convertible debt was $6,279, with a separate $247 derivative liability; the debt and derivative are measured using Level 3 fair-value inputs. A $1,000 related-party loan from the CEO is due June 17, 2017, bears 10% interest and is secured by company assets. NioCorp reported compliance with the convertible-security covenant at quarter-end. Shares outstanding were 180.6 million at September 30 and 184.6 million as of November 11.
Changes, outlook and risks
- Management estimated planned operating needs of $6.7 million through June 30, 2017, with an average monthly burn of approximately $745, including about $470 for planned project work. It said existing cash would cover approximately two to three months of planned expenditures and that financing was needed on or before December 2016.
- The company anticipated needing to raise at least $3.2 million to $6.2 million to fund planned operations for the next 12 months. No additional financing commitment was in place; management was pursuing debt and equity, but said availability and terms were uncertain. Equity or equity-linked financing could dilute shareholders. Without funding, NioCorp expected to reduce or delay planned work.
- Management expected exploration spending to remain around the first-quarter level through completion of the feasibility study. The company expects to operate at a loss for the foreseeable future; no earnings or revenue guidance was provided.
- The filing states that accumulated deficit was $62,997 and working capital deficiency was $445, and identifies material uncertainty raising substantial doubt about the company’s ability to continue as a going concern. The financial statements assume continuation as a going concern and do not reflect adjustments that might be required otherwise.
- Project developments included production of a first scandium-material sample during bench testing and completion of the Army Corps of Engineers jurisdictional determination. Management said the determination identified regulated waters and reinforced its view that none were in the immediate footprint of planned mine infrastructure and surface facilities.
- Restricted cash of $500 secured feasibility-study work. After quarter-end, $235 was released to the company on October 5; the remaining $265 was to be drawn against outstanding payables after specified project milestones.
- Key risks include financing and going-concern uncertainty, exploration and feasibility outcomes, permitting and environmental requirements, commodity and currency fluctuations, debt obligations, and potential dilution. NioCorp also said it had been a passive foreign investment company (PFIC) in recent years and expected to remain one.
Important facts for investors to verify
- Whether NioCorp secured the financing needed to meet its stated December 2016 funding deadline and 12-month capital requirement.
- Whether subsequent cash use, restricted-cash releases and payable obligations matched management’s runway estimates.
- The progress, cost and completion timing of the Elk Creek feasibility study, and the project’s permitting and metallurgical results.
- The terms and potential dilution of any later financing, and the status of convertible debt, related-party debt and associated covenants.
- The filing’s cover page checks “No” for having filed all required reports during the preceding 12 months; investors may wish to verify the company’s reporting history and filing status.