NioDevelopments .(NB) - 2023 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION This section details the company's financial statements, management's analysis of operations and liquidity, market risk exposures, and internal control effectiveness Financial Statements NioCorp, a development-stage company, reported a $4.8 million net loss and a $6.6 million working capital deficit, raising substantial doubt about its going concern ability Condensed Consolidated Balance Sheet Highlights (in thousands of U.S. dollars) | Account | Dec 31, 2022 | June 30, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash | $424 | $5,280 | | Total current assets | $536 | $5,682 | | Mineral interests | $16,085 | $16,085 | | Total assets | $21,901 | $22,756 | | Liabilities & Equity | | | | Accounts payable and accrued liabilities | $4,520 | $817 | | Convertible debt | $502 | $2,169 | | Total current liabilities | $7,088 | $5,068 | | Total liabilities | $7,088 | $5,091 | | Total shareholders' equity | $14,813 | $17,665 | Condensed Consolidated Statements of Operations Highlights (in thousands of U.S. dollars) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total operating expenses | $2,201 | $3,028 | $4,283 | $4,284 | | Net loss | $2,208 | $3,992 | $4,762 | $6,080 | | Loss per common share | $0.01 | $0.01 | $0.02 | $0.02 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands of U.S. dollars) | Cash Flow Activity | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($4,124) | ($2,958) | | Net cash provided by (used in) investing activities | $21 | ($16) | | Net cash (used in) provided by financing activities | ($547) | $645 | | Change in cash and cash equivalents | ($4,856) | ($2,451) | | Cash and cash equivalents, end of period | $424 | $4,866 | Notes to the Condensed Consolidated Financial Statements These notes detail the company's business, going concern warning, prior period restatement, and proposed business combination with GXII and Yorkville financings - The company operates in a single segment: exploration and development of the Elk Creek Niobium/Scandium/Titanium project in Nebraska[18] - Substantial doubt exists about the Company's going concern ability due to a $4.8 million loss, $6.6 million working capital deficit, and $0.4 million cash insufficient for twelve months of operations[33][34] - Prior period financial statements were restated to correct errors in accounting for unamortized deferred financing costs and debt discounts[27] - NioCorp entered a business combination agreement with GXII on September 25, 2022, aiming for financing and a Nasdaq listing by Q1 2023[53][54] - Post-quarter, NioCorp secured agreements with Yorkville for up to $16.0 million in convertible debentures and a $65.0 million standby equity facility, contingent on the GXII transaction closing[60][61] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the $4.8 million net loss, critical liquidity challenges, and dependence on GXII and Yorkville financings to continue as a going concern - The primary strategy is to advance the Elk Creek Project to commercial production, focusing on securing necessary project financing[99][100] - Elk Creek Project's demonstration plant shows positive results, with high dissolution and recovery rates for Rare Earths, potentially exceeding 92% for key magnetic rare earth oxides[110][112] Comparison of Operating Expenses (in thousands of U.S. dollars) | Expense Category | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | Change Driver | | :--- | :--- | :--- | :--- | | Employee-related costs | $584 | $1,551 | Decrease due to timing of stock option grants in 2021 | | Exploration expenditures | $2,605 | $1,112 | Increase due to demonstration plant development and operational costs | | Other operating expenses | $668 | $1,107 | Decrease due to timing of director stock option grants in 2021 | | Total operating expenses | $4,283 | $4,284 | Relatively flat overall | - As of December 31, 2022, the company had $0.4 million cash and a $6.6 million working capital deficit, requiring an additional $13.5 million to $15.5 million for twelve months of operations[124][126] - The proposed GXII transaction could accelerate financing by providing up to $285 million in net cash proceeds and facilitating a Nasdaq listing[128] Quantitative and Qualitative Disclosures About Market Risk The company's market risk is primarily from interest rates, foreign currency fluctuations, and future commodity price volatility, with no current derivative use - Interest Rate Risk: Exposure is limited to interest income earned on cash deposits[144] - Foreign Currency Exchange Risk: The company incurs costs in both U.S. and Canadian dollars, creating risk from currency fluctuations, mitigated by holding cash balances in both currencies[145] - Commodity Price Risk: The company is exposed to price fluctuations for the elements associated with the Elk Creek Project, but holds no commodity derivative positions as the project is not in production[146] Controls and Procedures Management concluded disclosure controls were ineffective due to a material weakness in accounting for non-routine transactions, leading to financial statement restatement and a remediation plan - The CEO and CFO concluded that disclosure controls and procedures were not effective as of the end of the period[147] - A material weakness in internal controls over non-routine transaction accounting led to prior period financial statement restatement[151] - Management is implementing a remediation plan to enhance controls over non-routine transactions, with remediation pending effective operation for a sufficient period[152] PART II — OTHER INFORMATION This section covers non-financial disclosures including legal proceedings, significant risk factors, unregistered equity sales, and other required information and exhibits Legal Proceedings The company is not aware of any material, active, or pending legal proceedings against it - There are no known material, active, or pending legal proceedings against the Company[155] Risk Factors This section highlights significant risks, primarily concerning the proposed GXII business combination and Yorkville financings, including potential failure, reduced cash, and shareholder dilution - Failure to consummate the GXII business combination could negatively impact NioCorp's share price and financial position, potentially incurring a termination fee of up to $25 million[158][129] - The company may not realize anticipated transaction benefits if significant GXII shareholder redemptions reduce net cash proceeds[161] - Completion of Yorkville Financings is subject to conditions, including shareholder approval, and failure to complete them could materially and adversely affect the company[162][163] - Consummation of Yorkville Financings will incur significant additional debt ($16.0 million in convertible debentures) and substantial shareholder dilution from new share issuance[165][167] Unregistered Sales of Equity Securities and Use of Proceeds During the quarter, NioCorp issued 421,605 Common Shares in a non-cash transaction to settle convertible debt with Lind Global Asset Management III, LLC Convertible Debt Conversion | Date | Conversion Amount (USD) | Shares Issued | Conversion Price/Share (CAD) | | :--- | :--- | :--- | :--- | | November 22, 2022 | $300,000 | 421,605 | C$0.9569 | Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[170] Mine Safety Disclosures The company is not a U.S. mine operator and is therefore not subject to MSHA regulation, requiring no mine safety disclosures - The Company's operations were not subject to regulation by MSHA under the Mine Act during the period[171][172] Other Information The company reported no other information for the period - None[173] Exhibits This section lists exhibits filed with the Form 10-Q, including Yorkville financing agreements and officer certifications - Key exhibits filed include agreements related to the Yorkville financings (Securities Purchase Agreement, Form of Convertible Debentures, Standby Equity Purchase Agreement) and officer certifications[174]