NioDevelopments .(NB) - 2023 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for the quarter, detailing balance sheets, operations, cash flows, and equity, alongside notes on going concern status and a financial restatement Condensed Consolidated Balance Sheet Highlights (unaudited) | Account | September 30, 2022 ($ thousands) | June 30, 2022 ($ thousands) | | :--- | :--- | :--- | | Assets | | | | Cash | 3,192 | 5,280 | | Total current assets | 3,381 | 5,682 | | Total assets | 23,246 | 22,756 | | Liabilities & Equity | | | | Total current liabilities | 6,511 | 5,068 | | Total liabilities | 6,511 | 5,091 | | Total shareholders' equity | 16,735 | 17,665 | Condensed Consolidated Statements of Operations (unaudited) | Metric | Three months ended Sep 30, 2022 ($ thousands) | Three months ended Sep 30, 2021 ($ thousands) | | :--- | :--- | :--- | | Total operating expenses | 2,082 | 1,256 | | Net loss | 2,554 | 2,088 | | Loss per common share | 0.01 | 0.01 | Condensed Consolidated Statements of Cash Flows (unaudited) | Activity | Three months ended Sep 30, 2022 ($ thousands) | Three months ended Sep 30, 2021 ($ thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | (1,738) | (1,609) | | Net cash used in financing activities | - | (16) | | Net cash provided by financing activities | (21) | 346 | | Change in cash and cash equivalents | (2,088) | (1,449) | - The company, in the exploration and development stage for its Elk Creek Project, currently earns no operating revenues, raising substantial doubt about its ability to continue as a going concern due to the need for additional capital[19][21][33] - NioCorp entered a business combination agreement with GXII on September 25, 2022, concurrently signing non-binding letters of intent for up to $81.0 million in financing with Yorkville Advisors Global, LP, contingent on closing[51][52] - The company restated its financial statements for fiscal years 2021 and 2022 to correct errors in accounting for unamortized deferred financing costs and debt discounts upon debt extinguishments[29] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, liquidity, and capital resources, focusing on the Elk Creek Project, the proposed GXII business combination, and the ongoing need for substantial additional financing - NioCorp is developing the Elk Creek Project in Nebraska, an advanced Niobium, Scandium, and Titanium property, while also evaluating Rare Earth byproduct potential[69] - The company entered a Business Combination Agreement with GXII, expected to be accounted for as a recapitalization, aiming to accelerate project financing efforts with potential Yorkville funding[71][72][94] - A demonstration-scale processing plant in Quebec commenced operations to test a new, simplified process for extracting niobium, scandium, titanium, and rare earth elements from Elk Creek ore[76][78] Comparison of Operating Results | Item | Three Months Ended Sep 30, 2022 ($ thousands) | Three Months Ended Sep 30, 2021 ($ thousands) | Change | | :--- | :--- | :--- | :--- | | Exploration expenditures | 1,288 | 621 | +$667 | | Total operating expenses | 2,082 | 1,256 | +$826 | | Interest expense | 300 | 605 | -$305 | | Net loss | 2,554 | 2,088 | +$466 | - Increased operating expenses were primarily due to higher exploration expenditures for demonstration plant development and TRS filing costs, while interest expense decreased due to Lind III Convertible Security conversions[85][88] - As of September 30, 2022, the company had $3.2 million in cash and a $3.1 million working capital deficit, with management stating current cash is insufficient and an additional $12.0 million to $13.5 million is needed for the next twelve months to advance the project[90][92] Quantitative and Qualitative Disclosures About Market Risk This section details the company's primary market risk exposures, including interest rate risk on cash deposits, foreign currency exchange risk, and commodity price risk related to Elk Creek Project minerals - The company is exposed to interest rate risk on cash deposits, foreign currency exchange risk from U.S. and Canadian dollar expenditures, and commodity price risk for Elk Creek Project elements[110][111][112] Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of September 30, 2022, due to a material weakness in internal control over financial reporting, leading to a restatement and prompting a remediation plan - The CEO and CFO concluded that disclosure controls and procedures were not effective as of September 30, 2022[113] - A material weakness was identified in internal controls over financial reporting, as controls for non-routine transactions were inadequately designed, leading to a financial statement restatement[117] - Management is implementing a remediation plan to enhance the design of controls over accounting for non-routine transactions[118] PART II — OTHER INFORMATION Legal Proceedings The company is not aware of any material, active, or pending legal proceedings against it, nor is it involved as a plaintiff in any material litigation - The company knows of no material, active, or pending legal proceedings against it[121] Risk Factors This section updates the company's risk factors, focusing on the proposed business combination with GXII, including potential transaction failure, unrealized benefits, and uncertainty in securing definitive Yorkville financing - The business combination with GXII may not be completed, potentially negatively impacting the company's share price and financial position, as completion is subject to shareholder approvals and a minimum cash condition[124][125] - Even if the transaction is consummated, the company may not realize anticipated benefits, as a significant number of GXII shareholders may redeem their shares, reducing available cash[127] - The company may not negotiate definitive agreements for the proposed Yorkville financing, which could materially adversely affect its ability to complete the GXII transaction and fund the Elk Creek Project[128] Unregistered Sales of Equity Securities and Use of Proceeds This section discloses the issuance of common shares during the quarter, all made in connection with the voluntary conversion of portions of the Lind III Convertible Security Common Shares Issued via Conversion of Lind III Convertible Security | Date | Conversion Amount ($ thousands) | Shares Issued | Conversion Price/Share (C$) | | :--- | :--- | :--- | :--- | | July 27, 2022 | 600 | 1,025,796 | 0.7504 | | August 8, 2022 | 250 | 431,286 | 0.7496 | | September 7, 2022 | 600 | 958,193 | 0.8236 | | September 26, 2022 | 200 | 307,346 | 0.8845 | Defaults Upon Senior Securities The company reports that there were no defaults upon senior securities during the period - None[131] Mine Safety Disclosures The company's operations were not subject to MSHA regulation during the three-month period ended September 30, 2022, thus requiring no mine safety disclosures - The Company and its properties were not subject to regulation by MSHA under the Mine Act during the reporting period[133] Other Information The company reports no information for this item - None[134] Exhibits This section provides a list of exhibits filed with the Form 10-Q, including the Business Combination Agreement with GXII, related support and employment agreements, and CEO/CFO certifications - Key exhibits filed include the Business Combination Agreement with GXII, various support and employment agreements, and Sarbanes-Oxley certifications[135] Signatures