NioCorp Developments Ltd. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended March 31, 2023; the filing was signed May 30, 2023. Amounts below are in U.S. dollars; financial statement amounts are in thousands unless stated otherwise. NioCorp is a development-stage company advancing the Elk Creek niobium, scandium and titanium project in Nebraska. It had no mining revenue.
Financial results and position
| Metric | Three months ended March 31, 2023 | Nine months ended March 31, 2023 |
|---|---|---|
| Revenue | None | None |
| Operating expenses | $29.192 million | $33.475 million |
| Net loss attributable to NioCorp | $29.343 million | $35.649 million |
| Loss per share, basic and diluted | $1.00 | $1.26 |
| Net cash used in operating activities | $11.465 million for the nine months |
Margins are not meaningful because the company reported no revenue. The quarter’s operating expenses included substantial transaction-related and fair-value accounting items; therefore, the net loss is not solely a measure of recurring project spending.
At March 31, 2023, cash was $7.145 million, working capital was approximately $2.6 million, and total assets were $24.456 million. Current liabilities were $4.678 million. Total liabilities were $34.735 million, including $12.263 million of convertible debt, $5.303 million of warrant liabilities and a $12.314 million earnout liability. The convertible debentures have $16 million aggregate principal; the company also owed $1.289 million under its CEO’s related-party credit facility. Shareholders’ equity was negative $12.512 million, with a further $2.233 million redeemable noncontrolling interest.
Cash increased by $1.865 million over the nine months, from $5.280 million. Operating activities used $11.465 million; financing activities provided $13.621 million, principally from Yorkville debt financing, partly offset by debt repayments and related-party loan activity.
Changes versus comparable periods and transactions
- Nine-month net loss attributable to NioCorp rose to $35.649 million from $8.080 million in the prior-year period. Operating expenses increased to $33.475 million from $5.670 million, primarily reflecting the March 2023 GXII business combination and related expenses, higher exploration and demonstration-plant activity, and other corporate costs.
- Exploration expenditures were $4.015 million for nine months, compared with $1.957 million. The company cited demonstration-plant work and technical-study costs as key contributors.
- On March 17, 2023, NioCorp closed its GXII transaction, completed a 1-for-10 reverse stock split and began Nasdaq trading. The transaction provided $2.168 million of net GXII cash; NioCorp also received Yorkville convertible-debt proceeds. Reported net proceeds from the transactions were $8.720 million after specified financing and transaction costs.
- Yorkville advanced $15.360 million for $16 million of unsecured convertible debentures and warrants. Separately, its equity facility provides for up to $65 million of share purchases over 36 months, subject to conditions and limitations; the filing estimates potential net proceeds of up to $61.6 million. No shares had been drawn under the facility by March 31.
- The filing restated the September and December 2022 interim financial statements after concluding the Lind consent amendment had been accounted for under the wrong guidance. The correction included a debt-extinguishment loss and recognition of warrant liabilities. It also describes earlier restatements relating to debt-conversion accounting.
Outlook, risks and notable items
- Going concern: Management states cash may not fund normal operations for the next 12 months without additional financing or deferring liabilities; the filing says substantial doubt exists about the company’s ability to continue as a going concern. NioCorp expects continued losses and says it requires substantial further funding to advance and construct Elk Creek.
- Management estimated planned cash needs of approximately $7.7 million through June 30, 2023, and said an additional $3 million to $5 million, beyond the $1.8 million raised in an April 28 registered direct offering, was likely needed to continue advancing financing, permitting and detailed engineering. The April offering issued 314,465 shares at $6.36 each.
- An EXIM letter of interest contemplated potential debt financing of up to $800 million, but the filing emphasizes it is preliminary and not a financing commitment. A final commitment would depend on due diligence, underwriting, approvals and definitive terms; the process was estimated at six to nine months after application.
- Project milestones reported include demonstration-plant rare-earth recovery results and a contract with Zachry Group to develop surface-facility costs. The company said further metallurgical testing and project engineering remained ongoing; these are development updates, not operating results or a construction financing commitment.
- Convertible-debt terms include an 18-month term, 5% interest (15% upon default), conversion provisions and potential cash redemption obligations in specified circumstances. Future equity issuance may dilute shareholders. The filing also identifies financing access, project execution, costs, permits, commodity demand, market conditions and possible PFIC tax treatment as risks.
- Disclosure controls were deemed ineffective. Management reported multiple material weaknesses, including controls over complex and non-routine transactions, risk assessment, staffing and monitoring. Remediation was in progress and had not been completed.
- Transaction accounting produced significant noncash and unusual charges, including $6.309 million of transaction costs, $13.195 million initial fair value of earnout shares, and $3.848 million initial fair value of assumed private warrants. The filing also records a $1.922 million nine-month debt-extinguishment loss.
Important facts for investors to verify
- Whether NioCorp can obtain sufficient financing to fund operations and Elk Creek development, and whether Yorkville facility proceeds are available under its conditions and restrictions.
- Progress toward a binding EXIM financing commitment; the $800 million letter of interest is not committed funding.
- Cash runway, subsequent financing needs and the company’s ability to meet convertible-debt and related-party obligations.
- Remediation and testing of the material weaknesses, and the accuracy of future filings following the restatements.
- Potential dilution from convertible debt, warrants, exchangeable vested shares and future equity financing, alongside progress on permitting, engineering and metallurgical testing.