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 three months ended January 31, 2021, and our Form 10-K Annual Report for the fiscal year ended July 31, 2020, including the consolidated financial statements and related notes contained therein. 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 made in this Quarterly Report. Refer to “Cautionary Note Regarding Forward-looking Statements” as disclosed in our Form 10-K Annual Report for the fiscal year ended July 31, 2020, 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, 2020, our most recently completed year end, to January 31, 2021, and our results of operations for the three and six months ended January 31, 2021, 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 2020.
Business
We are predominantly 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 2020.
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 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 January 31, 2021, 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 of development 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.
Uranium Market Developments
Over the past few years, global uranium market fundamentals have been improving as the market transitions from being an inventory driven to more of a production driven market. The spot market bottomed in November 2016 at about $17.75 per pound U3O8 and stood at about $27.72 per pound at January 31, 2021. Curtailments in production from several global producers have lowered uranium supply over the past few years. In 2020, about 50% of global production was shutdown attributable to the COVID-19 virus. This event has accelerated a rebalancing in the market, resulting in about 19 million pounds of supply being removed that will not be made up. Supply and demand projections show a structural deficit between production and utility requirements of about 40 million pounds per year through 2026 that approaches 70 million pounds by 2030. The gap is being filled with secondary market sources, including finite inventory that is projected to decline in upcoming years.
Higher priced contracts that have supported production are continuing to roll out of producer and utility supply portfolios. These higher priced contracts are not replaceable with current market prices below production costs for the vast majority of western producers. This will likely continue the trend of production cuts and deferrals until prices rise sufficiently to sustain long-term mining operations. In late 2020, one of the world’s largest and low-cost mines shut down again because of COVID-19 concerns and is currently reducing expected supply by another 1.5 million pounds per month. In addition, some of the more significant global projects have recently shut down or are in their final stages of production as their resources become depleted.
On the demand side of the equation, the global nuclear energy industry continues robust growth, with 53 new reactors connected to the grid since the start of 2013 and another 52 reactors under construction as of February 2021. Nuclear generation has continued to increase over the past several years and has eclipsed pre-Fukushima production volumes. In the 2020 edition (World Energy Outlook 2020), the International Energy Agency “Stated Policies Scenario” sees installed nuclear capacity growth of over 15% from 2019 to 2040, reaching about 480 GWE. Further upside market pressure also appears likely as utilities finally return to a longer-term contracting cycle to replace expiring contracts, something the market has not experienced for several years.
In the U.S., significant political developments are improving the outlook for American uranium producers. In September 2020, for the first time in 48 years, the Democratic Party platform endorsed nuclear power, creating a solid base of bipartisan political support for the nuclear industry. In October 2020, the U.S. Department of Commerce concluded an amendment to the Agreement Suspending the Antidumping Investigation on Uranium from the Russian Federation that reduces America’s dependence on Russian natural uranium concentrates up to 75% from prior levels. In December, the U.S. Federal Government omnibus spending bill passed by Congress includes $75 million for initial funding of the 10-year U.S. Uranium Reserve. More recently, the Nuclear Prosperity and Security Act was reintroduced in the U.S. House of Representative that would direct the Secretary of Energy to establish and operate a U.S. Uranium Reserve.
Response to COVID-19 Pandemic
In response to the COVID-19 pandemic, we have taken proactive steps to lower our operating expenses and to adjust our timing of capital expenditures. For the protection of our employees, we have arranged for our teams at our Vancouver, Corpus Christi and Paraguay offices to work remotely. In the meantime, we continued to operate our Palangana Mine at a reduced pace to capture residual uranium only and continue to advance our ISR projects with engineering and geologic evaluations that support the Company’s extraction readiness strategy.
Results of Operations
For the three and six months ended January 31, 2021, we recorded net losses of $3,461,059 ($0.02 per share) and $8,424,596 ($0.04 per share) and losses from operations of $3,523,558 and $6,910,188, respectively. For the three and six months ended January 31, 2020, we recorded net losses of $1,888,661 ($0.01 per share) and $6,931,238 ($0.04 per share), and losses from operations of $$3,799,869 and $7,714,876, respectively.
During the three and six months ended January 31, 2021, in response to the significant financial market uncertainty as a result of the COVID-19 pandemic, we continued our efforts of corporate-wide cost-cutting and cash saving measures. In the meantime, we continued with our strategic plan for reduced operations at our Palangana Mine to capture residual pounds of U3O8 only. As a result, no U3O8 extraction or processing costs were capitalized to inventories during the three months ended January 31, 2021. At January 31, 2021, the total value of inventories was $211,662 (July 31, 2020: $211,662).
Costs and Expenses
Mineral Property Expenditures
Mineral property expenditures primarily consisted of costs relating to permitting, property maintenance, exploration and pre-extraction activities and other non-extraction related activities on our projects.
During the three and six months ended January 31, 2021, mineral property expenditures totaled $961,257 and $1,663,018, respectively, of which $242,047 and $440,067, respectively, were directly related to maintaining operational readiness and permitting compliance for our Palangana Mine and Hobson Processing Facility. During the three and six months ended January 31, 2020, mineral property expenditures totaled $1,323,323 and $2,846,774, respectively, of which $301,114 and $650,249, respectively, were directly related to maintaining operational readiness and permitting compliance for our Palangana Mine and Hobson Processing Facility.
The following table provides mineral property expenditures on our projects for the periods indicated:
|
|
|
Three Months Ended January 31,
|
|
|
Six Months Ended January 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Mineral Property Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Palangana Mine
|
|
$
|
232,866
|
|
|
$
|
528,699
|
|
|
$
|
431,668
|
|
|
$
|
848,726
|
|
|
Goliad Project
|
|
|
71,267
|
|
|
|
36,843
|
|
|
|
117,056
|
|
|
|
96,807
|
|
|
Burke Hollow Project
|
|
|
185,838
|
|
|
|
220,812
|
|
|
|
315,616
|
|
|
|
869,673
|
|
|
Longhorn Project
|
|
|
2,289
|
|
|
|
2,289
|
|
|
|
4,577
|
|
|
|
12,446
|
|
|
Salvo Project
|
|
|
7,673
|
|
|
|
6,702
|
|
|
|
15,865
|
|
|
|
13,970
|
|
|
Anderson Project
|
|
|
19,425
|
|
|
|
13,433
|
|
|
|
38,891
|
|
|
|
29,486
|
|
|
Workman Creek Project
|
|
|
8,167
|
|
|
|
8,168
|
|
|
|
16,365
|
|
|
|
16,365
|
|
|
Slick Rock Project
|
|
|
12,993
|
|
|
|
13,271
|
|
|
|
26,129
|
|
|
|
26,405
|
|
|
Reno Creek Project
|
|
|
169,576
|
|
|
|
144,181
|
|
|
|
270,066
|
|
|
|
292,224
|
|
|
Yuty Project
|
|
|
8,334
|
|
|
|
16,718
|
|
|
|
14,328
|
|
|
|
30,914
|
|
|
Oviedo Project
|
|
|
98,804
|
|
|
|
123,117
|
|
|
|
146,415
|
|
|
|
229,055
|
|
|
Alto Paraná Titanium Project
|
|
|
29,463
|
|
|
|
110,085
|
|
|
|
45,914
|
|
|
|
166,333
|
|
|
Other Mineral Property Expenditures
|
|
|
114,562
|
|
|
|
99,005
|
|
|
|
220,128
|
|
|
|
214,370
|
|
|
|
|
$
|
961,257
|
|
|
$
|
1,323,323
|
|
|
$
|
1,663,018
|
|
|
$
|
2,846,774
|
|
General and Administrative
During the three and six months ended January 31, 2021, general and administrative expenses totaled $2,464,703 and $5,050,392, respectively, which increased by $69,909 and $340,428, respectively, compared to $2,394,794 and $4,709,964, respectively, for the three and six months ended January 31, 2020. The increases primarily resulted from increases in stock-based compensation expenses being offset by decreases in general and administrative expenses of other categories.
The following summary provides a discussion of the major expense categories including analyses of the factors that caused significant variances compared to the same period last year:
|
|
●
|
for the three and six months ended January 31, 2021, salaries and management fees totaled $379,767 and $745,270, respectively, which decreased by $37,406 and $135,942, respectively, compared to $417,173 and $881,212, respectively, for the three and six months ended January 31, 2020, primarily as a result of corporate-wide reduction in salaries and fees;
|
|
|
●
|
for the three and six months ended January 31, 2021, office, insurance, filing and listing fees, investor relations, corporate development and travel expenses totaled $682,482 and $1,402,246, respectively, which decreased by $170,182 and $249,530, respectively, compared to $852,664 and $1,651,776, respectively, for the three and six months ended January 31, 2020, primarily as a result of corporate-wide cost reductions;
|
|
|
●
|
for the three and six months ended January 31, 2021, professional fees totaled $184,396 and $306,303, respectively, which decreased by $142,311 and $155,037, respectively, compared to $326,707 and $461,340, respectively, for the three and six months ended January 31, 2020. The decrease primarily resulted from decrease in general legal fees and accounting and audit fees. Professional fees are primarily comprised of legal services related to certain transactional activities and regulatory compliance, in addition to audit and tax services; and
|
|
|
●
|
for the three and six months ended January 31, 2021, stock-based compensation totaled $1,218,058 and $2,596,573, respectively, which increased by $419,808 and $880,937, respectively, compared to $798,250 and $1,715,636, respectively, for the three and six months ended January 31, 2020. During the three and six months ended January 31, 2021, in response to the financial market uncertainty as a result of the COVID-19 pandemic, we continued our efforts of corporate-wide cost-cutting and cash saving measures implemented in Fiscal 2020, where we expanded the scope of equity-based payments, including shares issued in lieu of cash for certain salaries and fees under our Stock Incentive Plan, to compensate certain employees and consultants to reduce cash outlays. During Fiscal 2020, we granted approximately 6.2 million stock options to our directors, officers, employees and certain consultants and awarded 1.3 million RSUs to certain of our directors and officers. The stock-based compensation expenses included the fair value of compensation shares at the time of issuance and the amortization of the fair value of various stock awards granted in Fiscal 2020 and prior fiscal years using graded vesting method.
|
Depreciation, Amortization and Accretion
During the three and six months ended January 31, 2021, depreciation, amortization and accretion totaled $97,598 and $196,778, respectively, which increased by $15,846 and $38,640, respectively, compared to $81,752 and $158,138, respectively, for the three and six months ended January 31, 2020.
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 and six months ended January 31, 2021, interest and finance costs totaled $829,727 and $1,720,641, respectively, which were consistent with $859,163 and $1,744,288, for the three and six months ended January 31, 2020, respectively.
For the three and six months ended January 31, 2021, interest paid on long-term debt totaled $368,000 and $776,889, respectively, which decreased by $40,889 and $40,889, respectively, compared to $408,889 and $817,778, respectively, for the three and six months ended January 31, 2020. For the three months ended January 31, 2021, amortization of debt discount totaled $381,828 and $825,695, respectively, which decreased by $30,752 and $19,106, respectively, compared to $412,580 and $844,801, respectively, for the three and six months ended January 31, 2020. The decreases in interest on long-term debt and amortization of debt discount are a result of the decrease in the outstanding principle amount of our long-term debt to $18,000,000 from $20,000,000 in the comparable periods of last year.
For the three and six months ended January 31, 2021, surety bond premium totaled $61,009 and $90,079, respectively, which increased by $31,939 and $26,383, respectively, compared to $29,070 and $63,696, respectively, for the three and six months ended January 31, 2020.
Income or Loss from Equity-Accounted Investment
During the three and six months ended January 31, 2021, we recorded income of $600,913 and a loss of $102,692, respectively, as a result of income and loss pick up from URC’s operations. During the three and six months ended January 31, 2020, we recorded income of $2,704,373 and $2,363,776, respectively, primarily due to a dilution gain of $2,728,026 and $3,056,656, respectively, recognized as a result of the change of our ownership interest in URC due to URC’s initial public offering in December 2019, offset by loss pick up totaling $23,653 and $692,880, respectively, from URC’s operations.
Gain on Loan Extinguishment
During the three months ended January 31, 2021, we received a Notice of Paycheck Protection Program Forgiveness Payment from the Small Business Administration regarding the approval of our application for forgiveness of the PPP Loan amount of $277,250 and associated interest. As a result, a gain on loan extinguishment of $278,617 was recorded on our statement of operations and comprehensive loss for the three and six months ended January 31, 2021.
Summary of Quarterly Results
|
|
|
For the Quarters Ended
|
|
|
|
|
January 31, 2021
|
|
|
October 31, 2020
|
|
|
July 31, 2020
|
|
|
April 30, 2020
|
|
|
Net loss
|
|
$
|
(3,461,059
|
)
|
|
$
|
(4,963,537
|
)
|
|
$
|
(4,405,634
|
)
|
|
$
|
(3,273,644
|
)
|
|
Total comprehensive loss
|
|
|
(2,975,021
|
)
|
|
|
(4,900,776
|
)
|
|
|
(4,009,649
|
)
|
|
|
(3,752,792
|
)
|
|
Basic and diluted loss per share
|
|
|
(0.02
|
)
|
|
|
(0.03
|
)
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
Total assets
|
|
|
100,142,619
|
|
|
|
102,213,761
|
|
|
|
91,389,617
|
|
|
|
93,647,447
|
|
|
|
|
For the Quarters Ended
|
|
|
|
|
January 31, 2020
|
|
|
October 31, 2019
|
|
|
July 31, 2019
|
|
|
April 30, 2019
|
|
|
Net loss
|
|
$
|
(1,888,661
|
)
|
|
$
|
(5,042,577
|
)
|
|
$
|
(6,334,132
|
)
|
|
$
|
(5,017,557
|
)
|
|
Total comprehensive loss
|
|
|
(1,928,309
|
)
|
|
|
(5,052,471
|
)
|
|
|
(6,199,949
|
)
|
|
|
(5,177,511
|
)
|
|
Basic and diluted loss per share
|
|
|
(0.01
|
)
|
|
|
(0.03
|
)
|
|
|
(0.04
|
)
|
|
|
(0.03
|
)
|
|
Total assets
|
|
|
96,514,311
|
|
|
|
96,696,496
|
|
|
|
101,040,242
|
|
|
|
105,055,912
|
|
Liquidity and Capital Resources
|
|
|
January 31, 2021
|
|
|
July 31, 2020
|
|
|
Cash and cash equivalents
|
|
$
|
8,713,193
|
|
|
$
|
5,147,703
|
|
|
Term deposits
|
|
|
4,000,000
|
|
|
|
-
|
|
|
Current assets
|
|
|
14,437,870
|
|
|
|
6,589,879
|
|
|
Current liabilities
|
|
|
19,467,523
|
|
|
|
2,037,402
|
|
|
Working capital (deficit)
|
|
|
(5,029,653
|
)
|
|
|
4,552,477
|
|
During the six months ended January 31, 2021, we received net proceeds of $14,121,656 from the September 2020 Offering. During the three months ended January 31, 2021, we received net proceeds of $1,074,337 under the ATM Offering. At January 31, 2021, we had cash and cash equivalents of $8,713,193 and term deposits of $4,000,000. Subsequent to January 31, 2021, we received further net proceeds of $28,246,612 under the ATM Offering, which substantially increased our cash and cash equivalent balances and improved our working capital position.
At January 31, 2021, our $18,000,000 long-term debt with maturity on January 31, 2022 became a current liability, resulting in a working capital deficit of $5,029,653. With the cash proceeds received from the ATM Offering, our existing cash resources are expected to provide sufficient funds to repay the long-term debt when it comes due and carry out our planned operations for 12 months from the date of this Quarterly Report. Our continuation as a going concern beyond 12 months from the date of this Quarterly Report 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.
Historically we have been reliant primarily on equity financings from the sale of our common stock and on debt financings in order to fund our operations. We have also relied, to a limited extent, on cash flows generated from our mining activities during the year ended July 31, 2015 (“Fiscal 2015), 2013 (“Fiscal 2013) and 2012 (“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 market price of uranium weakens;
|
|
|
●
|
if the weakness in the market price of our common stock continues;
|
|
|
●
|
if we default on making scheduled payments of fees and complying with the restrictive covenants as required under our Credit Facility resulting in accelerated repayment of our indebtedness and/or enforcement by the Lenders against our key assets securing our indebtedness;
|
|
|
●
|
if the COVID-19 pandemic worsens or continues over an extended period and causes further financial market uncertainty; and
|
|
|
●
|
if a nuclear incident, such as the events that occurred at Fukushima in March 2011, is to occur, 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 minerals 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”) 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 April 9, 2019, we entered into the ATM Offering Agreement with the ATM 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. In connection with the ATM Offering, 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 Offering.
On February 21, 2020, we filed a Form S-3 shelf registration statement under the Securities Act which was declared effective by the SEC on March 3, 2020 (the “2020 Shelf”) providing for the public offer and sale of certain securities of the Company from time to time, at our discretion, of up to an aggregate offering amount of $100 million. As a result of the 2020 Shelf, our 2017 Shelf was then deemed terminated and, as a consequence, our then ATM Offering terminated unless renewed under the 2020 Shelf.
On March 19, 2020, we entered into an Amending Agreement to the ATM Offering Agreement with the ATM Managers under which the Company may, from time to time, sell shares of its common stock having an aggregate offering price of up to $30 million through the ATM Managers under its ATM Offering through the 2020 Shelf.
On September 23, 2020, we completed our September 2020 Offering of 12,500,000 units at a price of $1.20 per unit for gross proceeds of $15,000,000. Each unit was comprised of one share of the Company and one-half of one share purchase warrant, and each whole warrant entitles its holder to acquire one share at an exercise price of $1.80 per share exercisable immediately upon issuance and expiring 24 months from the date of issuance. In connection with the September 2020 Offering, we also issued compensation share purchase warrants to agents as part of share issuance costs to purchase 583,333 shares of our Company exercisable at an exercise price of $1.80 per share and expiring 24 months from the date of issuance.
During the three months ended January 31, 2021, we issued 632,487 shares at a weighted average price of $1.74 per share under the ATM Offering for net cash proceeds of $1,074,337. Subsequent to January 31, 2021, we issued 13,036,419 shares at a weighted average price of $2.22 under the ATM Offering for net cash proceeds of $28,246,612.
At January 31, 2021, $30 million of the 2020 Shelf was utilized for the ATM Offering and $27.3 million was utilized for the September 2020 Offering; and therefore, as at January 31, 2021, there was $42.7 million available for distribution under our 2020 Shelf.
Credit Facility
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 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 Credit Facility is non-revolving with an amended term of 8.5 years since inception maturing on January 31, 2022, subject to an interest rate of 8% per annum, compounded and payable on a monthly basis.
The Third Amended and Restated Credit Agreement superseded, in their entirety, our Second Amended and Restated Credit Agreement dated and effective February 9, 2016, our Amended and Restated Credit Agreement dated and effective March 13, 2014 and our Credit Agreement dated and effective July 30, 2013 with our Lenders.
During the three months ended January 31, 2021, we made a voluntary payment of $2,000,000 to one of our Lenders.
During the three months ended January 31, 2021, and pursuant to the terms of the Third Amended and Restated Credit Agreement, we issued an aggregate of 1,249,039 shares with a fair value of $1,170,000, representing 6.5% of the $18,000,000 principal balance outstanding, as payment of anniversary fees to our Lenders.
Subsequent to January 31, 2021, we made further voluntary principal payment of $8,000,000 to our Lenders, which decreased the principal balance outstanding to $10,000,000.
Government Loans
In April 2020, our Canadian subsidiary received a loan of $31,299 (CAD$40,000) under the Canadian Emergency Business Account Program (“CEBA”), which provides financial relief for Canadian small businesses during the COVID-19 pandemic (the “CEBA Loan”). The CEBA Loan has an initial term date on December 31, 2022 (the “Initial Term Date”) and may be extended to December 31, 2025. The CEBA Loan is non-revolving, with an interest rate being 0% per annum prior to the Initial Term Date and 5% per annum thereafter during any extended term.
On April 28, 2020, we entered into a business loan agreement with Kleberg Bank, N.A., under the Paycheck Protection Program administered by the Small Business Administration, which is a part of the Coronavirus Aid, Relief, and Economic Security Act enacted by the U.S. Congress in response to the COVID-19 pandemic. On May 5, 2020, we received the PPP Loan in the amount of $277,250. During the three months ended January 31, 2021, we received a Notice of Paycheck Protection Program Forgiveness Payment from the Small Business Administration regarding the approval of our application for forgiveness of the PPP Loan amount of $277,250 and associated interest.
Promissory Note
During the three months ended January 31, 2021, in connection with the Goliad Land Purchase, we issued the Promissory Note with a principal amount of $380,000 to Mar G B Ranch LLC. The Promissory Note carries an interest rate of 5% per annum with principal and interest payable in 24 monthly installments with a maturity date of November 1, 2022. We may prepay the Promissory Note in any amount at any time before the maturity date without penalty.
Operating Activities
Net cash used in operating activities during the six months ended January 31, 2021 and 2020 was $5,603,172 and $7,545,794, respectively. Significant operating expenditures included mineral property expenditures, general and administrative expenses and interest payments.
Financing Activities
During the six months ended January 31, 2021, net cash provided by financing activities totaled $13,389,086 primarily from net proceeds of $14,121,656 from our September 2020 Offering, net proceeds of $1,074,337 from the ATM Offering, and net proceeds of $223,324 from the exercise of stock options and share purchase warrants, which were offset by a $2,000,000 voluntary payment to one of our Lenders under our Credit Facility and $30,231 payments under the Promissory Note. No cash was provided by financing activities during the six months ended January 31, 2020.
Investing Activities
During the six months ended January 31, 2021, net cash used by investing activities totaled $4,220,340, primarily for cash used for the investment in term deposits of $10,000,000, cash used for the purchase of property, plant and equipment of $140,340, and cash used for investment in mineral rights and properties of $80,000, offset by cash received from the redemption of term deposits of $6,000,000. During the six months ended January 31, 2020, net cash provided by investing activities totaled $11,773,277, primarily from cash received from the redemption of term deposits totaling $11,831,671, offset by cash used for the purchase of property, plant and equipment of $30,194 and cash used for investment in mineral rights and properties of $30,000.
Stock Options and Warrants
At January 31, 2021, we had stock options outstanding representing 13,070,468 shares at a weighted-average exercise price of $1.10 per share, and share purchase warrants outstanding representing 14,254,264 shares at a weighted-average exercise price of $1.93 per share. At January 31, 2021, outstanding stock options and warrants represented a total 27,324,732 shares issuable for gross proceeds of approximately $41.9 million should these stock options and warrants be exercised in full on a cash basis. At January 31, 2021, outstanding in-the-money stock options represented a total of 12,850,468 shares exercisable for gross proceeds of approximately $13.7 million should these in-the-money stock options be exercised in full on a cash basis. The exercise of stock options and warrants is at the discretion of the respective holders and, accordingly, there is no assurance that any of the stock options or warrants will be exercised in the future.
Transactions with a Related Party
During the three and six months ended January 31, 2021, we incurred $17,464 and $34,141 (three and six months ended January 31, 2020: $35,657 and $68,490), 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, financial subscriptions, corporate branding, media, website design, maintenance and hosting, provided by Blender to the Company.
At January 31, 2021, the amount owing to Blender was $16,520 (July 31, 2020: $31,334).
Material Commitments
Long-Term Debt Obligations
At January 31, 2021 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 2021.
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 Annual Report on Form 10-K for Fiscal 2020.
Refer to “Critical Accounting Policies” under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for Fiscal 2020.
Subsequent Events
Subsequent to January 31, 2021, we issued 13,036,419 shares at a weighted average price of $2.22 under the ATM Offering for net cash proceeds of $28,246,612.
Subsequent to January 31, 2021, we received cash proceeds of $381,631 and issued 680,043 shares upon the exercise of 984,223 stock options.
Subsequent to January 31, 2021, we received cash proceeds of $511,726 and issued 435,542 shares upon the exercise of 1,597,333 share purchase warrants.
Subsequent to January 31, 2021, we made further voluntary principal payment of $8,000,000 to our Lenders.
Subsequent to January 31, 2021, we entered into an agreement to purchase 400,000 pounds of U3O8 at a price of $27.29 per pound.
Subsequent to January 31, 2021, we paid an additional $198,377 as surety bond collateral for inflation adjustments upon renewal of various surety bonds relating to our Palangana Mine and Hobson Processing Facility.