Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following management’s discussion and analysis of
the Company’s
financial condition and results of operations
(
the
“MD&A
”
)
contain forward-looking statements that involve risks, uncertainties and assumptions including, among others, statements regarding our capital needs, business plans and expectations. In evaluating these statements,
you should consider
various factors
,
including the risks, uncertainties and assumptions set forth in
reports and other documents
we have
filed
with or furnished to the SEC
and
, including, without limitation, this
Form 10-Q
Quarterly Report
for the
nine months
ended
April 30
, 2019
,
and
our
Form 10-K
Annual Report
for the fiscal year ended July 31, 201
8
,
including the consolidated financial statements and relate
d
notes contained
t
herein. These factors, or any one of them, may cause
our
actual results
or actions in the future
to differ materially from any forward-looking statement ma
de in this document. Refer to
“Cautionary Note Regarding
Forward-
l
ooking Statements”
as disclosed in our Form 10-K Annual Report for the fiscal year ended July 31, 201
8
,
and
Item 1A
,
Risk Factors
under Part II - Other Information
of this Quarterly Report
.
Introduction
This MD&A is focused on material changes in our financial condition from July 31, 2018, our most recently completed year end, to April 30, 2019, and our results of operations for the three and nine months ended April 30, 2019, and should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations as contained in our Form 10-K Annual Report for Fiscal 2018.
Business
We are pre-dominantly engaged in uranium mining and related activities, including exploration, pre-extraction, extraction and processing, on uranium projects located in the United States and Paraguay, as more fully described in our Form 10-K Annual Report for Fiscal 2018.
We utilize in-situ recovery (“ISR”) mining where possible which we believe, when compared to conventional open pit or underground mining, requires lower capital and operating expenditures with a shorter lead time to extraction and a reduced impact on the environment. We have one uranium mine located in the State of Texas, the Palangana Mine, which utilizes ISR mining and commenced extraction of uranium concentrates (“U3O8”), or yellowcake, in November 2010. We have one uranium processing facility located in the State of Texas, the Hobson Processing Facility, which processes material from the Palangana Mine into drums of U3O8, our only sales product and source of revenue, for shipping to a third-party storage and sales facility. At April 30, 2019, we had no uranium supply or off-take agreements in place.
Our fully-licensed and 100%-owned Hobson Processing Facility forms the basis for our regional operating strategy in the State of Texas, specifically the South Texas Uranium Belt where we utilize ISR mining. We utilize a “hub-and-spoke” strategy whereby the Hobson Processing Facility acts as the central processing site (the “hub”) for the Palangana Mine and future satellite uranium mining activities, such as our Burke Hollow and Goliad Projects, located within the South Texas Uranium Belt (the “spokes”). The Hobson Processing Facility has a physical capacity to process uranium-loaded resins up to a total of two million pounds of U3O8 annually and is licensed to process up to one million pounds of U3O8 annually.
We acquired the fully permitted Reno Creek Project in August 2017 and expanded our operations to the strategic Powder River Basin in Wyoming.
We also hold certain mineral rights in various stages in the States of Arizona, Colorado, New Mexico, Texas and Wyoming, in Canada and in the Republic of Paraguay, many of which are located in historically successful mining areas and have been the subject of past exploration and pre-extraction activities by other mining companies. We do not expect, however, to utilize ISR mining for all of the uranium mineral rights in which case we would expect to rely on conventional open pit and/or underground mining techniques.
Since we completed the acquisition of the Alto Paraná Titanium Project located in Paraguay in July 2017, we are also involved in titanium mining and related activities, including exploration, development, extraction and processing of titanium minerals such as ilmenite.
Our operating and strategic framework is based on expanding our uranium and titanium extraction activities, which includes advancing certain projects with established mineralized materials towards extraction, and establishing additional mineralized materials on our existing uranium and titanium projects or through the acquisition of additional projects.
During the nine months ended April 30, 2019, we continued our strategic plan for reduced operations implemented in September 2013 to align our operations to a weak uranium market in a challenging post-Fukushima environment. As part of this strategy, we operated the Palangana Mine at a reduced pace to capture residual uranium only, while maintaining the Palangana Mine and Hobson Facility in a state of operational readiness. This strategy also included the deferral of major exploration and pre-extraction expenditures and maintaining our core exploration projects in good standing in anticipation of a recovery in uranium prices.
Mineral Rights and Properties
The following is a summary of significant activities by project for the nine months ended April 30, 2019:
Burke Hollow Project
During the nine months ended April 30, 2019, we received the final Radioactive Material License from the TCEQ after receipt of the Mine Area Permit and Aquifer Exemption in Fiscal 2017 and the two Class I disposal well permits in Fiscal 2016, completing the last permit required for uranium extraction.
During the three months ended April 30, 2019, we started a drilling campaign and drilled 28 exploration holes and five monitor wells totaling 15,180 feet at the Burke Hollow Project.
Yuty Project
During the nine months ended April 30, 2019, we continued detailed resource mapping and modeling of the roll front systems that comprise the deposit at the Yuty Project, which will support a Preliminary Economic Assessment in accordance with the provisions of National Instrument 43-101 for the Yuty Project.
Equity-Accounted Investment
During the nine months ended April 30, 2019, we completed a Royalty Purchase Agreement with URC in connection with the purchase by URC from our Company of a one percent (1%) net smelter return royalty for uranium only on each of our Slick Rock, Workman Creek and Anderson projects.
On December 4, 2018, we closed the Royalty Purchase Agreement and received 12,000,000 Consideration Shares of URC with a fair value of $9,077,842. As a result, we own 14,000,000 shares or a 33.7 % interest in URC as at April 30, 2019.
Results of Operations
For the three months ended April 30, 2019 and 2018, we recorded net losses of $5,017,557 ($0.03 per share) and $4,146,646 ($0.03 per share), respectively. For the nine months ended April 30, 2019 and 2018, we recorded net losses of $10,818,657 ($0.06 per share) and $13,056,299 ($0.08 per share), respectively.
During the nine months ended April 30, 2019, we continued with our strategic plan for reduced operations implemented in September 2013 and continued reduced operations at the Palangana Mine to capture residual pounds of U3O8 only. As a result, no U3O8 extraction or processing costs were capitalized to inventories during the nine months ended April 30, 2019. At April 30, 2019, the total value of inventories was $211,662 (July 31, 2018: $211,662).
Costs and Expenses
For the three months ended April 30, 2019 and 2018, costs and expenses totaled $3,492,361 and $3,477,358, respectively, which were comprised of mineral property expenditures of $1,453,358 and $981,493, general and administrative expenses of $1,952,616 and $2,407,571, and depreciation, amortization and accretion of $86,387 and $88,294, respectively.
For the nine months ended April 30, 2019 and 2018, costs and expenses totaled $9,873,802 and $11,433,172, respectively, which were comprised of mineral property expenditures of $3,218,818 and $3,638,408, general and administrative expenses of $6,395,014 and $7,526,698, and depreciation, amortization and accretion of $259,970 and $268,066, respectively.
Mineral Property Expenditures
Mineral property expenditures were primarily comprised of costs relating to permitting, property maintenance, exploration and pre-extraction activities and other non-extraction related activities on our projects.
During the three months ended April 30, 2019 and 2018, mineral property expenditures totaled $1,453,358 and $981,493, respectively, of which $322,667 and $353,294 were directly related to maintaining operational readiness and permitting compliance for the Palangana Mine and Hobson Processing Facility, respectively. During the nine months ended April 30, 2019 and 2018, mineral property expenditures totaled $3,218,818 and $3,638,408, respectively, of which $924,886 and $992,142 were directly related to maintaining operational readiness and permitting compliance for the Palangana Mine and Hobson Processing Facility respectively.
The following table provides mineral property expenditures on our projects for the periods indicated:
|
|
Three Months Ended April 30,
|
|
|
Nine Months Ended April 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Mineral Property Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Palangana Mine
|
|
$
|
248,687
|
|
|
$
|
264,447
|
|
|
$
|
775,311
|
|
|
$
|
740,977
|
|
Goliad Project
|
|
|
34,071
|
|
|
|
28,658
|
|
|
|
71,949
|
|
|
|
71,373
|
|
Burke Hollow Project
|
|
|
605,025
|
|
|
|
152,307
|
|
|
|
880,039
|
|
|
|
570,099
|
|
Longhorn Project
|
|
|
10,157
|
|
|
|
5,760
|
|
|
|
35,691
|
|
|
|
11,832
|
|
Salvo Project
|
|
|
6,702
|
|
|
|
6,702
|
|
|
|
20,211
|
|
|
|
20,338
|
|
Anderson Project
|
|
|
15,097
|
|
|
|
15,211
|
|
|
|
52,367
|
|
|
|
45,241
|
|
Workman Creek Project
|
|
|
7,673
|
|
|
|
7,673
|
|
|
|
23,037
|
|
|
|
23,627
|
|
Slick Rock Project
|
|
|
12,206
|
|
|
|
12,206
|
|
|
|
41,637
|
|
|
|
40,012
|
|
Reno Creek Project
|
|
|
178,722
|
|
|
|
158,546
|
|
|
|
474,015
|
|
|
|
1,126,918
|
|
Yuty Project
|
|
|
8,297
|
|
|
|
114,481
|
|
|
|
94,299
|
|
|
|
339,677
|
|
Oviedo Project
|
|
|
105,724
|
|
|
|
17,982
|
|
|
|
167,207
|
|
|
|
99,224
|
|
Alto Paraná Titanium Project
|
|
|
78,325
|
|
|
|
33,312
|
|
|
|
138,588
|
|
|
|
147,744
|
|
Other Mineral Property Expenditures
|
|
|
142,672
|
|
|
|
164,208
|
|
|
|
444,467
|
|
|
|
401,346
|
|
|
|
$
|
1,453,358
|
|
|
$
|
981,493
|
|
|
$
|
3,218,818
|
|
|
$
|
3,638,408
|
|
General and Administrative
During the three months ended April 30, 2019, general and administrative expenses totaled $1,952,616, which decreased by $454,955 compared to $2,407,571 for the three months ended April 30, 2018. During the nine months ended April 30, 2019, general and administrative expenses totaled $6,395,014, which decreased by $1,131,684 compared to $7,526,698 for the nine months ended April 30, 2018.
The following summary provides a discussion of the major expense categories, including analyses of the factors that caused significant variances compared to the same periods last year:
|
●
|
for the three months ended April 30, 2019, salaries, management and consulting fees totaled $468,190, which was consistent with $484,864 for the three months ended April 30, 2018. For the nine months ended April 30, 2019, salaries, management and consulting fees totaled $1,394,655, which decreased by $445,418 compared to $1,840,073 for the nine months ended April 30, 2018. The decrease primarily resulted from severance payments totaling $466,117 to certain employees during the nine months ended April 30, 2018.
|
|
●
|
for the three months ended April 30, 2019 and 2018, office, insurance, filing and listing fees, investor relations, corporate development and travel expenses totaled $804,920, which decreased by $179,300 compared to $984,220 for the three months ended April 30, 2018. For the nine months ended April 30, 2019, office, insurance, filing and listing fees, investor relations, corporate development and travel expenses totaled $2,378,515, which decreased by $198,420 compared to $2,576,935 for the nine months ended April 30, 2018. The decreases were primarily a result of a reduction in consulting, investor relations and corporate development expenses;
|
|
●
|
for the three months ended April 30, 2019, professional fees totaled $124,774, which decreased by $295,128 compared to $419,902 for the three months ended April 30, 2018. For the nine months ended April 30, 2019, professional fees totaled $478,246, which decreased by $498,085, compared to $976,331 for the nine months ended April 30, 2018. The decreases in professional fees were primarily the result of the dismissal of legal claims. Professional fees are primarily comprised of legal services related to certain transactional activities, regulatory compliance and ongoing legal claims, in addition to audit and tax services; and
|
|
●
|
for the three and nine months ended April 30, 2019, stock-based compensation totaled $554,732 and $2,143,598, respectively, which was consistent with $518,585 and $2,133,359 for the three and nine months ended April 30, 2018. During the nine months ended April 30, 2019, we continued to utilize equity-based payments to compensate certain directors, officers, employees and consultants for services provided as part of our continuing efforts to reduce cash outlays. In July 2018 and August 2017, we granted approximately 2.0 million and 1.8 million stock options, respectively, to our directors, officers, employees and consultants. The fair value of these stock options has been amortized on an accelerated basis over the vesting periods of the options, resulting in a higher stock-based compensation expense being recognized at the beginning of the vesting periods than at the end of the vesting periods.
|
Depreciation, Amortization and Accretion
During the three and nine months ended April 30, 2019, depreciation, amortization and accretion totaled $86,387 and $259,970, respectively, which were consistent compared to $88,294 and $268,066 for the three and nine months ended April 30, 2018, respectively.
Depreciation, amortization and accretion include depreciation and amortization of long-term assets acquired in the normal course of operations and accretion of asset retirement obligations.
Other Income and
Expenses
Interest and Finance Costs
During the three months ended April 30, 2019, interest and finance costs totaled $815,258, which increased by $105,258 compared to $710,000 for the three months ended April 30, 2018. During the nine months ended April 30, 2019, interest and finance costs totaled $2,383,916, which increased by $177,331, compared to $2,206,585 for the nine months ended April 30, 2018. The increases primarily resulted from an increased amortization of debt discount.
For the three months ended April 30, 2019 and 2018, interest and finance costs were primarily comprised of interest paid on long-term debt of $395,555 and $395,555, amortization of debt discount of $384,551 and $277,502, and amortization of annual surety bond premiums of $29,450 and $29,394, respectively. For the nine months ended April 30, 2019 and 2018, interest and finance costs were primarily comprised of interest paid on long-term debt of $1,213,333 and $1,213,333, amortization of debt discount of $1,050,671 and $883,333, and amortization of annual surety bond premiums of $99,925 and $87,941, respectively.
Income
or L
oss
from
E
quity-
A
ccounted
I
nvestment
During the three months ended April 30, 2019, we recorded a loss of $872,851 from an equity-accounted investment compared to a loss of $10,134 for the three months ended April 30, 2018. During the nine months ended April 30, 2019, we recorded a loss of $590,819 from an equity-accounted investment, compared to an income of $91,099 for the nine months ended April 30, 2018. The increases in loss from equity-accounted investment primarily resulted from the Company’s increased ownership interest in URC from 11.3% at July 31, 2018 to 33.7% at April 30, 2019.
Gain
or Loss
on
Disposition of Assets
During the three months ended April 30, 2019, we recorded a gain of $7,598 on disposition of assets, compared to a loss of $1,222 for the three months ended April 30, 2018. During the nine months ended April 30, 2019, we recorded a gain of $1,591,362 on disposition of assets, compared to a loss of $1,696 for the nine months ended April 30, 2018. During the nine months ended April 30, 2019, we recorded a gain of $1,578,864 on disposition of assets from the sale of royalty interests to URC. Refer to Note 4: Mineral Rights and Properties to the condensed consolidated financial statements.
Summary of Quarterly Results
|
|
For the Quarters Ended
|
|
|
|
April 30, 2019
|
|
|
January 31, 2019
|
|
|
October 31, 2018
|
|
|
July 31, 2018
|
|
Net loss
|
|
$
|
(5,017,557
|
)
|
|
$
|
(2,349,674
|
)
|
|
$
|
(3,451,426
|
)
|
|
$
|
(4,770,335
|
)
|
Total comprehensive loss
|
|
|
(5,177,511
|
)
|
|
|
(2,311,442
|
)
|
|
|
(3,451,426
|
)
|
|
|
(4,652,380
|
)
|
Basic and diluted loss per share
|
|
|
(0.03
|
)
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
|
(0.03
|
)
|
Total assets
|
|
|
105,055,912
|
|
|
|
106,958,178
|
|
|
|
108,046,108
|
|
|
|
89,611,309
|
|
|
|
For the Quarters Ended
|
|
|
|
April 30, 2018
|
|
|
January 31, 2018
|
|
|
October 31, 2017
|
|
|
July 31, 2017
|
|
Net loss
|
|
$
|
(4,146,646
|
)
|
|
$
|
(4,353,813
|
)
|
|
$
|
(4,555,840
|
)
|
|
$
|
(5,587,130
|
)
|
Total comprehensive loss
|
|
|
(4,146,394
|
)
|
|
|
(4,354,060
|
)
|
|
|
(4,555,457
|
)
|
|
|
(5,587,076
|
)
|
Basic and diluted loss per share
|
|
|
(0.03
|
)
|
|
|
(0.03
|
)
|
|
|
(0.03
|
)
|
|
|
(0.04
|
)
|
Total assets
|
|
|
88,958,320
|
|
|
|
92,046,979
|
|
|
|
94,523,947
|
|
|
|
72,177,234
|
|
Liquidity and Capital Resources
|
|
April 30, 2019
|
|
|
July 31, 2018
|
|
Cash and cash equivalents
|
|
$
|
6,093,098
|
|
|
$
|
6,926,523
|
|
Short-term investments
|
|
|
14,858,126
|
|
|
|
-
|
|
Current assets
|
|
|
22,969,697
|
|
|
|
8,340,728
|
|
Current portion of long-term debt
|
|
|
-
|
|
|
|
10,000,000
|
|
Other current liabilities
|
|
|
1,493,746
|
|
|
|
2,315,570
|
|
Working capital (deficit)
|
|
|
21,475,951
|
|
|
|
(3,974,842
|
)
|
During the nine months ended April 30, 2019, we completed the public October 2018 Offering of 12,613,049 units at a price of $1.60 per unit for gross proceeds of $20,180,878, and received cash proceeds of $4,894,720 from the exercise of stock options and warrants, which substantially increased our cash and cash equivalent and improved our working capital positions. At April 30, 2019, we had working capital of $21,475,951, which increased by $25,450,793 from the working capital deficit of $3,974,842 at July 31, 2018.
On December 5, 2018, we entered into the Third Amended and Restated Credit Agreement with our Lenders, whereby we and the Lenders agreed to certain further amendments to our $20,000,000 Credit Facility, the maturity date was extended from January 1, 2020 to January 31, 2022, and the prior monthly principal payments were deferred until the new maturity date of January 31, 2022. As a result, the $15.0 million principal amount reported as current portion of long-term debt at October 31, 2018, representing principal amounts due over the then next 12 months from October 31, 2018, was removed from our capital resource requirement for the then next 12 months. With the October 2018 Offering completed and the Third Amended and Restated Credit Agreement effected, our existing cash resources as at April 30, 2019 are expected to provide sufficient funds to carry our planned operations for the next 12 months from the date that this Quarterly Report is issued. Our continuation as a going concern for a period beyond 12 months will be dependent upon our ability to obtain adequate additional financing, as our operations are capital intensive and future capital expenditures are expected to be substantial. Our continued operations, including the recoverability of the carrying values of our assets, are dependent ultimately on our ability to achieve and maintain profitability and positive cash flow from our operations.
Historically, we have been reliant primarily on equity financings from the sale of our common stock and, during Fiscal 2014 and Fiscal 2013, on debt financing in order to fund our operations. We have also relied, to a limited extent, on cash flows generated from our mining activities during Fiscal 2015, Fiscal 2013 and Fiscal 2012; however, we have yet to achieve profitability or develop positive cash flow from operations and we do not expect to achieve profitability or develop positive cash flow from operations in the near term. Our reliance on equity and debt financings is expected to continue for the foreseeable future, and their availability whenever such additional financing is required will be dependent on many factors beyond our control including, but not limited to, the market price of uranium, the continuing public support of nuclear power as a viable source of electrical generation, the volatility in the global financial markets affecting our stock price and the status of the worldwide economy, any one of which may cause significant challenges in our ability to access additional financing, including access to the equity and credit markets. We may also be required to seek other forms of financing, such as asset divestitures or joint venture arrangements to continue advancing our uranium projects which would depend entirely on finding a suitable third party willing to enter into such an arrangement, typically involving an assignment of a percentage interest in the mineral project. However, there is no assurance that we will be successful in securing any form of additional financing when required and on terms favorable to us.
Our operations are capital intensive and future capital expenditures are expected to be substantial. We will require significant additional financing to fund our operations, including continuing with our exploration and pre-extraction activities and acquiring additional mineral projects. In the absence of such additional financing, we would not be able to fund our operations, including continuing with our exploration and pre-extraction activities, which may result in delays, curtailment or abandonment of any one or all of our mineral projects.
Our anticipated operations, including exploration and pre-extraction activities, will be dependent on and may change as a result of our financial position, the market price of uranium and other considerations, and such change may include accelerating the pace or broadening the scope of reducing our operations as originally announced in September 2013.
Our ability to secure adequate funding for these activities will be impacted by our operating performance, other uses of cash, the market price of commodities, the market price of our common stock and other factors which may be beyond our control. Specific examples of such factors include, but are not limited to:
|
●
|
if the weakness in the market price of uranium experienced in Fiscal 2018 continues or weakens further during Fiscal 2019;
|
|
●
|
if the weakness in the market price of our common stock experienced in Fiscal 2018 continues or weakens further during Fiscal 2019;
|
|
●
|
if we default on making scheduled payments of fees and complying with the restrictive covenants as required under our Credit Facility, and it results in accelerated repayment of our indebtedness and/or enforcement by the Lenders against our key assets securing our indebtedness; and
|
|
●
|
if another nuclear incident, such as the events that occurred at Fukushima in March 2011, were to occur during Fiscal 2019, continuing public support of nuclear power as a viable source of electrical generation may be adversely affected, which may result in significant and adverse effects on both the nuclear and uranium industries.
|
Our long-term success, including the recoverability of the carrying values of our assets and our ability to acquire additional mineral projects and to continue with exploration and pre-extraction activities and mining activities on our existing mineral projects, will depend ultimately on our ability to achieve and maintain profitability and positive cash flow from our operations by establishing ore bodies that contain commercially recoverable mineral and to develop these into profitable mining activities.
Equity Financings
We filed a Form S-3 shelf registration statement under the United States
Securities Act of 1933
, as amended (the “Securities Act”), which was declared effective on March 10, 2017 (the “2017 Shelf”), providing for the public offer and sale of certain securities of our Company from time to time, at our discretion, of up to an aggregate offering amount of $100 million.
On October 3, 2018, we completed our October 2018 Offering of 12,613,049 units at a price of $1.60 per unit for gross proceeds of $20,180,878. Each unit was comprised of one share of the Company and one-half of one share purchase warrant. Each whole warrant entitles its holder to acquire one share at an exercise price of $2.05 per share, exercisable immediately upon issuance and expiring 30 months from the date of issuance. In connection with the October 2018 Offering, we also issued compensation share purchase warrants to agents as part of share issuance costs to purchase 756,782 shares of our Company, exercisable at an exercise price of $2.05 per share and expiring 30 months from the date of issuance.
As at April 7, 2019, a total of $68.4 million of the 2017 Shelf was utilized through the registration of our shares of common stock underlying outstanding common share purchase warrants from previous registered offerings with a remaining available balance of $31.6 million under the 2017 Shelf. On April 8, 2019 we filed an additional Form S-3 shelf registration statement pursuant to Rule 462(b) of the Securities Act, which became effective upon filing on April 8, 2019, providing for the public offer and sale of certain additional securities of our Company representing an additional 20%, or $6.3 million, of the then remaining $31.6 million available under the 2017 Shelf, which increased the remaining amount available under the 2017 Shelf to $37.9 million.
On April 9, 2019, we entered into an At The Market Offering Agreement (the “Offering Agreement”) with H.C. Wainwright & Co., LLC (as the “Lead Manager”) and the co-managers set forth on the signature page of the Offering Agreement (each, a “Co-Manager” and, collectively, with the Lead Manager, the “Managers”); under which the Company may, from time to time, sell shares of its common stock having an aggregate offering price of up to $37.9 million through the Managers (collectively, the “ATM”). Upon delivery of a “Sales Notice” under and subject to the terms and conditions of the Offering Agreement, the “Designated Manager” of the Managers under the Offering Agreement may sell the shares by methods deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act, including sales made directly on the NYSE American, the existing trading market for our common stock, sales made to or through a market maker other than on an exchange or otherwise, directly to the sales agent as principal, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, and/or in any other method permitted by law. Subject to the terms and conditions of the Offering Agreement, the Managers will use commercially reasonable efforts, consistent with its normal trading and sales practices, to sell the shares from time to time, based upon the Company’s instructions, subject to applicable state and federal laws, rules and regulations, and the rules of the NYSE American. The Company is not obligated to, and the Company cannot provide any assurances that it will, make any sales of the shares under the Offering Agreement. The Offering Agreement will terminate upon the earlier of (i) sale of the shares under the Offering Agreement having an aggregate offering price of $37.9 million, (ii) the three year anniversary of the date of the Offering Agreement, and (iii) the termination of the Offering Agreement as permitted therein. The Offering Agreement may be terminated by the Lead Manager or the Company at any time upon 5 days’ notice to the other party, or by the Lead Manager at any time in certain circumstances, including the occurrence of a material adverse change in the Company. The Company will pay the Designated Manager a commission of 2.25% of the gross proceeds from the sale of shares, and has agreed to provide the Managers with customary indemnification and contribution rights.
In connection with the ATM, on April 9, 2019, we filed a prospectus supplement to the 2017 Shelf providing for the public offer and sale of the Company’s shares having an aggregate offering price of up to $37.9 million through one or more at-the-market offerings pursuant to the ATM. At April 30, 2019, no public offer or sale of the Company’s shares was completed under the ATM.
As at April 30, 2019, all $106.3 million under the 2017 Shelf was utilized through the registration of our shares of common stock and shares of common stock underlying outstanding common share purchase warrants from previous registered offerings as well as our shares of common stock to be sold under the ATM as follows:
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up to 2,850,000 shares of our common stock (the “2015 Warrant Shares”) issuable from time to time upon the exercise of 2,850,000 whole common share purchase warrants at a price of $2.35 per 2015 Warrant Share issued by us on June 25, 2015 as part of a unit offering on the same date representing approximately $6.7 million under the 2017 Shelf;
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up to 6,594,348 shares of our common stock (the “2016 Warrant Shares”) issuable from time to time upon the exercise of 6,594,348 whole common share purchase warrants at a price of $1.20 per 2016 Warrant Share issued by us on March 10, 2016 as part of a unit offering on the same date representing approximately $7.9 million under the 2017 Shelf;
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up to 9,571,929 shares of our common stock (the “2017 Warrant Shares”) issuable from time to time upon the exercise of 9,571,929 whole common share purchase warrants at a price of $2.00 per 2017 Warrant Share issued by us on January 20, 2017 as part of a unit offering on the same date representing approximately $19.1 million under the 2017 Shelf;
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12,613,049 shares of our common stock (the “2018 Unit Shares”) issued by us on October 3, 2018 as part of the unit offering on the same date representing approximately $20.2 million under the 2017 Shelf;
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7,063,253 shares of our common stock (the “2018 Warrant Shares”) issuable from time to time upon the exercise of 7,063,253 whole common share purchase warrants at a price of $2.05 per 2018 Warrant Share issued by us on October 3, 2018 as part of our October 2018 Offering representing approximately $14.5 million under the 2017 Shelf; and
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up to $37.9 million in shares of our common stock issuable from time to time under the ATM under the 2017 Shelf.
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Debt Financing
On December 5, 2018, we entered into the Third Amended and Restated Credit Agreement with our Lenders, whereby we and the Lenders agreed to certain further amendments to the Credit Facility, under which initial funding of $10,000,000 was received by the Company upon closing of the Credit Facility on July 30, 2013, and additional funding of $10,000,000 was received by the Company upon closing of the amended Credit Facility on March 13, 2014.
The key terms of the Third Amended and Restated Credit Agreement are summarized as follows:
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extension of the maturity date from January 1, 2020 to January 31, 2022;
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deferral of the prior monthly principal payments until the new maturity date of January 31, 2022;
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issuance of third extension fee shares equal to 7% of the principal balance outstanding or $1,400,000 paid to the Lenders by way of the issuance of 1,180,328 shares of the Company at a deemed issuance price per share of $1,18611 representing a 10% discount to our five trading-day volume-weighted average trading price prior to closing; and
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payment of anniversary fees to the Lenders on each of November 30, 2019, 2020 and 2021, of 7%, 6.5% and 6%, respectively, of the principal balance then outstanding, if any, payable at the option of the Company in cash or shares of the Company with a price per share calculated at a 10% discount to the five trading-day volume-weighted average price of the Company’s shares immediately prior to the applicable date.
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The Credit Facility is non-revolving with an amended term of 8.5 years maturing on January 31, 2022, subject to an interest rate of 8% per annum, compounded and payable on a monthly basis.
The Third Credit Amended and Restated Agreement supersedes, in their entirety, the Second Amended and Restated Credit Agreement dated and effective February 9, 2016, the Amended and Restated Credit Agreement dated and effective March 13, 2014 and the Credit Agreement dated and effective July 30, 2013 with our Lenders. Refer to Note 9
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Long-Term Debt of the Notes to the Condensed Consolidated Financial Statements for the nine months ended April 30, 2019 and Note 10: Long-Term Debt of the Notes to the Consolidated Financial Statements for Fiscal 2018.
Operating Activities
Net cash used in operating activities during the nine months ended April 30, 2019 and 2018 was $9,626,039 and $10,387,947, respectively. Significant operating expenditures included mineral property expenditures, general and administrative expenses and interest payments.
Financing Activities
During the nine months ended April 30, 2019, net cash provided by financing activities was $23,843,995. On October 3, 2018, we completed our October 2018 Offering of 12,613,049 units at a price of $1.60 per unit and received net proceeds of $18,969,211. In addition, we received net proceeds of $4,822,357 from the exercise of share purchase warrants and $72,363 from the exercise of stock options. During the nine months ended April 30, 2018, net cash provided by financing activities was $328,300 from the exercise of stock options.
Investing Activities
During the nine months ended April 30, 2019, net cash used in investing activities totaled $15,028,437, primarily for the purchase of short-term investments of $29,858,126, investment in mineral rights and properties of $105,000 and purchase of property, plant and equipment of $77,809, offset by cash received from the redemption of short-term investments totaling $15,000,000. During the nine months ended April 30, 2018, net cash provided by investing activities was $8,780,276, resulting primarily from cash received from the redemption of short-term investments totaling $30,771,253, net cash and restricted cash of $289,038 received from the acquisition of the Reno Creek, offset by cash used in the purchase of short-term investments of $21,771,253, an increase of $188,400 in other long-term assets, cash used in the investment in mineral rights and properties of $309,120, and cash used in the purchase of property, plant and equipment of $11,242.
Stock Options and Warrants
At April 30, 2019, we had stock options outstanding representing 14,736,375 shares at a weighted-average exercise price of $1.41 per share and share purchase warrants outstanding representing 19,443,910 shares at a weighted-average exercise price of $1.94 per share. At April 30, 2019, outstanding stock options and warrants represented a total 34,180,285 shares issuable for gross proceeds of approximately $58.5 million should these stock options and warrants be exercised in full on a cash basis. At April 30, 2019, outstanding in-the-money stock options and warrants represented a total of 13,834,875 shares exercisable for gross proceeds of approximately $17.3 million should these in-the-money stock options and warrants be exercised in full on a cash basis. The exercise of these stock options and warrants is at the discretion of the respective holders and, accordingly, there is no assurance that any of these stock options or warrants will be exercised in the future.
Transactions with
a Related Party
During the three months ended April 30, 2019 and 2018, we incurred $39,365 and $36,210 (nine months ended April 30, 2019 and 2018: $117,086 and $112,850), respectively, in general and administrative costs paid to Blender, a company controlled by Arash Adnani, a direct family member of our President and Chief Executive Officer, for various services including information technology, corporate branding, media, website design, maintenance and hosting, provided to the Company.
During the nine months ended April 30, 2018, we issued 104,706 shares to Blender with a fair value of $141,678, as settlement of the equivalent amounts owed.
At April 30, 2019, the amount owing to Blender was $48,545 (July 31, 2018: $807).
Material Commitments
Long-Term Debt Obligations
On December 5, 2018, we entered into the Third Amended and Restated Credit Agreement, whereby we and our Lenders agreed to extend the maturity date of the Credit Facility from January 1, 2020 to January 31, 2022, and to defer the prior monthly principal payments until the new maturity date of January 31, 2022.
At April 30, 2019, we have made all scheduled payments and complied with all covenants under our Credit Facility, and we expect to continue complying with all scheduled payments and covenants during Fiscal 2019.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
For a complete summary of all of our significant accounting policies, refer to Note 2: Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements as presented under Item 8. Financial Statements and Supplementary Data in our Form 10-K Annual Report for Fiscal 2018.
Refer to “Critical Accounting Policies” under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K Annual Report for Fiscal 2018.
Subsequent Event
s
We have no material subsequent events to report in this Quarterly Report.