Item
1. Financial Statements
WESTERN
URANIUM & VANADIUM CORP.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Stated
in $USD)
|
|
June 30,
2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
2,954,380
|
|
|
$
|
909,865
|
|
Prepaid expenses
|
|
|
252,596
|
|
|
|
127,122
|
|
Marketable securities
|
|
|
4,969
|
|
|
|
4,781
|
|
Other current assets
|
|
|
141,047
|
|
|
|
93,841
|
|
Total current assets
|
|
|
3,352,992
|
|
|
|
1,135,609
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
928,485
|
|
|
|
889,030
|
|
Mineral properties and equipment
|
|
|
11,732,841
|
|
|
|
11,681,720
|
|
Ablation intellectual property
|
|
|
9,488,051
|
|
|
|
9,488,051
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
25,502,369
|
|
|
$
|
23,194,410
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
592,018
|
|
|
$
|
493,320
|
|
Deferred revenue, current portion
|
|
|
44,620
|
|
|
|
44,620
|
|
Total current liabilities
|
|
|
636,638
|
|
|
|
537,940
|
|
|
|
|
|
|
|
|
|
|
Reclamation liability
|
|
|
233,173
|
|
|
|
224,645
|
|
Deferred tax liability
|
|
|
2,708,887
|
|
|
|
2,708,887
|
|
Deferred contingent consideration
|
|
|
351,099
|
|
|
|
352,361
|
|
Deferred revenue, net of current portion
|
|
|
25,410
|
|
|
|
47,720
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
3,955,207
|
|
|
|
3,871,553
|
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity
|
|
|
|
|
|
|
|
|
Common stock, no
par value, unlimited authorized shares, 30,084,053 and 25,977,143 shares issued as of June 30, 2019 and December 31, 2018,
respectively and 30,083,747 and 25,976,837 shares outstanding as of June 30, 2019 and December 31, 2018, respectively
|
|
|
29,042,547
|
|
|
|
25,865,367
|
|
Treasury shares,
306 and 306 shares held in treasury as of June 30, 2019 and December 31, 2018, respectively
|
|
|
-
|
|
|
|
-
|
|
Accumulated deficit
|
|
|
(7,551,816
|
)
|
|
|
(6,584,342
|
)
|
Accumulated other comprehensive income
|
|
|
56,431
|
|
|
|
41,832
|
|
Total shareholders’ equity
|
|
|
21,547,162
|
|
|
|
19,322,857
|
|
Total liabilities and shareholders’ equity
|
|
$
|
25,502,369
|
|
|
$
|
23,194,410
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
WESTERN
URANIUM & VANADIUM CORP.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
(Stated
in $USD)
(Unaudited)
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease revenue
|
|
$
|
11,155
|
|
|
$
|
11,155
|
|
|
$
|
22,310
|
|
|
$
|
22,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mining expenditures
|
|
|
84,440
|
|
|
|
44,474
|
|
|
|
128,286
|
|
|
|
93,529
|
|
Professional fees
|
|
|
94,316
|
|
|
|
88,291
|
|
|
|
187,633
|
|
|
|
267,517
|
|
General and administrative
|
|
|
244,406
|
|
|
|
155,378
|
|
|
|
619,379
|
|
|
|
380,297
|
|
Consulting fees
|
|
|
33,680
|
|
|
|
68,736
|
|
|
|
48,680
|
|
|
|
109,950
|
|
Total operating expenses
|
|
|
456,842
|
|
|
|
356,879
|
|
|
|
983,978
|
|
|
|
851,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(445,687
|
)
|
|
|
(345,724
|
)
|
|
|
(961,668
|
)
|
|
|
(828,983
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
2,912
|
|
|
|
11,265
|
|
|
|
5,806
|
|
|
|
25,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(448,599
|
)
|
|
|
(356,989
|
)
|
|
|
(967,474
|
)
|
|
|
(854,853
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gain (loss)
|
|
|
(680
|
)
|
|
|
19,725
|
|
|
|
14,599
|
|
|
|
17,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(449,279
|
)
|
|
$
|
(337,264
|
)
|
|
$
|
(952,875
|
)
|
|
$
|
(837,677
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
29,275,781
|
|
|
|
21,129,031
|
|
|
|
29,275,781
|
|
|
|
20,821,474
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
WESTERN
URANIUM & VANADIUM CORP.
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Stated
in $USD)
(Unaudited)
|
|
Common Stock
|
|
|
Treasury Shares
|
|
|
Accumulated
|
|
|
Accumulated Other Comprehensive
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Deficit
|
|
|
Income
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2019
|
|
|
25,976,837
|
|
|
$
|
25,865,367
|
|
|
|
306
|
|
|
$
|
-
|
|
|
$
|
(6,584,342
|
)
|
|
$
|
41,832
|
|
|
$
|
19,322,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation - stock options
|
|
|
-
|
|
|
|
180,269
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
180,269
|
|
Foreign exchange gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,279
|
|
|
|
15,279
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(518,875
|
)
|
|
|
-
|
|
|
|
(518,875
|
)
|
Balance as of March 31, 2019
|
|
|
25,976,837
|
|
|
$
|
26,045,636
|
|
|
|
306
|
|
|
$
|
-
|
|
|
$
|
(7,103,217
|
)
|
|
$
|
57,111
|
|
|
$
|
18,999,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private placement - April 16, 2019
|
|
|
3,914,632
|
|
|
|
2,856,356
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,856,356
|
|
Private placement - June 17, 2019
|
|
|
192,278
|
|
|
|
140,555
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
140,555
|
|
Foreign exchange gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(680
|
)
|
|
|
(680
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(448,599
|
)
|
|
|
-
|
|
|
|
(448,599
|
)
|
Balance as of June 30, 2019
|
|
|
30,083,747
|
|
|
$
|
29,042,547
|
|
|
|
306
|
|
|
$
|
-
|
|
|
$
|
(7,551,816
|
)
|
|
$
|
56,431
|
|
|
$
|
21,547,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2018
|
|
|
20,510,500
|
|
|
$
|
22,657,529
|
|
|
|
306
|
|
|
$
|
-
|
|
|
$
|
(4,540,143
|
)
|
|
$
|
36,134
|
|
|
$
|
18,153,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation - stock options
|
|
|
-
|
|
|
|
54,188
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
54,188
|
|
Foreign exchange gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,549
|
)
|
|
|
(2,549
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(497,864
|
)
|
|
|
-
|
|
|
|
(497,864
|
)
|
Balance as of March 31, 2018
|
|
|
20,510,500
|
|
|
$
|
22,711,717
|
|
|
|
306
|
|
|
$
|
-
|
|
|
$
|
(5,038,007
|
)
|
|
$
|
33,585
|
|
|
$
|
17,707,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of 909,622 units on May 4, 2018 in private placement
|
|
|
909,622
|
|
|
|
457,608
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
457,608
|
|
Issuance of 60,832 shares of common stock in exchange of accounts payable
|
|
|
60,832
|
|
|
|
32,251
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,251
|
|
Stock based compensation - stock options
|
|
|
-
|
|
|
|
652
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
652
|
|
Foreign exchange gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,725
|
|
|
|
19,725
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(356,989
|
)
|
|
|
-
|
|
|
|
(356,989
|
)
|
Balance as of June 30, 2018
|
|
|
21,480,954
|
|
|
$
|
23,202,228
|
|
|
|
306
|
|
|
$
|
-
|
|
|
$
|
(5,394,996
|
)
|
|
$
|
53,310
|
|
|
$
|
17,860,542
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
WESTERN
URANIUM & VANADIUM CORP.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated
in $USD)
(Unaudited)
|
|
For the Six Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(967,474
|
)
|
|
$
|
(854,853
|
)
|
Reconciliation of net loss to cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,297
|
|
|
|
-
|
|
Accretion of and additions to reclamation liability
|
|
|
8,528
|
|
|
|
5,213
|
|
Amortization of debt discount on notes payable
|
|
|
-
|
|
|
|
9,750
|
|
Stock based compensation
|
|
|
180,269
|
|
|
|
54,840
|
|
Change in foreign exchange on marketable securities
|
|
|
(188
|
)
|
|
|
(1,837
|
)
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
(172,680
|
)
|
|
|
76,313
|
|
Accounts payable and accrued liabilities, net of shares issued for accounts payable
|
|
|
98,698
|
|
|
|
16,555
|
|
Deferred revenue
|
|
|
(22,310
|
)
|
|
|
14,650
|
|
Net cash used in operating activities
|
|
|
(873,860
|
)
|
|
|
(679,369
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(52,418
|
)
|
|
|
-
|
|
Net cash provided in investing activities
|
|
|
(52,418
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
Issuances of Common shares, net of offering costs
|
|
|
2,996,911
|
|
|
|
457,608
|
|
Receipt of subscription payable
|
|
|
-
|
|
|
|
78,367
|
|
Net cash provided by financing activities
|
|
|
2,996,911
|
|
|
|
535,975
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate on cash
|
|
|
13,337
|
|
|
|
(3,023
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and restricted cash
|
|
|
2,083,970
|
|
|
|
(146,417
|
)
|
|
|
|
|
|
|
|
|
|
Cash and restricted cash - beginning
|
|
|
1,798,895
|
|
|
|
1,247,454
|
|
|
|
|
|
|
|
|
|
|
Cash and restricted cash - ending
|
|
$
|
3,882,865
|
|
|
$
|
1,101,037
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
2,954,380
|
|
|
|
280,563
|
|
Restricted cash
|
|
|
928,485
|
|
|
|
820,474
|
|
Total
|
|
$
|
3,882,865
|
|
|
$
|
1,101,037
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash financing activities:
|
|
|
|
|
|
|
|
|
Shares issued for accounts payable and accrued expenses
|
|
$
|
-
|
|
|
$
|
32,251
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
WESTERN URANIUM & VANADIUM
CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
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 June 30, 2019, the Company had an accumulated deficit of
$7,551,816 and working capital of $2,716,354.
Since
inception, the Company has met its liquidity requirements principally through the issuance of notes and the sale of its shares
of common stock.
The
Company’s ability to continue its operations and to pay its obligations when they become due is contingent upon the Company
obtaining additional financing. Management’s plans include seeking to procure additional funds through debt and equity financings,
to secure regulatory approval to fully utilize its ablation technology and to initiate the processing of ore to generate operating
cash flows.
There
are no assurances that the Company will be able to raise capital on terms acceptable to the Company or at all, or that cash flows
generated from its operations will be sufficient to meet its current operating costs. 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 condensed consolidated financial statements. The accompanying condensed consolidated financial
statements do not include any adjustments that might result from the outcome of these uncertainties.
WESTERN URANIUM & VANADIUM
CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
Note
3 – SUMMARY OF Significant Accounting Policies
Basis
of Presentation and Principles of Consolidation
The
accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10–Q and Rule 10 of Regulation S–X. Accordingly,
they do not include all of the information and notes required by accounting principles generally accepted in the United States
of America. However, in the opinion of the management of the Company, all adjustments necessary for a fair presentation of the
financial position and operating results have been included in these statements. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual
Report on Form 10–K for the fiscal year ended December 31, 2018, as filed with the SEC on April 1, 2019. Operating results
for the six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for any subsequent quarters
or for the year ending December 31, 2019.
The
accompanying condensed 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.
Use
of Estimates
The
preparation of these condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and revenues
and expenses during the periods reported. By their nature, these estimates are subject to measurement uncertainty and the
effects on the financial statements of changes in such estimates in future periods could be significant. Significant areas requiring
management’s estimates and assumptions include determining the fair value of transactions involving common stock, assessment of
the useful life and evaluation for impairment of intangible assets, valuation and impairment assessments on mineral properties,
deferred contingent consideration, and the reclamation liability, valuation of stock-based compensation, valuation of available-for-sale
securities and valuation of long-term debt. Other areas requiring estimates include allocations of expenditures, depletion and
amortization of mineral rights and properties. Actual results could differ from those estimates.
Foreign
Currency Translation
The
reporting currency of the Company, including its subsidiaries, is the United States dollar. The financial statements of subsidiaries
located outside of the U.S. are measured in their functional currency, which is the local currency. The functional currency of
the parent (Western Uranium & 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 condensed consolidated balance sheets.
WESTERN URANIUM & VANADIUM
CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
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 842 “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:
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 June 30, 2019
|
|
$
|
4,969
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities as of December 31, 2018
|
|
$
|
4,781
|
|
|
$
|
-
|
|
|
$
|
-
|
|
WESTERN URANIUM & VANADIUM
CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
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 June 30, 2019 and December 31, 2018, 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 periods ended June 30,
2019 and 2018. 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 2015 through 2018 remain subject to examination.
Loss
per Share
Basic
net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during
the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential
common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the
exercise of stock options and warrants (using the treasury stock method). The computation of basic net loss per share for the
three and six months ended June 30, 2019 and 2018 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 Six Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Warrants to purchase shares of common stock
|
|
|
8,838,701
|
|
|
|
4,587,124
|
|
Options to purchase shares of common stock
|
|
|
2,416,664
|
|
|
|
1,783,664
|
|
Total potentially dilutive securities
|
|
|
11,255,365
|
|
|
|
6,370,788
|
|
WESTERN URANIUM & VANADIUM
CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Recent
Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material
effect on the accompanying condensed consolidated financial statements, other than those disclosed below.
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 December 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 condensed 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 adopted ASU 2018-10, and has determined that there are no material impacts to the condensed
consolidated financial statements.
WESTERN URANIUM & VANADIUM
CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
NOTE
4 – MINERAL ASSETS, ABLATION INTELLECTUAL PROPERTY AND OTHER PROPERTY
The Company’s mining properties acquired
on August 18, 2014 that the Company retains as of June 30, 2019, 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 June 30, 2019, include Hansen,
North Hansen, High Park, Hansen Picnic Tree, and Taylor Ranch, located in Fremont and Teller Counties, Colorado. The Company also
acquired the Keota project located in Weld County, Wyoming and 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.
The
Company’s mineral properties and equipment and ablation intellectual property are:
|
|
As of
|
|
|
|
June 30,
2019
|
|
|
December 31, 2018
|
|
Mineral properties and equipment
|
|
$
|
11,732,841
|
|
|
$
|
11,681,720
|
|
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 three months ended June 30, 2019 and 2018 the Company recognized aggregate revenue of $11,155 and $11,155 and for the six
months ended June 30, 2019 and 2018 the Company recognized aggregate revenue of $22,310 and $22,310, respectively, under these
oil and gas lease arrangements.
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 June 30, 2019 and December 31, 2018,
to be approximately $897,492 and $889,030, respectively. During the three months ended June 30, 2019 and 2018, the accretion of
the reclamation liabilities was $5,234 and $2,638, and for the six months ended June 30, 2019 and 2018 was $8,528 and $5,213,
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 June 30,
2019 and December 31, 2018 of $233,173 and $224,645, respectively. The gross reclamation liabilities as of June 30, 2019 and December
31, 2018 are secured by certificates of deposit in the amount of $897,492 and $889,030, respectively.
WESTERN URANIUM & VANADIUM
CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
NOTE
4 – MINERAL ASSETS, ABLATION INTELLECTUAL PROPERTY AND OTHER PROPERTY, CONTINUED
Reclamation
liability activity for the six months ended June 30, 2019 and 2018 consists of:
|
|
For the Six Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Beginning balance
|
|
$
|
224,645
|
|
|
$
|
196,821
|
|
Accretion
|
|
|
8,528
|
|
|
|
5,213
|
|
Ending Balance
|
|
$
|
233,173
|
|
|
$
|
202,034
|
|
NOTE
5 - Accounts Payable and Accrued Liabilities
Accounts
payable and accrued liabilities consisted of:
|
|
As of
|
|
|
|
June 30,
2019
|
|
|
December 31,
2018
|
|
Trade accounts payable
|
|
$
|
420,204
|
|
|
$
|
326,250
|
|
Accrued liabilities
|
|
|
171,814
|
|
|
|
167,070
|
|
Total accounts payable and accrued liabilities
|
|
$
|
592,018
|
|
|
$
|
493,320
|
|
NOTE
6 - 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 June 30, 2019 and December 31, 2018, an unlimited number of common shares were
authorized for issuance.
Private
Placement
On April 16, 2019, the Company completed a private placement of
3,914,632 units at a price of CAD $0.98 (USD $0.73) per unit for net proceeds of CAD $3,836,340 (USD $2,856,356). 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 $1.70 and expires three years from the date of issuance.
On
June 17, 2019, the Company completed a private placement of 192,278 units at a price of CAD $0.98 (USD $0.73) per unit for gross
proceeds of CAD $188,432 (USD $140,555). 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 $1.70 and expires three years from the date of issuance.
Incentive
Stock Option Plan
The
Company maintains an Incentive Stock Option Plan (the “Plan”) that permits the granting of stock options as incentive
compensation. Shareholders of the Company approved the Plan on June 30, 2008 and amendments to the Plan on June 20, 2013, and
the Board of Directors approved additional changes to the Plan on September 12, 2015.
The
purpose of the Plan is to attract, retain and motivate directors, management, staff and consultants by providing them with the
opportunity, through stock options, to acquire a proprietary interest in the Company and benefit from its growth.
The
Plan provides that the aggregate number of common shares for which stock options may be granted will not exceed 10% of the issued
and outstanding common shares at the time stock options are granted. As of June 30, 2019 and December 31, 2018, a total of 30,083,747
common shares were outstanding, and at that date the maximum number of stock options eligible for issue under the Plan was 3,008,375.
WESTERN URANIUM & VANADIUM
CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
NOTE
6 - SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS, CONTINUED
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, 2019
|
|
|
2,416,664
|
|
|
$
|
1.67
|
|
|
|
|
|
|
$
|
0.48
|
|
|
|
|
|
Outstanding - June 30, 2019
|
|
|
2,416,664
|
|
|
$
|
1.73
|
|
|
|
3.23
|
|
|
$
|
0.48
|
|
|
$
|
26,319
|
|
Exercisable - June 30, 2019
|
|
|
2,416,664
|
|
|
$
|
1.73
|
|
|
|
3.23
|
|
|
$
|
0.48
|
|
|
$
|
26,319
|
|
The
Company’s stock based compensation expense related to stock options for the three months ended June 30, 2019 and 2018 was
$180,269 and $652 and for the six months ended June 30, 2019 and 2018 was $180,269 and $54,840, respectively. As of June 30, 2019,
the Company had $0 in unamortized stock option expense.
Warrants
|
|
Number of Shares
|
|
|
Weighted Average Exercise Price (USD)
|
|
|
Weighted Average Contractual Life (years)
|
|
|
Intrinsic Value
(USD)
|
|
Outstanding - January 1, 2019
|
|
|
6,798,401
|
|
|
$
|
1.49
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
2,059,825
|
|
|
$
|
1.30
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(19,525
|
)
|
|
$
|
2.56
|
|
|
|
|
|
|
|
|
|
Outstanding - June 30, 2019
|
|
|
8,838,701
|
|
|
$
|
1.18
|
|
|
|
1.39
|
|
|
$
|
396,697
|
|
Exercisable - June 30, 2019
|
|
|
8,838,701
|
|
|
$
|
1.18
|
|
|
|
1.39
|
|
|
$
|
396,697
|
|
Note
7 - Mining Expenditures
|
|
For the Three Months Ended
June 30,
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Permits
|
|
$
|
66,940
|
|
|
$
|
33,124
|
|
|
$
|
109,322
|
|
|
$
|
78,579
|
|
Maintenance
|
|
|
17,500
|
|
|
|
300
|
|
|
|
18,964
|
|
|
|
3,900
|
|
Contract Labor
|
|
|
-
|
|
|
|
11,050
|
|
|
|
-
|
|
|
|
11,050
|
|
|
|
$
|
84,440
|
|
|
$
|
44,474
|
|
|
$
|
128,286
|
|
|
$
|
93,529
|
|
NOTE
8 - Related Party Transactions
The
Company has transacted with related parties pursuant to service arrangements in the ordinary course of business, as follows:
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 $351,099 as of
June 30, 2019) 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 is estimable, the Company recorded the deferred contingent consideration as an assumed liability in
the amount of $351,099 and $352,361 as of June 30, 2019 and December 31, 2018, respectively.
WESTERN URANIUM & VANADIUM
CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
Note
9 – Subsequent event
Van
4 Mine Permitting Status
A
prior owner of the Company’s 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 must include
all of the parties in the proceeding. The plaintiff organizations are 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, whereby the additional
five-year temporary cessation period was granted. The Plaintiffs appealed this ruling to the Colorado Court of Appeals and on
July 25, 2019 the ruling was reversed, whereby the additional five-year temporary cessation period should not have been granted.
The Colorado Mined Land Reclamation Board (CMLRB) and the Colorado Attorney General continue to evaluate next steps. In discussions
with CMLRB, PRM has been advised to await feedback as the State of Colorado completes its process.
Hansen
and Picnic Tree Loss of Property
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 (as extended) on July 28, 2019 if not exercised.
Prior to July 28, 2019, the Company decided not to exercise the
option to purchase the remaining 51% of the mineral rights of specific areas of the Hansen and Picnic Tree deposits, and thus the
option has expired unexercised.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking
Statements
The
information disclosed in this quarterly report, and the information incorporated by reference herein, include “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include, but are not
limited to, statements regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding
the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances,
including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,”
“continue,” “could,” “estimate,” “expect,” “intend,” “may,”
“might,” “plan,” “possible,” “potential,” “predict,” “project,”
“should,” “would” and similar expressions may identify forward-looking statements, but the absence of
these words does not mean that a statement is not forward-looking.
The forward-looking statements contained
or incorporated by reference in this quarterly report are based on our current expectations and beliefs concerning future developments
and their potential effects on us and speak only as of the date of each such statement. There can be no assurance that future
developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks,
uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially
different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are
not limited to, those factors described in this Item 2 of Part I of this quarterly report and in Item 1A of Part I of annual report
on Form 10-K for the year ended December 31, 2018. Should one or more of these risks or uncertainties materialize, or should any
of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking
statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise, except as may be required under applicable securities laws.
The
following discussion should be read in conjunction with our condensed consolidated interim financial statements and footnotes
thereto contained in this quarterly report.
Overview
General
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”).
On
August 18, 2014, the Company closed on the purchase of certain mining properties in Colorado and Utah from Energy Fuels Holding
Corp. Assets purchased included both owned and leased lands in Utah and Colorado and all represent properties that have been previously
mined for uranium to varying degrees in the past. The acquisition included the purchase of the Sunday Mine Complex. The Sunday
Mine Complex is located in western San Miguel County, Colorado. The complex consists of the following five individual mines: the
Sunday mine, the Carnation mine, the Saint Jude mine, the West Sunday mine and the Topaz mine. The operation of each of these
mines requires a separate permit and all such permits have been obtained by Western and are currently valid. In addition, each
of the mines has good access to a paved highway, electric power to existing declines, office/storage/shop and change buildings,
and extensive underground haulage development with several vent shafts complete with exhaust fans. These properties were formerly
secured by a first priority interest collateralizing a $500,000 promissory note which was paid in full on August 31, 2018 and
thus the properties are now held free and clear of encumbrances. The Sunday Mine Complex is where the Company anticipates it would
initiate production and Ablation operations, since the complex is ready to be mined.
On
September 16, 2015, Western completed its acquisition of Black Range, an Australian company that was listed on the Australian
Securities Exchange until the acquisition was completed. The acquisition terms were pursuant to a definitive Merger Implementation
Agreement entered into between Western and Black Range. Pursuant to the agreement, Western acquired all of the issued shares of
Black Range by way of Scheme of Arrangement (“the Scheme”) under the Australian Corporation Act 2001 (Cth) (the "Black
Range Transaction"), with Black Range shareholders being issued common shares of Western on a 1 for 750 basis. On August
25, 2015, the Scheme was approved by the shareholders of Black Range and on September 4, 2015, Black Range received approval by
the Federal Court of Australia. In addition, Western issued to certain employees, directors and consultants options to purchase
Western common shares. Such stock options were intended to replace Black Range stock options outstanding prior to the Black Range
Transaction on the same 1 for 750 basis.
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" and are traded on the OTCQX Best Market under the symbol “WSTRF”. 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”).
Recent
Developments
April
2019 Private Placement
On April 16, 2019, the Company completed a private
placement of 3,914,632 units at a price of CAD $0.98 (USD $0.73) per unit for net proceeds of CAD $3,836,340 (USD $2,856,356).
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 $1.70 and expires three years from the date of issuance.
June
2019 Private Placement
On
June 17, 2019, the Company completed a private placement of 192,278 units at a price of CAD $0.98 (USD $0.73) per unit for gross
proceeds of CAD $188,432 (USD $140,555). 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 $1.70 and expires three years from the date of issuance.
Ablation
Licensing
During 2016, the Company submitted documentation
to the Colorado Department of Public Health and Environment (“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 the Company’s regulatory counsel does not agree. NRC’s advisory opinion
recommended that Ablation should be regulated as a milling operation but did recognize that there may be exemptions to certain
milling regulatory requirements because of 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. Beginning in 2017, the Company’s regulatory counsel has prepared significant documentation
in preparation for a prospective submission.
Reopening
of the Sunday Mine Complex
On
October 25, 2018, the Company announced its intention to re-open the Sunday Mine Complex. Western is commencing this program with
the goals of upgrading the vanadium resource and monetizing these already significant vanadium resource holdings. This new initiative
also supports Western’s discussions with multiple potential customers and joint venture partners who are requesting ore
samples. It is Western’s view that these discussions will result in an agreement sufficient to commence production at the
Sunday Mine Complex.
On
April 17, 2019 the Company announced that the proceeds of the April Private Placement were sufficient to fully fund the Sunday
Mine Complex Vanadium Project. The work program was defined to focus on the identification of high-grade vanadium zones by XRF
surface sampling and underground drilling, test mining, vanadium ore sample delivery, and large-scale ore testing to further define
the vanadium resource for near-term delivery to worldwide vanadium processing facilities.
On
May 14, 2019 the Company announced that the first underground work on the Sunday Mine Vanadium Project was tracking to commence
in June and that after mine opening, vanadium ore samples will be delivered to vanadium processors and users around the world.
To oversee the project, Western hired a Chief Geologist who has a decade of expertise in vanadium/uranium deposits, specific Colorado/Utah
Mineral Belt experience, and a Ph.D. in Geological Science.
On
June 18, 2019, the Company announced the commencement of the Sunday Mine Complex Vanadium Project subsequent to the opening of
the Sunday Mine and Saint Jude Mine portals. Additionally, commercial power has been switched on at the Sunday Mine Complex and
mine opening requirements have been completed with the Bureau of Land Management (BLM), Colorado Division of Reclamation, Mining
and Safety (CDRMS) and Mine Safety and Health Administration (MSHA). Historical geological and mining data analysis of the sandstone
hosted deposits has provided initial target locations for sampling to identify high grade vanadium zones. Following bulk sampling,
vanadium ore samples will be delivered to prospective customers around the world.
Addendum
to Chief Executive Officer’s Employment Agreement
On
May 30, 2019, the Company entered into an Addendum to the existing employment agreement with George Glasier, its Chief Executive
Officer. The Addendum increases his base salary to a rate of $220,000 per annum and the other terms of the agreement remain unmodified.
Sunday
Mine Complex Vanadium Project Supplementary Requirements
On
June 18, 2019, The Colorado Division of Reclamation, Mining and Safety (CDRMS) issued a letter indicating limited supplementary
requirements prior to the removal of material (ore) from the Sunday Mine Complex underground workings and further offsite handling.
In a follow-up meeting on Monday, August 5, 2019, the Company agreed to construct an ore pad on the surface before stockpiling
or storing ore outside the mine and acquire certification that the storm drainage system was constructed in accordance with the
existing plan prior to the removal of ore from the SMC. The Company expects to have fulfilled all supplementary requirements by
the fourth quarter.
Van
4 Mine Permitting Status
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 must include all of
the parties in the proceeding. The plaintiff organizations are 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, whereby the additional
five-year temporary cessation period was granted. The Plaintiffs appealed this ruling to the Colorado Court of Appeals and on
July 25, 2019 the ruling was reversed, whereby the additional five-year temporary cessation period should not have been granted.
The Colorado Mined Land Reclamation Board (CMLRB) and the Colorado Attorney General continue to evaluate next steps. In discussions
with CMLRB, PRM has been advised to await feedback as the State of Colorado completes its process.
Weld
County Colorado Litigation
On June 13, 2019, Black Range was sued over
the original Weld County Colorado deed language. The lawsuit was filed in the Weld County District Court. This deed was negotiated
prior to the Company acquiring Black Range in September 2015 by prior management and a bank representing the estate of the property
owner. The plaintiff, the estate’s beneficiaries, assert that it was the intent that they would receive a production override
royalty for oil and gas production from the property, however this language was not included in the deed. Western’s attorney
has filed a response with the court contesting this allegation. This only involves royalties on oil and gas production on this
undeveloped property, thus there is no current economic impact.
Uranium
Section 232 Investigation
In
the United States, a Section 232 investigation was undertaken in 2018 to assess the impact to national security of the importation
of the vast majority of uranium utilized by the 98 operating civilian nuclear reactors within the United States. The U.S. Department
of Commerce provided a report containing a recommendation to the White House on April 14, 2018; President Trump considered the
findings of the Section 232 report and disseminated a Presidential Memoranda on July 12, 2019. At this time, the President did
not implement the quota solution proposed by the petitioners or another remedy. Instead, to address the concerns of the Department
of Commerce, the President formed the United States Nuclear Fuel Working Group and charged them with finding solutions for reviving
and expanding domestic nuclear fuel production and reinvigorating the entire nuclear fuel supply chain. The group is required
to submit a report containing findings and recommendations to the President within 90 days. Western is one of very few uranium
companies holding previously producing, permitted, and developed mines in the United States and thus positioned to benefit in
the short-term from a favorable determination.
Results
of Operations
|
|
For
the Three Months Ended
June 30,
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease revenue
|
|
$
|
11,155
|
|
|
$
|
11,155
|
|
|
$
|
22,310
|
|
|
$
|
22,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mining expenditures
|
|
|
84,440
|
|
|
|
44,474
|
|
|
|
128,286
|
|
|
|
93,529
|
|
Professional fees
|
|
|
94,316
|
|
|
|
88,291
|
|
|
|
187,633
|
|
|
|
267,517
|
|
General and administrative
|
|
|
244,406
|
|
|
|
155,378
|
|
|
|
619,379
|
|
|
|
380,297
|
|
Consulting fees
|
|
|
33,680
|
|
|
|
68,736
|
|
|
|
48,680
|
|
|
|
109,950
|
|
Total operating expenses
|
|
|
456,842
|
|
|
|
356,879
|
|
|
|
983,978
|
|
|
|
851,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(445,687
|
)
|
|
|
(345,724
|
)
|
|
|
(961,668
|
)
|
|
|
(828,983
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
2,912
|
|
|
|
11,265
|
|
|
|
5,806
|
|
|
|
25,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(448,599
|
)
|
|
|
(356,989
|
)
|
|
|
(967,474
|
)
|
|
|
(854,853
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gain
|
|
|
(680
|
)
|
|
|
19,725
|
|
|
|
14,599
|
|
|
|
17,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Loss
|
|
$
|
(449,279
|
)
|
|
$
|
(337,264
|
)
|
|
$
|
(952,875
|
)
|
|
$
|
(837,677
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.04
|
)
|
Three
Months Ended June 30, 2019 as Compared to the Three Months Ended June 30, 2018
Summary
Our
condensed consolidated net loss for the three months ended June 30, 2019 and 2018 was $448,599 and $356,989 or $0.02 and $0.02
per share, respectively. The principal components of these quarter over quarter changes are discussed below.
Our
comprehensive loss for the three months ended June 30, 2019 and 2018 was $449,279 and $337,264, respectively.
Revenue
Our
revenue for the three months ended June 30, 2019 and 2018 was $11,155 and $11,155, respectively. The revenue resulted from lease
revenue pursuant to the Company’s lease agreements and easements. The counterparties are from the oil and gas industry.
Mining
Expenditures
Mining
expenditures for the three months ended June 30, 2019 were $84,440 as compared to $44,474 for the three months ended June 30,
2018. The increase in mining expenditures of $39,966, or 90% was principally attributable to mining expenditures needed for the
Sunday Mine Complex vanadium project.
Professional
Fees
Professional
fees for the three months ended June 30, 2019 were $94,316 as compared to $88,291 for the three months ended June 30, 2018. The
net increase in professional fees of $6,025, or 7% was principally due to an increase in investor relations and professional fee
expenditures net of reduced audit and legal fee expenditures.
General
and Administrative
General
and administrative expenses for the three months ended June 30, 2019 were $244,406 as compared to $155,378 for the three months
ended June 30, 2018. The increase in general and administrative expense of $89,028, or 57% is primarily due to an increase of
$51,409 in payroll resulting from consultant compensation being moved onto payroll and the addition of new staff for the Sunday
Mine Complex project.
Consulting
Fees
Consulting
fees for the three months ended June 30, 2019 were $33,680 as compared to $68,736 for the three months ended June 30, 2018. The
decrease in consulting fees of $35,056, or 51% was principally related to a decrease in consultant utilization and consultant
compensation being moved onto payroll.
Interest
Expense, net
Interest
expense, net, for the three months ended June 30, 2019 was $2,912 as compared to $11,265 for the three months ended June 30, 2018.
The decrease of interest expense, net, of $8,353, or 74% was attributable to the Company paying off promissory notes during 2018.
Foreign
Exchange
Foreign
exchange gain (loss) for the three months ended June 30, 2019 was $(680) as compared to $19,725 for the three months ended June
30, 2018. The decrease of the foreign exchange gain of $20,405, or 103% is primarily due to the U.S. Dollar weakening against
the Canadian Dollar during the current quarter while holding cash balances in Canadian Dollars.
Six
Months Ended June 30, 2019 as Compared to the Six Months Ended June 30, 2018
Summary
Our
condensed consolidated net loss for the six months ended June 30, 2019 and 2018 was $967,474 and $854,853 or $0.03 and $0.04 per
share, respectively. The principal components of these quarter over quarter changes are discussed below.
Our
comprehensive loss for the six months ended June 30, 2019 and 2018 was $952,875 and $837,677, respectively.
Revenue
Our
revenue for the six months ended June 30, 2019 and 2018 was $22,310 and $22,310, respectively. The revenue resulted from lease
revenue pursuant to the Company’s lease agreements and easements. The counterparties are from the oil and gas industry.
Mining
Expenditures
Mining
expenditures for the six months ended June 30, 2019 were $128,286 as compared to $93,529 for the six months ended June 30, 2018.
The increase in mining expenditures of $34,757, or 37% was principally attributable to mining expenditures needed for the Sunday
Mine Complex vanadium project.
Professional
Fees
Professional
fees for the six months ended June 30, 2019 were $187,633 as compared to $267,517 for the six months ended June 30, 2018. The
decrease in professional fees of $79,884, or 30% was principally due to a decrease in investor relations fees of $75,734 and legal
services of $29,703.
General
and Administrative
General
and administrative expenses for the six months ended June 30, 2019 were $619,379 as compared to $380,297 for the six months ended
June 30, 2018. The increase in general and administrative expense of $239,082, or 63% is due to an increase of $124,345 in stock-based
compensation and $76,669 in payroll resulting from consultant compensation being moved onto payroll and adding staff for the Sunday
Mine Complex project.
Consulting
Fees
Consulting
fees for the six months ended June 30, 2019 were $48,680 as compared to $109,950 for the six months ended June 30, 2018. The decrease
in consulting fees of $61,270, or 56% was principally related to a decrease in consultant utilization and consultant compensation
being moved onto payroll.
Interest
Expense, net
Interest
expense, net, for the six months ended June 30, 2019 was $5,806 as compared to $25,870 for the six months ended June 30, 2018.
The decrease of interest expense, net, of $20,064, or 78% was attributable to the Company paying off promissory notes during 2018.
Foreign
Exchange
Foreign
exchange gain for the six months ended June 30, 2019 was $14,599 as compared to $17,176 for the six months ended June 30, 2018.
The decrease of the foreign exchange gain of $2,577, or 15% 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 June 30, 2019 was $2,954,380. 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. The Company expects to require additional capital in order to
continue the development of Ablation. 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. 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 $873,860 for the six months ended June 30, 2019, as compared with $679,369 for the six months
ended June 30, 2018. Of the $873,860 in net cash used in operating activities, $967,474 is derived from our net loss. During the
six months ended June 30, 2019, $98,698 represented an increase in accounts payable and accrued liabilities, $172,680 represented
an increase in prepaid expenses, $8,528 represented an increase in the reclamation liability, $22,310 represented a decrease in
deferred revenue and $180,269 represented non-cash stock based compensation.
Net
cash used in investing activities
During
the six months ended June 30, 2019, the Company purchased $52,418 in property and equipment. This capital expenditure represents
the initiation of expenditures needed to re-open the Sunday Mine Complex. There was no cash used in investing activities during
the six months ended June 30, 2018.
Net
cash provided by financing activities
Net
cash provided by financing activities for the six months ended June 30, 2019 was $2,996,911 as compared to $535,975 for the six
months ended June 30, 2018. For the six months ended June 30, 2019, the net cash provided by financing activities consisted of
$2,996,911 from the proceeds received in our private placements.
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 June 30, 2019 and December 31, 2018,
to be approximately $897,492 and $889,030, respectively. During the three months ended June 30, 2019 and 2018, the accretion of
the reclamation liabilities was $3,294 and $2,638, and for the six months ended June 30, 2019 and 2018 was $8,528 and $5,213,
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 June 30,
2019 and December 31, 2018 of $233,173 and $224,645, respectively. The gross reclamation liabilities as of June 30, 2019 and December
31, 2018 are secured by certificates of deposit in the amount of $897,492 and $889,030, respectively.
Related
Party Transactions
The
Company has transacted with related parties pursuant to service arrangements in the ordinary course of business, as follows:
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 $351,099) 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 $351,099 and $352,361 as of June 30, 2019 and December
31, 2018, respectively.
Going
Concern
The
Company has incurred continuing losses from its operations and as of June 30, 2019 the Company had an accumulated deficit of $7,551,816
and a working capital of $2,716,354.
Since
inception, the Company has met its liquidity requirements principally through the issuance of notes and the sale of its shares
of common stock.
The
Company’s ability to continue its operations and to pay its obligations when they become due is contingent upon the Company
obtaining additional financing. Management’s plans include seeking to procure additional funds through debt and equity financings,
to secure regulatory approval to fully utilize its ablation technology and to initiate the processing of ore to generate operating
cash flows.
There
are no assurances that the Company will be able to raise capital on terms acceptable to the Company or at all, or that cash flows
generated from its operations will be sufficient to meet its current operating costs. 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 condensed consolidated financial statements
do not include any adjustments that might result from the outcome of these uncertainties.
Off
Balance Sheet Arrangements
As
of June 30, 2019, 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 condensed 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 condensed 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 shares
of common stock, 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.