NIOCORP DEVELOPMENTS LTD 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements as of, and for the three and nine months ended March 31, 2023, and the related notes thereto, which have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). This discussion and analysis contains forward-looking statements and forward-looking information that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements and information as a result of many factors, including, but not limited to, those set forth elsewhere in this Quarterly Report on Form 10-Q. See “Note Regarding Forward-Looking Statements” below. All currency amounts are stated in thousands of U.S. dollars unless noted otherwise. As used in this report, unless the context otherwise indicates, references to “we,” “our,” the “Company,” “NioCorp,” and “us” refer to NioCorp Developments Ltd. and its subsidiaries, collectively. Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q and the exhibits attached hereto contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and “forward-looking information” within the meaning of applicable Canadian securities legislation (collectively, “forward-looking statements”). Such forward-looking statements concern our anticipated results and developments in the operations of the Company in future periods, planned exploration activities, the adequacy of the Company’s financial resources, and other events or conditions that may occur in the future. Forward-looking statements have been based upon our current business and operating plans, as approved by the Company’s Board of Directors, and may include statements regarding the anticipated benefits of the Transactions (as defined below), including NioCorp’s ability to access the full amount of the expected net proceeds of the Yorkville Equity Facility Financing Agreement (as defined below) over the next three years; NioCorp’s ability to receive a final commitment of financing from the Export-Import Bank of the United States (“EXIM”); anticipated benefits of the listing of NioCorp’s common shares, without par value (the “Common Shares”), on The Nasdaq Stock Market LLC (“Nasdaq”); the financial and business performance of NioCorp; NioCorp’s anticipated results and developments in the operations of NioCorp in future periods; NioCorp’s planned exploration activities; the adequacy of NioCorp’s financial resources; NioCorp’s ability to secure sufficient project financing to complete construction and commence operation of the Elk Creek Project; NioCorp’s expectation and ability to produce niobium, scandium, and titanium at the Elk Creek Project; the outcome of current recovery process improvement testing, and NioCorp’s expectation that such process improvements could lead to greater efficiencies and cost savings in the Elk Creek Project; the Elk Creek Project’s ability to produce multiple critical metals; the Elk Creek Project’s projected ore production and mining operations over its expected mine life; the completion of the demonstration plant and technical and economic analyses on the potential addition of magnetic rare earth oxides to NioCorp’s planned product suite; the exercise of options to purchase additional land parcels; the execution of contracts with engineering, procurement and construction companies; NioCorp’s ongoing evaluation of the impact of inflation, supply chain issues and geopolitical unrest on the Elk Creek Project’s economic model; the impact of health epidemics, including the COVID-19 pandemic, on NioCorp’s business and the actions NioCorp may take in response thereto; and the creation of full time and contract construction jobs over the construction period of the Elk Creek Project. Forward-looking statements are frequently, but not always, identified by words such as “expects,” “anticipates,” “believes,” “intends,” “estimates,” “potential,” “possible,” and similar expressions, or statements that events, conditions, or results “will,” “may,” “could,” or “should” (or the negative and grammatical variations of any of these terms) occur or be achieved. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, or future events or performance (often, but not always, using words or phrases such as “expects” or “does not expect,” “is expected,” “anticipates” or “does not anticipate,” “plans,” “estimates,” or “intends,” or stating that certain actions, events, or results “may,” “could,” “would,” “might,” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Such forward-looking statements reflect the Company’s current views with respect to future 28 events and are subject to certain known and unknown risks, uncertainties, and assumptions. Many factors could cause actual results, performance, or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements, including, among others, risks related to the following: NioCorp’s ability to recognize the anticipated benefits of the Transactions, including NioCorp’s ability to access the full amount of the expected net proceeds under the Yorkville Equity Facility Financing Agreement over the next three years; unexpected costs related to the Transactions; the outcome of any legal proceedings that may be instituted against NioCorp following closing of the Transactions; NioCorp’s ability to receive a final commitment of financing from EXIM on the anticipated timeline, on acceptable terms, or at all; NioCorp’s ability to continue to meet Nasdaq listing standards; NioCorp’s ability to operate as a going concern; risks relating to the Common Shares, including price volatility, lack of dividend payments and dilution or the perception of the likelihood any of the foregoing; NioCorp’s requirement of significant additional capital; the extent to which NioCorp’s level of indebtedness and/or the terms contained in agreements governing NioCorp’s indebtedness or the Yorkville Equity Facility Financing Agreement may impair NioCorp’s ability to obtain additional financing; covenants contained in agreements with NioCorp’s secured creditors that may affect its assets; NioCorp’s limited operating history; NioCorp’s history of losses; the restatement of NioCorp’s consolidated financial statements as of and for the fiscal years ended June 30, 2022 and 2021 and the interim periods ended September 30, 2021, December 31, 2021, March 31, 2022, September 30, 2022, and December 31, 2022 and the impact of such restatement on NioCorp’s future financial statements and other financial measures; the material weaknesses in NioCorp’s internal control over financial reporting, NioCorp’s efforts to remediate such material weaknesses and the timing of remediation; the possibility that NioCorp may qualify as a PFIC under the Code; the potential that the Transactions could result in NioCorp becoming subject to materially adverse U.S. federal income tax consequences as a result of the application of Section 7874 and related sections of the Code; cost increases for NioCorp’s exploration and, if warranted, development projects; a disruption in, or failure of, NioCorp’s information technology systems, including those related to cybersecurity; equipment and supply shortages; current and future offtake agreements, joint ventures, and partnerships; NioCorp’s ability to attract qualified management; the effects of the COVID-19 pandemic or other global health crises on NioCorp’s business plans, financial condition and liquidity; estimates of mineral resources and reserves; mineral exploration and production activities; feasibility study results; the results of metallurgical testing; changes in demand for and price of commodities (such as fuel and electricity) and currencies; competition in the mining industry; changes or disruptions in the securities markets; legislative, political or economic developments, including changes in federal and/or state laws that may significantly affect the mining industry; the impacts of climate change, as well as actions taken or required by governments related to strengthening resilience in the face of potential impacts from climate change; the need to obtain permits and comply with laws and regulations and other regulatory requirements; the timing and reliability of sampling and assay data; the possibility that actual results of work may differ from projections/expectations or may not realize the perceived potential of NioCorp’s projects; risks of accidents, equipment breakdowns, and labor disputes or other unanticipated difficulties or interruptions; the possibility of cost overruns or unanticipated expenses in development programs; operating or technical difficulties in connection with exploration, mining, or development activities; the management of the water balance at the Elk Creek Project site; land reclamation requirements related to the Elk Creek Project; the speculative nature of mineral exploration and development, including the risks of diminishing quantities of grades of reserves and resources; claims on the title to NioCorp’s properties; potential future litigation; and NioCorp’s lack of insurance covering all of NioCorp’s operations. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Company or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties, and other factors, including without limitation those discussed under the heading “Risk Factors” in our Annual Report on Form 10-K/A for the fiscal year ended June 30, 2022, as well as other factors described elsewhere in this report and the Company’s other reports filed with the Securities and Exchange Commission (“SEC”). The Company’s forward-looking statements contained in this Quarterly Report on Form 10-Q are based on the beliefs, expectations, and opinions of management as of the date of this report. The Company does not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations, or opinions should change, except as required by law. For the reasons set forth above, investors should not attribute undue certainty to, or place undue reliance on, forward-looking statements. 29 Qualified Person All technical and scientific information that forms the basis for the Elk Creek Project disclosure included in this Quarterly Report on Form 10-Q has been reviewed and approved by Scott Honan, M.Sc., SME-RM, NioCorp’s Chief Operating Officer. Mr. Honan is a “Qualified Person” as such term is defined in National Instrument 43-101 – Standards of Disclosure for Mineral Projects and subpart 1300 of Regulation S-K. Company Overview NioCorp is developing the Elk Creek Project, located in southeast Nebraska. The Elk Creek Project is an advanced Niobium, Scandium and Titanium development stage property. The Company is evaluating the potential to produce several Rare Earth byproducts from the Elk Creek Project. Niobium is used to produce various superalloys that are extensively used in high performance aircraft and jet turbines. It also is used in High-Strength, Low-Alloy steel, a stronger steel used in automobiles, bridges, structural systems, buildings, pipelines, and other applications that generally increases strength and/or reduces weight, which can result in environmental benefits, including reduced fuel consumption and material usage and fewer air emissions. Scandium can be combined with aluminum to make high-performance alloys with increased strength and improved corrosion resistance. Scandium also is a critical component of advanced solid oxide fuel cells, an environmentally preferred technology for high-reliability, distributed electricity generation. Titanium is a component of various superalloys and other applications that are used for aerospace applications, weapons systems, protective armor, medical implants, and many others. It also is used in pigments for paper, paint, and plastics. Rare Earths are critical to electrification and decarbonization initiatives and can be used to manufacture the strongest permanent magnets commercially available. Our primary business strategy is to advance our Elk Creek Project to commercial production. We are focused on obtaining additional funds to carry out our near-term planned work programs associated with securing the project financing necessary to complete mine development and construction of the Elk Creek Project. Recent Corporate Events The Transactions The GXII Transaction On March 17, 2023 (the “Closing Date”), the Company closed the GXII Transaction (as defined below) with GX Acquisition Corp. II ("GXII"), pursuant to the Business Combination Agreement, dated September 25, 2022 (the “Business Combination Agreement”), among the Company, GXII and Big Red Merger Sub Ltd (the “Closing”). The GXII Transaction is being accounted for as an equity raise transaction in accordance with U.S. GAAP. At the Closing, the following transactions (collectively, the “GXII Transaction”) occurred: ● As a result of a series of transactions, GXII became an indirect, majority-owned subsidiary of NioCorp and changed its name to “Elk Creek Resources Corp” (“ECRC”). ● As the parent company of the merged entity, NioCorp issued 1,753,821 post-Reverse Stock Split (as defined below) Common Shares in exchange for all of the Class A shares of GXII issued and outstanding immediately prior to the Closing, including 83,770 Common Shares issued to BTIG, LLC in exchange for Class A shares of GXII that it received as partial payment for advisory services. ● All of the Class B shares of GXII issued and outstanding immediately prior to the Closing (after giving effect to the surrender of certain Class B shares of GXII in accordance with the Sponsor Support Agreement, dated September 25, 2022 (the “Sponsor Support Agreement”), among GX Sponsor II LLC (the “Sponsor”), GXII, NioCorp and the other persons party thereto) were converted into 7,957,404 shares of Class B common stock of GXII (now known as ECRC) as the surviving entity of the mergers that occurred on the Closing Date as part of the GXII Transaction. Pursuant to the Business Combination Agreement, the Sponsor Support Agreement and the Exchange Agreement, dated as of March 17, 2023 (as amended, supplemented or otherwise modified, the “Exchange Agreement”), by and among NioCorp, ECRC and the Sponsor, after the Closing, the shares of Class B common stock of ECRC are exchangeable into Common Shares on a one-for-one basis, subject to certain equitable adjustments, under certain conditions. Of the issued and outstanding shares of Class B common stock of ECRC, 4,565,808 shares (the “Vested Shares”) were vested as of the Closing Date and are exchangeable at any time, and from time to time, until the tenth anniversary of the Closing Date (the “Ten-Year Anniversary”) and 3,391,596 shares (the “Earnout Shares”) are exchangeable until the Ten-Year Anniversary, subject to certain vesting conditions. See Note 9 for additional information regarding the Class B common stock of ECRC. 30 ● NioCorp assumed GXII’s obligations under the agreement governing the GXII share purchase warrants (the “GXII Warrants”) and issued an aggregate of 15,666,626 warrants (the “NioCorp Assumed Warrants”) to purchase up to an aggregate of 17,519,864 Common Shares. The NioCorp Assumed Warrants issued at the Closing consisted of (a) 9,999,959 public NioCorp Assumed Warrants (the “Public Warrants”) that were issued in respect of the GXII Warrants that were publicly traded prior to the Closing and (b) 5,666,667 NioCorp Assumed Warrants (the “Private Warrants”) that were issued to the Sponsor in respect of the GXII Warrants that it held prior to the Closing, which NioCorp Assumed Warrants were subsequently distributed by the Sponsor to its members in connection with the Closing. See Note 10b for additional information regarding the NioCorp Assumed Warrants. On the Closing Date, the Company also effected a reverse stock split (the “Reverse Stock Split”) on the basis of one (1) post-Reverse Stock Split Common Share for every ten (10) pre-Reverse Stock Split Common Shares issued and outstanding, with any fractional shares resulting from the Reverse Stock Split rounded down to the nearest whole share. The transactions contemplated by the Business Combination Agreement, including the GXII Transaction, the Yorkville Convertible Debt Facility Financing (as defined below), the Yorkville Equity Facility Financing (as defined below) and the Reverse Stock Split, are referred to, collectively, as the “Transactions.” The number of Common Shares issued and outstanding immediately following the consummation of the Transactions were as follows: Common Shares Percentage Legacy NioCorp Shareholders 28,246,621 93.90 % Former GXII Class A Shareholders 1 1,753,821 5.83 % Other 2 81,213 0.27 % Total Common Shares Outstanding Upon Completion of Transactions 30,081,655 100 % 1 – Includes 83,770 Common Shares issued to BTIG, LLC in exchange for Class A shares of GXII that it received as partial payment for advisory services. 2 - Represents Commitment Shares (as defined below) issued under the Yorkville Equity Facility Financing Agreement. After consideration of GXII expenses incurred in connection with the Transactions, the Company acquired net cash of $2,168, and assumed net liabilities of approximately $392, Private Warrant liabilities of $3,848, and the Earnout Shares liability of $13,195. The Company incurred expenses related to the Transactions of $6,309, all of which were recorded as other operating expenses. In addition, in connection with the Transactions, the Common Shares and the NioCorp Assumed Warrants were listed for trading on The Nasdaq Stock Market LLC (“Nasdaq”). The Common Shares and the NioCorp Assumed Warrants began trading on The Nasdaq Global Market and The Nasdaq Capital Market, respectively, on March 21, 2023, under the symbols “NB” and “NIOBW,” respectively. The Common Shares continued to trade on the Toronto Stock Exchange (“TSX”) under the symbol “NB,” and began trading on the TSX on a post-Reverse Stock Split basis on March 21, 2023. The Common Shares ceased being quoted on the OTC Markets in connection with the commencement of trading on The Nasdaq Global Market. Yorkville Financings In connection with the entry into the Business Combination Agreement, the Company announced the signing of non-binding letters of intent for two separate financing packages with Yorkville Advisors Global, LP. On January 26, 2023, the Company entered into definitive agreements with respect to these financings, including a Securities Purchase Agreement, dated January 26, 2023 (as amended the “Yorkville Convertible Debt Financing Agreement”), between the Company and YA II PN, Ltd., an investment fund managed by Yorkville Advisors Global, LP (together with YA II PN, Ltd., “Yorkville”), and a Standby Equity Purchase Agreement, dated January 26, 2023 (the “Yorkville Equity Facility Financing Agreement”), between the Company and Yorkville. Pursuant to the Yorkville Equity Facility Financing Agreement, Yorkville has committed to purchase up to $65.0 million of our Common Shares (the “Commitment Amount”), at our direction from time to time for a period commencing upon the Closing Date and ending on the earliest of (i) the first day of the month next following the 36-month anniversary of the Closing, (ii) the date on which Yorkville shall have made payment of the full Commitment Amount and (iii) the date that the Yorkville Equity Facility Financing Agreement otherwise terminates in accordance with its terms (the “Commitment Period”), subject to certain limitations and the satisfaction of the conditions in the Yorkville Equity Facility Financing Agreement. Pursuant to the terms of the Yorkville Equity Facility Financing Agreement, we issued 81,213 of our Common Shares (the “Commitment Shares”) to Yorkville as consideration for its irrevocable commitment to purchase Common Shares under the Yorkville Equity Facility Financing Agreement. Additionally, we are required to pay Yorkville an aggregate fee of $1,500,000 in cash (the “Cash Fee”), including $500,000 that we paid on the Closing Date and the remainder that we will pay in installments over a 12-month period following the Closing Date, provided that, we will have the right to prepay without penalty all or part of the remaining installments of the Cash Fee at any time. The transactions contemplated by the Yorkville Equity Facility Financing Agreement are collectively referred to as the “Yorkville Equity Facility Financing.” 31 Pursuant to the Yorkville Convertible Debt Financing Agreement, at the Closing, Yorkville advanced a total amount of $15.36 million to NioCorp in consideration of the issuance by NioCorp to Yorkville of (i) $16.0 million aggregate principal amount of unsecured convertible debentures (the “Convertible Debentures”) and (ii) Common Share purchase warrants, exercisable for up to 1,789,267 Common Shares for cash or, if at any time there is no effective registration statement registering, or no current prospectus available for, the resale of the underlying Common Shares, on a cashless basis, at the option of the holder, at a price per Common Share of approximately $8.9422, subject to adjustment to give effect to any stock dividend, stock split, reverse stock split or similar transaction (the “Financing Warrants”). See Notes 8 and 10 for descriptions of certain terms of the Convertible Debentures and the Financing Warrants. The transactions contemplated by the Yorkville Convertible Debt Financing Agreement are collectively referred to as the “Yorkville Convertible Debt Financing.” Registered Direct Offering On April 28, 2023, the Company issued and sold 314,465 Common Shares in a registered direct offering at a price of $6.36 per share. Net proceeds to the Company from the offering were approximately $1.8 million. NioCorp intends to use the net proceeds from the offering for working capital and general corporate purposes, including to advance its efforts to launch construction of the Elk Creek Project and move it to commercial operation. Elk Creek Project Update On October 25, 2022, the Company announced that its demonstration-scale processing plant (the “demonstration plant”), operated in Quebec, Canada, by L3 Process Innovation (“L3”), had completed demonstrating its planned process for removing calcium and magnesium from ore obtained from the Elk Creek Project. This positive result is a key milestone in NioCorp’s proposed optimization of its process flow sheet for the Elk Creek Project, which was designed by L3 and NioCorp. Removing carbonate minerals in this fashion is expected to reduce the size of the follow-on planned production steps and make them more efficient. Characterization of the calcium and magnesium carbonate from the completed demonstration plant production runs has demonstrated very low levels of impurities, and an overall 99% purity of the mixed calcium-magnesium carbonate. On January 4, 2023, the Company announced that the demonstration plant has succeeded in obtaining a Rare Earth dissolution rate of 86-95% from ore from the Elk Creek Project site through hydrochloric acid leaching and has achieved a loading rate of Rare Earths as high as 99% in the follow-on solvent extraction recovery step. These relatively high rates, which were expected, point to potentially strong rates of overall recovery of separated Rare Earth oxides, subject to additional demonstration testing over the coming weeks. Additional solvent extraction steps will be deployed to establish the ultimate recovery rates of potential Rare Earth products. The demonstration plant has further established that the Rare Earths recovered in the initial solvent extraction step are accompanied by only two impurities of note: iron and a very small amount of nickel. Given the success of this initial separation step, L3 and NioCorp expect that losses in the additional solvent extraction steps would be low. On February 6, 2023, the Company announced that overall recoveries for praseodymium oxide, neodymium oxide, terbium oxide, and dysprosium oxide are likely to be greater than 92% and meet commercial purity specifications for magnetic rare earth oxides. These results are in line with bench- and pilot-scale testing of L3’s rare earth recovery system, as well as hydrometallurgical performance models that have been run on the rare earth recovery process upon which the demonstration plant is based. On February 20, 2023, the Company announced that it had executed a contract with Zachry Group (“Zachry“) to develop a cost for the surface facilities associated with NioCorp’s Elk Creek Project. The contract represents the first phase of engineering, procurement, and construction (“EPC”) contracting for the Elk Creek Project. NioCorp had previously selected Zachry as its EPC firm for the Elk Creek Project’s surface facilities. On April 4, 2023, the Company announced a process breakthrough in niobium and titanium recovery achieved at the demonstration plant. The breakthrough points to a potentially more efficient way to process niobium and titanium into higher-purity products, which may in turn open up new markets for the Elk Creek Project’s planned products. 32 The demonstration plant is also expected to deliver updated metallurgical recoveries for niobium, scandium and titanium and expects to complete operations in the second calendar quarter of 2023. Other Activities Our long-term financing efforts continued during the quarter ended March 31, 2023, including consummating the Transactions, as discussed above. In addition, on March 6, 2023, the Company announced the receipt of a Letter of Interest from the EXIM for potential debt financing of up to $800 million through EXIM’s “Make More In America” initiative to fund a portion of the project costs of the Elk Creek Project. A project finance letter of interest from EXIM represents only a preliminary step in the formal EXIM application process, and the Letter of Interest states that the communication “does not represent a financing commitment” and “is not an explicit indication of the financial or commercial viability of a transaction.” NioCorp expects to submit an application to EXIM to begin the first phase of the underwriting process (“Phase I”) as soon as possible. As stated in the Letter of Interest, “Upon receipt of NioCorp’s application for financing, EXIM will conduct all requisite due diligence necessary to determine if a Final Commitment may be issued for this transaction.” The process from submission of a Phase I application to a final commitment of financing by EXIM, if any, is expected to take approximately six to nine months and is subject to a number of risks and uncertainties. As explained in the Letter of Interest, “Any final commitment will be dependent on meeting EXIM’s underwriting criteria, authorization process, and finalization and satisfaction of terms and conditions. All Final Commitments must be in compliance with EXIM policies as well as program, legal, and eligibility requirements.” The debt financing is subject to the satisfactory completion of due diligence, the negotiation and settlement of final terms, and the negotiation of definitive documentation. There can be no assurance that the debt financing will be completed on the terms as described above or at all. As funds become available through the Company’s fundraising efforts, we expect to undertake the following activities: ● Continuation of the Company’s efforts to secure federal, state, and local permits; ● Continued evaluation of the potential to produce Rare Earth products; ● Negotiation and completion of offtake agreements for the remaining uncommitted production from the project; ● Negotiation and completion of engineering, procurement, and construction agreements; ● Completion of the final detailed engineering for the underground portion of the Elk Creek Project; ● Initiation and completion of the final detailed engineering for surface project facilities; ● Construction of natural gas and electrical infrastructure under existing agreements to serve the Elk Creek Project site; ● Completion of water supply agreements and related infrastructure to deliver fresh water to the project site; ● Initiation of revised mine groundwater investigation and control activities; ● Land clearing operations intended to prepare property owned by ECRC for the commencement of project construction; ● Initiation of efforts to satisfy conditions of Johnson County’s Special Use Permit, including road upgrades and the provision of additional law enforcement during the construction period; ● Initiation of long-lead equipment procurement activities; and ● Completion of the operations of the demonstration plant. 33 Financial and Operating Results The Company has no revenues from mining operations. Operating expenses incurred related primarily to costs incurred in connection with the Transactions, as well as performing exploration activities and the activities necessary to support corporate and shareholder duties, and are detailed in the following table. For the Three Months Ended March 31, For the Nine Months Ended March 31, 2023 2022 2023 2022 Operating expenses Employee-related costs $ 1,405 $ 308 $ 1,989 $ 1,859 Professional fees 157 16 583 530 Exploration expenditures 1,410 845 4,015 1,957 Other operating expenses 26,220 217 26,888 1,324 Total operating expenses 29,192 1,386 33,475 5,670 Change in fair value of Earnout Shares liability (881 ) - (881 ) - Change in fair value of warrant liabilities 784 - 868 - Debt extinguishment 300 - 1,922 - Foreign exchange (gain) loss 83 (66 ) 192 98 Interest expense 142 679 362 2,306 Gain on sale of assets - - (13 ) - Loss on equity securities 1 1 2 6 Income tax benefit (186 ) - (186 ) - Loss attributable to noncontrolling interest (92 ) - (92 ) - Net loss attributable to the Company $ 29,343 $ 2,000 $ 35,649 $ 8,080 Nine-month period ended March 31, 2023 compared to the nine-month period ended March 31, 2022 Significant items affecting operating expenses are noted below: Other operating expenses include costs incurred in connection with the Transactions, including direct transaction expenses, and the fair value of warrant and Earnout Shares liabilities assumed, as well as costs related to investor relations, general office expenditures, equity offering and proxy expenditures, board-related expenditures, and other miscellaneous costs. These costs increased in 2023 as compared to 2022 primarily due to the costs incurred in connection with the Transactions, which closed on March 17, 2023. A summary of these costs is presented below: Amount Gross cash proceeds, net of transaction costs incurred by GXII $ 2,168 Less: Net liabilities assumed 392 Private Warrants assumed at fair value 3,848 Earnout Shares assumed at fair value 13,195 Transaction costs expensed 6,309 Yorkville Equity Facility Financing Agreement expenses 2,646 Transaction related losses incurred $ 24,222 Employee-related costs increased in 2023 as compared to 2022, primarily due to the timing of board-authorized employee award payments, partially offset by a decrease in share-based compensation expense and the impact of reduced headcount. Share based compensation costs increased in 2023 as compared to 2022 due to the impact of an increased Common Share price offset slightly by a decrease in the number of Options issued. Options granted in both 2023 and 2022 were fully vested and expensed on the grant date. 34 Exploration expenditures increased in 2023 as compared to 2022, primarily due to the timing of demonstration plant development, start-up, and operational costs incurred in 2023, as well as costs related to the completion and filing of the Technical Report Summary based on the Company’s 2022 Feasibility Study for the Elk Creek Project, which was filed with the SEC on September 6, 2022. Other significant items impacting the change in the Company’s net loss are noted below : Change in fair value of Earnout Shares liability represents the change in fair value related to the Earnout Shares between the Closing Date and the end of the quarter, based on the results of Monte Carlo financial modeling. Change in fair value of warrant liability represents the change in fair value related to the additional Warrants (the “Contingent Consent Warrants”) that the Company agreed to issue to Lind Global Asset Management III, LLC (“Lind”) upon certain conditions in connection with the Waiver and Consent Agreement, dated September 25, 2022, between the Company and Lind (the “Lind Consent”), as discussed in Note 8, as well as the change in the fair value of the Private Warrants based primarily on the impacts of a lower closing Common Share price, which increases the probability of these Contingent Consent Warrants being issued on the 18-month anniversary. Loss on debt extinguishment represents the loss incurred under Accounting Standards Codification (“ASC”) Topic 470, Debt, related to the convertible security issued to Lind (the “Lind III Convertible Security”) pursuant to the Convertible Security Funding Agreement, dated February 26, 2021, as amended by Amendment #1 to the Convertible Security Funding Agreement, dated December 2, 2021, between the Company and Lind), as discussed in Note 3 to the interim condensed consolidated financial statements. Interest expense decreased in 2023 as compared to 2022 due to the impacts of conversions on the outstanding balance of the Lind III Convertible Security during 2022, as well as the impact of debt extinguishment accounting as discussed in Note 3. Loss attributable to noncontrolling interest represents the portion of net loss in ECRC attributable to the Vested Shares, which are not owned by the Company. Three-month period ended March 31, 2023 compared to the three-month period ended March 31, 2022 Overall, the increase in net loss for the three-month period ended March 31, 2023, as compared to the same period in 2022, is primarily the result of the same factors underlying the nine-month changes in expense categories as discussed above. The increase in employee-related costs for the three-month period ended March 31, 2023 is due to the timing of Options issued to employees. Liquidity and Capital Resources We have no revenue generating operations from which we can internally generate funds. To date, our ongoing operations have been financed by the sale of our equity securities by way of private placements, convertible securities issuances, the exercise of incentive Options and Warrants, and related party loans. With respect to currently outstanding Options and Warrants, we believe that exercise of these instruments, and cash proceeds from such exercises, will not occur unless and until the market price for our Common Shares equals or exceeds the related exercise price of each instrument. In connection with the Closing of the Transactions, the Company received net cash proceeds of $8.7 million, as follows: Description Amount Net cash received from GXII trust account, after payment of direct and incremental transaction costs incurred by GXII $ 2,168 Net proceeds from the Yorkville Convertible Debt Financing Agreement 14,857 Net cash costs incurred in connection with Yorkville Equity Facility Financing Agreement (1,996 ) NioCorp direct and incremental transaction costs (6,309 ) Net proceeds from Transactions $ 8,720 The Transactions delivered to NioCorp several important benefits, including a ready pathway to an up-listing to the Nasdaq, which is expected to allow additional institutional firms to invest in the Company for the first time. Further, we believe it has given NioCorp and the Elk Creek Project a much higher profile among institutional investors evaluating projects in the critical materials space. Many new investors, including institutional and other large investment funds, are now anticipated to look more closely at NioCorp, particularly since the Common Shares and the Public Warrants are now trading on Nasdaq. 35 The Yorkville Convertible Debt Financing has provided, and the Yorkville Equity Facility Financing is expected to provide, near-term and longer-term access to capital. The ability of the Company to draw down on the Yorkville Equity Facility Financing Agreement, at its discretion, is subject to certain limitations and the satisfaction of certain conditions. If and when available, the Yorkville Equity Facility Financing Agreement provides an opportunity to actively manage the cash needs of the Company more closely. Historically, cash has generally been available to the Company through private placements of equity for which the timing did not always coincide with the Company’s cash needs. The Company may utilize the Yorkville Equity Facility Financing Agreement to potentially generate funds at a time when they are in need. Alternatively, the Company can also utilize the Yorkville Equity Facility Financing Agreement for opportunistic share sales. As of March 31, 2023, the Company had cash of $7.1 million and working capital of $2.6 million, compared to cash of $5.3 million and working capital of $0.6 million on June 30, 2022. On April 28, 2023, the Company issued and sold 314,465 Common Shares in a registered direct offering at a price of $6.36 per share. Net proceeds to the Company from the offering were approximately $1.8 million. NioCorp intends to use the net proceeds from the offering for working capital and general corporate purposes, including to advance its efforts to launch construction of the Elk Creek Project and move it to commercial operation. We expect that the Company will operate at a loss for the foreseeable future. The Company’s current planned cash needs are approximately $7.7 million until June 30, 2023. In addition to outstanding accounts payable and short-term liabilities, our average monthly planned expenditures are approximately $1,136 per month where approximately $610 is for corporate overhead and estimated costs related to securing financing necessary for advancement of the Elk Creek Project. Approximately $526 per month is planned for expenditures relating to the advancement of Elk Creek Project by NioCorp’s majority-owned subsidiary, ECRC. The Company’s ability to continue operations and fund our current work plan is dependent on management’s ability to secure additional financing. The Company anticipates that it does not have sufficient cash on hand to continue to fund basic operations for the next twelve months, and additional funds totaling $3.0 million to $5.0 million, in addition to the $1.8 million raised from the Registered Direct Offering completed on April 28, 2023, are likely to be necessary to continue advancing the project in the areas of financing, permitting, and detailed engineering. While the Yorkville Equity Facility Financing Agreement may provide the Company with access to additional capital, the Company may require additional capital to meet its cash needs. Management is actively pursuing such additional sources of debt and equity financing, and while it has been successful in doing so in the past, there can be no assurance it will be able to do so in the future. Elk Creek property lease commitments are nil until June 30, 2023. To maintain our currently held properties and fund our currently anticipated general and administrative costs and planned exploration and development activities at the Elk Creek Project for the fiscal year ending June 30, 2023, the Company will likely require additional financing during the current fiscal year. Should such financing not be available in that timeframe, we will be required to reduce our activities and will not be able to carry out all our presently planned activities at the Elk Creek Project. Except for potential funding under the Yorkville Equity Facility Financing, discussed above, and the potential exercise of Options and Warrants, we currently have no further funding commitments or arrangements for additional financing at this time, and there is no assurance that we will be able to obtain any such additional financing on acceptable terms, if at all. Pursuant to the Exchange Agreement, NioCorp is restricted from issuing equity or equity-linked securities (other than Common Shares) or any preferred equity or non-voting equity if such issuance would adversely impact the rights of the holders of the shares of Class B common stock of ECRC, without the consent of the holders of a majority of the shares of Class B common stock of ECRC. The Yorkville Convertible Debt Financing Agreement also contains certain covenants that, among other things, limit NioCorp’s ability to use the proceeds from the Yorkville Convertible Debt Financing to repay related party debt or to enter into any variable rate transaction, including issuances of equity or debt securities that are convertible into Common Shares at variable rates and any equity line of credit, ATM agreement or other continuous offering of Common Shares, other than with Yorkville, subject to certain exceptions. Notwithstanding the restrictions set forth in the Exchange Agreement and the Yorkville Convertible Debt Financing Agreement, there is significant uncertainty that we would be able to secure any additional financing in the current equity or debt markets. The quantity of funds to be raised and the terms of any proposed equity or debt financing that may be undertaken will be negotiated by management as opportunities to raise funds arise. Management may pursue funding sources of both debt and equity financing, including but not limited to the issuance of equity securities in the form of Common Shares, Warrants, subscription receipts, or any combination thereof in units of the Company pursuant to private placements to accredited investors or pursuant to public offerings in the form of underwritten/brokered offerings, registered direct offerings, or other forms of equity financing and public or private issuances of debt securities including secured and unsecured convertible debt instruments or secured debt project financing. Management does not currently know the terms pursuant to which such financings may be completed in the future, but any such financings will be negotiated at arm’s length. Future financings involving the issuance of equity securities or derivatives thereof will likely be completed at a discount to the then-current market price of the Company’s securities and will likely be dilutive to 36 current shareholders. In addition, we could raise funds through the sale of interests in our mineral properties, although current market conditions and other recent worldwide events have substantially reduced the number of potential buyers/acquirers of any such interests. However, we cannot provide any assurances that we will be able to be successful in raising such funds. Based on the conditions described within, management has concluded and the audit opinion and notes that accompany our financial statements for the year ended June 30, 2022, disclose that substantial doubt exists as to our ability to continue in business. The financial statements included in this Quarterly Report on Form 10-Q have been prepared under the assumption that we will continue as a going concern. We are a development stage issuer and we have incurred losses since our inception. We may not have sufficient cash to fund normal operations and meet debt obligations for the next twelve months without deferring payment on certain current liabilities and raising additional funds. Recent worldwide events have created general global economic uncertainty as well as uncertainty in capital markets, supply chain disruptions, increased interest rates and inflation, and the potential for geographic recessions. During fiscal year 2022 and continuing into fiscal year 2023, these events continued to create uncertainty with respect to overall project funding and timelines. We believe that the going concern uncertainty cannot be alleviated with confidence until the Company has entered into a business climate where funding of its planned ongoing operating activities is secured. Therefore, these factors raise substantial doubt as to our ability to continue as a going concern. We have no exposure to any asset-backed commercial paper. Other than cash held by our subsidiaries for their immediate operating needs in Colorado and Nebraska, all of our cash reserves are on deposit with major U.S. and Canadian chartered banks. We do not believe that the credit, liquidity, or market risks with respect thereto have increased as a result of the current market conditions. However, in order to achieve greater security for the preservation of our capital, we have, of necessity, been required to accept lower rates of interest, which has also lowered our potential interest income. Operating Activities During the nine months ended March 31, 2023, the Company’s operating activities consumed $11.5 million of cash (2022: $4.4 million). The cash used in operating activities for the nine months ended March 31, 2023, reflects the Company’s funding of losses of $35.7 million, partially offset by net fair value losses related to NioCorp Assumed Warrants and the Earnout Shares liability, share-based compensation and other non-cash transactions. Overall, operational outflows during the nine months ended March 31, 2023, increased from the corresponding period of 2022 due to cash expenses related to the Transactions and an increase in exploration-related spending at the Elk Creek Project. Going forward, the Company’s working capital requirements are expected to increase substantially in connection with the development of the Elk Creek Project. Financing Activities Financing inflows were $13.6 million during the nine months ended March 31, 2023 (2022: $0.7 million), with 2023 inflows reflecting the receipt of $14.9 million from the Yorkville Convertible Debt Financing (net of costs), and $1.13 million of additional borrowings under the related party loan with our President, Chief Executive Officer (“CEO”) and Executive Chairman, Mark Smith, partially offset by the repayment of the outstanding balance at maturity of the Lind III Convertible Security, and a partial repayment of the related party loan with our CEO. Cash Flow Considerations The Company has historically relied upon debt and equity financings to finance its activities. Subject to the restrictions set forth in the Yorkville Convertible Debt Financing Agreement, the Company may pursue additional debt and/or equity financing in the medium term; however, there can be no assurance the Company will be able to obtain any required financing in the future on acceptable terms. The Company has limited financial resources compared to its proposed expenditures, no source of operating income, and no assurance that additional funding will be available to it for current or future projects, although the Company has been successful in the past in financing its activities through the sale of equity securities. The ability of the Company to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions, and its success in developing the Elk Creek Project. Any quoted market for the Common Shares 37 may be subject to market trends generally, notwithstanding any potential success of the Company in creating revenue, cash flows, or earnings, and any depression of the trading price of the Common Shares could impact its ability to obtain equity financing on acceptable terms. Historically, the Company has used net proceeds from issuances of Common Shares to provide sufficient funds to meet its near-term exploration and development plans and other contractual obligations when due. However, development and construction of the Elk Creek Project will require substantial additional capital resources. This includes near-term funding and, ultimately, funding for Elk Creek Project construction and other costs. See “ Liquidity and Capital Resources ” above for the Company’s discussion of arrangements related to possible future financings. Critical Accounting Estimates Except as discussed below, there have been no material changes in our critical accounting estimates discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Critical Accounting Estimates and Recent Accounting Pronouncements” as of June 30, 2022, in our Annual Report on Form 10-K/A for the fiscal year ended June 30, 2022. Warrants We apply relevant accounting guidance for warrants to purchase our stock based on the nature of the relationship with the counterparty. For warrants issued to investors or lenders in exchange for cash or other financial assets, we follow guidance issued within ASC 480, Distinguishing Liabilities from Equity, and ASC Topic 815, Derivatives and Hedging, (“ASC 815”) to assist in the determination of whether the warrants should be classified as liabilities or equity. The fair value of warrants is estimated using Black Scholes modeling or Monte Carlo modeling, depending on the settlement features embedded in the warrant. Inputs under both models include inputs such as NioCorp’s Common Share price, the risk-free interest rate, the expected term, the volatility, and the dividend rate. Warrants that are determined to require liability classifications are measured at fair value upon issuance and are subsequently remeasured to their then fair value at each subsequent reporting period with changes in fair value recorded in current earnings. Warrants that are determined to require equity classifications measured at fair value upon issuance and are not subsequently remeasured unless they are required to be reclassified. Earnout Shares The Earnout Shares are classified as a liability due to failure to meet the equity classification criteria under ASC 815-40. The fair value of the Earnout Shares on the date of issuance and on each measurement date is estimated using a Monte Carlo simulation methodology, which includes inputs such as NioCorp’s Common Share price, the risk-free interest rate, the expected term, the implied volatility underlying the Company’s Public Warrants, the dividend rate, the conversion price, and the number of Earnout Shares outstanding. Assumptions used in the model are subjective and require significant judgment. Certain U.S. Federal Income Tax Considerations If NioCorp (or a subsidiary) is a “passive foreign investment company” (“PFIC”) for any taxable year during the holding period of a U.S. shareholder (as determined under applicable U.S. federal income tax law), then certain significant adverse tax consequences could apply to such U.S. shareholder, including requirements to treat any gain realized upon a disposition of Common Shares (or Warrants) as ordinary income, to include certain “excess distributions” on Common Shares in income, and to pay an interest charge on a portion of any such gain or distribution. NioCorp believes that it was classified as a PFIC during the taxable years ended June 30, 2022 and 2021, and, based on the current composition of its income and assets, as well as current business plans and financial expectations, that it may meet the PFIC qualification tests for its current taxable year or in future taxable years. No opinion of legal counsel or ruling from the Internal Revenue Service (the “IRS”) concerning the PFIC status of NioCorp or any subsidiary has been obtained or is currently planned to be requested. The determination of whether any corporation was, or will be, a PFIC for a taxable year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether any corporation will be a PFIC for any taxable year depends on the assets and income of such corporation over the course of each such taxable year and, as a result, cannot be predicted with certainty as of the date of this Quarterly Report on Form 10-Q. In addition, even if NioCorp concluded that it or any subsidiary did not qualify as a PFIC, the IRS could challenge any determination made by NioCorp (or any subsidiary) concerning its PFIC status in any taxable year, and a court could sustain such challenge. Accordingly, there can be no assurance that NioCorp or any subsidiary will not be treated as a PFIC for any taxable year. Each holder of Common Shares or other NioCorp instruments should consult its own tax advisors regarding the PFIC status of NioCorp and each subsidiary thereof and the resulting tax consequences to the shareholder. See the “Risk Factors” section of this Quarterly Report on Form 10-Q. 38 Other The Company has one class of shares, being Common Shares. A summary of outstanding shares, Options, Warrants, and convertible debt option as of May 30, 2023, is set out below, on a fully-diluted basis. Common Shares Outstanding (fully diluted) Common Shares 30,396,120 Vested Shares 1 4,565,808 Options 2 1,541,500 Warrants 3 19,257,515 Convertible Debt 4 3,483,600 1 Each exchangeable into one Common Share at any time, and from time to time, until the tenth anniversary of the Closing Date. 2 Each exercisable into one Common Share. 3 Includes 15,666,626 NioCorp Assumed Warrants that are each exercisable into 1.11829212 Common Shares, and 1,737,651 Warrants that are each exercisable into one Common Share. 4 Represents Common Shares issuable on conversion of an aggregate outstanding principal amount of $16,147 of convertible debt as of May 30, 2023, assuming a market price per Common Share of $5.19 on that date.