Business context and reporting period
NioCorp Developments Ltd. filed this Form 10-Q for its fiscal second quarter ended December 31, 2022, and the six months then ended. Unless noted otherwise, financial amounts are in thousands of U.S. dollars. The company is a development-stage mineral explorer focused on the Elk Creek Niobium/Scandium/Titanium project in Nebraska; it had no operating revenue.
Financial results and liquidity
| Metric | Three months ended Dec. 31, 2022 | Six months ended Dec. 31, 2022 | Comparable 2021 period |
|---|---|---|---|
| Operating expenses | $2,201 | $4,283 | $3,028 / $4,284 |
| Net loss | $2,208 | $4,762 | $3,992 / $6,080 |
| Loss per share, basic and diluted | $0.01 | $0.02 | $0.01 / $0.02 |
| Cash used in operating activities | Not separately presented | $4,124 | $2,958 |
Exploration spending drove operating costs: six-month exploration expenditures were $2,605 versus $1,112, primarily reflecting demonstration-plant work and project study costs. Lower employee-related and other expenses, including fewer prior-year option-related charges, offset much of the increase. Interest expense fell to $382 for the six months from $1,627, mainly as convertible debt was converted. There are no meaningful operating margins because the company has no revenue.
At December 31, cash was $424, down from $5,280 at June 30, 2022. Working capital was negative $6,552, compared with a $614 surplus at June 30. Total assets were $21,901; total liabilities were $7,088; and shareholders’ equity was $14,813. Current liabilities included $4,520 of accounts payable and accrued liabilities, a $2,000 related-party loan, and $502 of convertible debt. The related-party facility bears 10% interest, is secured by company assets, and was due June 30, 2023.
Material changes and unusual items
- Six-month net loss improved year over year, while operating cash use increased by $1,166, principally due to higher project-related spending.
- Trade payables and accrued liabilities rose to $4,520 from $817 at June 30, including $3,431 of trade payables. Deferred transaction costs were $4,338, with a further $3,800 accrued but unpaid.
- The company restated prior 2021 comparative results for errors in accounting for deferred financing costs and debt discounts on debt conversions. Restated interest expense increased by $534 for the three-month comparison and $647 for the six-month comparison; the filing identifies a material weakness related to accounting for non-routine transactions.
- The company sold approximately 1.27 acres of land for $21 and recorded a $13 gain.
Outlook, financing, and risks
Management stated that cash was insufficient to fund normal operations for the next 12 months without additional financing or deferring liabilities. It estimated planned cash needs of approximately $13.5 million through June 30, 2023, and said an estimated $13.5 million to $15.5 million would likely be needed to continue advancing financing, permitting, and detailed engineering. The company warned that absent financing it would have to reduce activities. The financial statements disclose substantial doubt about its ability to continue as a going concern.
The proposed GX Acquisition Corp. II business combination was expected to close in the first calendar quarter of 2023, subject to shareholder, exchange, cash, and other conditions. The filing described potential transaction proceeds of up to $285 million, dependent in part on GXII shareholder redemptions. Definitive Yorkville agreements signed January 26, 2023, contemplated up to $16 million of convertible debentures and an optional equity facility of up to $65 million over as long as 36 months. Both depend on the transaction closing and other approvals; proceeds are not assured. The debentures carry 5% interest, conversion features and warrants, and could create significant debt and shareholder dilution. Equity-facility shares would be sold at a discount to market prices.
Management reported demonstration-plant progress on rare-earth processing, including announced expected recoveries above 92% for certain magnetic rare-earth oxides, subject to further testing. It also cited ongoing needs for permitting, engineering, infrastructure, offtake agreements, and project financing. Key risks include failure or delay of the business combination or Yorkville financings, redemptions reducing cash proceeds, dilution, commodity and capital-market uncertainty, permitting and technical risks, and supply-chain and cost pressures. Disclosure controls were ineffective at period-end due to the material weakness; management’s remediation plan had not yet been completed. No material pending legal proceedings were reported.
Investor verification points
- Confirm subsequent cash balances, funding runway, and whether the company can meet liabilities and required financing needs.
- Verify the business-combination closing status, actual GXII redemptions, net cash received, and satisfaction of minimum-cash and net-tangible-asset conditions.
- Check whether Yorkville funding and equity advances closed, the amounts actually drawn, associated fees, repayment obligations, and potential share dilution.
- Review remediation and testing of the material weakness, and the effects of the prior-period restatement on reported results and controls.
- Assess demonstration-plant results, project permitting and engineering progress, and the assumptions and financing required to advance Elk Creek toward construction.