The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements for Uranium Resources, Inc. (the Company, we, us, or URI) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying statements should be read in conjunction with the audited financial statements included in Uranium Resources, Inc.s 2016 Annual Report on Form 10-K. In the opinion of management, all adjustments (which are of a normal, recurring nature) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for any other period including the full year ending December 31, 2017.
Recently Issued Accounting Pronouncements
In January 2017, the FASB issued Accounting Standards Update No. 2017-01 (ASU 2017-01), Business Combinations: Clarifying the Definition of a Business, which clarifies the definition of a business when determining whether a company has acquired or sold a business. The ASU applies to all entities and is effective for annual periods ending after December 15, 2017, and interim periods thereafter, with early adoption permitted under certain circumstances. The Company does not believe that the adoption of this guidance will have a material impact on our financial statements.
In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows: Restricted Cash, which will require that a statement of cash flows explain the change during period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The ASU applies to all entities and is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years beginning after December 15, 2019, with early adoption permitted. As a result, upon adoption, the Company will include the restricted cash amount in its beginning-of-period and end-of-period reconciliations of cash on its statement of cash flows. For the three months ended March 31, 2017, this would have resulted in the Company including an additional $4.0 million in its beginning-of-period cash balance and an additional $3.9 million in its end-of-period cash balance. The Company also would not have recorded a release of restricted cash of $23,000 in the investing section of its statement of cash flows.
2. LIQUIDITY
At March 31, 2017, the Company had working capital of $11.4 million, which is expected to provide it with the necessary liquidity through March 31, 2018. At December 31, 2016, the Company had a working capital deficit of $4.3 million. The increase in working capital of $15.7 million for the three months ended March 31, 2017 was primarily due to the following:
the completion of two equity offerings in January 2017 and February 2017 for net proceeds of $8.9 million and $4.5 million, respectively;
the completion of the sale of the Companys wholly-owned subsidiary Hydro Resources Inc. (HRI) to Laramide Resources Ltd. (Laramide) on January 5, 2017. Upon completion, the Company received $2.2 million in cash, a $5.0 million promissory note, of which $1.5 million is due within 12 months and 2,218,333 shares of Laramide Resources Ltd.s common stock which had a fair value of $1.0 million at March 31, 2017. Details regarding this transaction are discussed in Note 3, below; and
the repayment of the remaining $5.5 million outstanding under the RCF Loan (defined in Note 7, below.)
Subsequent to March 31, 2017, the Company entered into a Controlled Equity Offering Sales Agreement on April 14, 2017 pursuant to which the Company may offer and sell from time to time shares of its common stock having an aggregate offering price of up to $30.0 million through Cantor Fitzgerald & Co. acting as sales agent (the ATM Offering.) The Company believes that the ATM Offering, along with its existing working capital balance, will provide it with the necessary liquidity to fund operations in 2018 and beyond. The Company will also continue to explore additional opportunities to raise capital, further monetize its non-core assets and identify ways to reduce its cash expenditures.
7
URANIUM RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
While the Company has been successful in the past raising funds through equity and debt financings as well as through the sale of non-core assets, no assurance can be given that additional financing will be available to it in amounts sufficient to meet the Companys needs or on terms acceptable to the Company. In the event that funds are not available, the Company may be required to materially change its business plans.
3. DISPOSAL OF HYDRO RESOURCES, INC.
On January 5, 2017, Laramide and the Company closed the sale of the Companys wholly-owned subsidiary HRI, which holds the Churchrock and Crownpoint projects, pursuant to a Share Purchase Agreement (the Laramide SPA). Under the terms of the Laramide SPA, as amended on December 5, 2016, the Company received the following consideration:
$2.5 million in cash, of which $250,000 was paid in advance on October 21, 2016;
2,218,333 each of shares of Laramide common stock and Laramide common stock purchase warrants. Each common stock purchase warrant entitles the Company to purchase one share of common stock of Laramide at a price of CDN$0.45 for a period of 60 months from the date of closing;
a $5.0 million promissory note, secured by a mortgage over the projects. The note has a three-year term and carries an initial interest rate of 5% which then increases to 10% upon Laramides decision regarding commercial production at the Churchrock project. Principal payments of approximately $1.5 million are due and payable on January 5 in each of 2018 and 2019, with the balance of $2.0 million due and payable on January 5, 2020. Interest is payable on a quarterly basis, provided however that no interest will be payable until March 31, 2018. Laramide will have the right to satisfy up to half of each of these principal payments by delivering shares of its common stock to the Company, which shares will be valued by reference to the volume weighted average price (VWAP) for Laramides common stock for the 20 trading days before the respective anniversary of January 5, on which each payment is due;
a retained 4.0% Net Smelter Returns Royalty (NSR Royalty) on the Churchrock project, which royalty may be repurchased by Laramide by January 5, 2018 for $4.95 million; and
an option to purchase Laramides La Sal project for $3.0 million and an option to purchase its La Jara Mesa project for $5.0 million, both of which expire on January 5, 2018. Any such exercise by the Company will first result in a reduction of the principal amount due under the promissory note with any remaining portions of the purchase price to be paid in cash by the Company.
The divestiture of HRI was accounted for as an asset disposal and the non-cash consideration received from Laramide was recorded at fair value. The fair value of the shares of Laramide common stock received was determined using the closing share price of Laramides stock on January 5, 2017. The Company did not record a value for the warrants received as these were considered contingent consideration until the receipt of approval by Laramides stockholders which was obtained at a meeting held on April 27, 2017. Upon stockholder approval, the Company recorded additional gain of $0.5 million, which was the fair value of the warrants using the black-scholes method on that date. The fair value of the notes receivable was determined using the present value of the future cash receipts discounted at a market rate of 9.5%. The Company did not record a separate fair value for the options as the exercise of the options would reduce the amount outstanding under the notes receivable. Due to the high degree of uncertainties surrounding future mine development and minerals prices, as well as limited marketability, the Company determined the fair value of the NSR Royalty to be nil. The following fair value amounts were recorded as the purchase consideration:
|
|
|
(thousands of dollars)
|
|
Fair Value
|
Cash, less transaction costs
|
|
$ 1,950
|
Laramide common stock
|
|
569
|
Notes receivable
|
|
3,501
|
Total consideration received
|
|
$ 6,020
|
The fair value of the shares of Laramides common stock received were valued using Level 1 inputs of the fair value hierarchy and the fair value of the notes receivable was valued using Level 2 inputs, as defined in Note 4 below.
8
URANIUM RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The Company recorded the following gain on disposal of uranium properties within its Condensed Consolidated Statement of Operations:
|
|
|
(thousands of dollars)
|
|
|
Total consideration received
|
|
$ 6,020
|
Carrying value of Churchrock project
|
|
(2,123)
|
Carrying value of other plant and equipment
|
|
(31)
|
Accounts payable
|
|
1
|
Asset retirement obligation
|
|
105
|
Royalty payable on Churchrock project
|
|
450
|
Gain on disposal of HRI
|
|
$ 4,422
|
4. FINANCIAL INSTRUMENTS
Applicable accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and establishes a fair-value hierarchy that prioritizes the inputs used to measure fair value using the following definitions (from highest to lowest priority):
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that are observable at the measurement date.
Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 includes unobservable inputs that reflect managements assumptions about what factors market participants would use in pricing the asset or liability. These inputs are developed based on the best information available, including internal data.
The Company believes that the fair values of our assets and liabilities approximate their reported carrying amounts. The following table presents information about assets that were recorded at fair value on a recurring and non-recurring basis as of March 31, 2017 and December 31, 2016 and indicate the fair value hierarchy:
|
|
|
|
|
|
|
|
March 31, 2017
|
(in thousands)
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Current Assets
|
|
|
|
|
|
Marketable securities
|
|
$ 999
|
$ -
|
$ -
|
$ 999
|
Notes receivable current
|
|
-
|
1,500
|
-
|
1,500
|
Total current assets recorded at fair value
|
|
$ 999
|
$ 1,500
|
$ -
|
$ 2,499
|
Non-Current Assets
|
|
|
|
|
|
Restricted cash
|
|
3,941
|
-
|
-
|
3,941
|
Notes receivable - non-current
|
|
-
|
2,176
|
-
|
2,176
|
Total non-current assets recorded at fair value
|
|
$ 3,941
|
$ 2,176
|
$ -
|
$ 6,117
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Non-Current Assets
|
|
|
|
|
|
Restricted cash
|
|
$ 3,964
|
$ -
|
$ -
|
$ 3,964
|
Total non-current assets recorded at fair value
|
|
$ 3,964
|
$ -
|
$ -
|
$ 3,964
|
9
URANIUM RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Assets that are measured on a recurring basis include the Companys marketable securities and restricted cash. The Companys notes receivable current and non-current were measured at fair value upon receipt, which approximates fair value as of March 31, 2017.
5. PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Book Value of Property, Plant and Equipment at March 31, 2017
|
(thousands of dollars)
|
|
Turkey
|
|
Texas
|
|
New Mexico
|
|
Corporate
|
|
Total
|
Uranium plant
|
|
$ -
|
|
$ 8,455
|
|
$ -
|
|
$ -
|
|
$ 8,455
|
Mineral rights and properties
|
|
17,968
|
|
-
|
|
19,102
|
|
-
|
|
37,070
|
Other property, plant and equipment
|
21
|
|
1,176
|
|
-
|
|
127
|
|
1,324
|
Total
|
|
$ 17,989
|
|
$ 9,631
|
|
$ 19,102
|
|
$ 127
|
|
$ 46,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Book Value of Property, Plant and Equipment at December 31, 2016
|
(thousands of dollars)
|
|
Turkey
|
|
Texas
|
|
New Mexico
|
|
Corporate
|
|
Total
|
Uranium plant
|
|
$ -
|
|
$ 8,459
|
|
$ -
|
|
$ -
|
|
$ 8,459
|
Mineral rights and properties
|
|
17,968
|
|
-
|
|
19,102
|
|
-
|
|
37,070
|
Other property, plant and equipment
|
22
|
|
1,224
|
|
-
|
|
141
|
|
1,387
|
Total
|
|
$ 17,990
|
|
$ 9,683
|
|
$ 19,102
|
|
$ 141
|
|
$ 46,916
|
6. MINERAL PROPERTY EXPENDITURES
Mineral property expenditures by geographical location for the three months ended March 31, 2017 and 2016
are as follows:
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
|
2017
|
|
2016
|
|
|
(thousands of dollars)
|
Temrezli project, Turkey
|
|
$ 98
|
|
$ 241
|
Total Turkey projects
|
|
98
|
|
241
|
|
|
|
|
|
Kingsville Dome project, Texas
|
|
262
|
|
234
|
Rosita project, Texas
|
|
112
|
|
68
|
Vasquez project, Texas
|
|
169
|
|
158
|
Other projects, Texas
|
|
1
|
|
22
|
Total Texas projects
|
|
544
|
|
482
|
|
|
|
|
|
Cebolleta project, New Mexico
|
|
-
|
|
1
|
Juan Tafoya project, New Mexico
|
|
6
|
|
7
|
Total New Mexico projects
|
|
6
|
|
8
|
|
|
|
|
|
Columbus Basin project, Nevada
|
|
117
|
|
-
|
Other projects, Nevada
|
|
4
|
|
-
|
Total Nevada projects
|
|
121
|
|
-
|
|
|
|
|
|
Total expense for the period
|
|
$ 769
|
|
$ 731
|
On March 24, 2017, the Companys wholly owned subsidiary Lithium Holdings Nevada LLC entered into an option agreement to purchase a block of unpatented placer mining claims covering an area of approximately 3,000 acres within the Columbus Salt Marsh area of Esmeralda County, Nevada. The claims adjoin a portion of the Companys current property holdings at its Columbus Basin project, expanding the project area within the basin to approximately 14,000 acres. The Company has the right to conduct exploration activities on the claims during the one-year option period. Under the option agreement, the Company may acquire the mineral property claims on or before March 24, 2018 in exchange for 200,000 shares of its common stock and a 1% NSR Royalty on the claims. The Company paid $75,000 for this option, which has been included as exploration expense for the Columbus Basin project.
10
URANIUM RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
7. CONVERTIBLE LOAN
On November 13, 2013, the Company entered into a loan agreement (the RCF Loan) with Resource Capital Fund V L.P. (RCF), whereby RCF agreed, subject to the terms and conditions set forth in the RCF Loan, to provide a secured convertible loan facility of up to $15.0 million to the Company, which was subsequently amended on April 29, 2014 to reduce the amount available thereunder from $15.0 million to $8.0 million. The Company exchanged $2.5 million in principal for its common shares in December 2016 and repaid the remaining $5.5 million outstanding under the RCF Loan on February 9, 2017. No further obligations remain under the RCF Loan following the repayment. The Company and RCF remain party to the Stockholders Agreement dated March 1, 2012, pursuant to which RCF has the right to participate in equity offerings by the Company, in order to maintain its pro rata ownership of the Companys common stock. Based on the Schedule 13D/A filed by RCF on March 3, 2017, RCF and its affiliates beneficially owned approximately 2.9% of the Companys outstanding common stock as of April 13, 2017.
As a result of the repayment, the Company recorded a loss of $39,000 on the extinguishment of debt which represented the difference between the principal amount of $5.5 million and the carrying value of the RCF Loan on the date of repayment.
8. ASSET RETIREMENT OBLIGATIONS
The following table summarizes the changes in the reserve for future restoration and reclamation costs on the balance sheet:
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
2017
|
|
2016
|
(thousands of dollars)
|
|
|
|
|
Balance, beginning of period
|
|
$ 4,894
|
|
$ 4,468
|
Liabilities settled
|
|
(14)
|
|
(54)
|
Liabilities disposed
|
|
(105)
|
|
|
Accretion expense
|
|
132
|
|
480
|
Balance, end of period
|
|
4,907
|
|
4,894
|
Less: Current portion
|
|
(121)
|
|
(121)
|
Less: Liabilities held for sale
|
|
-
|
|
(105)
|
Non-current portion
|
|
$ 4,786
|
|
$ 4,668
|
The Company is currently performing surface reclamation activities at its Rosita project located in Duval County, Texas. The Companys current liability of $0.1 million consists of the estimated costs associated with current surface reclamation activities through March 2018 at the Companys Rosita project.
9. COMMON STOCK
Common Stock Issued, Net of Issuance Costs
Confidentially Marketed Public Offering
On January 19, 2017, the Company completed a registered public offering for net proceeds of $8.9 million. The Company sold 1,399,140 shares of common stock at a price of $2.01 per share and 3,426,731 pre-funded warrants at a price of $2.00 per warrant. The warrants have an exercise price of $0.01. All of the pre-funded warrants have been exercised.
Registered Direct Offering
On February 16, 2017, the Company completed a registered direct offering for net proceeds of $4.5 million with Aspire Capital Fund LLC (Aspire Capital) whereby Aspire Capital purchased 2,100,000 shares of common stock at a price of $1.58 and 748,101 pre-funded common stock purchase warrants at a price of $1.57. The warrants have an exercise price of $0.01 per share and a term of three years. All of the pre-funded warrants have been exercised.
11
URANIUM RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Common Stock Issued for Investor Relations Fees
On February 28, 2017, the Company issued 150,000 shares with a fair market value of $0.3 million or $2.00 per share as partial consideration for investor relations services that will be provided to the Company over the next 12 months.
10. STOCK-BASED COMPENSATION
Stock-based compensation awards consist of stock options, restricted stock units (RSUs) and restricted stock awards (RSAs) issued under the Companys equity incentive plans which include: the 2013 Omnibus Incentive Plan (the 2013 Plan); the 2007 Restricted Stock Plan (the 2007 Plan); the Amended and Restated 2004 Directors Stock Option and Restricted Stock Plan (the 2004 Directors Plan); and the 2004 Stock Incentive Plan (the 2004 Plan). Upon approval of the 2013 Plan by the Companys stockholders on June 4, 2013, the Companys authority to grant new awards under all plans other than the 2013 Plan was terminated. As of March 31, 2017, 54,460 shares were available for future issuances under the 2013 Plan. For the three months ending March 31, 2017 and 2016, the Company recorded stock-based compensation expense of $22,000 and $0.2 million, respectively, which has been included in general and administrative expense.
In addition to the plans above, upon closing of the Companys acquisition of the Anatolia Energy Ltd in November 2015, the Company issued 374,749 replacement options and performance shares to the option holders and performance shareholders of Anatolia Energy Ltd. The number of replacement options and performance shares was based upon the Black-Scholes value with the exercise prices of the replacement options and performance shares determined using the exchange rate of 0.00548. The options and performance shares were issued with the same terms and conditions as were applicable prior to the acquisition of Anatolia Energy Ltd.
Stock Options
The following table summarizes stock options outstanding and changes for the three-month periods ending March 31, 2017 and 2016, which excludes non-compensatory stock options that are listed on the ASX, relating to 266,742 shares in each period:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
March 31,
|
|
|
2017
|
|
2016
|
|
|
Number of Stock Options
|
|
Weighted Average Exercise Price
|
|
Number of Stock Options
|
|
Weighted Average Exercise Price
|
Stock options outstanding at beginning of period
|
|
110,828
|
|
$ 18.24
|
|
326,424
|
|
$ 24.90
|
Expired
|
|
(5,583)
|
|
11.04
|
|
-
|
|
-
|
Stock options outstanding at end of period
|
|
105,245
|
|
$ 18.62
|
|
326,424
|
|
$ 24.90
|
Stock options exercisable at end of period
|
|
105,139
|
|
$ 18.60
|
|
326,111
|
|
$ 24.89
|
The following table summarizes stock options outstanding and exercisable by stock option plan at March 31, 2017, which excludes non-compensatory stock options that are listed on the ASX, relating to 266,742 shares:
|
|
|
|
|
|
|
|
|
|
|
Outstanding Stock Options
|
|
Exercisable Stock Options
|
Stock Option Plan
|
|
Number of Outstanding Stock Options
|
|
Weighted Average Exercise Price
|
|
Number of
Exercisable
Stock Options
|
|
Weighted Average Exercise Price
|
2004 Plan
|
|
4,792
|
|
$ 35.14
|
|
4,792
|
|
$ 35.14
|
2004 Directors Plan
|
|
1,390
|
|
629.52
|
|
1,390
|
|
629.52
|
2013 Plan
|
|
417
|
|
35.88
|
|
312
|
|
35.88
|
Replacement Stock Options
|
|
98,646
|
|
9.13
|
|
98,645
|
|
9.23
|
|
|
105,245
|
|
$ 18.62
|
|
105,139
|
|
$ 18.60
|
12
URANIUM RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Restricted Stock Units
Time-based and performance-based RSUs are valued using the closing share price of the Companys common stock on the date of grant. The final number of shares issued under performance-based RSUs is generally based on the Companys prior year performance as determined by the Compensation Committee of the Board of Directors at each vesting date, and the valuation of such awards assumes full satisfaction of all performance criteria.
The following table summarizes RSU activity for the three-month periods ended March 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
March 31,
|
|
|
2017
|
|
2016
|
|
|
Number of RSUs
|
|
Weighted-Average Grant Date Fair Value
|
|
Number of RSUs
|
|
Weighted-Average Grant Date Fair Value
|
Unvested RSUs at beginning of period
|
|
8,649
|
|
$ 43.71
|
|
32,699
|
|
$ 34.25
|
Forfeited
|
|
-
|
|
-
|
|
(3,332)
|
|
32.21
|
Vested
|
|
(2,513)
|
|
31.32
|
|
(5,291)
|
|
32.71
|
Unvested RSUs at end of period
|
|
6,136
|
|
$ 48.78
|
|
24,076
|
|
$ 34.87
|
11. EARNINGS PER SHARE
Basic and diluted loss per common share have been calculated based on the weighted-average shares outstanding during the period. Potentially dilutive shares of 561,456 were excluded from the calculation of earnings per share because the effect on the basic income per share would be anti-dilutive for the quarter ended March 31, 2017.
12. COMMITMENTS AND CONTINGENCIES
The Companys uranium recovery operations are subject to federal and state regulations for the protection of the environment, including water quality. Future closure and reclamation costs are provided for as each pound of uranium is produced on a unit-of-production basis. The Company reviews its reclamation obligations each year and determines the appropriate unit charge. The Company also evaluates the status of current environmental laws and their potential impact on their accrual for costs. The Company believes its operations are materially compliant with current environmental regulations.
13. GEOGRAPHIC AND SEGMENT INFORMATION
The Company has one reportable operating segment, consisting of the exploration and development of lithium and uranium projects. These activities are focused principally in the United States and the Republic of Turkey. We reported no revenues during the three-month periods ended March 31, 2017 and 2016. Geographic location of property, plant and equipment, including mineral rights, and mineral property expenses, is provided in Notes 5 and 6, above.
14. SUBSEQUENT EVENT
On April 14, 2017, the Company entered into a Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co. (Cantor) acting as sales agent. Under the ATM Offering, the Company may from time to time sell shares of its common stock having an aggregate offering amount up to $30.0 million in at-the-market offerings, which shares are registered under a registration statement on Form S-3, which was declared effective on March 9, 2017. The Company pays Cantor a commission equal to 2.5% of the gross proceeds from the sale of any shares pursuant to the ATM Offering. As of May 11, 2017, the Company had sold 20,413 shares of common stock for net proceeds of $37,152 million under the ATM Offering. As a result, the Company had approximately $30.0 million remaining available for future sales under the ATM Offering.
13