☐ Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
☐ Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
☐ Check box if any part of the fee if offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
COMPENSATION
OF DIRECTORS AND NAMED EXECUTIVE OFFICERS
Basis
of Reporting
The
Company, originally named Western Uranium Corporation, was created on November 20, 2014 when Homeland Uranium Inc. changed its
name subsequent to a reverse takeover of Homeland Uranium Inc. by Pinon Ridge Mining LLC. As part of that process, Homeland Uranium
Inc. acquired 100% of the members’ interests of Pinon Ridge Mining LLC and subsequent to obtaining appropriate shareholder approvals,
the Company reconstituted its Board of Directors and senior management team. Homeland Uranium Inc. was a non-listed reporting
issuer subject to the rules and regulations of the Ontario Securities Commission. Concurrent with the reverse takeover, the Company
completed a listing process on the Canadian Securities Exchange (the “
CSE
”).
In
March 2015, Western and Black Range Minerals Limited (“
Black Range
”) entered into a definitive Merger Implementation
Agreement, pursuant to which Western agreed to acquire all of the issued shares of Black Range by way of Scheme of Arrangement
under the Australian Corporations Act 2001. On September 16, 2015, Western completed its takeover of Black Range, an Australian
company that was listed on the ASX until the acquisition was completed.
On
May 23, 2016, the Company’s common shares were approved for the commencement of trading on the OTCQX Market under the
symbol “WSTRF”, and thereafter became an SEC reporting company on June 27, 2016. In October 2018, the Company changed
its name from Western Uranium Corporation to Western Uranium & Vanadium Corp.
Western’s
common shares continue to trade on the CSE under the symbol “WUC”. As a result of the transition to an SEC reporting
company, Western has begun presenting its consolidated financial statements in accordance with United States generally accepted
accounting principles (U.S. GAAP), replacing the former International Financial Reporting Standards (IFRS) presentation.
Consequently,
the disclosure in this section is being presented in accordance with both the rules of the U.S. Securities and Exchange Commission
and the Ontario Securities Commission. Thus in order to comply with both regulatory regimes and conform to its financial statement
presentation a reporting currency of U.S. dollars is utilized in all the tables.
Pursuant to
National Instrument 51-102 Continuous Disclosure
Obligations
(Canada), the Company is required to disclose all compensation for services rendered to the Company for its two
most recently completed financial years in respect of (i) the Chief Executive Officer (“
CEO
”), (ii) the Chief
Financial Officer (“
CFO
”) and (iii) any other executive officer whose compensation in any of those years exceeded
$150,000 (together, “
Named Executive Officers
”), as well as directors. During the financial years ended on
December 31, 2017 and December 31, 2018, the Company had three Named Executive Officers: George Glasier (President and CEO), Robert
Klein (CFO), and Russell Fryer (Executive Chairman until April 30/May 1, 2018).
Total
Compensation Excluding Compensation Securities
The
table below sets out information concerning the compensation earned or awarded to the Company Named Executive Officers and Directors
during the financial years ended December 31, 2017 and 2018.
Total
of compensation excluding compensation of securities
|
Name
and position
|
|
|
Year
|
|
|
Salary,
consulting fee, retainer or commission
($)
|
|
Bonus
($)
|
|
Committee
or meeting fees
($)
|
|
Value
of prerequisites
($)
|
|
Value
of all other compensation
($)
|
|
Total
compensation
($)
|
George
Glasier,
Chief Executive Officer, President and Director
|
|
|
2018
2017
|
|
|
180,000
165,000
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
34,615
|
|
180,000
199,615
|
Andrew
Wilder,
Director and Former Chief Financial Officer
|
|
|
2018
2017
|
|
|
13,860
26,638
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
137,211
34,615
|
|
151,071
61,253
|
Michael
Skutezky
(1)
,
Former
Chairman and Director
|
|
|
2018
2017
|
|
|
N/A
42,966
|
|
N/A
Nil
|
|
N/A
Nil
|
|
N/A
Nil
|
|
N/A
N/A
|
|
N/A
42,966
|
Russell
Fryer
(2)
,
Former
Executive Chairman and Director
|
|
|
2018
2017
|
|
|
N/A
163,321
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
N/A
34,615
|
|
N/A
197,936
|
Robert
Klein,
Chief Financial Officer
|
|
|
2018
2017
|
|
|
120,000
110,000
|
|
30,000
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
137,211
34,615
|
|
287,211
144,615
|
Bryan
Murphy
(3)
, Chairman and Director
|
|
|
2018
2017
|
|
|
27,123
N/A
|
|
Nil
N/A
|
|
Nil
N/A
|
|
Nil
N/A
|
|
142,941
N/A
|
|
170,064
N/A
|
Notes:
(1)
|
Michael
Skutezky resigned from his board of director positions with the Company on July 27, 2017.
|
|
|
(2)
|
Russell
Fryer provided his services to the Company as a director and executive chairman of the
Company through a consulting agreement between Baobab Asset Management LLC and the Company.
On January 29, 2018, the Company provided the requisite 90-day notification to terminate
the consulting agreement, effective April 30, 2018. Subsequently, on May 1, 2018, Mr.
Fryer resigned as director and chairman of the board of directors.
|
|
|
(3)
|
Bryan
Murphy was appointed to the Board of Directors on January 31, 2018 and was later appointed
Chairman on May 1, 2018.
|
Incentive
Plan Awards
During
the financial year ended December 31, 2018, the Company issued 1,083,000 stock options to a number of its officers, consultants,
directors and employees. Please see the chart below for the options issued to Named Executive Officers and directors of the Company
during the financial year ended December 31, 2018.
Compensation
Securities
|
Name
and position
|
|
Type
of compensation security
|
|
Number
of compensation securities, number of underlying securities, and percentage of class
|
|
|
Date
of issue or grant
|
|
Issue,
conversion or exercise price ($)
|
|
|
Closing
price of security or underlying security on date of grant
($)
|
|
Closing
price of security or underlying security at year end December 31, 2018
($)
|
|
Expiry
date
|
Andrew
Wilder,
Director
|
|
Stock
Options
|
|
|
250,000
|
|
|
September
24, 2018
|
|
|
C$2.15
|
|
|
C$2.14
|
|
C$1.50
|
|
September 24,
2023
|
Bryan
Murphy
|
|
Stock
options
|
|
|
100,000
|
|
|
February
8, 2018
|
|
|
C$1.00
|
|
|
C$0.66
|
|
C$1.50
|
|
See
note (1) below
|
|
|
Stock
options
|
|
|
250,000
|
|
|
September
24, 2018
|
|
|
C$2.15
|
|
|
C$2.14
|
|
C$1.50
|
|
September 24,
2023
|
Robert
Klein,
Chief Financial Officer
|
|
Stock
Options
|
|
|
250,000
|
|
|
September
24, 2018
|
|
|
C$2.15
|
|
|
C$2.14
|
|
C$1.50
|
|
September 24,
2023
|
|
(1)
|
A
total of 50,000 options granted to Bryan Murphy vested on the date of the grant and will
expire on January 31, 2023. The balance of 50,000 options granted to Mr. Murphy vested
on December 31, 2018 and will expire on December 31, 2023.
|
The
following table identifies all exercises of stock options or other compensation securities by Named Executive Officers and directors
during the financial year ended December 31, 2018.
Exercise
of Compensation Securities by Directors and NEOs
Financial Year Ended December 31, 2018
|
Name
and position
|
|
Type
of
compensation
security
|
|
Number
of
compensation
securities exercised
|
|
|
Exercise
price per security
($)
|
|
|
|
Date
of exercise
|
|
|
|
Closing
price of security on date of exercise
($)
|
|
|
|
Difference
between exercise price and closing price on date of exercise
($)
|
|
|
Total
value on each exercise date
($)
|
George
Glasier
Chief Executive Officer, President and Director
|
|
N/A
|
|
N/A
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
N/A
|
Andrew
Wilder
Director
|
|
N/A
|
|
N/A
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
N/A
|
Russell
Fryer
Former Chairman and Director
|
|
N/A
|
|
N/A
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
N/A
|
Robert
Klein
Chief Financial Officer
|
|
N/A
|
|
N/A
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
N/A
|
Bryan
Murphy Chairman and Director
|
|
N/A
|
|
N/A
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
N/A
|
Employment,
Consulting and Management Contracts
On
February 8, 2017, the Company entered into an employment agreement with George Glasier, its Chief Executive Officer. The employment
agreement provides for an initial term of January 1, 2017 through December 31, 2018 with automatic annual renewals unless the
Company or Mr. Glasier was to provide 90 days written notice of their desire to not renew the agreement. That employment agreement
provides for a base salary of $180,000 per annum and a discretionary annual cash bonus to be determined by the Company’s
Board of Directors. For his services under that agreement, Mr. Glasier was paid $180,000 during the financial year ended December
31, 2018. No bonus was awarded to Mr. Glasier for that fiscal year. Pursuant to the agreement, Mr. Glasier is entitled to benefits
upon the termination of his employment without cause or in case of a change of control of the Company under certain circumstances.
The agreement defines “change of control” as follows: (a) a transaction or series of transactions whereby a person
or a group becomes owner directly or indirectly of at least 50% of the securities of WUC; (b) a transaction or series of transactions
whereby the Company transfers all or substantially all its assets; and (c) a merger or a consolidation between WUC and another
entity whereby WUC’s shareholders prior to such merger or consolidation own less than 80% of the voting shares of the surviving
entity. In the event of a change of control or if Mr. Glasier’s employment with the Company is terminated without cause,
the Company is required to pay Mr. Glasier a lump sum representing the aggregate annual base salary for two and a half years (which
at the date of this Circular would be $450,000).
On
May 12, 2017, the Company entered into an engagement agreement with Robert Klein to continue his service as the Company’s
Chief Financial Officer. The engagement agreement provides for an initial term of May 1, 2017 through June 30, 2017 and a base
salary of $12,500 per month. On August 1, 2017, the Company extended the May 12, 2017 agreement with Mr. Klein from July 1, 2017
through September 30, 2017 at a base salary of $8,000 per month. On November 13, 2017, the Company entered into an employment
agreement with Mr. Klein. The agreement became effective on October 1, 2017 and provides for an initial term through September
30, 2018 and compensation of $120,000 per annum and an annual bonus at the discretion of the Board of Directors. For his services
under that agreement, Mr. Klein was paid $120,000 during the financial year ended December 31, 2018. A $30,000 bonus was awarded
to Mr. Klein for that fiscal year. Pursuant to the agreement Mr. Klein is entitled to benefits upon the termination of his employment
without cause or in case of a change of control of the Company under certain circumstances. The agreement defines “change
of control” as follows: (a) a transaction or series of transactions whereby a person or a group becomes owner directly or
indirectly of at least 50% of the securities of WUC; (b) a transaction or series of transactions whereby the Company transfers
all or substantially all its assets; and (c) a merger or a consolidation between WUC and another entity whereby WUC’s shareholders
prior to such merger or consolidation own less than 80% of the voting shares of the surviving entity. In the event of a change
of control where the transaction consideration is above $2.00 per share of the Company or if Mr. Klein’s employment with
the Company is terminated without cause, the Company is required to pay Mr. Klein a lump representing his aggregate annual base
salary for two and a half years (which at the date of this Circular would be $300,000).
Russell
Fryer provided his services to the Company as director and Executive Chairman of the Company through Baobab Asset Management LLC
(“
Baobab
”), a company owned and controlled by Mr. Fryer. During the year ended December 31, 2018, the Company
incurred $60,000 of professional fees to Baobab. On January 29, 2018, the Company provided the requisite 90-day notification to
terminate the consulting agreement, effective April 30, 2018. Subsequently, Mr. Fryer resigned on May 1, 2018 as director and
chairman of the board of directors.
Bryan
Murphy provides his services as director and member of the Audit Committee of the Company through Magellan Limited (a company
owned and controlled by Mr. Murphy) as per a director compensation and indemnification agreement between the Company and Magellan
Limited entered into on January 31, 2018. The monthly compensation paid by the Company to Mr. Murphy for his services as director
and member of the Audit Committee of the Company is $2,000 plus HST; subsequent to his appointment as Chairman this was increased
to $5,000 plus HST.
Summary
of Stock Option Plan
The
Company maintains a stock option plan (the “
Plan
”) for its directors, officers, consultants and employees. All
previously issued stock options awarded by Homeland Uranium Inc. were cancelled pursuant to the reverse takeover with Homeland
Uranium Inc.
The
Company’s maintains an Incentive Stock Option Plan which permits the granting of stock options as incentive compensation.
This plan was approved by shareholders on June 30, 2008 and amendments to the plan were approved by shareholders on June 20, 2013,
and the Board of Directors approved additional changes to the Plan on September 12, 2016.
As
a result of the acquisition of Black Range Minerals Limited (the “
Black Range Transaction
”), options previously
issued by Black Range were cancelled and new options were granted to the former Black Range officers and directors which have
2019 expirations. The additional outstanding options represent the Company’s issuance of stock options to a number of officers,
consultants, directors and employees in the years ended December 31, 2017 and December 31, 2018. As at the date of this Circular,
there are 2,416,664 stock options outstanding, each option entitling the option-holder to purchase one common share of the Company,
as follows:
Number
of Options
|
|
|
Exercise
Price
|
|
Expiration
Date
|
59,998
|
|
|
C$5.25
|
|
July
20, 2019
|
148,666
|
|
|
C$4.80
|
|
November
27, 2019
|
500,000
|
|
|
C$2.50
|
|
March
31, 2022
|
625,000
|
|
|
C$1.60
|
|
March
31 2023
|
50,000
|
|
|
C$1.00
|
|
January
31, 2023
|
50,000
|
|
|
C$1.00
|
|
December
31, 2023
|
983,000
|
|
|
C$2.15
|
|
March
31. 2024
|
On
October 4, 2016, the Company granted an aggregate of 1,075,000 options to purchase common shares to a number of officers, consultants,
directors and employees of the Company under the Company’s Incentive Stock Option Plan. The options have an exercise price
of CAD $2.50 ($1.90) vesting equally over three years commencing initially on the date of grant and thereafter on October 31,
2016, and March 31, 2017 with a five-year term from the date of vesting.
On
October 6, 2017, the Company granted options under the Plan for the purchase of an aggregate of 825,000 common shares
to ten individuals consisting of officers, consultants, directors and employees of the Company. The options have a five year term,
an exercise price of CAD $1.60 ($1.28), and vest equally in thirds commencing initially on the date of grant and thereafter on
October 31, 2017, and March 31, 2018.
On
February 8, 2018, the Company granted options under the Plan for the purchase of an aggregate of 100,000 common shares
to Bryan Murphy, a new director of the Company. The options have a five year term, an exercise price of CAD $1.00 ($0.73), and
vest equally in halves commencing initially on the date of grant and thereafter on December 31, 2018.
On
September 24, 2018, the Company granted 983,000 options to five individuals who were officers, directors and consultants of the
Company. The options have a five year term, an exercise price of CAD $2.15 ($1.58), and vest equally in three installments beginning
on the date of grant and thereafter on October 31, 2018, and March 31, 2019.
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 for 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. At December 31, 2018 there were 25,977,143 common shares
outstanding and 2,416,664 Stock Options outstanding (78,664 options issued to replace the stock options of Black Range and 2,338,000
issued to a number of officers, consultants, directors and employees of the Company). Consequently, at that date the maximum number
of Stock Options eligible for issue may not convert into an aggregate of more than 2,597,714 common shares under the provisions
of the Plan which represents 10% of the current issued and outstanding common shares. As at the date of this document, there were
2,416,664 Stock Options to purchase common shares currently outstanding.
A
Stock Option exercise price shall not be less than the most recent share issuance price. The maximum term is five years. There
are no specific vesting provisions under the Plan. Options are non-assignable and non-transferable except that Stock Options may
be transferred to the spouse of an optionee or to the registered retirement savings plan or registered pension plan of an optionee.
The
Plan provides if the optionee’s employment is terminated for any reason, or if the service of a director, senior executive or
consultant of the Company who is an optionee is terminated, any vested Stock Option of such optionee may be exercised during a
period of ninety (90) days following the date of termination of such employment or service, as the case may be. In the case of
an optionee’s death, any vested Stock Option of such optionee at the time of death may be exercised by his or her heirs or legatees
or their liquidator during a period of 365 days following such optionee’s death.
The
total number of Shares issuable to any one person during a 12-month period may not exceed five percent (5%) of the total number
of Shares issued and outstanding. Options granted to consultants providing investor relations activities must vest over 12 months
in stages of no more than 25% in any three month period. Also, in any 12-month period, no options exercisable for more than 2%
of the Company’s issued and outstanding shares may be awarded to Consultants or employees conducting investor relations
activities. The Plan provides that where options are cancelled or lapse under the Plan, the associated Shares become available
again and new options may be granted in respect thereof in accordance with the provisions of the Plan.
The
Board may make any amendment to the Plan, without shareholder approval, except: (i) an increase in the number of common shares
reserved for issue under the Plan; and (ii) a reduction in the exercise price or the extension of the expiry date of an option
held by an insider.
Stock
Options Granted and Outstanding
An
aggregate of 1,083,000 stock options have been granted during the financial year ended December 31, 2018. During that financial
year no options were exercised.
Plan
Category
|
|
Number
of securities to be issued upon exercise of outstanding options (a)
|
|
|
Weighted-average
exercise price of outstanding options, warrants and rights
|
|
|
Number
of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column
(a) *
|
|
Equity
compensation plans approved by securityholders
|
|
|
2,416,664
|
|
|
$
|
1.67
|
|
|
|
181,020
|
|
Equity
compensation plans not approved by securityholders
|
|
|
Nil
|
|
|
|
Nil
|
|
|
|
Nil
|
|
Total
|
|
|
2,416,664
|
|
|
$
|
1.67
|
|
|
|
181,020
|
|
|
*
|
As
of December 31, 2018.
|
Outstanding
Equity Awards at Fiscal Year-End
The
disclosure under this “Outstanding Equity Awards at Fiscal Year-End” section is made pursuant to the SEC rules.
The
following table sets forth unexercised options, unvested stock and equity incentive plan awards outstanding for the Company’s
Named Executive Officers as of December 31, 2018.
Outstanding
Option Awards at Fiscal Year-End for 2018
Name
|
|
Number
of securities underlying unexercised options (#) exercisable
|
|
|
Number
of securities underlying unexercised options (#) unexercisable
|
|
|
Option
exercise price (CAD)
|
|
|
Option
expiration date
|
|
George
Glasier
|
|
|
150,000
|
|
|
|
-
|
|
|
$
|
2.50
|
|
|
|
10/4/2021
|
|
|
|
|
200,000
|
|
|
|
|
|
|
$
|
1.60
|
|
|
|
10/10/2022
|
|
Robert
Klein
|
|
|
100,000
|
|
|
|
-
|
|
|
$
|
2.50
|
|
|
|
10/4/2021
|
|
|
|
|
200,000
|
|
|
|
-
|
|
|
$
|
1.60
|
|
|
|
10/10/2022
|
|
|
|
|
166,667
|
|
|
|
83,333
|
|
|
$
|
2.15
|
|
|
|
9/24/2023
|
|
|
(1)
|
The
options that were unvested at December 31, 2018 vested on March 31, 2019.
|
Outstanding
Stock Awards at Fiscal Year-End for 2018
None.
Director
Compensation
The
following tables set forth a summary of the compensation earned by each director who is not a Named Executive Officer and who
served on the Board during the fiscal year ended December 31, 2018.
Name
|
|
Fees Earned
or Paid in
Cash
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Total
($)
|
|
Andrew
Wilder
(1)
|
|
$
|
13,860
|
|
|
|
Nil
|
|
|
$
|
137,211
|
|
|
$
|
151,071
|
|
Bryan
Murphy
(2)
|
|
$
|
27,123
|
|
|
|
Nil
|
|
|
$
|
142,941
|
|
|
$
|
170,064
|
|
(1)
|
Mr.
Wilder is the owner of Bedford Bridge. During the year ended December 31, 2018, the Company incurred $13,860 in director fees
for Mr. Wilder’s services as a director. On September 24, 2018, Mr. Wilder was granted an option to purchase 250,000
of the Company’s common shares at an exercise price of CAD $2.15 per share which expires five years from the date of
issuance. These options vest in thirds in equal installments on the date of grant, October 31, 2018 and March 31, 2019.
|
|
|
(2)
|
On
February 8, 2018, Mr. Murphy was granted an option to purchase 100,000 of our common shares at an exercise price of CAD $1.00
per share which vests 50% on the date of grant and 50% on December 31, 2018. One-half of the options expire on January 31,
2023 and one-half expire on December 31, 2023. On September 24, 2018, Mr. Murphy was granted an option to purchase 250,000
of our common shares at an exercise price of CAD $2.15 per share which expires five years from the date of issuance. These
options vest in thirds in equal installments on the date of grant, October 31, 2018 and March 31, 2019.
|
CORPORATE
GOVERNANCE DISCLOSURE
Corporate
governance refers to the policies and structure of the board of directors of a company, whose members are elected by and accountable
to the shareholders of the Company. Corporate governance encourages establishing a reasonable degree of independence of the board
of directors from executive management and the adoption of policies to ensure the board of directors recognizes the principles
of good management. The Board believes that good corporate governance improves corporate performance and benefits all shareholders
and is committed to sound corporate governance practices.
The
Canadian Securities Administrators (the “
CSA
”) have adopted National Policy 58-201 –
Corporate Governance
Guidelines
, which provides non-prescriptive guidelines on corporate governance practices for reporting issuers such as the
Company. In addition, the CSA have implemented National Instrument 58-101 –
Disclosure of Corporate Governance Practices
,
which prescribes certain disclosure by the Company of its corporate governance practices. This section sets out the Company’s
approach to corporate governance and addresses the Company’s compliance with Form 58-101F2 –
Corporate Governance
Disclosure
.
Board
of Directors
The Board of the Company facilitates its exercise of
independent supervision over Management by ensuring representation on the Board by directors who are independent of Management
and by promoting frequent interaction and feedback.
Directors
are considered to be independent if they have no direct or indirect material relationship with the Company. A “material
relationship” is a relationship which could, in the view of the Board, be reasonably expected to interfere with the exercise
of a director’s independent judgment.
The
Company’s Board currently consists of three directors. Among this group, Bryan Murphy is the only independent Director based upon
the tests for independence set forth in National Instrument 52-110
Audit Committees
.
SEC
rules require a separate determination of independence of the Company’s directors based on the definition of independence
of a U.S. national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of
directors be independent. Because the Company’s common shares are not currently listed on a national securities exchange,
it currently uses the definition in Nasdaq Listing Rule 5605(a)(2) for determining director independence, which provides that
an “independent director” is a person other than an executive officer or employee of the company or any other
individual having a relationship which, in the opinion of the company’s Board of Directors, would interfere with the exercise
of independent judgment in carrying out the responsibilities of a director. The Nasdaq listing rules provide that a director
cannot be considered independent if:
|
●
|
the
director is, or at any time during the past three years was, an employee of the company;
|
|
|
|
|
●
|
the
director or a family member of the director accepted any compensation from the company
in excess of US$120,000 during any period of 12 consecutive months within the three years
preceding the independence determination (subject to certain exclusions, including, among
other things, compensation for board or board committee service);
|
|
●
|
a
family member of the director is, or at any time during the past three years was, an
executive officer of the company;
|
|
|
|
|
●
|
the
director or a family member of the director is a partner in, controlling shareholder
of, or an executive officer of an entity to which the company made, or from which the
company received, payments in the current or any of the past three fiscal years that
exceed 5% of the recipient’s consolidated gross revenue for that year or US$200,000,
whichever is greater (subject to certain exclusions);
|
|
●
|
the
director or a family member of the director is employed as an executive officer of an
entity where, at any time during the past three years, any of the executive officers
of the company served on the compensation committee of such other entity; or
|
|
|
|
|
●
|
the
director or a family member of the director is a current partner of the company’s
outside auditor, or at any time during the past three years was a partner or employee
of the company’s outside auditor, and who worked on the company’s audit.
|
Under
Rule 5605(a)(2) of the Nasdaq Listing Rules, one director of the Company, Bryan Murphy, would be considered an independent director.
Under
Rule 5605(c)(2) relating to audit committee composition, Bryan Murphy would also be considered an independent director. The standard
for independence in Rule 5605(c)(2) requires that a director:
|
●
|
meet
the standards for independence set forth above and in Nasdaq Rule 5605(a)(2);
|
|
|
|
|
●
|
meet
the criteria for independence set forth in Rule 10A-3(b)(1) under the U.S. Exchange Act
(subject to the exemptions provided in Rule 10A-3(c) under that Act);
|
|
|
|
|
●
|
not
have participated in the preparation of the financial statements of the Company or any
current subsidiary of the Company at any time during the past three years; and
|
|
|
|
|
●
|
be
able to read and understand fundamental financial statements, including a company’s balance
sheet, income statement, and cash flow statement.
|
Directorships
None
of the directors of the Company serves on the board of directors of any other reporting issuer.
Compensation
Principles
The main objective of the Company’s executive compensation
program is to ensure that executive compensation is fair and reasonable, rewards directors and Management’s performance,
and is successful in attracting and retaining experienced executives. The Company’s compensation program is based on the
principle that the compensation should be aligned with the short, medium and long-term interests of Company’s shareholders.
The Company’s compensation program also recognizes that the various components thereof must be sufficiently flexible to
adapt to unpredictable developments in the uranium and vanadium markets.
The
Company’s executive compensation program is comprised of three primary components: (a) base salary; (b) a short-term incentive
plan, which includes the potential for cash bonuses; and (iii) a long-term incentive plan, which consists of grants of stock options.
The Board does not have a compensation committee and executive compensation is determined by the Board as a whole. In determining
the executive compensation, the Board bears in mind the nature of the Company and scope of its operations, the small number of
executive officers and the financial health of the Company.
The
base salary of each executive is reviewed and evaluated by the Board based on the principles, objectives, criteria and processes
outlined above. Upon the Company’s listing on the CSE, the Board established a compensation of CAD $2,000 per quarter for
each director who is not otherwise remunerated by the Company.
The only executive officer compensated by the Company since inception
has been the CFO of the Company. As the Company is a newly established non-producing mineral exploration and mining company, the
Chief Financial Officer role has historically been fulfilled through a consulting agreement. The Chief Executive Officer has determined
the terms of, and overseen the drafting of agreements for the Chief Financial Officer’s engagement, which upon completion
have been presented to the Board for input and approval.
The
Company had entered into an employment agreement with its CEO at the beginning of 2017. At the request of the Board, the CEO employment
agreement was prepared by a large regional law firm in the US with a well-regarded employment law practice. This Denver headquartered
firm, did a survey of comparable mining companies with assets in Colorado to derive both compensation and employment provisions.
The resulting proposed agreement was presented to the Board and, after slight modification, was presented to the CEO.
In
November 2017, the Company entered into an employment agreement with its CFO. That agreement has similar general terms and conditions
to the CEO employment agreement, although certain key terms are different (for details on the CEO and CFO employment agreements,
please refer to section “Employment, Consulting and Management Contracts” of this Circular).
A
short-term incentive award, if any, in the form of a cash bonus may be awarded by the Board based on the principles, objectives,
criteria and processes outlined above. A $30,000 bonus was awarded and paid during the 2018 financial year.
With
regard to long-term incentives, the Company has a stock option plan which permits the granting of options to purchase common shares
to directors, officers, employees and consultants of the Company. The stock option plan was approved by the shareholders of the
Company and is administered by the Board. The amount of options to be granted to an executive is determined by the Board based
on the principles, objectives, criteria and processes outlined above. During the 2018 Financial Year, the Board granted a total
850,000 stock options to the Company’s executives. Please refer to the section
Incentive Plan Awards
of the Circular
for further details.
The
Company’s executive compensation program has allowed the Company to attract and retain a team of motivated executives who
are working towards the common goal of enhancing the Company’s value. The Board will periodically review the executive compensation
program to ensure that the resulting compensation remains consistent with the performance of the Company.
Board
Leadership Structure and Role in Risk Oversight
The
Board of Directors as a whole is responsible for risk oversight for the Company. The Company’s executive officers address
and discuss with the Board the Company’s risks and the manner in which the Company manages or mitigates such risks. While
the Board has the ultimate responsibility for the Company’s risk oversight, the Board works in conjunction with the Audit
Committee on certain aspects of its risk oversight responsibilities. In particular, the Audit Committee focuses on financial reporting
risks and related controls and procedures. The Company does not currently have a compensation committee or a nominating committee,
so the full Board evaluates the risks associated with the Company’s compensation philosophy and programs and strives to
create compensation practices that do not encourage excessive levels of risk taking that would be inconsistent with the Company’s
strategies and objectives, and it oversees risks associated with the Company’s Code of Ethics.
The Company’s leadership structure is enhanced by having
two separate individuals serving as Chief Executive Officer and Chairman of the Board. The Company believes that such a structure
allows for a more effective monitoring and objective evaluation of the performance of Management.
Orientation
and Continuing Education
The
Company does not currently have a formal orientation program for new directors. The Board’s continuing education is typically
derived from correspondence with the Company’s auditors, solicitors, and other advisers to remain up to date with the relevant
corporate and securities law matters.
Ethical
Business Conduct
The Board adopted a written Code of Ethics on September 12, 2015.
The role of the Board is to oversee the conduct of the Company’s business, to set corporate policy and to supervise Management,
which is responsible for the day-to-day conduct of business. However, given the size of the Company, all material transactions
are addressed at Board level.
Nomination
of Directors
Because
of the small size and early stage of the Company, the Company does not have a standing nominating committee. Directors are nominated
by the Board of Directors, which considers individual director qualifications as a whole. The Board believes that this is a practical
approach at this stage of the Company’s development and given the size of the Board. While there are no specific criteria for
Board membership, the Company attempts to attract and maintain directors with business knowledge and a particular knowledge of
mineral exploration and development or other areas such as finance which would assist in guiding the Company’s officers in the
performance of their roles.
Pension
Plan Benefits
There
is no pension plan benefit for any Named Executive Officer or executive officer, employee or former director, executive officer
or employee of the Company or any of its subsidiaries.
Attendance
of Directors at Meetings
Six (6)
meetings
of the Board of Directors were held in 2018, and all directors attended all such meetings. The Company does not have a
policy regarding attendance of directors at shareholder meetings. All those who were directors at the time attended the
Company’s annual general meeting held on June 29, 2018. All current directors have indicated that they intend to attend
the Meeting on June 21, 2019.
INDEBTEDNESS
OF DIRECTORS AND EXECUTIVE OFFICERS
No director, nominee for election as a director, executive
officer, employee or former director, executive officer or employee of the Company or any of its subsidiaries, or any of their
associates or other member of Management of the Company, was indebted to the Company at any time since the beginning of the most
recently completed financial year or as at the date hereof.
INTEREST
OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
An informed person is one who generally speaking is a
director or executive officer or a 10% shareholder of the Company. To the knowledge of Management of the Company, no informed
person or nominee for election as a director of the Company or any associate or affiliate of any informed person or proposed director
had any interest in any transaction involving the Company since the commencement of the Company’s most recently completed
financial year or in any proposed transaction which has materially affected or would materially affect the Company or any of its
subsidiaries.
The
following disclosure is provided in accordance with SEC rules requiring disclosure regarding transactions with related persons:
Pursuant
to a consulting agreement, Baobab Asset Management LLC, a U.S. limited liability company owned by Russell Fryer, who was then
a director of the Company and later also became executive chairman of the Company, entered into a consulting contract with the
Company effective April 1, 2017 to provide financial, advisory, and consulting services, including representing the Company to
a variety of stakeholders for a three month term ending on June 30, 2017 which then continued on a month to month basis. Professional
fees for the year ended December 31, 2018 were $60,000, related to this agreement. As of December 31, 2018 and December 31, 2017,
the Company had $0 and $0, respectively, included in accounts payable and accrued expenses payable 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, Mr. Fryer resigned his positions
as director and as executive chairman.
AUDIT
COMMITTEE
The
Board of Directors had an audit committee meeting on April 1, 2019 to discuss a report from the auditor, MNP LLP. This culminated
with the release of the annual audited financial statements.
Audit
Committee Charter
The
full text of the Company’s Audit Committee Charter is set out in Schedule “A” hereto.
Composition
of the Audit Committee
National
Instrument 52-110 (“
NI 52-110
”) requires the Company, as a venture issuer, to disclose in its management information
circular certain information concerning the constitution of its audit committee (the “
Audit Committee
”) and
its relationship with its independent auditor.
The
Audit Committee is currently composed of Messrs. Andrew Wilder (Chair), Bryan Murphy and George Glasier. As defined in NI 52-110,
Bryan Murphy is the only independent member of the Audit Committee.
All
current members of the Audit Committee are considered to be financially literate.
The
Chair of the Audit Committee, Andrew Wilder, who has previously served as Western’s Chief Financial Officer, qualifies as
an “audit committee financial expert”, as defined by the SEC.
Mr.
Wilder is the founder and CEO of Cross River Group, an investment and business development firm focused on environmental infrastructure.
At Cross River, Mr. Wilder created multiple partnerships with project developers and technology companies, secured over $2bn in
capital commitments for a variety of energy infrastructure projects, and co-founded Inventiv Capital Management, an infrastructure
and private equity fund management business focused on promoting the UN’s Sustainable Development Goals. Previously
Mr. Wilder was CFO, COO and co-founder of North Sound Capital, a $3 billion peak AUM long/short equity hedge fund, He co-founded
Columbus Avenue Consulting, an independent fund administration business with 90 clients and $7 billion AUA which was sold in 2012.
Earlier in his career, Mr. Wilder was the Head of Operations for C. Blair Asset Management, a $500 million long/short equity hedge
fund based in Greenwich, CT. Mr. Wilder began his career as Manager in Audit for Deloitte & Touche. Mr. Wilder holds the Chartered
Accountant (Canada) designation and the CFA designation. He received a Masters in Business Administration from the University
of Toronto and a Bachelor of Arts from the University of Western Ontario.
Mr.
Murphy is Founder of Magellan Limited, an advisory firm focusing on providing strategic, M&A, and financial advisory services
and currently serves as CFO and Head of Finance for Biome Renewables Inc., an early stage renewable energy innovation and industrial
design company. Formerly, Mr. Murphy was Co-Founder and Managing Partner of Quest Partners, a boutique investment bank that focuses
on the provision of M&A, corporate finance, and business strategy services. In these capacities, Mr. Murphy has developed
extensive international experience and relationships advising high-growth businesses across North America, Europe, and the Middle
East. In the prior dozen years, Mr. Murphy held senior management roles at Canadian Tire Corporation overseeing divisions and
business lines. Additionally, Mr. Murphy was formerly a board member of Covenant House Toronto, one of Canada’s largest
homeless youth agencies. Bryan has an Honours Bachelor of Arts in Business Administration majoring in Finance and an MBA with
Distinction from the University of Western Ontario Richard Ivey School of Business.
Mr.
Glasier has over 40 years of experience in the uranium industry, with extensive experience in sales and marketing; project development
and permitting uranium processing facilities. He was an Owner, Director and Vice President of Marketing at Energy Fuels Nuclear,
the largest producer of uranium in the United States during the 1980’s. He is the Founder of Energy Fuels Inc. (formerly
Volcanic Metals Exploration Inc.) and served as its Chief Executive Officer, President and Director from January 24, 2006 to March
31, 2010. At Energy Fuels, he was responsible for assembling a key management team, acquiring a portfolio of uranium projects,
and leading the successful permitting process that culminated in the licensing of the Piñon Ridge Uranium Mill in Western
Montrose County, Colorado. Mr. Glasier received his Juris Doctorate and Bachelor of Science/Business Administration from the University
of Denver.
Audit
Committee Oversight
There
have been no recommendations of the Audit Committee, since the commencement of the Company’s most recently completed financial
year, which the Board has not adopted.
Pre-Approval
Policies and Procedures
The
Audit Committee has not adopted specific policies and procedures for the engagement of non-audit services.
ANNUAL
REPORT
A
copy of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “Annual Report”)
is being provided to shareholders on the Company’s website at www.western-uranium.com and serves as the annual report to
security holders required to be delivered pursuant to SEC’s Rule 14a-3(b).
ADDITIONAL
INFORMATION
Additional
information concerning the Company can be obtained from www.sedar.com, on the SEC website at www.sec.gov, and on the CSE at www.thecse.com.
Shareholders of the Company may contact the Company to request copies of the Company’s financial statements and Management’s
Discussion and Analysis. Financial information is provided in the Company’s financial statements and Management’s
Discussion and Analysis for the year ended December 31, 2018.
APPROVAL
OF DIRECTORS
The
Circular and the mailing of same to Shareholders have been approved by the Board of Directors of the Company.
DATED
the ●
th
day of May, 2019.
BY
ORDER OF THE
BOARD OF DIRECTORS
"George Glasier"
George
Glasier
President and Chief Executive Officer
Schedule
“A”
WESTERN
URANIUM & VANADIUM CORP.
CHARTER
OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
|
1.
|
PURPOSE
AND PRIMARY RESPONSIBILITY
|
1.1
This Charter sets out the Audit Committee’s purpose, composition, member qualification, member appointment and removal,
responsibilities, operations, manner of reporting to the Board of Directors (the “
Board
”) of Western Uranium
& Vanadium Corp. and its subsidiaries (the “
Company
”), annual evaluation and compliance with this Charter.
1.2
The primary responsibility of the Audit Committee is for oversight of the Company’s financial reporting process, on behalf of
the Board. This includes oversight responsibility for financial reporting and continuous disclosure, oversight of external audit
activities, oversight of financial risk and financial management control, and oversight responsibility for compliance with applicable
laws in the area of financial reporting, as well as complaint procedures. The Audit Committee is also responsible for other matters
as set out in this charter or as may be directed by the Board from time to time.
2.1
Each member of the Audit Committee must be a Director of the Company.
2.2
The Audit Committee will consist of at least three members, all of whom shall be financially literate. An Audit Committee member
who is not financially literate may be appointed to the Audit Committee, provided the member becomes financially literate within
a reasonable period of time following his or her appointment.
2.3
The members of the Audit Committee will be appointed annually (and from time to time thereafter to fill vacancies on the Audit
Committee) by the Board. An Audit Committee member may be removed or replaced at any time at the discretion of the Board.
3.1
The Audit Committee shall have the resources and authority to carry out the duties and responsibilities included in this Charter,
including the authority to:
|
a)
|
engage,
and set the compensation for, external counsel and other advisors as it determines necessary to carry out its duties and responsibilities
and any such consultants or professional advisors retained by the Audit Committee will report directly to the Audit Committee;
|
|
b)
|
communicate
directly with management and any internal auditor, and with the external auditor without management involvement; and
|
|
c)
|
incur
ordinary administrative expenses that are necessary or appropriate in carrying out its duties, such expenses to be paid for by
the Company.
|
|
4.
|
DUTIES
AND RESPONSIBILITIES
|
4.1
The duties and responsibilities of the Audit Committee include responsibility to:
Oversight
of the External Auditor
|
(a)
|
recommend
to the Board the external auditor to be nominated by the Board;
|
|
(b)
|
recommend
to the Board the compensation of the external auditor, to be paid by the Company, in connection with (i) preparing and issuing
the audit report on the Company’s financial statements, and (ii) performing other audit, review or attestation services;
|
|
(c)
|
review
the external auditor’s annual audit plan, fee schedule and any related services proposals (including meeting with the external
auditor to discuss any deviations from or changes to the original audit plan, as well as to ensure that no management restrictions
have been placed on the scope and extent of the audit examinations by the external auditor or the reporting of their findings
to the Audit Committee);
|
|
(d)
|
oversee
the work of the external auditor;
|
|
(e)
|
evaluate
and report to the Board with regard to the independence and performance of the external auditors, including an evaluation of the
lead partner, consideration of a rotation of the lead partner of the external auditor and the audit firm itself and, if necessary,
make recommendations to the Board to take additional action to satisfy itself of the qualifications, performance and independence
of the external auditor;
|
|
(f)
|
review
and discuss with management and the external auditor the external auditor’s written communications to the Audit Committee
in accordance with generally accepted auditing standards and other applicable regulatory requirements arising from the annual
audit and quarterly review engagements;
|
|
(g)
|
resolve
disputes between management and the external auditor regarding financial reporting;
|
|
(h)
|
review
and discuss with management and the external auditor major issues regarding accounting principles and financial statement presentation,
including any significant changes in the selection or application of accounting principles to be observed in the preparation of
the financial statements of the Company and its subsidiaries;
|
Financial
Reporting
|
(i)
|
review
and discuss with management and the external auditor the annual audited and quarterly unaudited financial statements and related
Management Discussion and Analysis (“
MD&A
”), including the appropriateness of the Company’s accounting
policies, disclosures (including material transactions with related parties), reserves, key estimates and judgements (including
changes or variations thereto) and obtaining reasonable assurance that the financial statements are presented fairly in accordance
with GAAP and the MD&A is in compliance with appropriate regulatory requirements;
|
|
(j)
|
review
and discuss with management and the external auditor all press releases containing financial information based on the Company’s
financial statements, as well as financial information and earnings guidance provided to analysts and rating agencies prior to
such information being disclosed indicating in the disclosure that the Audit Committee reviewed the disclosure and releasing where
feasible any earning releases concurrently with the filing of the quarterly or annual financial statements;
|
|
(k)
|
report
on and recommend to the Board the approval of the annual financial statements and the external auditor’s report on those
financial statements, the quarterly unaudited financial statements, and the related MD&A and press releases for such financial
statements, prior to the dissemination of these documents to shareholders, regulators, analysts and the public;
|
|
(l)
|
satisfy
itself on a regular basis through reports from management and related reports, if any, from the external auditors, that adequate
procedures are in place for the review of the Company’s disclosure of financial information extracted or derived from the
Company’s financial statements, that such information is fairly presented;
|
|
(m)
|
satisfy
itself that management has developed and implemented a system to ensure that the Company meets its continuous disclosure obligations
through the receipt of regular reports from management and the Company’s legal advisors on the functioning of the disclosure
compliance system (including any significant instances of non-compliance with such system), in order to satisfy itself that such
system may be reasonably relied upon;
|
|
(n)
|
oversee
compliance with regulatory authority requirements for disclosure of external auditor services and Audit Committee activities;
|
|
(o)
|
review
and discuss such other relevant public disclosures containing financial information as the Committee may consider necessary or
appropriate;
|
Internal
Controls over Financial Reporting and Disclosure Controls
|
(p)
|
oversee
the adequacy of the Company’s system of internal accounting controls and obtain from management and the external auditor
summaries and recommendations for improvement of such internal controls and processes, together with reviewing management’s
remediation of identified weaknesses;
|
|
(q)
|
review
and monitor the processes in place to identify and manage the principal risks that could impact the financial reporting of the
Company, assess the effectiveness of the over-all process for identifying principal business risks and report thereon to the Board;
|
|
(r)
|
review
activities, organizational structure, and qualifications of the Chief Financial Officer (“CFO”) and employees in the
financial reporting area and ensuring that matters related to succession planning within the Company are raised for consideration
at the Board;
|
|
(s)
|
review
and discuss with management the disclosure controls relating to the Company’s public disclosure of financial information,
including information extracted or derived from financial statements and assess the adequacy of such procedures;
|
|
(t)
|
review
the effectiveness of the Company’s internal and disclosure control procedures including information gathering systems in
order to assess the adequacy of these procedures which the Company has implemented to support financial reporting;
|
|
(u)
|
inquire
as to major internal control weaknesses identified by the auditors, the Company or by external party and the effectiveness of
management to correct these problems;
|
Complaint
Procedures
|
(v)
|
e
stablish
procedures for the receipt, retention and treatment of complaints received by the Company from employees and others regarding
accounting, internal accounting controls or auditing matters and questionable practices relating thereto and the confidential,
anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters;
|
Other
|
(w)
|
review
the external auditor’s report to the shareholders on the Company’s annual financial statements; and
|
|
(x)
|
review
and approve the Company’s hiring policies with respect to partners or employees (or former partners or employees) of either
a former or the present external auditor.
|
4.2
In addition to the forgoing list of duties, the Committee may perform such other functions as may be necessary or appropriate
to the circumstances, or as delegated by the Board.
|
5.
|
STRUCTURE
AND COMPOSITION
|
Composition
5.1
The appointment of the members of the Audit Committee shall take place annually, at the first meeting of the board, after a meeting
of the shareholders at which directors are elected, provided that if the appointments are not made, the Directors then serving
as members of the Audit Committee shall continue to service until their successors are appointed.
5.2
The Committee shall review on a periodic basis whether any of its members serve on the audit committees of other public companies.
If any of the Audit Committee members fall into this category, the Committee shall consider the ability of such members to effectively
serve on the Audit Committee and, if it is determined that such members are able to continue serving, the Committee shall record
the reasons for such a decision.
5.3
The Board shall add members to the Audit Committee, on the recommendation of the Governance and Nominating Committee, to fill
vacancies on the Audit Committee, in accordance with the Articles and Bylaws of the Company.
5.4
The Committee may create one or more subcommittees and may delegate, in its discretion, all or a portion of its duties and responsibilities
to such subcommittees.
5.5
The Board shall designate one member of the Committee as the Chair of the Committee (“
Committee Chair
”) and
shall serve until his or her earlier resignation or removal by resolution of the Board, or until he or she ceases to be a Director
of the Company.
Responsibilities
of the Committee Chair
5.6
The responsibilities of the Committee Chair shall include:
|
a)
|
lead
the Committee in undertaking the duties and responsibilities under this Charter;
|
|
b)
|
facilitate
the flow of information to members of the Committee required in a timely fashion;
|
|
c)
|
facilitate
access by members of the Committee to management, as necessary;
|
|
d)
|
chair
Committee meetings;
|
|
e)
|
work
with the Committee members and the Chief Executive Officer (“
CEO
”) to establish the frequency of, and agenda
for, Committee meetings;
|
|
f)
|
lead
the Committee in reviewing and assessing the adequacy of its mandate, evaluate the effectiveness in fulfilling its mandate and
make recommendations to the Governance and Nominating Committee;
|
|
g)
|
maintain
regular liaison with the external auditor, including the lead partner and management, including the CEO and the CFO;
|
|
h)
|
canvass
members for continuous educational needs and, in conjunction with the Board education program, arrange for such education to be
provided to the Committee on a timely basis; and
|
|
i)
|
make
oral and written reports to the Board, on behalf of the Committee, on the activities and recommendations of the Committee (unless
that responsibility is otherwise delegated by the Committee or the Committee Chair to another Committee member) at the next Board
meeting or more regularly, as required.
|
5.7
The Committee Chair shall have the power to delegate his or her authority and duties to an individual member of the Committee
as he or she considers appropriate;
Meetings
5.8
The calling, times and locations of meetings of the Audit Committee and procedures at such meetings, shall be determined from
time to time by the Audit Committee, provided that there shall be a minimum of four meetings per year.
5.9
In general, and subject to the notice provisions in the Company’s Articles and Bylaws, written notice shall be provided
no later than 48 hours prior to the meetings, unless waived by all members of the Audit Committee. Notice of every meeting shall
be given to the external auditors, the Board, the Board Chair and the CEO.
5.10
A Committee member may participate in a Committee meeting by means of such telephonic, electronic or other communication facilities
so as to permit all persons participating in the meeting to communicate adequately with each other. A member participating in
such a meeting by any such means is deemed to be present at the meeting.
5.11
If a Committee Chair is not present at any meeting of a Committee, one of the other members of the Committee present at the meeting
shall be chosen by the Committee to preside at the meeting.
5.12
Each of the members of the Audit Committee, Board Chair, external auditor, CEO or CFO shall be entitled to request that the Chair
of the Audit Committee call a meeting, which shall be held within 48 hours of receipt of such request.
5.13
Agendas for the meetings of the Committee will be developed by the Chair of the Committee and shall be circulated to Committee
members prior to the Committee meetings.
5.14
The Audit Committee shall have the right to require the external auditors, or any member of management, or any employee of the
Company to attend a meeting of the Audit Committee.
5.15
The quorum for a meeting of the Committee is a majority of the members of the Committee, or such greater number as the Committee
shall by resolution determine.
5.16
The affirmative vote of a majority of the members of the Committee participating in any meeting of the Committee is necessary
for the adoption of any resolution.
5.17
The Committee may invite such officers, Directors, and employees of the Company as it may see fit from time to time to assist
the Committee with the carrying out of its duties and responsibilities under this Charter.
5.18
The Committee shall hold regular
in camera
sessions, during which the members of the Committee shall meet in the absence
of management.
5.19
The Committee will meet separately with each of the CEO and the CFO of the Company (at least annually) to review the financial
affairs of the Company.
5.20
The Committee will meet with the external auditor of the Company at least once each year, at such time(s) as it deems appropriate,
to review the external auditor’s examination and report.
5.21
The external auditor must be given reasonable notice of, and has the right to appear before and to be heard at, each meeting of
the Committee.
5.22
The Committee shall report to the Board on its activities after each meeting. The Committee shall report its discussions to the
Board by providing an oral or written report at the next Board meeting.
5.23
The Committee will report, at least annually, to the Board regarding the Committee’s examinations and recommendations.
5.24
The Committee will maintain written minutes of its meetings, which minutes will be filed with the minutes of the meetings of the
Board.
6.1 The
Committee shall on an annual basis:
|
a)
|
review
and assess the adequacy of the Charter and, if necessary, make recommendations to the Board with respect to its modification or
amendment;
|
|
b)
|
undertake
a regular performance evaluation of the Committee and compare the performance of the Committee to the Charter in a manner the
Committee deems appropriate; and
|
|
c)
|
report
the results of the performance evaluation to the Board, which may take the form of an oral or written report by the Committee
Chair or any other member of the Committee designated by the Committee Chair to make the report.
|
Schedule
“B”
RESOLUTION
AUTHORIZING THE NEW CLASS A OF COMMON SHARES
“BE IT RESOLVED AS A SPECIAL RESOLUTION THAT THE SHAREHOLDERS
AUTHORIZE AND APPROVE:
a) the amendment of the articles of incorporation of the Company
(as amended) to add to the authorized capital of the Company a new class of shares, being Class A of common shares (the “
Class
A Common Shares
”) that would be issuable in one or more series in the discretion of the Board of Directors of the Company,
with the Board of Directors having the discretion:
i) to specify the number of Class A Common Shares available
to be issued in any series;
ii) to delineate the voting rights applicable to a series
of Class A Common Shares prior to issue,
provided
that the voting rights attributed to any Class A Common Shares cannot
be equal to or greater than those conferred on the common shares; and
iii) to delineate the terms and conditions under which
the shares of a series of Class A Common Shares are convertible into common shares,
provided
that, for all series of Class
A Common Shares, upon conversion the holder cannot receive more than one (1) common share for each Class A Common Share held;
provided further
that except in respect of voting rights
and convertibility into common shares, the Class A Common Shares would otherwise be equal in all respects to the common shares
of the Company;
b) the amendment to the Company’s articles of incorporation,
as amended, that would authorize the creation and issuance of Class A Common Shares would authorize the Company to issue an unlimited
number of Class A Common Shares;
c) that any one director or officer of the Company may execute (whether
under the corporate seal of the Company or otherwise) and deliver all such documents and to do all such other acts and things as
such director or officer may determine to be necessary or advisable in connection with these resolutions, the execution of any
such document or the doing of any such other act or thing by any director or officer of the Company being conclusive evidence of
such determination; and
(d) that the Board of Directors may determine in its sole discretion
if and when to implement the foregoing amendment to the Company’s articles of incorporation, as amended, and to determine
not to implement that amendment, in all cases without further approval of the shareholders of the Company.”
Schedule
“C”
REPORT OF
THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The
Audit Committee of the Board has furnished the following report on its activities for the fiscal year ended December
31, 2018. The report is not deemed to be “soliciting material” or “filed” with the
SEC or subject to the SEC’s proxy rules or to the liabilities of Section 18 of the U.S. Exchange Act, and the report
shall not be deemed to be incorporated by reference into any prior or subsequent filing under the U.S. Securities Act of 1933,
as amended, or the U.S. Exchange Act, except to the extent that the Company specifically incorporates it by reference
into any such filing.
The
Audit Committee oversees the financial reporting process on behalf of the Board. Management has the primary responsibility for
the financial reporting process, principles and internal controls as well as preparation of the Company’s financial statements.
For the fiscal year ended December 31, 2018, the members of the Audit Committee were Andrew Wilder, Bryan Murphy and George Glasier.
Bryan Murphy is the only member of the Audit Committee who qualifies as an independent director as defined by the applicable Nasdaq
and SEC rules.
The Audit Committee met telephonically
with the Company’s Chief Financial Officer and reviewed and discussed with him the Company’s audited financial statements
and the adequacy of the Company’s internal controls. They discussed the independent auditor’s audits and the overall
qualify of the Company’s financial reporting.
The Audit Committee monitored the
independence and performance of the independent auditors. The Company’s independent auditors provided the Audit Committee
with the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent auditors’
communications with the Audit Committee concerning independence, which the Audit Committee has reviewed. The Audit Committee did
not discuss with the independent auditors any matters relating to their independence or the matters required to be discussed by
the statement on Auditing Standards adopted by the Public Company Accounting Oversight Board and codified as AS1301. Based upon
the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements
be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, for filing with the
SEC.
Date:
May ●, 2019
Andrew
Wilder (Chair)
Bryan
Murphy
George
Glasier
Schedule
“D”
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
General
Western was incorporated in December, 2006 under the Ontario
Business Corporations Act. During 2014, the Company acquired 100% of the issued and outstanding shares of PRM, a Delaware limited
liability company. The transaction constituted a reverse takeover of Western by PRM. After obtaining appropriate shareholder approvals,
the Company subsequently reconstituted its Board of Director and senior management team and changed its name to Western Uranium
Corporation. The Company’s name was changed again in October 2018 to Western Uranium & Vanadium Corp.
On
September 16, 2015, Western completed its acquisition of Black Range, an Australian company that was listed on the Australian
Securities Exchange (“ASX”) until the acquisition was completed. Western and Black Range entered into a definitive
Merger Implementation Agreement, pursuant to which Western agreed to acquire all of the issued and outstanding shares of Black
Range.
Western
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” and trade on the United States OTCQX Best Market under the ticker symbol “WSTRF.”
Its principal business activity is the acquisition and development of uranium resource properties principally in the states of
Utah and Colorado, in the United States of America.
Recent
Developments
May
2018 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 common share and a warrant to purchase one-half of one common share. Each warrant is exercisable at a price of CAD $1.15
and expires two years from the date of issuance.
July
2018 Private Placement
On July 27, 2018, the Company completed a private placement
of 2,525,526 units at a price of CAD $0.68 (USD $0.52) per unit for gross proceeds of CAD $1,717,358 (USD $1,319,096). Each unit
consisted of one common share and a warrant to purchase one-half of one common share. Each warrant is exercisable at a price of
CAD $1.15 and expires two years from the date of issuance.
August
2018 Private Placement
On August 9, 2018, the Company completed a private placement
of 1,907,088 units at a price of CAD $0.68 (USD $0.52) per unit for gross proceeds of CAD $1,296,820 (USD $1,000,000). Each unit
consisted of one common share and a warrant to purchase one-half of one common share. Each warrant is exercisable at a price of
CAD $1.15 and expires two years from the date of issuance.
Ablation
Licensing
During
2016, Western submitted documentation to the CDPHE for a determination ruling regarding the type of license which may be required
for the application of Ablation at the Sunday Mine Complex within the state of Colorado. During May and June of 2016, CDPHE held
four public meetings in several cities in Colorado as part of the process. On July 22, 2016 CDPHE closed the comment period. In
connection with this matter, the CDPHE consulted with the United States Nuclear Regulatory Commission (“NRC”). In
response, the CDPHE received an advisory opinion dated October 16, 2016, which did not contain support for the NRC’s opinion
and with which Western’s regulatory counsel does not agree. NRC’s advisory opinion recommends that Ablation should
be regulated as a milling operation but did recognize that there may be exemptions to certain milling regulatory requirements
due to the benign nature of the non-uranium bearing sands produced after Ablation is completed on uranium-bearing ores. On December
1, 2016, the CDPHE issued a determination that the proposed ablation operations at the Sunday Mine must be regulated by the CDPHE
through a milling license. The 2018 increase in the blended uranium/vanadium price has brought the Company closer to production.
During 2017/2018, the Company’s regulatory counsel prepared significant documentation in preparation for a prospective submission.
Letter
of Intent with Pinon Ridge Mill
The
Company entered into a letter of intent with Pinon Ridge Corporation for use of its Ablation at the permitted uranium recovery
facilities at the Pinon Ridge Mill site. The letter of intent provided for the processing of all of Western’s ore produced
by its mines in the region at the mill site to produce U308 and vanadium utilizing both the application of Ablation mining technology
and traditional milling techniques, at a cost to be determined in a definitive agreement. The Pinon Ridge Mill license is held
by Pinon Ridge Resources Corporation, a wholly owned subsidiary of Pinon Ridge Corporation, which is owned by Mr. George Glasier,
our Chief Executive Officer and a director, Mr. Andrew Wilder, a director, and Mr. Russell Fryer, a former executive chairman
and director. On February 22, 2019, the Company and Pinon Ridge Corporation cancelled and released each other from obligations
under the letter of intent.
Incentive
Stock Option Plan
The
Company maintains an Incentive Stock Plan (the “Plan”) which permits the granting of stock options as incentive compensation.
See Item 10, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters – Equity
Compensation Plan Information,” for more detailed information about the Plan.
Grant
of Stock Options
On October 6, 2017, the Company granted options under the Plan
for the purchase of an aggregate of 825,000 common shares to five individuals consisting of directors and officers of the Company.
The options have a five year term, an exercise price of CAD $1.60 (USD $1.28 as of December 31, 2018), and vest equally in thirds
commencing initially on the date of grant and thereafter on October 31, 2017, and March 31, 2018.
On February 8, 2018, the Company granted options under the plan
for the purchase of an aggregate of 100,000 common shares to a director. The options have an exercise price of CAD $1.00 (US $0.73
as of December 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.
On September 24, 2018, the Company granted options under the
plan for the purchase of an aggregate of 983,000 common shares to several officers, directors, and consultants. The options have
an exercise price of CAD $2.15 (US $1.58 as of December 31, 2018) and vest equally in three installments on the date of grant,
on October 31, 2018, and on March 31, 2019. One third of the options expire on September 24, 2023, one third expire on October
31, 2023, and the remaining one third expire on March 31, 2024.
Year
Ended December 31, 2018 as Compared to the Year Ended December 31, 2017
The
following table presents the Company’s financial results for the years ended December 31, 2018 and 2017.
|
|
For the Year Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Revenue
|
|
|
|
|
|
|
Lease revenue
|
|
$
|
48,245
|
|
|
$
|
20,000
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
Mining expenditures
|
|
|
177,715
|
|
|
|
154,724
|
|
Professional fees
|
|
|
426,020
|
|
|
|
529,854
|
|
General and administrative
|
|
|
1,252,334
|
|
|
|
723,387
|
|
Consulting fees
|
|
|
200,251
|
|
|
|
320,534
|
|
Total operating expenses
|
|
|
2,056,320
|
|
|
|
1,728,449
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(2,008,075
|
)
|
|
|
(1,708,499
|
)
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
36,124
|
|
|
|
60,232
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(2,044,199
|
)
|
|
|
(1,768,731
|
)
|
|
|
|
|
|
|
|
|
|
Income
tax benefit
|
|
|
-
|
|
|
|
(1,354,443
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(2,044,199
|
)
|
|
|
(414,288
|
)
|
|
|
|
|
|
|
|
|
|
Other Comprehensive loss
|
|
|
|
|
|
|
|
|
Foreign exchange gain
|
|
|
5,698
|
|
|
|
2,406
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Loss
|
|
$
|
(2,038,501
|
)
|
|
$
|
(411,882
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted
|
|
$
|
(0.09
|
)
|
|
$
|
(0.02
|
)
|
Summary:
Our
consolidated net loss for the years ended December 31, 2018 and 2017 was $2,044,199 and $414,288 or $0.09 and $0.02 per share,
respectively. The principal components of these year over year changes are discussed below.
Our
comprehensive loss for the years ended December 31, 2018 and 2017 was $2,038,501 and $411,882, respectively.
Revenue
Our
revenue for the years ended December 31, 2018 and 2017 was $48,245 and $20,000, respectively. The revenue in 2018 resulted from
lease revenue pursuant to a July 18, 2017 lease agreement, February 2, 2018 easement, and July 1, 2018 right-of-way agreement.
The counterparties are from the oil and gas industry.
Mining
Expenditures
Mining
expenditures for the year ended December 31, 2018 were $177,715 as compared to $154,724 for the year ended December 31, 2017.
The increase in mining expenditures of $22,991, or 14.9% was principally attributable to a decrease in ablation expenditures of
$12,229, an increase of maintenance fees of $10,576 and an increase of lease abandonment costs of $20,000.
Professional
Fees
Professional
fees for the year ended December 31, 2018 were $426,020 as compared to $529,854 for the year ended December 31, 2017. The decrease
in professional fees of $103,834, or 19.6% was principally due to a decrease in accounting costs of $28,168, audit costs of $62,806,
and legal services of $39,622.
General
and Administrative
General
and administrative expenses for the year ended December 31, 2018 were $1,252,334 as compared to $723,387 for the year ended December
31, 2017. The increase in general and administrative expense of $528,947, or 73% is due to an increase of $287,225 in stock-based
compensation, $128,323 in payroll resulting from formerly consultant compensation being moved onto payroll, $25,661 in investor
relation costs from increased conference participation and investor engagement and $34,711 in increased board of director fee
expenses. The increase in stock-based compensation derives from the increase in the quantity of stock options awarded in 2018
and several Black Scholes valuation factors, including the stock price appreciation, which increased the per stock option value
during 2018. The addition of a new director in February 2018 resulted in the award of additional stock options during calendar
year 2018.
Consulting
Fees
Consulting
fees for the year ended December 31, 2018 were $200,251 as compared to $320,534 for the year ended December 31, 2017. The decrease
in consulting fees of $120,283, or 37.5% was principally related to a decrease in consultant utilization and former consultant
compensation being moved onto payroll.
Interest
Expense, net
Interest
expense, net, for the year ended December 31, 2018 was $36,124 as compared to $60,232 for the year ended December 31, 2017. The
decrease of interest expense, net, of $24,108, or 40% was attributable to the full repayment of previously outstanding promissory
notes during 2018 and 2017.
Foreign
Exchange
Foreign
exchange gain for the year ended December 31, 2018 was $5,698 as compared to $2,406 for the year ended December 31, 2017. The
increase of the foreign exchange gain of $3,292, or 137% is primarily due to the U.S. Dollar weakening against the Canadian Dollar
during the current quarter while holding cash balances in Canadian Dollars.
Liquidity
and Capital Resources
The
Company’s cash balance as of December 31, 2018 was $909,865. The Company’s cash position is highly dependent on its
ability to raise capital through the issuance of debt and equity and its management of expenditures for mining development and
for fulfillment of its public company reporting responsibilities. Management believes that in order to finance the development
of the mining properties and Ablation, the Company will be required to raise additional capital by way of debt and/or equity.
The Company expects to require additional capital in 2019 in order to open the Sunday Mine Complex to complete an underground
vanadium work project. This outlook is based on the Company’s current financial position and is subject to change if opportunities
become available based on current exploration program results and/or external opportunities.
Net
cash used in operating activities
Net
cash used in operating activities was $1,645,265 for the year ended December 31, 2018, as compared with $1,665,734 for the year
ended December 31, 2017. Of the $1,645,265 in net cash used in operating activities, $2,044,199 is derived from our net loss before
non-cash adjustments. During the year ended December 31, 2018, $76,445 represented a decrease in accounts payable and accrued
liabilities, $34,235 represented a decrease in prepaid expenses, $27,824 represented an increase in the reclamation liability,
and $410,088 represented non-cash stock based compensation. The reclamation liability increase was primarily due to an increase
in reclamation requirements by the state of Colorado.
Net
cash used in investing activities
During
the year ended December 31, 2018, the Company purchased $36,502 in property and equipment. This capital expenditure represents
the initiation of expenditures needed to re-open the Sunday Mine Complex. During the year ended December 31, 2017, the Company
had written down $215,976 related to the Alaska reclamation liability and the corresponding reclamation bond.
Net
cash provided by financing activities
Net
cash provided by financing activities for the year ended December 31, 2018 was $2,265,499 as compared to $1,280,261 for the year
ended December 31, 2017. For the year ended December 31, 2018, the net cash provided by financing activities consisted of $2,703,331
from the proceeds received in our private placements and $62,168 from the exercise of stock options, offset by $500,000 used to
repay the EFHC promissory note, which was issued for the acquisition of the original Colorado and Utah resource package.
Reclamation
Liability
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 December 31, 2018 and December 31, 2017,
to be approximately $889,030 and $820,434, respectively. During the years ended December 31, 2018 and 2017, the accretion of the
reclamation liabilities was $11,030 and $9,158, 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 December 31, 2018 and December 31, 2017 of $224,645 and $196,281, respectively. The gross reclamation
liabilities as of December 31, 2018 and 2017 are secured by certificates of deposit in the amount of $889,030 and $820,434, respectively.
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 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 year ended December 31, 2018 and 2017, the Company recognized aggregate revenue of $48,245 and $20,000, respectively, under
these oil and gas lease arrangements.
Related
Party Transactions
The
Company has transacted with related parties pursuant to service arrangements in the ordinary course of business, as follows:
On
April 1, 2017, the Company entered into a new consulting agreement with a United States limited liability company owned by a person
who was 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 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 (“Seller”), 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 $352,361 as of December 31, 2018) 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 $352,361 and $390,350 as of December 31, 2018 and 2017,
respectively.
Going
Concern
The
Company has incurred continuing losses from its operations and as of December 31, 2018, the Company had an accumulated deficit
of $6,584,342 and working capital of $597,669.
Since inception, the Company has met its liquidity requirements
principally through the issuance of notes and the sale of its common shares.
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 the accompanying financial statements. The accompanying consolidated financial statements
do not include any adjustments that might result from the outcome of these uncertainties.
Off
Balance Sheet Arrangements
As
of December 31, 2018, there were no off-balance sheet transactions. The Company has not entered into any specialized financial
agreements to minimize its investment risk, currency risk or commodity risk.
Critical
Accounting Estimates and Policies
The
preparation of these consolidated financial statements requires management to make certain estimates, judgments and assumptions
that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts
of expenses during the reporting period.
Significant assumptions about the future and other sources of
estimation uncertainty that management has made at the end of the reporting period, that could result in a material adjustment
to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, include, but
are not limited to, the following: fair value of transactions involving common shares, assessment of the useful life and evaluation
for impairment of intangible assets, valuation and impairment assessments on mineral properties, deferred contingent consideration,
the reclamation liability, valuation of stock-based compensation, valuation of available-for-sale securities and valuation of long-term
debt, HST and asset retirement obligations. Other areas requiring estimates include allocations of expenditures, depletion and
amortization of mineral rights and properties.
Schedule
“E”
WESTERN
URANIUM & VANADIUM CORP. AND SUBSIDIARIES
CONSOLIDATED
FINANCIAL STATEMENTS
TABLE
OF CONTENTS
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Western Uranium & Vanadium Corp.
Opinion on the Consolidated Financial
Statements
We have audited the accompanying consolidated balance sheets of Western Uranium & Vanadium Corp. (the “Company”)
as of December 31, 2018 and 2017, and the related consolidated statements of operations and other comprehensive loss, shareholders’
equity and cash flows for the years then ended and the related notes thereto (collectively referred to as the consolidated
financial statements.
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial
position of the Company, as of December 31, 2018 and 2017, and the results of its consolidated operations and its consolidated
cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Material Uncertainty Related to Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
As discussed in Note 2 to the consolidated financial statements, the Company has incurred continuing losses from operations
and is dependent upon future sources of equity or debt financing in order to fund its operations. These conditions raise substantial
doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to those matters
are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required
to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining,
on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our
opinion.
Chartered Professional
Accountants
Licensed Public Accountants
We have served as the Company’s auditor
since 2015
Mississauga, Ontario
April 1, 2019
WESTERN URANIUM & VANADIUM CORP.
CONSOLIDATED BALANCE SHEETS
(Stated in $USD)
|
|
As of December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
909,865
|
|
|
$
|
427,020
|
|
Prepaid expenses
|
|
|
127,122
|
|
|
|
190,435
|
|
Marketable securities
|
|
|
4,781
|
|
|
|
3,123
|
|
Other current assets
|
|
|
93,841
|
|
|
|
64,763
|
|
Total current assets
|
|
|
1,135,609
|
|
|
|
685,341
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
889,030
|
|
|
|
820,434
|
|
Mineral properties
|
|
|
11,681,720
|
|
|
|
11,645,218
|
|
Ablation intellectual property
|
|
|
9,488,051
|
|
|
|
9,488,051
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
23,194,410
|
|
|
$
|
22,639,044
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
493,320
|
|
|
$
|
602,016
|
|
Current portion of notes payable
|
|
|
-
|
|
|
|
487,450
|
|
Deferred revenue, current portion
|
|
|
44,620
|
|
|
|
40,000
|
|
Total current liabilities
|
|
|
537,940
|
|
|
|
1,129,466
|
|
|
|
|
|
|
|
|
|
|
Reclamation liability
|
|
|
224,645
|
|
|
|
196,821
|
|
Deferred tax liability
|
|
|
2,708,887
|
|
|
|
2,708,887
|
|
Deferred contingent consideration
|
|
|
352,361
|
|
|
|
390,350
|
|
Deferred revenue, net of current portion
|
|
|
47,720
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
3,871,553
|
|
|
|
4,485,524
|
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity
|
|
|
|
|
|
|
|
|
Common stock, no par value, unlimited authorized shares, 25,977,143 and
20,510,806 shares issued as of December 31, 2018 and December 31, 2017, respectively and 25,976,837 and 20,510,500 shares
outstanding as of December 31, 2018 and December 31, 2017, respectively
|
|
|
25,865,367
|
|
|
|
22,657,529
|
|
Treasury shares, 306 and 306 shares held in treasury as of December 31,
2018 and December 31, 2017, respectively
|
|
|
-
|
|
|
|
-
|
|
Accumulated deficit
|
|
|
(6,584,342
|
)
|
|
|
(4,540,143
|
)
|
Accumulated other comprehensive income
|
|
|
41,832
|
|
|
|
36,134
|
|
Total shareholders’ equity
|
|
|
19,322,857
|
|
|
|
18,153,520
|
|
Total liabilities and shareholders’ equity
|
|
$
|
23,194,410
|
|
|
$
|
22,639,044
|
|
WESTERN URANIUM & VANADIUM CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
(Stated in $USD)
|
|
For the Years Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Revenues
|
|
|
|
|
|
|
Lease revenue
|
|
$
|
48,245
|
|
|
$
|
20,000
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
Mining expenditures
|
|
|
177,715
|
|
|
|
154,724
|
|
Professional fees
|
|
|
426,020
|
|
|
|
529,854
|
|
General and administrative
|
|
|
1,252,334
|
|
|
|
723,387
|
|
Consulting fees
|
|
|
200,251
|
|
|
|
320,534
|
|
Total operating expenses
|
|
|
2,056,320
|
|
|
|
1,728,499
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(2,008,075
|
)
|
|
|
(1,708,499
|
)
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
36,124
|
|
|
|
60,232
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(2,044,199
|
)
|
|
|
(1,768,731
|
)
|
|
|
|
|
|
|
|
|
|
Income tax benefit
|
|
|
-
|
|
|
|
(1,354,443
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(2,044,199
|
)
|
|
|
(414,288
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
Foreign exchange gain
|
|
|
5,698
|
|
|
|
2,406
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(2,038,501
|
)
|
|
$
|
(411,882
|
)
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted
|
|
$
|
(0.09
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
23,016,594
|
|
|
|
19,569,504
|
|
WESTERN URANIUM & VANADIUM CORP.
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Stated in $USD)
|
|
Common Stock
|
|
|
Treasury Shares
|
|
|
Subscription
|
|
|
Accumulated
|
|
|
Accumulated Other Comprehensive
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Receivable
|
|
|
Deficit
|
|
|
Income
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2017
|
|
|
18,886,497
|
|
|
$
|
20,927,360
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
(28,429
|
)
|
|
$
|
(4,125,855
|
)
|
|
$
|
33,728
|
|
|
$
|
16,806,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares to vendors and consultants
|
|
|
53,788
|
|
|
|
83,338
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
83,338
|
|
Receipt of subscription receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,429
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,429
|
|
Sale of 634,424 units on March 31, 2017 in private placement
|
|
|
634,424
|
|
|
|
801,160
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
801,160
|
|
Sale of 509,763 units on September 15, 2017 in private placement
|
|
|
509,763
|
|
|
|
343,105
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
343,105
|
|
Sale of 426,334 units on December 29, 2017 in private placement
|
|
|
426,334
|
|
|
|
293,131
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
293,131
|
|
Acquisition of shares into treasury
|
|
|
(306
|
)
|
|
|
-
|
|
|
|
306
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Stock based compensation - stock options
|
|
|
-
|
|
|
|
209,435
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
209,435
|
|
Foreign exchange gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,406
|
|
|
|
2,406
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(414,288
|
)
|
|
|
-
|
|
|
|
(414,288
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2017
|
|
|
20,510,500
|
|
|
$
|
22,657,529
|
|
|
|
306
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(4,540,143
|
)
|
|
$
|
36,134
|
|
|
$
|
18,153,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of 909,622 units on May 4, 2018 in private placement
|
|
|
909,622
|
|
|
|
457,608
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
457,608
|
|
Sale of 2,525,526 units on July 27, 2018 in private placement
|
|
|
2,525,526
|
|
|
|
1,272,210
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,272,210
|
|
Sale of 1,907,088 units on August 9, 2018 in private placement
|
|
|
1,907,088
|
|
|
|
973,513
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
973,513
|
|
Issuance of 60,832 shares of common stock in exchange of accounts payable
|
|
|
60,832
|
|
|
|
32,251
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,251
|
|
Exercise of warrants
|
|
|
63,269
|
|
|
|
62,168
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
62,168
|
|
Stock based compensation - stock options
|
|
|
-
|
|
|
|
410,088
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
410,088
|
|
Foreign exchange gain
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,698
|
|
|
|
5,698
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,044,199
|
)
|
|
|
-
|
|
|
|
(2,044,199
|
)
|
Balance as of December 31, 2018
|
|
|
25,976,837
|
|
|
$
|
25,865,367
|
|
|
|
306
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(6,584,342
|
)
|
|
$
|
41,832
|
|
|
$
|
19,322,857
|
|
WESTERN URANIUM & VANADIUM CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in $USD)
|
|
For the Years Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,044,199
|
)
|
|
$
|
(414,288
|
)
|
Reconciliation of net loss to cash used in operating activities:
|
|
|
|
|
|
|
|
|
Accretion of and additions to reclamation liability
|
|
|
27,824
|
|
|
|
9,158
|
|
Amortization of debt discount on notes payable
|
|
|
12,550
|
|
|
|
21,521
|
|
Stock based compensation
|
|
|
410,088
|
|
|
|
209,435
|
|
Change in foreign exchange on marketable securities
|
|
|
(1,658
|
)
|
|
|
(147
|
)
|
Deferred income taxes
|
|
|
-
|
|
|
|
(1,354,443
|
)
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
34,235
|
|
|
|
(152,417
|
)
|
Accounts payable and accrued liabilities, net of shares issued for accounts payable
|
|
|
(76,445
|
)
|
|
|
(84,553
|
)
|
Deferred revenue
|
|
|
(7,660
|
)
|
|
|
100,000
|
|
Net cash used in operating activities
|
|
|
(1,645,265
|
)
|
|
|
(1,665,734
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(36,502
|
)
|
|
|
-
|
|
Forfeiture of reclamation bond
|
|
|
-
|
|
|
|
(215,976
|
)
|
Net cash used in investing activities
|
|
|
(36,502
|
)
|
|
|
(215,976
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
Payment of Nueco Note
|
|
|
-
|
|
|
|
(185,564
|
)
|
Payment of EFHC Note
|
|
|
(500,000
|
)
|
|
|
-
|
|
Issuance of Common shares, net of offering costs
|
|
|
2,703,331
|
|
|
|
1,437,396
|
|
Proceeds from the exercise of warrants
|
|
|
62,168
|
|
|
|
-
|
|
Receipt of subscription receivable
|
|
|
-
|
|
|
|
28,429
|
|
Net cash provided by financing activities
|
|
|
2,265,499
|
|
|
|
1,280,261
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate on cash
|
|
|
(32,291
|
)
|
|
|
20,756
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and restricted cash
|
|
|
551,441
|
|
|
|
(580,693
|
)
|
|
|
|
|
|
|
|
|
|
Cash and restricted cash - beginning
|
|
|
1,247,454
|
|
|
|
1,828,147
|
|
|
|
|
|
|
|
|
|
|
Cash and restricted cash - ending
|
|
$
|
1,798,895
|
|
|
$
|
1,247,454
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
909,865
|
|
|
$
|
427,020
|
|
Restricted cash
|
|
|
889,030
|
|
|
|
820,434
|
|
Total
|
|
$
|
1,798,895
|
|
|
$
|
1,247,454
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for accounts payable and accrued expenses
|
|
$
|
32,251
|
|
|
$
|
83,338
|
|
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
NOTE
1 – BUSINESS
Nature
of operations
Western
Uranium & Vanadium Corp. (“Western” or the “Company”, formerly Western Uranium Corporation) 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 and vanadium 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.
On June 29, 2018, the shareholders of the Company approved
the name change of the Company from “Western Uranium Corporation” to “Western Uranium & Vanadium Corp.”
The name change became effective in Ontario, Canada on October 1, 2018; thereafter on October 4, 2018 Western’s shares started
trading under the new name on the CSE and OTCQX and the Company announced the name change by news release.
Note
2 – Liquidity and going concern
The
Company has incurred continuing losses from its operations and as of December 31, 2018, the Company had an accumulated deficit
of $6,584,342 and working capital of $597,669.
Since
inception, the Company has met its liquidity requirements principally through the issuance of notes and the sale of its shares
of common stock.
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 common share and a warrant to purchase one-half of one common share. Each warrant is exercisable at a price of CAD $1.15
and expires two years from the date of issuance.
On July 27, 2018, the Company completed a private placement
of 2,525,526 units at a price of CAD $0.68 (USD $0.52) per unit for gross proceeds of CAD $1,717,358 (USD $1,319,096). Each unit
consisted of one common share and a warrant to purchase one-half of one common share. Each warrant is exercisable at a price of
CAD $1.15 and expires two years from the date of issuance.
On August 9, 2018, the Company completed a private placement of 1,907,088 units at a price of CAD $0.68
(USD $0.52) per unit for gross proceeds of CAD $1,296,820 (USD $1,000,000). Each unit consisted of one common share and a warrant
to purchase one-half of one common share. Each warrant is exercisable at a price of CAD $1.15 and expires two years from the date
of issuance.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
Note
2 – Liquidity and going concern
,
CONTINUED
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 consolidated financial statements. The accompanying consolidated financial statements
do not include any adjustments that might result from the outcome of these uncertainties.
Note
3 – SUMMARY OF Significant Accounting Policies
Basis
of Presentation and Principles of Consolidation
These
consolidated financial statements are presented in United States dollars and have been prepared in accordance with United States
generally accepted accounting principles (“U.S. GAAP”).
The
accompanying consolidated financial statements include the accounts of Western and its wholly-owned subsidiaries, Western Uranium
Corp. (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.
Exploration
Stage
In
accordance with U.S. GAAP, expenditures relating to the acquisition of mineral rights are initially capitalized as incurred while
exploration and pre-extraction expenditures are expensed as incurred until such time the Company exits the Exploration Stage by
establishing proven or probable reserves. Expenditures relating to exploration activities such as drill programs to search for
additional mineralized materials are expensed as incurred. Expenditures relating to pre-extraction activities such as the construction
of mine wellfields, ion exchange facilities and disposal wells are expensed as incurred until such time proven or probable reserves
are established for that uranium project, after which subsequent expenditures relating to mine development activities for that
particular project are capitalized as incurred.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
Note
3 – SUMMARY OF Significant Accounting Policies, Continued
Exploration
Stage, continued
Companies
in the Production Stage as defined under Industry Guide 7, having established proven and probable reserves and exited the Exploration
Stage, typically capitalize expenditures relating to ongoing development activities, with corresponding depletion calculated over
proven and probable reserves using the units-of-production method and allocated to future reporting periods to inventory and,
as that inventory is sold, to cost of goods sold. The Company is in the Exploration Stage which has resulted in the Company reporting
larger losses than if it had been in the Production Stage due to the expensing, instead of capitalizing, of expenditures relating
to ongoing mill and mine development activities. Additionally, there would be no corresponding amortization allocated to future
reporting periods of the Company since those costs would have been expensed previously, resulting in both lower inventory costs
and cost of goods sold and results of operations with higher gross profits and lower losses than if the Company had been in the
Production Stage. Any capitalized costs, such as expenditures relating to the acquisition of mineral rights, are depleted over
the estimated extraction life using the straight-line method. As a result, the Company’s consolidated financial statements
may not be directly comparable to the financial statements of companies in the Production Stage.
Use
of Estimates
The
preparation of these 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 & Vanadium Corp. (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.
Segment
Information
The
Company determines its reporting units in accordance with FASB ASC 280, “
Segment Reporting
” (“ASC 280”).
The Company evaluates a reporting unit by first identifying its operating segments under ASC 280. The Company then evaluates each
operating segment to determine if it includes one or more components that constitute a business. If there are components within
an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must
be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating
segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated. The
Company has one operating segment and reporting unit. The Company operates in one reportable business segment; the Company is
in the business of exploring, developing, mining and the production of its uranium and vanadium resource properties, including
the utilization of the Company’s ablation technology in its mining processes. The Company is organized and operated as one
business. Management reviews its business as a single operating segment, using financial and other information rendered meaningful
only by the fact that such information is presented and reviewed in the aggregate.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Cash
and Cash Equivalents
The
Company considers all highly-liquid instruments with an original maturity of three months or less at the time of issuance to be
cash equivalents. As of December 31, 2018 and 2017, the Company had no cash equivalents.
Marketable
Securities
The
Company classifies its marketable securities as available-for-sale securities, which are carried at their fair value based on
the quoted market prices of the securities with unrealized gains and losses reported as accumulated comprehensive income (loss),
a separate component of shareholders’ equity. Realized gains and losses on available-for-sale securities are included in
net earnings in the period earned or incurred.
Restricted
Cash
Certain
cash balances are restricted as they relate to deposits with banks that have been assigned to state reclamation authorities in
the United States to secure various reclamation guarantees with respect to mineral properties in Utah, Alaska and Colorado. As
these funds are not available for general corporate purposes and secure the long term reclamation liability (see Note 6), they
have been separately disclosed and classified as long-term.
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.
Fair
Values of Financial Instruments
The
carrying amounts of cash, 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:
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Fair
Values of Financial Instruments
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 December 31, 2018
|
|
$
|
4,781
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities as of December 31, 2017
|
|
$
|
3,123
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Mineral
Properties
Acquisition
costs of mineral properties are capitalized as incurred while exploration and pre-extraction expenditures are expensed as incurred
until such time the Company exits the Exploration Stage by establishing proven or probable reserves, as defined by the SEC under
Industry Guide 7, through the completion of a “final” or “bankable” feasibility study. Expenditures relating
to exploration activities are expensed as incurred and expenditures relating to pre-extraction activities are expensed as incurred
until such time proven or probable reserves are established for that project, after which subsequent expenditures relating to
development activities for that particular project are capitalized as incurred.
Where
proven and probable reserves have been established, the project’s capitalized expenditures are depleted over proven and
probable reserves upon commencement of production using the units-of-production method. Where proven and probable reserves have
not been established, such capitalized expenditures are depleted over the estimated production life upon commencement of extraction
using the straight-line method. The Company has not established proven or probable reserves for any of its projects.
The
carrying values of the mineral properties are assessed for impairment by management.
Impairment
of Long-Lived Assets
The
Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related
carrying amounts may not be recoverable. Impairment is considered to exist if the total estimated future cash flows on an undiscounted
basis are less than the carrying amount of the assets. An impairment loss is measured and recorded based on discounted estimated
future cash flows or upon an estimate of fair value that may be received in an exchange transaction. Future cash flows are estimated
based on estimated quantities of recoverable minerals, expected U3O8 prices (considering current and historical prices, trends
and related factors), production levels, operating costs of production and capital and restoration and reclamation costs, based
upon the projected remaining future uranium production from each project. The Company’s long-lived assets (which include
its mineral assets and ablation intellectual property) were acquired during the end of 2014 and in 2015 in arms-length transactions.
As of December 31, 2018, the Company evaluated the total estimated future cash flows on an undiscounted basis for its mineral
properties and ablation intellectual property and determined that no impairment was deemed to exist. Estimates and assumptions
used to assess recoverability of the Company’s long-lived assets and measure fair value of our uranium properties are subject
to risk uncertainty. Changes in these estimates and assumptions could result in the impairment of its long-lived assets. In estimating
future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent
of future cash flows from other asset groups.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
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.
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 December 31, 2018 and December 31, 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 years ended December 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 2018 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 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 has finalized the accounting for the effects of the Tax
Act during 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.
Restoration
and Remediation Costs (Asset Retirement Obligations)
Various
federal and state mining laws and regulations require the Company to reclaim the surface areas and restore underground water quality
for its mine projects to the pre-existing mine area average quality after the completion of mining.
Future
reclamation and remediation costs, which include extraction equipment removal and environmental remediation, are accrued at the
end of each period based on management’s best estimate of the costs expected to be incurred for each project. Such estimates are
determined by the Company’s engineering studies which consider the costs of future surface and groundwater activities, current
regulations, actual expenses incurred, and technology and industry standards.
In
accordance with ASC 410, Asset Retirement and Environmental Obligations, the Company capitalizes the measured fair value of asset
retirement obligations to mineral properties. The asset retirement obligations are accreted to an undiscounted value until the
time at which they are expected to be settled. The accretion expense is charged to earnings and the actual retirement costs are
recorded against the asset retirement obligations when incurred. Any difference between the recorded asset retirement obligations
and the actual retirement costs incurred will be recorded as a gain or loss in the period of settlement.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Restoration
and Remediation Costs (Asset Retirement Obligations), continued
At
each reporting period, the Company reviews the assumptions used to estimate the expected cash flows required to settle the
asset retirement obligations, including changes in estimated probabilities, amounts and timing of the settlement of the asset
retirement obligations, as well as changes in the legal obligation requirements at each of its mineral properties. Changes in
any one or more of these assumptions may cause revision of asset retirement obligations for the corresponding
assets.
Deferred
Financing Costs
Deferred
financing costs represent costs incurred in connection with the issuance of debt. Once the associated debt instrument is issued,
these costs would be recorded as a debt discount and amortized to interest expense using the effective interest method over the
term of the related debt instrument. Upon the abandonment of a pending financing transaction, the related deferred financing costs
would be charged to general and administrative expense.
The
Company may also issue warrants or other equity instruments in connection with the issuance of debt instruments. The equity instruments
are recorded at their relative fair market value on the date of issuance which results in a debt discount which is amortized to
interest expense using the effective interest method.
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 & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
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
years ended December 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 Years
Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Warrants to purchase shares of common stock
|
|
|
6,798,401
|
|
|
|
4,095,563
|
|
Options to purchase shares of common stock
|
|
|
2,416,664
|
|
|
|
1,846,996
|
|
Total potentially dilutive securities
|
|
|
9,215,065
|
|
|
|
5,942,559
|
|
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 consolidated financial statements, other than those disclosed below.
In June 2016, the FASB issued ASU No. 2016-13,
"Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (“ASU
2016-13”). ASU 2016-13 replaces the incurred loss model with an expected loss model, which is referred to as the current
expected credit loss (CECL) model. The CECL model is applicable to the measurement of credit losses on financial assets measured
at amortized cost, including loan receivables, held-to-maturity debt securities, and reinsurance receivables. It also applies
to off-balance sheet credit exposures not accounted for as insurance (such as loan commitments, standby letters of credit, financial
guarantees, and other similar instruments) and net investments in leases recognized by a lessor. For public business entities
that meet the definition of an SEC filer, the standard will be effective for fiscal years beginning after Dec. 15, 2019, including
interim periods in those fiscal years. For debt securities with other-than-temporary impairment, the guidance will be applied
prospectively. Existing purchased credit impaired (PCI) assets will be grandfathered and classified as purchased credit deteriorated
(PCD) assets at the date of adoption. The asset will be grossed up for the allowance for expected credit losses for all PCD assets
at the date of adoption and will continue to recognize the noncredit discount in interest income based on the yield of such assets
as of the adoption date. Subsequent changes in expected credit losses will be recorded through the allowance. For all other assets
within the scope of CECL, a cumulative-effect adjustment will be recognized in retained earnings as of the beginning of the first
reporting period in which the guidance is effective. The Company does not believe ASU 2016-13 will have a material effect on its
consolidated financial statements.
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 consolidated statements of cash flows.
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
consolidated statements of cash flows.
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.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Recent
Accounting Pronouncements, continued
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 there was no impact on the consolidated financial
statements. Accordingly, the new revenue standard has been applied prospectively in the Company’s 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.
In February 2018, the FASB issued ASU 2018-03, Technical Corrections
and Improvements to Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial
Liabilities (“ASU 2018-03”). ASU 2018-03 provided targeted improvements to address certain aspects of recognition,
measurement, presentation, and disclosure of financial instruments. Specifically, the amendments include clarifications related
to: measurement elections, transition requirements, and adjustments associated with equity securities without readily determinable
fair values; fair value measurement requirements for forward contracts and purchased options on equity securities; presentation
requirements for hybrid financial liabilities for which the fair value option has been elected; and measurement requirements for
liabilities denominated in a foreign currency for which the fair value option has been elected. The adoption of these amendments
did not have a material impact on the Company's consolidated financial statements.
In July 2018, the FASB issued ASU 2018-10 Leases (Topic 842),
Codification Improvements and ASU 2018-11 Leases (Topic 842), Targeted Improvements, to provide additional guidance for the adoption
of Topic 842. ASU 2018-10 clarifies certain provisions and correct unintended applications of the guidance such as the application
of implicit rate, lessee reassessment of lease classification, and certain transition adjustments that should be recognized to
earnings rather than to stockholders’ (deficit) equity. ASU 2018-11 provides an alternative transition method and practical
expedient for separating contract components for the adoption of Topic 842. In February 2016, the FASB issued ASU 2016-02 Leases
(Topic 842) which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating
leases with terms greater than 12 months. ASU 2018-11, ASU 2018-10, and ASU 2016-02 (collectively, “the new lease standards”)
are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company has evaluated the
effects of ASU 2018-10, and determined that there are no material impacts to the consolidated financial statements.
In August 2018, the FASB issued
ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value
Measurement (“ASU 2018-13”). The ASU was issued to improve the effectiveness of disclosures surrounding fair value
measurements. The ASU removes numerous disclosures from Topic 820 including; transfers between level 1 and 2 of the fair value
hierarchy, the policy for timing of transfers between levels, and the valuation process for level 3 fair value measurements. The
ASU also modified and added disclosure requirements in regards to changes in unrealized gains and losses included in other comprehensive
income, as well as the range and weighted average of unobservable inputs for level 3 fair value measurements. The ASU is effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted.
The guidance is not expected to have a significant impact on the Company's consolidated financial statements.
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 December 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 December 31, 2018, include Hansen,
North Hansen, High Park, Hansen Picnic Tree, a nd Taylor Ranch, located in Fremont and Teller Counties, Colorado. The Company
also acquired the Keota project located in Weld County, Wyoming and the Ferris Haggerty project 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 & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
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 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 December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Mineral properties
|
|
$
|
11,681,720
|
|
|
$
|
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 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 years ended December 31, 2018 and 2017 the Company recognized aggregate revenue of $48,245 and $20,000, respectively, under
these oil and gas lease arrangements.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
NOTE
4 - MINERAL ASSETS, ABLATION INTELLECTUAL PROPERTY AND OTHER PROPERTY, CONTINUED
Right-of-way
grant agreement
On
July 1, 2018, the Company entered into a right of way agreement with a third party, whereby, the Company has granted “right
of way” access to a portion of its mineral properties in exchange for an up front payment of $3,624. The Company is recognizing
this payment incrementally over the term of the right-of-way agreement.
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 December 31, 2018 and December 31, 2017,
to be approximately $889,030 and $820,434, respectively. During the years ended December 31, 2018 and 2017, the accretion of the
reclamation liabilities was $11,030 and $9,158, 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 December 31, 2018 and December 31, 2017 of $224,645 and $196,821, respectively. The gross reclamation
liabilities as of December 31, 2018 and 2017 are secured by certificates of deposit in the amount of $889,030 and $820,434, respectively.
On
April 11, 2018, the Company received notice from the Colorado Division of Reclamation, Mining and Safety (“CDRMS”)
in regard 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
had until June 8, 2018 to comply with or appeal the determination. On August 7, 2018, the Company paid CDRMS $68,517 in additional
reclamation bonds to satisfy their requirement.
Reclamation
liability activity for the years ended December 31, 2018 and 2017 consists of:
|
|
For the Years Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Beginning balance
|
|
$
|
196,821
|
|
|
$
|
403,639
|
|
Increase in reclamation liability required by CDRMS
|
|
|
16,794
|
|
|
|
-
|
|
Accretion
|
|
|
11,030
|
|
|
|
9,158
|
|
Write-off of Alaska reclamation liability
|
|
|
-
|
|
|
|
(215,976
|
)
|
Ending Balance
|
|
$
|
224,645
|
|
|
$
|
196,821
|
|
NOTE
5 - Accounts Payable and Accrued Liabilities
Accounts
payable and accrued liabilities consisted of:
|
|
As of
|
|
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
Trade accounts payable
|
|
$
|
326,250
|
|
|
$
|
453,618
|
|
Accrued liabilities
|
|
|
167,070
|
|
|
|
148,398
|
|
|
|
$
|
493,320
|
|
|
$
|
602,016
|
|
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
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 was due and payable on August 18, 2018 and interest on the EFHC
Note was due and payable annually beginning August 18, 2015. Prior to the original August 18, 2018 maturity, the Company and EFHC
modified the EFHC Note to extend the maturity date to September 4, 2018. On August 31, 2018, the Company paid the EFHC Note in
full.
Notes
Payable Summary
Notes
payable consisted of:
|
|
Principal
|
|
|
Discount
|
|
|
Balance,
Net of
Discount
|
|
|
Current
|
|
|
Non-Current
|
|
December 31, 2017
|
|
$
|
500,000
|
|
|
$
|
12,550
|
|
|
$
|
487,450
|
|
|
$
|
487,450
|
|
|
$
|
-
|
|
As
of December 31, 2018, there were no notes payable outstanding.
The
Company’s total interest expense, net, consisted of:
|
|
For the Years Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Interest expense, notes payable
|
|
$
|
13,830
|
|
|
$
|
17,162
|
|
Amortization of discount on notes payable
|
|
|
12,550
|
|
|
|
34,771
|
|
Accretion of reclamation liabilities
|
|
|
11,030
|
|
|
|
9,158
|
|
Other interest expense
|
|
|
-
|
|
|
|
1,074
|
|
Interest income
|
|
|
(1,286
|
)
|
|
|
(1,933
|
)
|
Interest expense, net
|
|
$
|
36,124
|
|
|
$
|
60,232
|
|
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
NOTE
7 - COMMITMENTS
Consulting
Agreement with Executive Chairman
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 $350,000. 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.
Vanadium
Joint Venture
On
June 1, 2018, the Company signed a letter agreement with Battery Mineral Resource Nevada, Inc. (“BMR”) to form a joint
venture for vanadium development at the Sage Mine.
Pursuant
to the agreement, BMR will underwrite the cost of scoping, engineering and technical studies during the due diligence period to
prepare for commencing pre-production work for resumption of production. Subsequent to the due diligence work program, BMR has
the option to enter into a definitive joint venture agreement which will trigger an additional buy-in payment to the Company.
Thereafter BMR and the Company will divide joint venture expenditures 50/50 and divide vanadium offtake 65/35 and uranium offtake
10/90. The higher percentage of vanadium offtake for BMR aligns with its rechargeable battery and energy storage mandate. The
agreed deal structure compensates the Company for the differential in the offtake percentage. The agreement provides BMR an additional
period to exercise a short-term option to purchase the entire Sage Mine Project. BMR also retains the right to not proceed beyond
due diligence.
Since
the agreement was signed during the first week of June, vanadium prices have risen from over $14 per pound to over $18 per pound.
Consequently, rather than pursuing a joint venture, BMR provided notification of their desire to exercise the purchase option.
Both parties were working toward the completion of a definitive agreement for the Sage Mine Project. On September 13, 2018, the
Company and BMR mutually terminated the letter agreement and ceased negotiations.
Supply
Contract
In
December 2015, the Company signed a uranium concentrates supply agreement with a major U.S. utility for delivery commencing in
2018 and continuing for a five year period through 2022. As the Company is not currently in production, a partial assignment agreement
was put in place whereby the assignee accepted the Company’s right to the Year 1 delivery of 125,000 pounds of natural uranium
concentrates. The delivery was made on May 1, 2018 and the assignee was paid the full consideration under the agreement. The Company
did not recognize any gain or loss on this transaction. A partial assignment agreement was put in place whereby the assignee accepted
the Company’s right to the Year 2 delivery of 125,000 pounds of natural uranium concentrates. The delivery will be made and the
assignee will be paid the full consideration under the agreement. The Company will not recognize any gain or loss on this transaction.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
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 December 31, 2018 and 2017, an unlimited number of common shares were authorized
for issuance.
Shares
issued for Accounts Payable
On
February 7, 2017, the Company issued 53,788 shares of its common stock in exchange for approximately $83,338 of its accounts payable
outstanding with certain creditors.
On
May 4, 2018, the Company issued 60,832 shares of its common stock in exchange for approximately $32,251 of its accounts payable
outstanding with certain creditors.
Private
Placement
On
March 31, 2017, the Company completed a private placement of 634,424 units at a price of CAD $1.75 (USD $1.35) per unit for gross
proceeds of CAD $1,110,263 (USD $835,805) and net proceeds of CAD $1,066,223 (USD $801,160). Each unit consisted of one share
of the Company’s common stock and a warrant for the purchase of one share of the Company’s common stock. Each warrant
is immediately exercisable at a price of CAD $3.25 and expires five years from the date of issuance.
On
September 15, 2017, the Company completed a private placement of 509,763 units at a price of CAD $0.90 (USD $0.74) per unit for
gross proceeds of CAD $458,787 (USD $376,022) and net proceeds of CAD $418,880 (USD $343,105). Each unit consisted of one share
of common stock and one warrant. Each warrant is immediately exercisable at a price of CAD $1.40 and expires five years from the
date of issuance. The Company also issued broker warrants to purchase 21,751 shares of common stock at a price of CAD $1.40 per
common share, which expire two years from the date of issuance.
On
December 29, 2017, the Company completed a private placement of 426,334 units at a price of CAD $0.90 (USD $0.72) per unit for
gross proceeds of CAD $383,071 (USD $305,918) and net proceeds of CAD $367,059 (USD $293,131). 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 $1.50 and expires two years from the date of issuance. The Company also issued broker warrants to purchase 9,310
shares of common stock at a price of CAD $1.50 per common share, which expire two years from the date of issuance.
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). The Company paid
USD $8,794 in offering costs and received net proceeds of USD $457,608. 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 exercisable at a price of CAD $1.15 and expires two
years from the date of issuance.
On July 27, 2018, the Company completed a private placement
of 2,525,526 units at a price of CAD $0.68 (USD $0.52) per unit for gross proceeds of CAD $1,717,358 (USD $1,319,096). The Company
paid USD $46,886 in offering costs and received net proceeds of USD $1,272,210. 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 exercisable at a price of CAD $1.15 and expires
two years from the date of issuance.
On August 9, 2018, the Company completed a private placement of 1,907,088 units at a price of CAD $0.68
(USD $0.52) per unit for gross proceeds of CAD $1,296,820 (USD $1,000,000). The Company paid USD $26,487 in offering costs and
received net proceeds of USD $973,513. 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 exercisable at a price of CAD $1.15 and expires two years from the date of issuance.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
NOTE
8 - SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS, CONTINUED
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 December 31, 2018, a total of 25,976,837 common shares
were outstanding, and at that date the maximum number of stock options eligible for issue under the Plan was 2,597,684.
On
October 6, 2017, the Company granted options under the Plan for the purchase of an aggregate of 825,000 shares of common stock
to five individuals consisting of directors and officers of the Company. The options have a five year term, an exercise price
of CAD $1.60 (USD $1.28 as of December 31, 2018), and vest equally in thirds commencing initially on the date of grant and thereafter
on October 31, 2017, and March 31, 2018.
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 $0.73 as of December 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.
On
September 24, 2018, the Company granted options under the plan for the purchase of an aggregate of 983,000 shares of common stock
to several officers, directors, and consultants. The options have an exercise price of CAD $2.15 (US $1.58 as of December 31,
2018) and vest equally in three installments on the date of grant, on October 31, 2018, and on March 31, 2019. One third of the
options expire on September 24, 2023, one third expire on October 31, 2023, and the remaining one third expire on March 31, 2024.
Stock
Options
|
|
Number of Shares
|
|
|
Weighted Average Exercise Price (USD)
|
|
|
Weighted Average Contractual Life (years)
|
|
|
Weighted Average Grant Date Fair Value (USD)
|
|
|
Intrinsic Value
(USD)
|
|
Outstanding - January 1, 2018
|
|
|
1,846,996
|
|
|
$
|
1.92
|
|
|
|
|
|
|
$
|
0.42
|
|
|
|
|
|
Granted
|
|
|
1,083,000
|
|
|
$
|
1.50
|
|
|
|
|
|
|
$
|
0.50
|
|
|
|
|
|
Expired, forfeited, or cancelled
|
|
|
(513,332
|
)
|
|
$
|
2.01
|
|
|
|
|
|
|
$
|
0.24
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - December 31, 2018
|
|
|
2,416,664
|
|
|
$
|
1.67
|
|
|
|
3.73
|
|
|
$
|
0.48
|
|
|
$
|
38,705
|
|
Exercisable - December 31, 2018
|
|
|
2,088,997
|
|
|
$
|
1.68
|
|
|
|
3.57
|
|
|
$
|
0.47
|
|
|
$
|
38,705
|
|
The
Company’s stock based compensation expense related to stock options for the years ended December 31, 2018 and 2017 was $410,088
and $209,435, respectively. As of December 31, 2018, the Company had $432,080 in unamortized stock option expense, which will
be amortized over a period of 0.25 years.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
NOTE
8 - SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS, CONTINUED
Stock
Options, continued
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
|
|
|
September 24,
2018
|
|
Stock Price
|
|
|
CAD $0.52
|
|
|
|
CAD $2.14
|
|
Exercise Price
|
|
|
CAD $1.00
|
|
|
|
CAD $2.15
|
|
Number of Options Granted
|
|
|
100,000
|
|
|
|
983,000
|
|
Dividend Yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected Volatility
|
|
|
49
|
%
|
|
|
49
|
%
|
Weighted Average Risk-Free Interest Rate
|
|
|
1.64
|
%
|
|
|
2.94
|
%
|
Expected life (in years)
|
|
|
2.50
- 3.00
|
|
|
|
2.50-3.00
|
|
Warrants
|
|
Number of Shares
|
|
|
Weighted Average Exercise Price (USD)
|
|
|
Weighted Average Contractual Life (years)
|
|
|
Intrinsic Value (USD)
|
|
Outstanding, January 1, 2018
|
|
|
4,095,563
|
|
|
$
|
2.27
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
2,766,107
|
|
|
$
|
0.84
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(63,269
|
)
|
|
$
|
0.98
|
|
|
|
|
|
|
|
|
|
Outstanding - December 31, 2018
|
|
|
6,798,401
|
|
|
$
|
1.49
|
|
|
|
2.30
|
|
|
$
|
739,929
|
|
Exercisable - December 31, 2018
|
|
|
6,798,401
|
|
|
$
|
1.49
|
|
|
|
2.30
|
|
|
$
|
739,929
|
|
Note
9 - Mining Expenditures
|
|
For the Year Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Permits
|
|
$
|
142,148
|
|
|
$
|
132,183
|
|
Maintenance
|
|
|
19,879
|
|
|
|
8,706
|
|
Contract Labor
|
|
|
11,050
|
|
|
|
8,575
|
|
Royalties
|
|
|
4,638
|
|
|
|
5,260
|
|
|
|
$
|
177,715
|
|
|
$
|
154,724
|
|
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
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:
On
April 1, 2017, the Company entered into a consulting agreement with a United States limited liability company owned by a person
who was 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 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 $352,361 as of December 31, 2018)
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 $352,361 and $390,350 as of December
31, 2018 and 2017, respectively.
Note
11 – Income Taxes
The
tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities
are as follows:
|
|
As of December 31,
|
|
Deferred tax assets:
|
|
2018
|
|
|
2017
|
|
Net operating loss carryovers
|
|
$
|
4,114,419
|
|
|
$
|
3,651,732
|
|
Marketable securities
|
|
|
15,060
|
|
|
|
15,471
|
|
Accrued expenses
|
|
|
39,871
|
|
|
|
44,059
|
|
Deferred tax assets, gross
|
|
|
4,169,350
|
|
|
|
3,711,262
|
|
|
|
|
|
|
|
|
|
|
Less: valuation allowance
|
|
|
(1,962,122
|
)
|
|
|
(1,512,585
|
)
|
Deferred tax assets, net
|
|
|
2,207,228
|
|
|
|
2,198,677
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
(4,916,114
|
)
|
|
|
(4,907,564
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax assets (liabilities), net
|
|
$
|
(2,708,887
|
)
|
|
$
|
(2,708,887
|
)
|
The
change in the Company’s valuation allowance is as follows:
|
|
For the Years Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Beginning of year
|
|
$
|
1,512,585
|
|
|
$
|
1,578,784
|
|
Increase (decrease) in valuation allowance
|
|
|
449,537
|
|
|
|
(66,199
|
)
|
End of year
|
|
$
|
1,962,122
|
|
|
$
|
1,512,585
|
|
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(Stated in $USD)
Note
11 – Income Taxes, CONTINUED
A
reconciliation of the provision for income taxes with the amounts computed by applying the statutory Federal income tax rate to
income from operations before the provision for income taxes is as follows:
|
|
For the Years Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
U.S. federal statutory rate
|
|
|
(21.0
|
)%
|
|
|
(34.0
|
)%
|
State and foreign taxes
|
|
|
(3.8
|
)%
|
|
|
(3.2
|
)%
|
Permanent differences
|
|
|
|
|
|
|
|
|
Non-deductible expenses
|
|
|
5.2
|
%
|
|
|
2.9
|
%
|
Valuation allowance
|
|
|
22.0
|
%
|
|
|
(3.7
|
)%
|
Change in federal tax rate
|
|
|
0
|
%
|
|
|
(33.3
|
)%
|
True-up of prior year deferred tax assets
|
|
|
(2.4
|
)%
|
|
|
(4.1
|
)%
|
Effective income tax rate
|
|
|
0
|
%
|
|
|
(75.4
|
)%
|
The
Company has net operating loss carryovers of approximately $16,590,041 for federal and state income tax purposes, which begin
to expire in 2026. The ultimate realization of the net operating loss is dependent upon future taxable income, if any, of the
Company. Based on losses from inception, the Company determined that as of December 31, 2018 it is more likely than not that the
Company will not realize benefits from the deferred tax assets. The Company will not record income tax benefits in the financial
statements until it is determined that it is more likely than not that the Company will generate sufficient taxable income to
realize the deferred income tax assets. As a result of the analysis, the Company determined that a valuation allowance against
the deferred tax assets was required of $1,962,122 and $1,512,585 as of December 31, 2018 and 2017, respectively.
Internal
Revenue Code (“IRC”) Section 382 imposes limitations on the use of net operating loss carryovers when the stock ownership
of one or more 5% stockholders (stockholders owning 5% or more of the Company’s outstanding capital stock) has increased
on a cumulative basis over a period of three years by more than 50 percentage points. Management cannot control the ownership
changes occurring. Accordingly, there is a risk of an ownership change beyond the control of the Company that could trigger a
limitation of the use of the loss carryover. The Company has analyzed the issuances of shares of common stock during the years
ended December 31, 2018 and 2017 and does not believe such change of control occurred. If such ownership change under IRC section
382 had occurred, such change would substantially limit the Company’s ability in the future to utilize its net operating
loss carryforwards
.
WESTERN URANIUM & VANADIUM CORP.
PROXY
FOR USE AT THE
ANNUAL GENERAL and SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON JUNE 21, 2019
The
undersigned, being a shareholder of
WESTERN URANIUM & VANADIUM CORP.
(the "
Corporation
") hereby
appoints,
George Glasier
, President and Chief Executive Officer of the Corporation, or failing him,
Bryan
Murphy
, Chairman of the Corporation, or instead of either of them, _____________________ as proxyholder for and on behalf
of the undersigned with the power of substitution to attend, act and vote for and on behalf of the undersigned in respect of
all matters that may properly come before the annual general and special meeting of the shareholders of the Corporation to be
held on
June 21, 2019 (
the “
Meeting
”) and at any adjournment or adjournments thereof, to the same
extent and with the same power as if the undersigned were personally present at the said meeting or such adjournment or
adjournments thereof. The undersigned hereby directs the proxyholder to vote the securities of the Corporation recorded in
the name of the undersigned as specified herein.
1.
|
FOR
AGAINST
ABSTAIN
|
☐
☐
☐
|
To increase the number of directors of the Company from three (3) to four (4).
|
2.
|
FOR
WITHHOLD
|
☐
☐
|
To elect George E. Glasier, Bryan Murphy, Andrew Wilder,
and Robert Klein as directors, as nominated by management of the Corporation.
Instruction:
To withhold your vote from any
individual nominee, write the nominee’s name on the following space:
|
3.
|
FOR
WITHHOLD
|
☐
☐
|
To re-appoint MNP LLP as auditors of the Corporation for the ensuing year and authorize the directors to fix the remuneration of the auditors.
|
4.
|
FOR
AGAINST
ABSTAIN
|
☐
☐
☐
|
To consider, and if deemed advisable, approve a special
resolution authorizing an amendment to the Company’s Articles which would permit the issuance of Class A of common shares
in one or more series in the discretion of the Board of Directors, as further described in the Management Information Circular
for the Meeting.
|
If any amendments or variations
to the matters referred to above or to any other matters identified in the notice of meeting are proposed at the meeting or any
adjournment or adjournments thereof, or if any other matters which are not now known to management should properly come before
the meeting or any adjournment or adjournments thereof, this proxy confers discretionary authority on the person voting the proxy
to vote on such amendments or variations or such other matters in accordance with the best judgment of such person.
To be valid, this proxy must
be received by the Corporation’s transfer agent, Capital Transfer Agency Inc., 390 Bay Street, Suite 920, Toronto, ON M5H
2Y2, not later than 10:00 am (Daylight Saving Time), on the last business day preceding the day of the Meeting, being Thursday,
June 20, 2019. Late proxies may be accepted or rejected by the Chairman of the meeting in his discretion, and the Chairman is under
no obligation to accept or reject any particular late proxy.
This proxy revokes and supersedes
all proxies of earlier date.
DATED
this ____ day of ____________, 2019.
|
|
|
|
Signature of Shareholder
|
|
|
|
|
|
|
Number of Shares Held
|
|
|
|
|
|
|
|
(See Reverse)
|
|
Name of Shareholder (Please Print)
|
|
NOTES:
1.
THIS PROXY IS SOLICTED BY THE BOARD
OF DIRECTORS OF THE CORPORATION.
2. The shares represented by this proxy
will be voted. Where a choice is specified, the proxy will be voted as directed.
Where no choice is specified, this proxy will
be voted in favour of the matters listed on the proxy.
The proxy confers discretionary authority on the above named person
to vote in his or her discretion with respect to amendments or variations to the matters identified in the Notice of Meeting accompanying
the proxy or such other matters which may properly come before the Meeting.
3. Each shareholder has the right to appoint
a person other than management designees specified above to represent them at the Meeting. Such right may be exercised by inserting
in the space provided the name of the person to be appointed, who need not be a shareholder of the Corporation.
4. Each shareholder must sign this proxy.
Please date the proxy. If the shareholder is a corporation, the proxy must be executed by an officer or attorney thereof duly authorized.
5. If the proxy is not dated in the space
provided, it is deemed to bear the date of its mailing to the shareholders of the Corporation.
6. If the shareholder appoints any of the
persons designated above,
including persons other than management designees
, as proxy to attend and act at the said Meeting:
(a) The shares represented by the proxy
will be voted in accordance with the instructions of the shareholder on any ballot that may be called for;
(b) Where the shareholder specifies a choice
in the proxy with respect to any matter to be acted upon, the shares represented by the proxy shall be voted accordingly; and
(c)
IF NO CHOICE IS SPECIFIED WITH RESPECT
TO THE MATTERS LISTED ABOVE, THE PROXY WILL BE VOTED
FOR
SUCH MATTERS.
|
WESTERN
URANIUM & VANADIUM CORP.
(the “Corporation”)
Request
for Financial Statements
In accordance with Canadian Securities
Administrator’s National Instrument 51-102 –
Continuous Disclosure Obligations,
registered and beneficial shareholders
may elect annually to receive a copy of our annual financial statements and corresponding management discussion and analysis (“MD&A”)
or interim financial statements and the corresponding MD&A, or both.
If you wish to receive these documents
by mail, please return this completed form to:
Capital Transfer Agency Inc.
390 Bay Street, Suite 920
Toronto, Ontario
M5H 2Y2
Rather than receiving the financial
statements by mail, you may choose to view these documents under the Corporation's profile on SEDAR at
www.sedar.com
,
www.sec.gov
or
www.capitaltransferagency.com
I HEREBY CERTIFY that I am a registered
and/or beneficial holder of the Corporation, and as such, request that my name be placed on the Corporation’s Mailing List
in respect to its annual and/or interim financial statements and the corresponding MD&A for the current financial year.
Please send me:
☐
|
|
Interim Financial Statements with MD&A
|
|
|
|
☐
|
|
Annual Financial Statements with MD&A
|
PLEASE PRINT
|
|
|
CITY
|
PROVINCE/ STATE
|
POSTAL / ZIP CODE
|
SIGNED:
|
|
|
(Signature of Shareholder)
|
IF THIS IS AN ADDRESS CHANGE, PLEASE CHECK
HERE:
☐
(Please provide previous address below)
WESTERN URANIUM & VANADIUM CORP.
NOTICE AND ACCESS NOTIFICATION TO SHAREHOLDERS
ANNUAL GENERAL AND SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON
JUNE 21, 2019
You are receiving this notification as
Western Uranium & Vanadium Corporation (“
Western
” or the “
Corporation
”) has decided to
use the notice and access model (“Notice and Access”), provided for under recent amendments to National Instrument
54-101, for the delivery of meeting materials to its shareholders. In respect to the Corporation’s annual general and special
meeting of shareholders to be held on June 21, 2019 (the “
Meeting
”), instead of receiving paper copies of the
Corporation’s management information circular, audited annual consolidated financial statements, MD&A and Form 10-K annual
report for the year ended December 31, 2018 (the “
Meeting Materials
”), shareholders are receiving this notice
with information on how they may access the Meeting Materials electronically. However, together with this notification, shareholders
continue to receive a proxy or voting instruction form, as applicable, enabling them to vote at the Meeting. The use of this alternative
means of delivering Meeting Materials is more environmentally friendly and will reduce the Corporation’s printing and mailing
costs.
MEETING DATE AND LOCATION:
The Meeting will be held at 10:00 a.m.
(local time) on Friday, June 21, 2019 at the OTCQX Markets Group headquarters located at 300 Vesey Street 12th Floor, New York,
New York, 10282, for the following purposes:
SHAREHOLDERS WILL BE ASKED TO CONSIDER
AND/OR VOTE ON THE FOLLOWING MATTERS:
1. Financial Statements: To receive the audited
annual consolidated financial statements of the Corporation for the fiscal period ended December 31, 2018 with the report of the
auditors therein;
2. Increase of Number of Directors: To approve
the increase of the numbers of directors of the Company from three (3) to four (4);
3. Election of Directors: To elect the directors
of the Corporation for the ensuing year;
4. Appointment of Auditors: To re-appoint MNP
LLP as the auditors of the Corporation for the ensuing year and to authorize the Directors to fix their remuneration;
5. Creation of a New Class of Common Shares:
to consider, and if deemed advisable, approve a special resolution authorizing an amendment to the Company’s Articles which
would permit the issuance of Class A of common shares in one or more series in the discretion of the Board of Directors, as further
described in the management information circular for the Meeting; and
6. Other Business: To consider and, if thought
fit, act on other items of business that may be properly brought before the Meeting and any adjournment thereof.
SHAREHOLDERS ARE REMINDED TO
VIEW
THE MEETING MATERIALS
PRIOR
TO VOTING.
ACCESSING MEETING MATERIALS ONLINE
Materials can be viewed at
www.SEDAR.com
or www.SEC.gov
or www.capitaltransferagency.com
HOW TO OBTAIN PAPER COPIES OF THE MEETING
MATERIALS
Beneficial shareholders may request paper
copies of the Meeting Materials be sent to them by postal delivery at no cost. Requests for meeting material may be made up to
one year from the date the information circular was filed on SEDAR, by contacting Capital Transfer Agency at toll free 1 (844)
499-4482 (US and Canada), 1(416)350-5007 (local) or by email at info@capitaltransferagency.com. Requests should be received at
least 10 business days in advance of the proxy deposit date and time set out in the accompanying proxy in order to receive the
meeting material in advance of the meeting.
VOTING
Registered Shareholders are asked to return
their proxies using the following methods by the proxy deposit date:
|
Mail:
|
Capital Transfer Agency Inc.
|
|
|
390 Bay Street, Suite 920
|
|
|
Toronto, ON M5H 2Y2
|
|
|
|
|
Fax:
|
(416) 350-5008
|
|
|
|
|
Email:
|
info@capitaltransferagency.com
|
Shareholders with questions about Notice and
Access may contact the Capital Transfer Agency by phone at toll free 1(844)499-4482 (US and Canada), 1(416)350-5007 (local) or
by email at info@capitaltransferagency.com.
Dated the ● day of May, 2019
BY ORDER OF THE BOARD OF DIRECTORS
“George Glasier”
George Glasier
President, Chief Executive Officer, and
Director