NioCorp Developments Ltd. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended March 31, 2018; filed May 11, 2018. Amounts are in U.S. dollars, thousands, unless otherwise noted. The filing covers 2018, notwithstanding the request metadata stating 2017 Q3.
Business context and financial results
NioCorp is an exploration-stage company developing the Elk Creek niobium, scandium and titanium project in Nebraska. It had no operating revenue and expensed exploration costs as incurred. It reported no income-tax expense or benefit.
| Metric | Three months ended Mar. 31, 2018 | Prior-year quarter | Nine months ended Mar. 31, 2018 | Prior-year period |
|---|---|---|---|---|
| Operating expenses | $1,350 | $4,075 | $4,845 | $10,405 |
| Net loss | $3,146 | $4,609 | $6,919 | $10,931 |
| Loss per share, basic and diluted | $0.02 | $0.02 | $0.03 | $0.06 |
| Cash used in operating activities | Not presented for the quarter | Not presented for the quarter | $4,627 | $9,017 |
Revenue and operating margins are not applicable because the company had no operating revenue. The nine-month loss improved year over year, primarily alongside lower exploration spending; however, fair-value losses on financial instruments rose to $1,811 from $189. For the quarter, net loss also declined, while fair-value losses increased to $1,514 from $524.
Financial position, liquidity and debt
- At March 31, 2018, cash was $483; current assets were $967 and current liabilities were $4,076, resulting in a $3,109 working-capital deficit. The deficit was $5,827 at June 30, 2017.
- Total assets were $11,636, including $10,617 in mineral interests. Total liabilities were $8,656, and shareholders’ equity was $2,980.
- Convertible debt was $5,290 in total: $710 current and $4,580 noncurrent. Related-party loans were $1,480, including $1,000 owed under a secured loan to CEO Mark Smith and $480 drawn on his credit facility. Related-party debt bears 10% interest.
- Nine-month financing activities provided $4,620, compared with $6,782 in the prior-year period. Financing included $1,545 from share issuance, $3,415 from convertible debt and $305 in related-party borrowing. The company also reported $3,693 of debt conversions to equity.
- Shares outstanding at March 31 were 210.2 million, up from 198.8 million at June 30, 2017. The cover page reports 210.9 million outstanding as of May 11, 2018.
Management stated that cash and existing financing were insufficient to fund normal operations and debt obligations for the next 12 months without deferring certain liabilities and raising additional funds. The filing identifies a material uncertainty that raises substantial doubt about the company’s ability to continue as a going concern.
Material changes, outlook and risks
- Exploration expenditures fell to $1,499 for the nine months from $7,128 a year earlier, reflecting the timing and nature of project work. Employee-related costs rose to $1,809 from $1,371, primarily due to share-based compensation.
- Management estimated approximately $1.7 million of planned operational needs through June 30, 2018, net of Lind’s recent $1.0 million funding. It anticipated needing $5.7–$6.0 million to continue planned operations for the following 12 months. The filing cautions that financing may not be available on acceptable terms, or at all.
- Financing work included completion of an independent technical review of the revised feasibility study for a potential debt-financing syndicate. Remaining stated steps included independent market reviews for niobium and scandium, investor presentations, further due diligence, and negotiation of financing and regulatory approvals.
- The company signed an agreement with Nordmin for detailed engineering of mine infrastructure, with a possible future EPC contract subject to satisfactory engineering and final agreement. Permit work continued; management expected to file an air construction permit application in calendar 2018.
- Lind funded an additional $2.5 million under its convertible security in early 2018. A further $1.0 million was funded on April 5, 2018, after quarter-end; the related security face amount increased by $1.2 million, including implied interest, and warrants were issued. Smith loan and credit-facility maturities were extended after quarter-end to June 2019.
- Convertible-security conversion pricing is based on 85% of the five-day volume-weighted average share price, creating potential dilution. The filing also identifies financing, project feasibility and development, permitting, commodity prices, foreign exchange, debt covenants, and dilution as risks.
Important facts for investors to verify
- Whether the company secured sufficient additional funding to meet near-term needs and address the going-concern uncertainty.
- Terms, costs, security and dilution associated with Lind financing and any subsequent debt or equity raises.
- Progress and conclusions from project technical and market reviews, and the economic assumptions underlying the feasibility study.
- Status of engineering, environmental and other permits, and the schedule and funding required to advance Elk Creek toward construction.
- Current debt balances, payment obligations, related-party loan terms and compliance with financing covenants.