Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
URRE > SEC Filings for URRE > Form 10-K on 18-Mar-2016All Recent SEC Filings

Show all filings for URANIUM RESOURCES INC /DE/

Form 10-K for URANIUM RESOURCES INC /DE/


18-Mar-2016

Annual Report


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our consolidated financial statements as of and for the two years ended December 31, 2015, and the related notes thereto appearing elsewhere in this Annual Report on Form 10-K, which have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"). This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth under the section heading "Item 1A. Risk Factors" above and elsewhere in this Annual Report on Form 10-K. See "Cautionary Note Regarding Forward-Looking Statements" above.

INTRODUCTION

URI is a uranium exploration, development and production company. We were organized in 1977 to acquire and develop uranium projects in South Texas using the ISR process. Following our acquisition of Anatolia Energy, we are focused on advancing to near-term production the Temrezli ISR project in Turkey. We also control extensive exploration properties under nine exploration and operating licenses covering approximately 44,700 acres with numerous exploration targets, including the potential satellite Sefaatli project, which is 25 miles southwest of the Temrezli project. We have historically produced uranium by ISR methods in the state of Texas where we currently have ISR projects and two licensed processing facilities. We also have approximately 190,000 acres of mineral holdings in the prolific Grants Mineral Belt of the state of New Mexico, a portion of which we have entered into a binding letter of intent to sell, and 14,000 acres in the South Texas uranium province. We acquired these properties over the past 25 years along with an extensive information database of historic drillhole logs and analysis. None of URI's properties are currently in production.

RECENT DEVELOPMENTS

Reverse Stock Split

Immediately following the close of trading on March 7, 2016, URI affected a one-for-twelve reverse stock split of its common stock. With the reverse stock split, every twelve shares of URI's issued and outstanding common stock were combined into one issued and outstanding share of common stock. The reverse stock split reduced the number of shares outstanding from approximately 61.8 million shares to approximately 5.2 million shares. In addition, effective upon the reverse stock split, the number of authorized shares of URI's common stock was reduced from 200 million to 100 million. The reverse stock split did not have any effect on the par value of URI's common stock. No fractional shares were issued as a result of the reverse stock split. Any fractional shares that would have resulted were settled in cash. All share data herein has been retroactively adjusted for the reverse stock split.

Option Agreement with Aspire Capital

On February 3, 2016, URI and Aspire Capital, entered into an option agreement by which Aspire Capital granted us the right at any time or times prior to April 30, 2017 to require Aspire Capital to enter into up to two common stock purchase agreements, each having a term of up to 24 months and collectively requiring Aspire Capital to purchase up to $10 million in the aggregate of our common stock (or such lesser amount as we may determine) on an ongoing basis when required by URI. As consideration for Aspire Capital entering into the option agreement, we issued 75,000 shares of our common stock to Aspire Capital.

Registered Direct Offerings

On February 4, 2016, we completed a registered direct offering for gross proceeds of $838,000. Net proceeds to URI, after deducting offering expenses, were approximately $0.8 million. We sold 296,667 shares of common stock at a price of $2.82 per share.

On December 18, 2015, we completed a registered direct offering for gross proceeds of $1.0 million. Net proceeds to URI, after deducting agent fees and offering expenses, were $0.7 million. We sold 208,332 shares of common stock at a price of $4.80 per share.


On March 6, 2015, we completed a registered direct offering for gross proceeds of $6.0 million. Net proceeds to URI, after deducting agent's fees and offering expenses, were $5.4 million. We sold 333,333 million units at a price of $18.00 per unit, with each unit comprised of one share of our common stock and a warrant to purchase 0.55 shares of common stock at an exercise price of $24.00 per whole share. The warrants are exercisable for a period of five years beginning on the six-month anniversary of original issuance and ending on a date five years after the first date of exercisability.

Acquisition of Anatolia Energy

On November 9, 2015, we completed the Anatolia Transaction. Upon the closing of the Anatolia Transaction, we issued approximately 1.7 million shares of our common stock, 577,663 replacement options and replacement performance shares relating to 58,286 shares of our common stock to holders of Anatolia Energy's securities, and Anatolia Energy became a wholly-owned subsidiary of URI. Immediately after the closing of the Anatolia Transaction, the former Anatolia Energy shareholders held approximately 40% of the outstanding common stock of the combined company (or approximately 43% on a fully diluted basis), and the shares of common stock held by continuing shareholders represented approximately 60% of the outstanding common stock of the combined company.

Laramide Asset Sale

Also on November 9, 2015, we entered into an LOI with Laramide Resources for the sale of our Churchrock and Crownpoint properties in New Mexico. Under the terms of the LOI, URI and certain of our subsidiaries have agreed, subject to the execution of definitive documentation, to transfer ownership of the Churchrock and Crownpoint properties to Laramide Resources or its subsidiaries. In exchange, we will receive from Laramide Resources at closing, cash in the amount of $5.25 million and a note receivable in the amount of $7.25 million payable in three equal installments over the next three years. Laramide Resources will also assume any liabilities related to reclamation and remediation on the subject lands. Closing of the transaction is expected to occur during the first half of 2016, subject to financing and other customary conditions, including applicable regulatory approvals.

Energy Fuels Asset Sale

On June 28, 2015, we completed the sale of our remaining Roca Honda project assets to Energy Fuels Inc. for $2.5 million in cash, $375,000 in Energy Fuels Inc.'s NYSE MKT-listed shares (amounting to 76,455 UUUU shares) plus other non-cash consideration. The transaction with Energy Fuels Inc. closed on July 31, 2015, and we sold the Energy Fuels Inc. shares on February 22, 2016 for net proceeds of $0.2 million.

Reclamation progress at the Rosita project.

We completed the plugging and abandonment phase of reclamation at its Rosita project during 2015. We are currently performing surface reclamation activities at the Rosita project and are approximately 45% complete in Production Area 1 and 55% complete in Production Area 2.

Exploration Drilling and Data Purchase

On March 23, 2015, we reported that all five drill holes from a completed preliminary drill program at the Butler Ranch project in South Texas encountered multiple zones of anomalous to low-grade levels of uranium mineralization. In July 2015, we acquired an extensive data set containing historical mineral resource estimates as well as over 2,000 drill logs, geologic and other data for the Butler Ranch project.

RESULTS OF OPERATIONS

Summary

Our consolidated net loss for the years ended December 31, 2015 and 2014 was $15.1 million and $10.7 million or $5.63 and $5.28 per share, respectively. The principal components of these year-over-year changes are discussed below.


Mineral property expenses

Mineral property expenses for the year ended December 31, 2015 were $4.5 million, as compared with $3.5 million for the year ended December 31, 2014.

The following table details our mineral property expenses for the years ended December 31, 2015 and 2014.

                                             For the years ended December 31,
                                                2015                 2014
                                                  (thousands of dollars)
  Restoration/Recovery expenses
     Kingsville Dome Project               $              -    $             309
     Rosita Project                                      77                  250
     Vasquez Project                                      -                   27
       Total restoration/recovery
  expenses                                               77                  586

  Standby care and maintenance expenses
     Kingsville Dome Project                            646                  565
     Rosita Project                                     406                  442
     Vasquez Project                                    416                  340
       Total standby care and maintenance
  expenses                                            1,468                1,347

  Exploration and evaluation costs                    1,027                    -

  Land maintenance and holding costs                  1,898                1,569

  Total mineral property expenses         $           4,470    $           3,502

For the year ended December 31, 2015, mineral property expenses increased by $1.0 million as compared with the corresponding period in 2014. This increase was mostly due to an increase in exploration and evaluation costs of $1.0 million. During 2015 we incurred $0.6 million on exploration programs at the Alta Mesa Este and Butler Ranch projects, which included the acquisition of an extensive data set containing historical mineral resource estimates as well as over 2,000 drill logs, geologic and other data for the Butler Ranch Project.
The remaining $0.4 million was attributable to evaluation activities at our recently acquired Temrezli Project. We did not incur any exploration or evaluation costs during 2014.

General and administrative expenses

Significant expenditures for general and administrative expenses for the years ended December 31, 2015 and 2014 were:

                                           For the year ended December 31,
                                             2015                  2014
                                              (thousands of dollars)

     Stock compensation expense        $              950   $             1,031
     Salaries and payroll burden                    2,276                 2,607
     Legal, accounting, public
     company expenses                               2,557                 3,282
     Insurance and bank fees                          571                   673
     Consulting and professional
     services                                         443                   646
     Office expenses                                  568                   615
     Other expenses                                   123                   278
     Total                            $             7,488   $             9,132

General administrative charges decreased by $1.6 million as compared with the corresponding period in 2014. This decrease mostly reflects our focus on the Anatolia Transaction during 2015 and our ongoing efforts to reduce costs.


Acquisition related expenses

During 2015, we incurred acquisition related costs associated with the Anatolia Transaction of $3.0 million. These costs were mostly the result of legal and accounting costs of $1.7 million and consultant fees, including investment banking fees, of $1.3 million.

Non-operating income and expenses

Gain on disposal/exchange of uranium properties

2015 Disposal

On June 26, 2015, we entered into a Purchase and Exchange Agreement ("PEA") with Energy Fuels Inc., pursuant to which at closing on July 31, 2015 subsidiaries of URI transferred ownership of the our Roca Honda project, including mineral fee lands and unpatented lode mining claims to Energy Fuels. In exchange, Energy Fuels delivered to URI (i) $2.5 million in cash, (ii) 76,455 shares of Energy Fuels common stock with a fair value upon closing of $0.3 million, which we sold on February 22, 2016 for $0.2 million (iii) Energy Fuels' 4% gross royalty covering 5,640 acres on seven mineral leases in the state of Wyoming at the Kendrick and Barber areas of the Lance uranium ISR project, which is currently under construction by Peninsula Energy Limited, and (iv) unpatented lode mining claims covering 640 acres located near Churchrock, New Mexico, which are contiguous with our Churchrock project.

We also retained a 4% royalty on Section 17 of the Roca Honda project. The royalty can be repurchased by Energy Fuels upon payment to URI of $5.0 million cash at any time at Energy Fuel's sole discretion prior to the date on which the first royalty payment becomes due.

The divestiture of the Roca Honda project was accounted for as an asset disposal and the non-cash considerations received from Energy Fuels was recorded at fair value. The fair value of the shares of Energy Fuels common stock received was determined using the closing share price of Energy Fuels stock on July 31, 2015. The fair value of the unpatented lode mining claims and mineral leases was determined based upon the per pound value of similar transactions involving unproved uranium assets within the last three years. We determined that the Lance Royalty had de minimus value and therefore determined the fair value to be nil. The following gain was included in our Statement of Operations and was determined using the fair value amounts of the purchase consideration less the carrying value of the Roca Honda project:

              (thousands of dollars)
              Total Consideration Received             $      4,916
              Carrying value of Roca Honda project            (648)
              Gain on disposal of Roca Honda project   $      4,268

2014 Asset Exchange

On September 5, 2014, URI, its wholly owned subsidiary Uranco, Inc. and Rio Grande Resources Corporation ("RGR") entered into an Asset Exchange Agreement whereby we agreed to acquire from RGR certain uranium properties located in South Texas near the Company's processing facilities, including, among others, the Alta Mesa Este, Butler Ranch and Sejita Dome exploration projects. In exchange for these South Texas properties, we agreed to transfer to RGR two parcels of fee-owned mineral rights and a royalty interest in the Roca Honda area of west-central New Mexico. URI retained certain leases, mining claims and fee-owned mineral interest on separate parcels in the Roca Honda area. On November 6, 2014, after completing customary due diligence and satisfying certain closing conditions, URI and RGR closed the transaction and effectuated the exchange of properties.

The Asset Exchange Agreement was accounted for as a non-monetary exchange of assets which requires the assets received in an asset exchange be recorded at the fair value of the assets relinquished. We determined the fair value of the Roca Honda assets relinquished to be $2.3 million. This fair value was determined based upon the per pound value of similar transactions involving uranium assets within the last 3 years. The carrying value of the Roca Honda assets relinquished in the transaction had previously been written off to nil in prior years and, as a result, the entire $2.3 million was recognized as a gain on non-monetary exchange of assets and included in our Consolidated Statements of Operations.


Interest expense

Interest expense of $2.6 million for the year ended December 31, 2015 consisted of interest of $0.7 million payable to RCF, amortization of the debt discount of $1.8 million and amortization of the establishment fee of $0.1 million.
Interest expense of $2.5 million for the year ended December 31, 2014 consisted of interest of $0.8 million payable to RCF, amortization of the debt discount of $1.6 million and amortization of the establishment fee of $0.1 million.

FINANCIAL POSITION

Operating Activities

Net cash used in operating activities was $12.0 million for the years ended December 31, 2015 and 2014. The increase in the net loss of $4.5 million for the year ended December 31, 2015 as compared with 2014 was offset by an increase in accounts payable of $2.3 million and an increase in non-cash items of $2.2 million.

Investing Activities

Net cash provided by investing activities was $1.0 million for the year ended December 31, 2015, as compared with net cash used by investing activities of $0.1 million for the same period in 2014. The increase in cash provided by investing activities of $1.1 million for the year ended December 31, 2015 is primarily due to the receipt of $2.5 million from Energy Fuels Inc. as partial consideration for the sale of the remaining Roca Honda project assets, which was offset by cash paid for the Anatolia Transaction of $1.4 million, which represented the amount loaned by URI to Anatolia Energy to fund operations prior to completion of the Anatolia Transaction, offset by cash received from Anatolia Energy upon completion of the Anatolia Transaction.

Financing Activities

Net cash provided by financing activities was $6.3 million for the year ended December 31, 2015. For 2015, we received net proceeds of $5.4 million from a registered direct offering completed on March 6, 2015, net proceeds of $0.7 million from a registered direct offering completed on December 18, 2015 and $0.3 million in net proceeds from common stock sold through our ATM program.
Offsetting these amounts were payments made for withholding taxes on net share settlements of equity awards of $0.1 million.

Net cash provided by financing activities was $16.5 million for the year ended December 31, 2014. For the year ended December 31, 2014 cash proceeds in aggregate of $5.0 million were received from two separate advances made under our Loan Agreement with RCF. An advance of $2.0 million was received in January 2014 and an advance of $3.0 million was received in April 2014. Also during the year ended December 31, 2014, we received net proceeds of $9.3 million from a registered direct offering completed in February 2014 and $2.5 million in net proceeds from common stock sold through the our ATM program. Offsetting these amounts were payments made for withholding taxes on net share settlements of equity awards of $0.1 million and payments made for the purchase of treasury stock of $0.2 million. On October 3, 2014, we entered into a Second Amendment to the Uranium Mining Lease and Agreement whereby, on October 6, 2014, we repurchased 7,635 shares of common stock from the Juan Tafoya Land Corporation for an aggregate purchase price of $0.2 million

Liquidity and Capital Resources

Our Consolidated Financial Statements have been prepared on a "going concern" basis, which means that the continuation of URI is presumed even though events and conditions exist that, when considered in the aggregate, raise substantial doubt about our ability to continue as a going concern because it is possible that we will be unable to meet our obligations as they become due within one year after the date that the financial statements were issued.

Following completion of the Anatolia Transaction, we faced liquidity challenges as we encountered difficulty raising sufficient capital as a result of weakening capital markets, particularly in the commodities sector. In addition, we incurred higher than expected transaction costs and assumed significant unpaid trade payables from Anatolia Energy. At December 31, 2015, our cash balances were $0.9 million and we had a working capital deficit of $8.9 million.
Contributing to the working capital deficit was the reclassification of the RCF Loan from long-term to short-term liabilities as the RCF Loan matures on December 31, 2016. On February 4, 2016, we completed a registered direct offering whereby we sold 296,667 shares of common stock at a price of $2.82 per share. Net proceeds, after deducting offering expenses, were $0.8


million. The ending cash balance of $0.9 million along with the proceeds received from the registered direct offering of $0.8 million provided us with sufficient capital to fund our critical operations through March 31, 2016.
Subsequent to March 31, 2016, we expect to receive funding from the following sources:

Laramide Asset Sale

As discussed under "Recent Corporate Developments," above, on November 9, 2015, we entered into an LOI with Laramide Resources for the sale of our Churchrock and Crownpoint properties in New Mexico. Under the terms of the binding LOI, we expect to receive a cash payment of $5.25 million upon closing, currently anticipated to occur in the second quarter of 2016.

Option Agreement with Aspire Capital

On February 3, 2016, we entered into an option agreement with Aspire by which Aspire Capital granted us the right at any time or times prior to April 30, 2017 to require Aspire Capital to enter into up to two common stock purchase agreements ("SPAs"), each having a term of up to 24 months and collectively requiring Aspire Capital to purchase up to $10 million in the aggregate of our common stock on an ongoing basis when we require.

At-the-Market Sales Agreement

We have an existing ATM Sales Agreement that allows us to sell, from time-to-time, shares of our common stock in at-the-market offerings having an aggregate offering amount up to $15.0 million of which we have approximately $5.6 million available for future sales as of March 18, 2016.

While we believe the sources of capital above may provide us with sufficient liquidity to fund ongoing operations through December 31, 2016 and settle the RCF Loan upon maturity, our market capitalization, low trading volume and potential to fall below the reference price under the SPAs may make it difficult for us to fully utilize the $10.0 million and $5.6 million available under the SPAs and ATM Sales Agreement, respectively. Therefore we believe that we will need to raise additional funding or renegotiate the terms of the RCF Loan in order to continue as a going concern. We are currently evaluating our options with respect to the RCF Loan and also continue to explore opportunities to raise additional funds, further monetize our non-core assets and look for ways to further reduce our monthly cash expenditures.

We have been successful at raising capital in the past, most recently with the completion of the registered direct offering on February 4, 2016 for gross proceeds of $0.8 million and two registered direct offerings during 2015 which occurred on December 18, 2015 and March 6, 2015 for aggregate net proceeds of $6.1 million. In addition, we were able to successfully raise capital in 2013 and 2014 through debt and equity fundraising efforts. Specifically, the completion of a registered direct offering in February 2014 for net proceeds of $9.3 million as well as procuring a convertible secured debt facility in November 2013 that provided us with $8.0 million in cash, which debt matures in December 2016. While we have been successful in the past raising funds through equity and debt financings as well as through the sale of non-core assets, no assurance can be given that additional financing will be available to us in amounts sufficient to meet our needs, including upon the maturity of our outstanding debt, or on terms acceptable to us. In the event funds are not available, we may be required to change our planned business strategies or we could default under our secured debt facility.

Off- Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies

Our significant accounting policies are described in Note 3 to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K. We believe our most critical accounting policies involve those requiring the use of significant estimates and assumptions in determining values or projecting future costs.


Property, Plant and Equipment

We review and evaluate our 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, availability and cost of capital and restoration and reclamation costs, based upon the projected remaining future uranium production from each project. The significant assumptions used in determining the future cash flows for our uranium properties and uranium plant assets at December 31, 2015 included an average long-term U3O8 price of $53.90 per pound and average operating costs and capital expenditure costs based on third-party and internal cost estimates. Estimates and assumptions used to assess recoverability of our 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 our long-lived assets. Events that could result in the impairment of our long-lived assets include, but are not limited to, decreases in the future U3O8 prices, decreases in the estimated recoverable minerals and any event that might otherwise have a material adverse effect on our costs. During 2015 and 2014, we recorded impairments of $1.0 million and $0.2 million, respectively, to reduce the carrying value of property, plant and mine equipment. Existing proven and probable reserves and value beyond proven and probable reserves, including mineralization that is not part of the measured, indicated or inferred resource base, are included when determining the fair value of uranium properties upon acquisition and, subsequently, in determining whether the assets are impaired. The term "recoverable minerals" refers to the estimated amount of uranium that will be obtained after taking into account losses during processing and treatment. 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.

Asset Retirement Obligations

Regarding our reserve for asset retirement obligations, significant estimates were utilized in determining the future costs to complete the groundwater restoration, plugging and abandonment of wellfields and surface reclamation at our ISR sites. Estimating future costs can be difficult and unpredictable as they are based principally on current legal and regulatory requirements and ISR site closure plans that may change materially. The laws and regulations . . .

  Add URRE to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for URRE - All Recent SEC Filings
Copyright © 2017 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.