The accompanying notes are in integral part
of these condensed consolidated financial statements.
There
were no cash flows from investing activities during the three months ended March 31, 2018 and 2017
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(unaudited)
NOTE
1 – Business
Nature
of operations
Western
Uranium Corporation (“Western” or the “Company”) was incorporated in December 2006 under the Ontario Business
Corporations Act. On November 20, 2014, the Company completed a listing process on the Canadian Securities Exchange (“CSE”).
As part of that process, the Company acquired 100% of the members’ interests of Pinon Ridge Mining LLC (“PRM”),
a Delaware limited liability company. The transaction constituted a reverse takeover (“RTO”) of Western by PRM. Subsequent
to obtaining appropriate shareholder approvals, the Company reconstituted its Board of Directors and senior management team. Effective
September 16, 2015, Western completed its acquisition of Black Range Minerals Limited (“Black Range”)
.
The
Company has registered offices at 330 Bay Street, Suite 1400, Toronto, Ontario, Canada, M5H 2S8 and its common shares are listed
on the CSE under the symbol “WUC.” On April 22, 2016, the Company’s shares of common stock began trading on the
OTC Pink Open Market, and on May 23, 2016, the Company’s common stock was approved for the commencement of trading on the
OTCQX Best Market. Its principal business activity is the acquisition and development of uranium resource properties in the states
of Utah and Colorado in the United States of America (“United States”).
On
June 28, 2016, the Company’s registration statement became effective and Western became a United States reporting issuer.
Thereafter, the Company was approved for Depository Trust Company eligibility through the Depository Trust and Clearing Corporation,
which facilitates electronic book-entry delivery, settlement and depository services for shares in the United States.
Note
2 – Liquidity and going concern
The
Company has incurred continuing losses from its operations and as of March 31, 2018 the Company had an accumulated deficit of
$5,038,007 and a working capital deficiency of $857,006.
Since
inception, the Company has met its liquidity requirements principally through the issuance of notes and the sale of its shares
of common stock.
The
Company’s ability to continue its operations and to pay its obligations when they become due is contingent upon the Company
obtaining additional financing. Management’s plans include seeking to procure additional funds through debt and equity financings,
to secure regulatory approval to fully utilize its ablation technology and to initiate the processing of ore to generate operating
cash flows.
There are no assurances that the Company will be able to raise capital
on terms acceptable to the Company or at all, or that cash flows generated from its operations will be sufficient to meet its current
operating costs and required debt service. If the Company is unable to obtain sufficient amounts of additional capital, it may
be required to reduce the scope of its planned product development, which could harm its financial condition and operating results,
or it may not be able to continue to fund its ongoing operations. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern to sustain operations for at least one year from the issuance of these financial statements.
The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome
of these uncertainties.
On May 4, 2018, the Company completed a private placement of 909,622
units at a price of CAD $0.68 (USD $0.53) per unit for gross proceeds of CAD $618,543 (USD $481,560). Each unit consisted of one
share of common stock and a warrant to purchase one-half of one share of common stock. Each warrant is immediately exercisable
at a price of CAD $1.15 and expires two years from the date of issuance.
WESTERN
URANIUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(unaudited)
Note
3 – SUMMARY OF Significant Accounting Policies
Basis
of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions
to Form 10–Q and Rule 10 of Regulation S–X. Accordingly, they do not include all of the information and notes required
by accounting principles generally accepted in the United States of America. However, in the opinion of the management of the Company,
all adjustments necessary for a fair presentation of the financial position and operating results have been included in these statements.
These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company’s Annual Report on Form 10–K for the fiscal year ended December 31, 2017, as
filed with the SEC on April 2, 2018. Operating results for the three months ended March 31, 2018 are not necessarily indicative
of the results that may be expected for any subsequent quarters or for the year ending December 31, 2018.
The accompanying condensed consolidated financial statements include
the accounts of Western and its wholly-owned subsidiaries, Western Uranium Corporation (Utah), PRM, Black Range, Black Range Copper
Inc., Ranger Resources Inc., Black Range Minerals Inc., Black Range Minerals Colorado LLC, Black Range Minerals Wyoming LLC, Haggerty
Resources LLC, Ranger Alaska LLC, Black Range Minerals Utah LLC, Black Range Minerals Ablation Holdings Inc. and Black Range Development
Utah LLC. All significant inter-company transactions and balances have been eliminated upon consolidation.
The
Company has established the existence of mineralized materials for certain uranium projects. The Company has not established proven
or probable reserves, as defined by the United States Securities and Exchange Commission (the “SEC”) under Industry
Guide 7, through the completion of a “final” or “bankable” feasibility study for any of its uranium projects.
Use
of Estimates
The
preparation of these condensed consolidated financial statements in conformity with U.S. GAAP requires management to
make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements
and revenues and expenses during the periods reported. By their nature, these estimates are subject to measurement uncertainty
and the effects on the financial statements of changes in such estimates in future periods could be significant. Significant areas
requiring management’s estimates and assumptions include determining the fair value of transactions involving common stock, assessment
of the useful life and evaluation for impairment of intangible assets, valuation and impairment assessments on mineral properties,
deferred contingent consideration, and the reclamation liability, valuation of stock-based compensation, valuation of available-for-sale
securities and valuation of long-term debt. Other areas requiring estimates include allocations of expenditures, depletion and
amortization of mineral rights and properties. Actual results could differ from those estimates.
Foreign
Currency Translation
The
reporting currency of the Company, including its subsidiaries, is the United States dollar. The financial statements of subsidiaries
located outside of the U.S. are measured in their functional currency, which is the local currency. The functional currency of
the parent (Western Uranium Corporation (Ontario)) is the Canadian dollar. Monetary assets and liabilities of these subsidiaries
are translated at the exchange rates at the balance sheet date. Income and expense items are translated using average monthly
exchange rates. Non-monetary assets are translated at their historical exchange rates. Translation adjustments are included in
accumulated other comprehensive loss in the consolidated balance sheets.
Revenue
Recognition
The Company leases certain of its mineral properties for the exploration
and production of oil and gas reserves. The Company accounts for lease revenue in accordance with ASC 840 “Leases”.
Lease payments received in advance are deferred and recognized on a straight – line basis over the related lease term associated
with the prepayment. Royalty payments are recognized as revenues when received.
WESTERN URANIUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(unaudited)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Fair
Values of Financial Instruments
The
carrying amounts of cash and cash equivalents, restricted cash, accounts payable, accrued liabilities, and notes payable approximate
their fair value due to the short-term nature of these instruments. Marketable securities are adjusted to fair value at each balance
sheet date based on quoted prices which are considered level 1 inputs. The reclamation deposits, which are reflected in restricted
cash on the consolidated balance sheets, are deposits mainly invested in certificates of deposit at major financial institutions
and their fair values were estimated to approximate their carrying values. The Company’s operations and financing activities are
conducted primarily in United States dollars and as a result, the Company is not subject to significant exposure to market risks
from changes in foreign currency rates. The Company is exposed to credit risk through its cash and restricted cash, but mitigates
this risk by keeping these deposits at major financial institutions.
ASC
820 “Fair Value Measurements and Disclosures” provides the framework for measuring fair value. That framework provides
a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and
the lowest priority to unobservable inputs (level 3 measurements).
Fair
value is defined as an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer
a liability in an orderly transaction between market participants. Fair value is a market-based measurement that is determined
based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy is
used to prioritize the inputs in measuring fair value as follows:
Level
1 Quoted prices in active markets for identical assets or liabilities.
Level
2 Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities
in markets that are not active, or other inputs that are observable, either directly or indirectly.
Level
3 Significant unobservable inputs that cannot be corroborated by market data.
The fair value of the Company’s financial instruments are
as follows:
|
|
Quoted Prices in Active Markets for Identical Assets or Liabilities
(Level 1)
|
|
|
Quoted Prices for Similar Assets or Liabilities in Active Markets
(Level 2)
|
|
|
Significant Unobservable Inputs
(Level 3)
|
|
Marketable securities as of March 31, 2018
|
|
$
|
3,104
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities as of December 31, 2017
|
|
$
|
3,123
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Income
Taxes
The
Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. The provision for income
taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of
taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of
the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected
to reverse.
The
Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than
not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation
of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In management’s
opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates,
additional allowances or reversals of reserves may be necessary.
WESTERN URANIUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(unaudited)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Income
Taxes, continued
Tax
benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities.
The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized
upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s
tax returns that do not meet these recognition and measurement standards. As of March 31, 2018 and 2017, no liability for unrecognized
tax benefits was required to be reported.
The
Company’s policy for recording interest and penalties associated with tax audits is to record such items as a component
of general and administrative expense. There were no amounts accrued for penalties and interest for the three months ended March
31, 2018 and 2017. The Company does not expect its uncertain tax position to change during the next twelve months. Management
is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from
its position.
The
Company has identified its federal tax return and its state tax returns in Colorado and Utah as its “major” tax jurisdictions,
and such returns for the years 2014 through 2017 remain subject to examination.
The Tax Cuts and Jobs Act (the “Tax Act”) was enacted
on December 22, 2017. The Tax Act reduced the U.S. federal corporate tax rate from 35% to 21%. As of December 31, 2017, the Company
had made a reasonable estimate of the effects of the Tax Act. This estimate incorporates assumptions made based upon the Company’s
current interpretation of the Tax Act, and may change as the Company may receive additional clarification and implementation guidance
and as the interpretation of the Tax Act evolves. In accordance with SEC Staff Accounting Bulletin No. 118, the Company will finalize
the accounting for the effects of the Tax Act no later than the fourth quarter of 2018. Future adjustments made to the provisional
effects will be reported as a component of income tax expense in the reporting period in which any such adjustments are determined.
Based on the new tax law that lowers corporate tax rates, on December 31, 2017, the Company revalued its deferred tax assets.
Stock-Based
Compensation
The
Company follows ASC 718, Compensation - Stock Compensation, which addresses the accounting for stock-based payment transactions,
requiring such transactions to be accounted for using the fair value method. Awards of shares for property or services are recorded
at the more readily measurable of the fair value of the stock and the fair value of the service. The Company uses the Black-Scholes
option-pricing model to determine the grant date fair value of stock-based awards under ASC 718. The fair value is charged to
earnings depending on the terms and conditions of the award, and the nature of the relationship of the recipient of the award
to the Company. The Company records the grant date fair value in line with the period over which it was earned. For employees
and management, this is typically considered to be the vesting period of the award. For consultants the fair value of the award
is recorded over the term of the service period, and unvested amounts are revalued at each reporting period over the service period.
The Company estimates the expected forfeitures and updates the valuation accordingly.
WESTERN URANIUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(unaudited)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Loss
per Share
Basic
net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during
the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential
common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the
exercise of stock options and warrants (using the treasury stock method). The computation of basic net loss per share for the
three months ended March 31, 2018 and 2017 excludes potentially dilutive securities. The computations of net loss per share for
each period presented is the same for both basic and fully diluted.
Potentially
dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because
the effect of their inclusion would have been anti-dilutive.
|
|
For the Three Months Ended March 31,
|
|
|
2018
|
|
2017
|
Warrants to purchase shares of common stock
|
|
|
4,095,563
|
|
|
|
3,341,572
|
|
Options to purchase shares of common stock
|
|
|
1,783,664
|
|
|
|
1,346,996
|
|
Total potentially dilutive securities
|
|
|
5,879,227
|
|
|
|
4,688,568
|
|
Recent
Accounting Pronouncements
Management does not believe that any recently issued, but not yet
effective accounting pronouncements, when adopted, will have a material effect on the accompanying condensed consolidated financial
statements, other than those disclosed below or in the Company’s Annual Report on Form 10-K filed with the SEC on April 2,
2018.
In August 2016 the FASB issued Topic ASU No. 2016-15 “Statement
of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”).
ASU 2016-15 clarifies diversity in practice in how certain cash receipts and cash payments are presented and classified in the
statement of cash flows. The Company adopted ASU 2016-15 on January 1, 2018 and it has not had a material impact on its condensed
consolidated financial position and results of operations.
In November 2016, the FASB issued ASU No. 2016-18, “Statement
of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”). ASU 2016-18 amends the classification and presentation
of changes in restricted cash or restricted cash equivalents in the statement of cash flows. The Company adopted ASU 2016-18 on
January 1, 2018 and it has not had a material impact on its condensed consolidated financial position and results of operations.
In May 2014, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update “ASU” No. 2014-09, Revenue from Contracts with Customers (Topic 606) which was subsequently
amended by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20, and ASU 2017-13. These ASUs outline a single comprehensive
model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition
guidance, including industry-specific guidance. The guidance includes a five-step framework that requires an entity to: (i) identify
the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price,
(iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when the entity satisfies
a performance obligation. In July 2015, the FASB deferred the effective date of ASU 2014-09 to annual reporting periods beginning
after December 15, 2017. A full retrospective or modified retrospective approach is required. The Company has adopted ASU No. 2014-09
effective January 1, 2018.
The Company has elected to apply the modified retrospective method
and the impact was determined to be immaterial on the condensed consolidated financial statements. Accordingly, the new revenue
standard has been applied prospectively in the Company’s condensed consolidated financial statements from January 1, 2018
forward and reported financial information for historical comparable periods will not be revised and will continue to be reported
under the accounting standards in effect during those historical periods.
The Company performed an analysis and determined that its revenues
are not within the scope of ASC 606, and as such, the Company determined that its methods of recognizing revenues have not been
impacted by the new guidance.
WESTERN URANIUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(unaudited)
NOTE
4 – MINERAL ASSETS, ABLATION INTELLECTUAL PROPERTY AND OTHER PROPERTY
The Company’s mining properties acquired on August 18, 2014
that the Company retains as of March 31, 2018, include: San Rafael Uranium Project located in Emery County, Utah; The Sunday Mine
Complex located in western San Miguel County, Colorado; The Van 4 Mine located in western Montrose County, Colorado; The Sage Mine
project located in San Juan County, Utah, and San Miguel County, Colorado. These mining properties include leased land in the states
of Colorado and Utah. None of these mining properties were operational at the date of acquisition.
The Company’s mining properties acquired on September 16,
2015 that the Company retains as of March 31, 2018, include Hansen, North Hansen, High Park, Hansen Picnic Tree, and Taylor Ranch,
located in Fremont and Teller Counties, Colorado. The Company also acquired the Keota project located in Weld County, Wyoming and
Ferris Haggerty located in Carbon County Wyoming. These mining assets include both owned and leased land in the states of Utah,
Colorado and Wyoming. All of the mining assets represent properties which have previously been mined to different degrees for uranium.
As the Company has not formally established
proven or probable reserves on any of its properties, there is inherent uncertainty as to whether or not any mineralized material
can be economically extracted as originally planned and anticipated.
On September 16, 2015, in connection with the Company’s acquisition
of Black Range, the Company assumed an option and exploration agreement (the “Option and Exploration Agreement”) with
STB Minerals, LLC, a Colorado limited liability company (“STB”). The Option and Exploration Agreement gives the Company
the right to purchase 51% of the mineral rights of specific areas of the Hansen and Picnic Tree deposits (for which the Company
already holds 49% of the rights). If the Company were to exercise its option under the Option and Exploration Agreement, it would
require the Company to (a) make a cash payment of $2,500,000 immediately upon exercise; (b) issue shares of common stock to STB
amounting to a value of $3,750,000 immediately upon exercise; and (c) issue shares of common stock to STB amounting to a value
of $3,750,000 on the date that is 180 days following exercise. The Option and Exploration Agreement was scheduled to expire by
its terms on July 28, 2017 if not exercised.
WESTERN URANIUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(unaudited)
NOTE
4 – MINERAL ASSETS, ABLATION INTELLECTUAL PROPERTY AND OTHER PROPERTY, CONTINUED
The Option and Exploration Agreement provided an extension for
an “event of force majeure”. Under this clause, the Company would receive an extension of the period during
which it could exercise its option if it experiences an unreasonable delay outside its control that prevents it from
exercising the option. On May 10, 2017, the Company provided to STB a notice that it was exercising the force majeure
clause due to the delay by government regulators in licensing the Company’s ablation technology and permitting mining
at the Hansen property. STB has contested the Company’s finding that an event of force majeure has occurred. Ongoing
negotiations continued until September 21, 2017 when the Company and STB agreed to settle the matter through the
pre-established arbitration mechanism. Prior to the commencement of arbitration, a settlement was agreed to on February 28,
2018 through the execution of an Amendment of Option and Exploration Agreement. As consideration, the Company paid STB a
$20,000 extension payment and granted STB the right to seek a bona fide written offer over the remaining term, and agreed to
the removal of the force majeure clause from the agreement. The Company received an extension until July 28, 2019 and a right
of first refusal to match any bona fide written offer. Hence the Company already controls 49% of the resource property and
retains an option to purchase the 51% of the resource property that the Company does not already control for the duration of
the agreement. Further the Company believes the execution of this agreement is without financial implications, and as such,
the Company has not made any adjustment to these condensed consolidated financials related to this matter.
A prior owner of the Van 4 Mine had been granted a first Temporary
Cessation from reclamation of the mine by the Colorado Mined Land Reclamation Board (“MLRB”) which was set to expire
June 23, 2017. Prior to its expiration, PRM formally requested an extension through a second Temporary Cessation. PRM subsequently,
participated in a public process which culminated in a hearing on July 26, 2017. Prior to the hearing, three non-profit organizations
who pursue environmental and conservation objectives filed a brief objecting to the extension. The MLRB board members voted to
grant a second five-year Temporary Cessation for the Van 4 Mine. Thereafter the three objecting parties filed a lawsuit on September
18, 2017. The MLRB was named as the defendant and PRM was named as a party to the case due to the Colorado law requirement that
any lawsuit filed after a hearing include all of the parties to the proceeding. The plaintiff organizations were seeking for the
court to set aside the board order granting a second five-year temporary cessation period to PRM for the Van 4 Mine. The Colorado
state Attorney General was defending this action in the Denver Colorado District Court. On May 8, 2018, the Denver Colorado District
Court ruled in favor of PRM, whereby the additional five-year temporary cessation period was granted.
The
Company’s mineral properties and ablation intellectual property are:
|
|
As of
|
|
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
Mineral properties
|
|
$
|
11,645,218
|
|
|
$
|
11,645,218
|
|
Ablation intellectual property
|
|
$
|
9,488,051
|
|
|
$
|
9,488,051
|
|
Oil and Gas Lease and Easement
On July 18, 2017, an oil and gas lease became effective with respect
to minerals and mineral rights owned by of the Company of approximately 160 surface acres of the Company’s property in Colorado.
As consideration for entering into the lease, the Company received $120,000 during the third quarter of 2017. The lease will be
in force for an initial term of three years and may be extended by the lessee at 150% of the initial rate. The lessee has also
agreed to pay the Company a royalty of 18.75% of the lessee’s revenue attributed to oil and gas produced, saved, and sold
attributable to the net mineral interest. The Company is recognizing the initial payment incrementally over the term of the lease.
On February 26, 2018, the Company entered into a further agreement
with the same entity as the oil and gas lease to provide them with an easement to an additional part of the Company’s property
solely for the purposes of transporting the oil and gas extracted via a pipeline. As consideration for the easement, the Company
received $36,960 during the first quarter of 2018. The Company is recognizing this payment incrementally over the eight year term
of the easement.
During the three months ended March 31, 2018 and 2017, the Company
recognized aggregate revenue of $11,155 and $0, respectively under these oil and gas lease arrangements.
WESTERN URANIUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(unaudited)
NOTE
4 – MINERAL ASSETS, ABLATION INTELLECTUAL PROPERTY AND OTHER PROPERTY, CONTINUED
Reclamation
Liabilities
The
Company’s mines are subject to certain asset retirement obligations, which the Company has recorded as reclamation liabilities.
The reclamation liabilities of the United States mines are subject to legal and regulatory requirements, and estimates of the
costs of reclamation are reviewed periodically by the applicable regulatory authorities. The reclamation liability represents
the Company’s best estimate of the present value of future reclamation costs in connection with the mineral properties.
The Company determined the gross reclamation liabilities of the mineral properties as of March 31, 2018 and December 31, 2017,
to be approximately $820,434 and $820,434, respectively. During the three months ended March 31, 2018 and 2017, the accretion
of the reclamation liabilities was $2,575 and $1,528, respectively. The Company expects to begin incurring the reclamation liability
after 2054 and accordingly, has discounted the gross liabilities over their remaining lives using a discount rate of 5.4% to net
discounted aggregated values as of March 31, 2018 and December 31, 2017 of $199,396 and $196,821, respectively. The gross reclamation
liabilities as of March 31, 2018 are secured by certificates of deposit in the amount of $820,434.
On April 11, 2018, the Company received notice from the Colorado
Division of Reclamation, Mining and Safety (“CDRMS”) in regards to its reclamation liability. CDRMS has recalculated
the Company’s estimated future reclamation liability, which would require the Company to increase its certificates of deposit
that secure its reclamation liability by $68,517. The Company has until June 8, 2018 to comply with or appeal the determination.
The Company is currently evaluating the notice and determining its position.
Reclamation
liability activity for the three months ended March 31, 2018 and 2017 consists of:
|
|
For the three months ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Beginning balance
|
|
$
|
196,821
|
|
|
$
|
403,639
|
|
Accretion
|
|
|
2,575
|
|
|
|
1,528
|
|
Ending Balance
|
|
$
|
199,396
|
|
|
$
|
405,167
|
|
NOTE
5 – Accounts Payable and Accrued Liabilities
Accounts
payable and accrued liabilities consisted of:
|
|
As of
|
|
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
Trade accounts payable
|
|
$
|
460,459
|
|
|
$
|
453,618
|
|
Accrued liabilities
|
|
|
155,849
|
|
|
|
148,398
|
|
|
|
$
|
616,308
|
|
|
$
|
602,016
|
|
NOTE
6
– Notes Payable
EFHC
Note
On
August 18, 2014, in connection with the purchase of certain of the mineral properties, the Company entered into a note payable
with Energy Fuels Holding Corporation (“EFHC”) (the “EFHC Note”) for $500,000. The EFHC Note bears interest
at a rate of 3.0% per annum and is secured by a first priority interest in certain of the Company’s mineral properties.
On the date of the purchase, the Company recorded the EFHC Note net of a discount for interest of $73,971 at a rate of 4% per
annum, resulting in a total effective interest rate of 7% per annum. The discount is being amortized using the effective interest
method over the life of the loan. All principal on the EFHC Note is due and payable on August 18, 2018 and interest on the EFHC
Note is due and payable annually beginning August 18, 2015.
WESTERN URANIUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(unaudited)
NOTE
6
– Notes Payable, CONTINUED
Notes
Payable Summary
Notes
payable consisted of:
|
|
Principal
|
|
Discount
|
|
Balance, Net
of Discount
|
|
Current
|
|
Non-Current
|
March 31, 2018
|
|
|
$
|
500,000
|
|
|
$
|
7,726
|
|
|
$
|
492,274
|
|
|
$
|
492,274
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
$
|
500,000
|
|
|
$
|
12,550
|
|
|
$
|
487,450
|
|
|
$
|
487,450
|
|
|
$
|
—
|
|
The
Company’s total interest expense, net, consisted of:
|
|
For the Three Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Interest expense, notes payable
|
|
$
|
7,479
|
|
|
$
|
5,861
|
|
Amortization of discount on notes payable
|
|
|
4,824
|
|
|
|
20,324
|
|
Accretion of reclamation liabilities
|
|
|
2,575
|
|
|
|
1,528
|
|
Other interest expense
|
|
|
-
|
|
|
|
726
|
|
Interest income
|
|
|
(273
|
)
|
|
|
(275
|
)
|
Interest expense, net
|
|
$
|
14,605
|
|
|
$
|
28,164
|
|
WESTERN URANIUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(unaudited)
NOTE 7 - COMMITMENTS
Russell Fryer
On July 28, 2017, Russell Fryer was appointed the Company’s
Executive Chairman. On November 13, 2017, the Company entered into a consulting agreement with an affiliate of Mr. Fryer. The agreement
became effective on July 28, 2017 and, pursuant to its terms, expires on December 31, 2018. The agreement may be terminated by
either party with 90 days’ notice. The agreement provides for compensation of $15,000 per month and an annual bonus at the
discretion of the Board of Directors. Pursuant to the agreement, if a change of control occurs wherein the consideration in such
change of control is more than USD $2.00 per share, the Company is required to pay a lump sum in the amount of two and one-half
times the entity’s annual fee to this entity. On January 29, 2018, the Company provided the requisite 90-day notification
to terminate the consulting agreement, effective April 30, 2018. On May 1, 2018, following the termination of this consulting contract,
Mr. Fryer resigned as director and executive chairman of the board of directors.
NOTE
8 – SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS
Authorized
Capital
The holders of the Company’s common stock are entitled to
one vote per share. Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the board
of directors out of legally available funds. Upon the liquidation, dissolution, or winding up of the Company, holders of common
stock are entitled to share rateably in all assets of the Company that are legally available for distribution. As of March 31,
2018 and December 31, 2017, an unlimited number of common shares were authorized for issuance.
Private Placement
On May 4, 2018, the Company completed a private placement of 909,622 units at a price of CAD $0.68 (USD $0.53)
per unit for gross proceeds of CAD $618,543 (USD $481,560). Each unit consisted of one share of common stock and a warrant to purchase
one-half of one share of common stock. Each warrant is immediately exercisable at a price of CAD $1.15 and expires two years from
the date of issuance.
Incentive
Stock Option Plan
The
Company maintains an Incentive Stock Option Plan (the “Plan”) that permits the granting of stock options as incentive
compensation. Shareholders of the Company approved the Plan on June 30, 2008 and amendments to the Plan on June 20, 2013, and
the Board of Directors approved additional changes to the Plan on September 12, 2015.
The
purpose of the Plan is to attract, retain and motivate directors, management, staff and consultants by providing them with the
opportunity, through stock options, to acquire a proprietary interest in the Company and benefit from its growth.
The
Plan provides that the aggregate number of common shares for which stock options may be granted will not exceed 10% of the issued
and outstanding common shares at the time stock options are granted. As of March 31, 2018, a total of 20,510,500 common shares
were outstanding, and at that date the maximum number of stock options eligible for issue under the Plan was 2,051,050.
On
February 8, 2018, the Company granted options under the plan for the purchase of an aggregate of 100,000 shares of common stock
to a director. The options have an exercise price of CAD $1.00 (US $0.78 as of March 31, 2018) and vest one half on the date of
grant and one half on December 31, 2018. One half of the options expire on January 31, 2023 and the remaining options expire on
December 31, 2023.
WESTERN URANIUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(unaudited)
NOTE
8 – SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS, CONTINUED
Stock
Options
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
|
Weighted Average Contractual Life (years)
|
|
Weighted Average Grant Date Fair Value
|
|
Intrinsic Value
|
Outstanding - January 1, 2018
|
|
|
1,846,996
|
|
|
$
|
1.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
100,000
|
|
|
$
|
0.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired, forfeited, or cancelled
|
|
|
(163,332
|
)
|
|
$
|
4.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - March 31, 2018
|
|
|
1,783,664
|
|
|
$
|
1.77
|
|
|
|
3.85
|
|
|
$
|
0.40
|
|
|
$
|
—
|
|
Exercisable - March 31, 2018
|
|
|
1,733,664
|
|
|
$
|
1.80
|
|
|
|
3.80
|
|
|
$
|
0.41
|
|
|
$
|
—
|
|
The
Company’s stock based compensation expense related to stock options for the three months ended March 31, 2018 and 2017 was
$69,832 and $133,282, respectively. As of March 31, 2018, the Company had $2,572 in unamortized stock option expense, which will
be amortized over a period of 0.75 years.
The
Company utilized the Black-Scholes option pricing model to determine the fair value of these stock options, using the assumptions
as outlined below.
|
|
February 8, 2018
|
|
Stock Price
|
|
|
CAD $0.52
|
|
Exercise Price
|
|
|
CAD $1.00
|
|
Number of Options Granted
|
|
|
100,000
|
|
Dividend Yield
|
|
|
0
|
%
|
Expected Volatility
|
|
|
49
|
%
|
Weighted Average Risk-Free Interest Rate
|
|
|
1.64
|
%
|
Expected life (in years)
|
|
|
2.50 - 3.00
|
|
Warrants
|
|
Number of Shares
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Contractual Life (years)
|
|
|
Intrinsic Value
|
|
Outstanding, January 1, 2018
|
|
|
4,095,563
|
|
|
$
|
2.27
|
|
|
|
|
|
|
|
|
|
Outstanding - March 31, 2018
|
|
|
4,095,563
|
|
|
$
|
2.27
|
|
|
|
3.56
|
|
|
$
|
-
|
|
Exercisable - March 31, 2018
|
|
|
4,095,563
|
|
|
$
|
2.27
|
|
|
|
3.56
|
|
|
$
|
-
|
|
WESTERN
URANIUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(unaudited)
Note
9 – Mining Expenditures
|
|
For the Three Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Permits
|
|
$
|
45,455
|
|
|
$
|
28,751
|
|
Maintenance
|
|
|
-
|
|
|
|
11,867
|
|
Contract Labor
|
|
|
3,600
|
|
|
|
-
|
|
|
|
$
|
49,055
|
|
|
$
|
40,618
|
|
NOTE
10 – Related Party Transactions (Including Key Management Compensation)
The
Company has transacted with related parties pursuant to service arrangements in the ordinary course of business, as follows:
Pursuant
to a consulting agreement, a United States limited liability company owned by a person who was a director, and on July 28, 2017,
became the Company’s executive chairman, entered into a consulting agreement with the Company effective April 1, 2016 to
provide financial, advisory, and consulting services, including representing the Company to a variety of stakeholders for a six
month term ending on September 30, 2016. On October 1, 2016 the Company extended this agreement through January 31, 2017. Professional
fees for the three months ended March 31, 2018 and 2017 were $45,000 and $15,014, respectively, related to this agreement. As
of March 31, 2018 and December 31, 2017, the Company had $0 and $0, respectively, included in accounts payable and accrued liabilities
payable to this entity.
On April 1, 2017, the Company entered into a new consulting agreement
with a United States limited liability company owned by a person who is a director. The consulting agreement is to provide assistance
with capital raising activities and other financial, advisory, and consulting services for the period April 1, 2017 through June
30, 2017. At June 30, 2017 and the last day of each month thereafter, the agreement may be extended by the Company on a month-to-month
basis with seven days’ notice. The agreement has a monthly fee of $15,000. Pursuant to the consulting agreement, if the Company
completes a merger with a third party introduced by this director whereby more than 50% of the Company’s then outstanding
shares are transferred to that third party, the Company is required to pay a lump sum in an amount of $350,000 to this entity.
On January 29, 2018, the Company provided the requisite 90-day notification to terminate the consulting agreement, effective April
30, 2018, upon which date the agreement was terminated. On May 1, 2018, upon termination of the agreement, this director resigned
from his positions as director and as executive chairman.
Prior
to the acquisition of Black Range, Mr. George Glasier, the Company’s CEO, who is also a director, transferred his interest
in a former joint venture with Ablation Technologies, LLC to Black Range. In connection with the transfer, Black Range issued
25 million shares of Black Range common stock to Seller and committed to pay AUD $500,000 (USD $384,290) to Seller within 60 days
of the first commercial application of the ablation technology. Western assumed this contingent payment obligation in connection
with the acquisition of Black Range. At the date of the acquisition of Black Range, this contingent obligation was determined
to be probable. Since the deferred contingent consideration obligation is probable and the amount estimable, the Company recorded
the deferred contingent consideration as an assumed liability in the amount of $384,290 and $390,350 as of March 31, 2018 and
December 31, 2017, respectively.
NOTE
11 – SUBSEQUENT EVENTS
Private
placement
On May 4, 2018, the Company completed a private placement of 909,622
units at a price of CAD $0.68 (USD $0.53) per unit for gross proceeds of CAD $618,543 (USD $481,560). Each unit consisted of one
share of common stock and a warrant to purchase one-half of one share of common stock. Each warrant is immediately exercisable
at a price of CAD $1.15 and expires two years from the date of issuance.
Shares issued in exchange for accounts payable
On May 4, 2018, the Company issued 60,832 shares of its common
stock to two vendors of the Company in satisfaction of an aggregate of CAD $41,366 (USD $32,205) of accounts payable.
Reclamation liability
On April 11, 2018, the Company received a notice from CDRMS. See
Note 4 for more information.