NioCorp Developments Ltd. — Form 10-Q Summary
Reporting period: Three months ended September 30, 2022, the first quarter of fiscal 2023 (not calendar 2022 Q1). The filing reports U.S. dollars in thousands unless otherwise stated. Financial statements are unaudited.
Business context
NioCorp is a development-stage company advancing the Elk Creek niobium, scandium and titanium project in Nebraska and evaluating potential rare-earth products. It has no mining operations or operating revenue and depends on external financing to advance the project.
Financial results and position
| Metric | Quarter ended Sep. 30, 2022 | Comparable 2021 period |
|---|---|---|
| Revenue | None | None |
| Operating expenses | $2.082 million | $1.256 million |
| Net loss | $2.554 million | $2.088 million, restated |
| Basic and diluted loss per share | $0.01 | $0.01 |
| Cash used in operating activities | $1.738 million | $1.609 million |
- Exploration expenditures rose to $1.288 million from $0.621 million, primarily reflecting demonstration-plant work and costs associated with the Elk Creek technical report. Total operating expenses increased about 66%; margins are not meaningful because the company generated no revenue.
- Cash was $3.192 million at quarter-end, down from $5.280 million at June 30, 2022. Working capital was a deficit of $3.130 million, versus a surplus of $0.614 million at June 30.
- Total assets were $23.246 million; total liabilities were $6.511 million and shareholders’ equity was $16.735 million. Current liabilities included $3.670 million of accounts payable and accrued liabilities, a $2.000 million related-party loan, and $0.755 million of convertible debt. The related-party facility bears 10% interest, is secured by company assets, and matures June 30, 2023.
- The remaining Lind III convertible security had an undiscounted face value of $0.815 million, including accrued interest. During the quarter, $1.650 million of debt was converted into shares. Common shares outstanding were 279.4 million at September 30.
- Cash from financing activities was a net outflow of $0.021 million; there were no financing inflows during the quarter. Cash declined by $2.088 million, including a $0.329 million adverse exchange-rate effect.
Changes, unusual items and reporting matters
- Net loss increased by $0.466 million year over year. Higher exploration, professional-fee and other operating costs were partly offset by lower interest and foreign-exchange expense.
- The 2021 comparative period was restated for errors in accounting for unamortized deferred financing costs and debt discounts upon debt extinguishments related to conversions. Restated 2021 net loss increased by $0.128 million to $2.088 million.
- At September 30, $2.809 million of transaction costs had been deferred in connection with the proposed business combination.
- Management concluded disclosure controls were ineffective because of a material weakness in controls over accounting for non-routine transactions. The weakness contributed to the prior-period restatement; remediation was planned but not yet established as complete.
Outlook, financing and risks
- The filing states substantial doubt exists about NioCorp’s ability to continue as a going concern. The company says quarter-end cash may not fund normal operations for the next 12 months without additional financing or deferral of liabilities.
- Management estimated planned cash needs of approximately $16 million through June 30, 2023, and said an additional $12 million to $13.5 million would likely be needed to continue advancing financing, permitting and detailed engineering. If financing is unavailable, the company may have to reduce activities.
- On September 25, 2022, NioCorp entered a business combination agreement with GX Acquisition Corp. II. The transaction was expected to close in the first calendar quarter of 2023, subject to shareholder, listing, registration and other conditions, including a minimum cash condition of $15 million, subject to adjustments. Redemptions by GXII shareholders could reduce proceeds. The company cited potential proceeds of up to $285 million, dependent on redemptions and other factors.
- Non-binding Yorkville letters of intent contemplated up to $81 million of additional financing: $16 million in convertible debentures and a standby equity purchase facility of up to $65 million. Definitive agreements, approvals and funding were not assured, and the transaction was not conditional on completing these financings.
- The company also disclosed potential transaction termination fees of $15 million or $25 million in specified circumstances, plus eligible GXII expenses capped at $5 million.
- Project risks include permitting, engineering and construction funding, mineral-resource and metallurgical uncertainty, commodity prices, supply chains, foreign exchange, and the potential effects of economic and capital-market conditions. Future equity or equity-linked financing could dilute shareholders.
- Management reported demonstration-plant work underway; a later October 25 update reported successful removal of calcium and magnesium carbonates at 99% purity. This was a process-development milestone, not commercial production.
Important facts for investors to verify
- Whether NioCorp secured enough committed financing to meet near-term operating needs and advance Elk Creek, and whether the going-concern uncertainty changed.
- The actual closing status, cash proceeds and GXII shareholder redemption level for the proposed business combination, including satisfaction of its closing conditions.
- Whether Yorkville financing moved from non-binding letters of intent to definitive, approved agreements, and its resulting cost and dilution.
- Progress on remediation of the material weakness and whether subsequent filings report effective financial controls.
- Updated project costs, permitting and engineering schedules, and demonstration-plant results, including whether rare-earth recovery and project economics are substantiated.