NioDevelopments .(NB) - 2020 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements The company reported a reduced net loss of $3.34 million for the nine-month period but faces a significant going concern risk with a working capital deficit of $7.6 million Condensed Consolidated Balance Sheet Highlights (in thousands of U.S. dollars) | Balance Sheet Item | March 31, 2020 | June 30, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash | $48 | $357 | | Total current assets | $50 | $428 | | Total assets | $10,706 | $11,085 | | Liabilities & Equity | | | | Total current liabilities | $7,666 | $5,221 | | Total liabilities | $7,666 | $6,233 | | Total equity | $3,040 | $4,852 | | Working Capital | ($7,616) | ($4,793) | Condensed Consolidated Statements of Operations Highlights (in thousands of U.S. dollars) | Metric | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | Nine Months Ended Mar 31, 2020 | Nine Months Ended Mar 31, 2019 | | :--- | :--- | :--- | :--- | :--- | | Total operating expenses | $817 | $1,587 | $2,710 | $4,803 | | Net loss | $1,262 | $1,519 | $3,343 | $5,723 | | Loss per common share | $0.00 | $0.01 | $0.01 | $0.03 | Condensed Consolidated Statements of Cash Flows Highlights (Nine months ended March 31, in thousands of U.S. dollars) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2,172) | ($3,134) | | Net cash provided by financing activities | $1,865 | $3,225 | | Change in cash and cash equivalents | ($309) | $53 | - The company's financial statements have been prepared on a going concern basis, but its ability to continue is uncertain and dependent on obtaining sufficient financing[17][26] - The company currently earns no operating revenues and as of March 31, 2020, had a working capital deficit of $7.6 million and an accumulated deficit of $94.0 million[18] Notes to the Condensed Consolidated Financial Statements The notes disclose a significant 'Going Concern' issue, detail related-party loans with the CEO, and report a subsequent SBA loan received under the CARES Act - The company's sole focus is the exploration and development of the Elk Creek Niobium/Scandium/Titanium property in Nebraska[16] - A material uncertainty exists that raises substantial doubt about the Company's ability to continue as a going concern due to recurring losses and a working capital deficit[26][27] - The potential impact of COVID-19 on obtaining financing is also noted as an adverse factor[28] - The maturity date for outstanding convertible promissory notes was extended by one year to October 14, 2020; during the nine months ended March 31, 2020, $867 thousand of the Lind convertible security was converted into 2,444,420 common shares[30][31] - As of March 31, 2020, the company had outstanding loans with CEO Mark Smith totaling $3.345 million, which was subsequently increased to $3.0 million in April 2020[37][39][49] - Subsequent to the quarter's end, on April 17, 2020, a subsidiary received a $196 thousand SBA Paycheck Protection Program (PPP) loan under the CARES Act[50] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the focus on advancing the Elk Creek Project, the financial impact of COVID-19, and the significant capital required to continue operations Company Overview and Strategy NioCorp is focused on advancing its Elk Creek Niobium, Scandium, and Titanium project in Nebraska to commercial production, contingent on securing project financing - The company is developing the Elk Creek Project to produce Niobium (Nb), Scandium (Sc), and Titanium (Ti)[62] - The core business strategy is to advance the Elk Creek Project to commercial production, with a current focus on obtaining funds for mine development, construction, and commissioning[63] COVID-19 Impact The COVID-19 pandemic has created funding uncertainty, though the company secured a $196 thousand SBA loan to mitigate some economic impact - The company has curtailed corporate travel and is following social distancing guidelines due to COVID-19[67] - On April 17, 2020, a wholly owned subsidiary received a $196 thousand SBA loan under the Paycheck Protection Program (PPP)[68][95] - The pandemic has created uncertainty for project funding timelines and heightened the risk of being unable to secure sufficient additional capital[69] Project and Corporate Updates Key developments include advancing the air permit application, increasing a credit facility with the CEO, and signing a non-binding offtake letter of intent - The credit facility with CEO Mark Smith was increased to $2.5 million in January 2020 and further to $3.0 million in April 2020 to support project financing efforts[70] - A non-binding letter of intent was signed with a large U.S. steel producer for the potential purchase of up to 25% of NioCorp's ferroniobium production over the first 10 years[72] - The air permit application process is advancing, with a draft permit issued for a 30-day public comment period on April 16, 2020[74][75] - The company has secured extensions on eight option-to-purchase agreements (OTPs) covering approximately 1,499 acres of land for the Elk Creek Project[79] Financial and Operating Results The company's net loss improved to $3.3 million from $5.7 million year-over-year, driven by a significant reduction in exploration expenditures Comparison of Operating Results (Nine Months Ended March 31, in thousands of U.S. dollars) | Expense Category | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Employee-related costs | $1,040 | $1,267 | ($227) | | Exploration expenditures | $971 | $2,863 | ($1,892) | | Total operating expenses | $2,710 | $4,803 | ($2,093) | | Net Loss | $3,343 | $5,723 | ($2,380) | - Exploration expenditures decreased significantly in 2020 compared to 2019, reflecting the completion of major engineering and design work for the 2019 Feasibility Study in the prior year[85] - Employee-related costs declined due to decreased share-based compensation costs[83] Liquidity and Capital Resources The company faces a severe liquidity challenge with minimal cash, a $7.6 million working capital deficit, and an estimated need for $11-12 million in new funding - The company has no revenue and finances operations through equity and debt offerings[89] - As of March 31, 2020, the company had cash of $48 thousand and a working capital deficit of $7.6 million[90] - The company anticipates needing to raise $11 million to $12 million to fund operations for the next twelve months, which are focused on financing, permitting, and engineering for the Elk Creek Project[92] - The financial statements contain a 'going concern' qualification, indicating significant uncertainty about the company's ability to continue operations without raising additional funds[97] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate, foreign currency exchange, and commodity price risks associated with its pre-production status - Interest rate risk is related to earned interest on cash deposits[109] - Foreign currency exchange risk exists due to expenditures in both U.S. and Canadian dollars, which the company mitigates by holding cash in both currencies[110] - The company is exposed to commodity price risk for the elements at its Elk Creek Project and does not currently use derivative instruments to hedge this risk[111] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal controls - The CEO and CFO concluded that as of March 31, 2020, the company's disclosure controls and procedures were effective[112] - There were no material changes to the company's internal control over financial reporting during the three months ended March 31, 2020[114] PART II — OTHER INFORMATION Legal Proceedings The company is not aware of any material, active, or pending legal proceedings against it - There are no material, active, or pending legal proceedings against the Company[117] Risk Factors Risk factors have been updated to include the potential adverse effects of the COVID-19 pandemic on operations, financing, and liquidity - A new risk factor has been added detailing the potential adverse effects of the COVID-19 pandemic on the company's business plans, financial condition, and liquidity[118][119] - Specific COVID-19 related risks include delays in obtaining permits, finalizing EPC agreements, negative impacts on liquidity, and increased cybersecurity vulnerabilities[119] Unregistered Sales of Equity Securities and Use of Proceeds The company issued 101,037 common shares upon the conversion of a portion of a convertible security - On March 2, 2020, the Company issued 101,037 Common Shares to Lind upon the conversion of a portion of its convertible security[121] Mine Safety Disclosures No mine safety disclosures are required as the company was not subject to MSHA regulation during the period - The company was not subject to regulation by MSHA during the quarter, and thus no disclosure is required under the Dodd-Frank Act[123] Exhibits Filed exhibits include amendments to the CEO's credit facility, Sarbanes-Oxley certifications, and XBRL data files - Exhibits filed include amending agreements to the credit facility with CEO Mark Smith, dated January 17, 2020, and April 3, 2020[125] - Standard certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act are included as exhibits[125]