NioCorp Developments Ltd. — Form 10-Q Summary
Business context and reporting period
The filing covers the three months ended September 30, 2020, NioCorp’s first quarter of fiscal 2021 (unaudited; U.S. dollars unless noted). NioCorp is an exploration-stage company developing the Elk Creek niobium, scandium and titanium project in Nebraska. It has no mining operations or operating revenue.
Financial results and liquidity
- Revenue and margins: No operating revenue; profit margins are not meaningful at this stage.
- Loss: Net loss was $1.053 million, versus $1.005 million in the prior-year quarter. Operating expenses rose to $1.063 million from $892,000, principally reflecting higher other operating expenses, including board-related share-based compensation. Interest expense increased to $127,000 from $60,000.
- Cash flow: Operating activities used $1.109 million, compared with $524,000 used in the prior-year quarter. Financing provided $1.348 million, primarily from warrant and option exercises. Cash increased by $235,000 to $542,000.
- Liquidity: Current assets were $601,000 and current liabilities were $7.894 million, resulting in a $7.293 million working capital deficit. The deficit improved from $7.7 million at June 30, 2020, partly due to equity exercises and efforts to reduce payables.
- Debt and obligations: Total liabilities were $8.314 million. These included $3.818 million owed under secured related-party loans bearing 10% interest, $800,000 of current convertible notes, $570,000 of notes payable, and $231,000 of lease liabilities. Accounts payable and accrued liabilities were $2.895 million.
- Equity: Common shares outstanding increased to 238.7 million at quarter-end from 235.9 million at June 30. The company raised $1.381 million from share issuance, with additional shares issued through exercises and debt conversion.
Changes versus the prior-year quarter and quarter-end
- Operating expenses increased $171,000 and net loss increased $48,000 year over year. Operating cash use more than doubled, partly because the company continued paying down accounts payable.
- Other operating expenses rose to $411,000 from $197,000; employee-related costs fell to $319,000 from $354,000.
- At September 30, cash was $542,000 versus $307,000 at June 30, while total liabilities declined slightly to $8.314 million from $8.356 million.
- The company converted the remaining $38,000 Lind convertible security into shares in July. After quarter-end, $750,000 of convertible notes was extended to October 14, 2021, and $50,000 was converted into shares on October 14.
Outlook, commentary and risks
- Management estimated planned operational needs of approximately $10 million through June 30, 2021, and said it may need to raise $9.6 million to $10.4 million for the next 12 months. No additional financing was committed at the filing date; management said financing may require equity or debt and could dilute existing shareholders.
- The company expects losses to continue and disclosed substantial doubt about its ability to continue as a going concern. It depends on obtaining financing, and may need to reduce planned activities if funding is unavailable.
- COVID-19 restrictions and capital-market disruption affected financing and project timelines; the ultimate impact was uncertain. The filing also identifies commodity-price, permitting, development, resource-estimate and other mining-project risks.
- Management reported securing options covering 2,536 acres for the Elk Creek Project. Preliminary small-scale testing of a possible carbonation process extracted 11–26% of niobium in a single pass; further testing is needed, and commercial-scale feasibility has not been established.
- The company received a $196,000 SBA/PPP loan and believed its use of proceeds could qualify for forgiveness, but stated forgiveness was not assured. A three-year office lease extension was recognized, producing $231,000 in lease liabilities.
Important facts for investors to verify
- Whether NioCorp secures the financing needed to fund operations and project work, and the terms and dilution associated with any financing.
- Cash runway, working-capital needs, and the status and repayment or extension terms of related-party and other debt.
- Progress toward permits, engineering, project financing and construction, including the status of land-option agreements.
- Results of larger-scale carbonation testing and whether the process proves technically and economically viable.
- Whether the SBA loan is forgiven and how COVID-19 or market conditions affect funding and project timelines.