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URRE > SEC Filings for URRE > Form 10-Q on 11-May-2016All Recent SEC Filings

Show all filings for URANIUM RESOURCES INC /DE/

Form 10-Q for URANIUM RESOURCES INC /DE/


11-May-2016

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management's discussion and analysis of the consolidated financial results and condition of URI for the three months ended March 31, 2016 has been prepared based on information available to us as of May 11, 2016. This discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included herewith and the audited Consolidated Financial Statements of URI for the period ended December 31, 2015 and the related notes thereto filed with our Annual Report on Form 10-K, which have been prepared in accordance with U.S. GAAP. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our 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 elsewhere in this report. See "Cautionary Note Regarding Forward-Looking Statements."

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 in-situ recovery ("ISR") process. We have historically produced uranium by ISR methods in the state of Texas where we currently have ISR projects and two licensed processing facilities. Following our 2015 acquisition of Anatolia Energy, we are focused on advancing to near-term production the Temrezli ISR project in Central Turkey. URI also controls extensive exploration properties in the region of the Temrezli project, which are held under nine exploration and operating licenses covering approximately 32,000 acres, with numerous exploration targets, including the potential satellite Sefaatli project, which is located approximately 30 miles southwest of the Temrezli project. We control 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 definitive purchase agreement to sell and 14,000 acres in the South Texas uranium province. URI acquired these properties over the past 25 years along with an extensive information database of historic drill-hole logs and analysis. None of URI's properties are currently in production.

Recent Developments

Reverse Stock Split

On March 7, 2016, following the close of trading, URI effected a one-for-twelve reverse split of its common shares. The consolidated common shares began trading on a split-adjusted basis on March 8, 2016. On February 11, 2016, at a Special Meeting of Stockholders, URI received approval for a charter amendment permitting URI to effect a reverse split. The primary purpose of the reverse split was to bring URI into compliance with the Nasdaq's $1.00 minimum bid price requirement to maintain URI's stock listing on Nasdaq.

The reverse split reduced the number of URI's outstanding common stock from 61,820,734 shares to 5,151,692 shares of common stock. 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. 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 to URI 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 URI's common stock at such times and in such amounts as elected by URI under the terms of the option agreement. As consideration for Aspire Capital entering into the option agreement, URI issued 75,000 shares of its common stock to Aspire Capital.


Common Stock Purchase Agreement with Aspire Capital

On April 8, 2016, the Company entered into the CSPA with Aspire Capital to place up to $12.0 million in the aggregate of the Company's common stock on an ongoing basis when required by the Company over a term of 30 months. The Company will control the timing and amount of sales to Aspire Capital, and at a price based on the market at that time. As consideration for Aspire Capital entering into the CSPA, the Company will issue 240,000 shares of its common stock to Aspire Capital upon the Company's receipt of shareholder approval at its Annual General Meeting of Stockholders. Also following receipt of shareholder approval, and effectiveness of the registration statement relating to the resale of the shares subject to the CSPA, the Company may begin selling shares of its common stock to Aspire Capital under the terms of the CSPA.

Registered Direct Offerings

On April 4, 2016, the Company completed a registered direct offering for gross proceeds of $1.25 million. The Company sold 375,000 shares of common stock at a price of $2.17 and 200,000 pre-funded warrants at a price of $2.16, which was paid at closing. The warrants have an exercise price of $0.01 and a term of three years.

On February 3, 2016, the Company completed a registered direct offering for gross proceeds of $0.8 million. The Company sold 296,666 shares of common stock at a price of $2.82 per share. Net proceeds to the Company, after deducting offering expenses, were approximately $0.8 million.

Laramide Asset Sale

On April 7, 2016, the Company entered into the Laramide SPA with Laramide Resources for the sale of its wholly-owned subsidiary Hydro Resources, Inc., which holds the Company's Churchrock and Crownpoint projects. Under the terms of the Laramide SPA, the Company is set to transfer ownership of the Churchrock and Crownpoint projects in exchange for the following consideration from Laramide Resources at closing:

$5.25 million in cash; and

$7.25 million promissory note, secured by a deed of trust or mortgage over the projects. The note will have a three-year term and carry an initial interest rate of 5% which then increases to 10% upon Laramide Resources decision regarding commercial production at the Churchrock project. Principal payments of approximately $2.4 million are due and payable on the anniversary of the closing of the transaction in each of 2017, 2018 and 2019. Interest will be payable on a quarterly basis, provided however that no interest will be payable prior to the first principal payment in 2017.

The closing under the Laramide SPA is subject to various conditions, including, without limitation, completion of a financing by Laramide Resources on commercially reasonable terms and in such amount as is necessary to fund the $5.25 million purchase price and certain customary and required consents and releases of and by third parties, including RCF. The United States Nuclear Regulatory Commission has approved the transfer of the Company's license to Laramide Resources, effective at closing.

Results of Operations

Summary

Our consolidated net loss for the three months ended March 31, 2016 was $4.3 million, or $0.86 per share as compared with a consolidated net loss of $3.8 million, or $1.70 per share for the same period in 2015. For the three months ended March 31, 2016, the increase in our consolidated net loss of $0.5 million from the respective prior period was mostly the result of a commitment fee of $0.3 million paid to Aspire Capital in accordance with the terms of an option agreement and a loss of $0.1 million on the sale of marketable securities.

Mineral Property Expenses

Mineral property expenses for the three months ended March 31, 2016 were $0.7 million, as compared with $0.8 million for the 2015 period.


The following table details our mineral property expenses for the three months ended March 31, 2016 and 2015:

                                           For the Three Months Ended March 31,
                                                2016                 2015
                                                  (thousands of dollars)
  Restoration/Recovery expenses
     Kingsville Dome Project               $              -    $               -
     Rosita Project                                    (18)                    9
     Vasquez Project                                      -                    -
       Total restoration/recovery
  expenses                                             (18)                    9

  Standby care and maintenance expenses
     Kingsville Dome Project                            142                  128
     Rosita Project                                      81                   94
     Vasquez Project                                     82                   89
     Temrezli Project                                   241                    -
       Total standby care and maintenance
  expenses                                              546                  311

  Exploration and evaluation costs                        7                  220

  Land maintenance and holding costs                    196                  269

  Total mineral property expenses           $           731      $           809

For the three months ended March 31, 2016, mineral property expenses decreased by $0.1 million as compared with the corresponding period in 2015. This decrease is mostly due to a decrease in exploration and evaluation costs of $0.2 million and land holding costs of $0.1 million, which was offset by an increase in costs associated with our Temrezli project of $0.2 million which was acquired in November 2015.

General and Administrative Expenses


Significant expenditures for general and administrative expenses for the three
months ended March 31, 2016 and 2015 were:


                                               For the Three Months Ended
                                                       March 31,
                                                  2016           2015
                                                 {thousands of dollars)
          Stock compensation expense            $      183     $      454
          Salaries and payroll burden                  694            575
          Legal, accounting, public company
          expenses                                     868            623
          Insurance and bank fees                      137            146
          Consulting and professional services         113            112
          Office expenses                              130            142
          Other expenses                                20             43
          Total                                 $    2,145     $    2,095

General and administrative charges increased by $50,000 as compared with the corresponding period in 2015. This increase was due to increased legal, accounting, public company expenses of $0.2 million which was mostly the result of increased legal fees associated with the sale of our Churchrock and Crownpoint projects. Also contributing to the increase was an increase in salaries and payroll burden expense of $0.1 million, which is mostly the result of a $90,000 provision for the settlement of litigation with a former contractor of the Company. These increases were partially offset by a decrease in stock-based compensation of $0.3 million which was the result of no stock bonus awards being issued during 2016.


Other Income and Expenses

Interest Expense

Interest expense of $0.7 million for the three months ended March 31, 2016 consisted of accrued interest of $0.2 million payable to RCF, amortization of the debt discount of $0.5 million and amortization of the establishment fee of $25,000.

Interest expense of $0.7 million for the three months ended March 31, 2015 consisted of accrued interest payable to RCF of $0.2 million, amortization of the debt discount of $0.4 million and amortization of the establishment fee of $25,000.

Commitment Fees

Commitment fees expense of $0.3 million for the three-months ended March 31, 2016 was the result of the Company's issuance of 75,000 shares of common stock to Aspire Capital on February 4, 2016 as consideration for Aspire Capital entering into an option agreement with the Company. The shares had a fair value of $4.44 per share.

Loss on Sale of Marketable Securities

On February 22, 2016, the Company received proceeds of $0.2 million from the sale of its 76,455 shares of Energy Fuels Inc. common stock that it had received as partial consideration for the sale of its Roca Honda assets during 2015. The Company recorded a loss of $0.1 million as the difference between the fair value on the date the Company received the shares of $0.3 million and the proceeds received of $0.2 million.

Financial Position

Operating Activities

Net cash used in operating activities was $2.2 million for the three months ended March 31, 2016, as compared with $2.7 million for the same period in 2015. The decrease of $0.5 million in cash used is primarily due to an increase in accounts payable of $0.9 million, which was offset by a decrease in the net loss of $0.5 million.

Investing Activities

Net cash provided by investing activities was $0.2 million for the three months ended March 31, 2016, as compared with $18,000 for the three months ended March 31, 2015. For the 2016 period, the Company received $0.2 million from the sale of short-term investments. For the 2015 period, the Company received $18,000 from the disposal of fixed assets.

Financing Activities

Net cash provided by financing activities was $1.2 million for the three months ended March 31, 2016. For the three months ended March 31, 2016, net cash proceeds of $0.8 million were received upon the February 16, 2016 completion of a registered direct offering and $0.4 million in net proceeds were received from the sale of common stock sold through the Company's ATM program.

Net cash provided by financing activities was $5.5 million for the three months ended March 31, 2015. For the three months ended March 31, 2015 net cash proceeds of $5.4 million were received upon the March 6, 2015 completion of a registered direct offering and $0.2 million in net proceeds were received from the sale of common stock sold through the Company's ATM program. Offsetting these amounts were payments made for income tax withholdings on net share settlements of equity awards of $0.1 million.

Liquidity and Capital Resources

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared on a "going concern" basis, which means that the continuation of the Company is presumed even though events and conditions exist that, when considered in the aggregate, raise substantial doubt about the Company's ability to continue as a going concern because it is possible that the Company will be unable to meet its obligations as they become due within one year after the date that these financial statements were issued.


Since the second half of 2015, the Company has faced liquidity challenges. The Company has encountered difficulties raising sufficient capital as a result of weak capital markets, particularly in the commodities sector. The Company's liquidity was further challenged following the completion of the Anatolia Transaction, as the Company incurred higher than expected transaction costs and assumed significant unpaid trade payables from Anatolia Energy. At March 31, 2016 the Company's cash balances were $0.1 million and the Company had a working capital deficit of $10.1 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 April 4, 2016, the Company completed a registered direct offering whereby it sold 375,000 shares of common stock at a price of $2.17 per share and 200,000 pre-funded warrants at a price of $2.16 per warrant, paid at closing. Gross proceeds to the Company were $1.25 million. Also subsequent to the quarter-end, the Company sold 159,356 shares of common stock under its ATM Sales Agreement for net proceeds of $0.3 million. The ending cash balance of $0.1 million along with the proceeds received from the April 4, 2016 registered direct offering of $1.25 million and the $0.3 million in proceeds from the ATM Sales Agreement is expected to provide the Company with sufficient capital to fund its critical operations through June 30, 2016. Subsequent to June 30, 2016, the Company expects to receive funding from the following sources:

Laramide Asset Sale

On April 7, 2016, Laramide Resources and the Company entered into the Laramide SPA for the sale of its Churchrock and Crownpoint properties in New Mexico for $12.5 million. Under the terms of the Laramide SPA, the Company expects to receive a cash payment of $5.25 million upon closing, currently anticipated to occur by the end of the second quarter of 2016.

Common Stock Purchase Agreement with Aspire Capital

On April 8, 2016, the Company entered into the CSPA with Aspire Capital to place up to $12.0 million in the aggregate of its common stock over a term of 30 months following receipt of shareholder approval at the Company's Annual General Meeting of Stockholders, currently anticipated to be held in June 2016, and effectiveness of the registration statement relating to such shares of common stock.

At-the-Market Sales Agreement

The Company has an existing ATM Sales Agreement that allows it to sell, from time-to-time, shares of its common stock in at-the-market offerings having an aggregate offering amount up to $15.0 million of which we have approximately $5.0 million available for future sales as of May 11, 2016. Once the CSPA is approved by the Company's stockholders, the Company will be unable to sell shares of its common stock through the ATM Sales Agreement on dates that it places shares with Aspire Capital through its CSPA.

While the Company believes the sources of capital above may provide sufficient liquidity to fund ongoing operations through December 31, 2016 and settle the RCF Loan upon maturity, the Company's market capitalization, low trading volume and potential to fall below the reference price under the CSPA may make it difficult for the Company to fully utilize the $12.0 million and $5.0 million available under the CSPA and ATM Sales Agreement, respectively. Therefore the Company believes that it will need to raise additional capital or renegotiate the terms of the RCF Loan in order to continue as a going concern. The Company is currently evaluating its options with respect to the RCF Loan and also continues to explore opportunities to raise additional funds, further monetize its non-core assets and look for ways to reduce its monthly cash expenditures.

The Company has been successful at raising capital in the past, most recently with the completion of registered direct offerings on April 4, 2016 and February 4, 2016 for gross proceeds of $1.25 million and $0.8 million, respectively, 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, the Company was able to successfully raise capital in 2013 and 2014 through debt and equity fundraising efforts. Specifically, the Company completed a registered direct offering in February 2014 for net proceeds of $9.3 million and procured a convertible secured debt facility in November 2013 that provided us with $8.0 million in cash, which debt matures in December 2016. While the Company has 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 it in amounts sufficient to meet the Company's needs, including upon the maturity of our outstanding debt, or on terms acceptable to the Company. In the event funds are not available, the Company may be required to change its planned business strategies or it could default under its secured debt facility.

Off- Balance Sheet Arrangements

We have no off-balance sheet arrangements.


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

With the exception of historical matters, the matters discussed in this report are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from projections or estimates contained herein. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, without limitation, statements regarding the adequacy of funding for the Company through the second quarter of 2016 and beyond, the timing or occurrence of any future drilling or production from the Company's properties, the ability of the Company to acquire additional properties or partner with other companies and the Company's anticipated cash burn rate and capital requirements. Words such as "may," "could," "should," "would," "believe," "estimate," "expect," "anticipate," "plan," "forecast," "potential," "intend," "continue," "project" and variations of these words, comparable words and similar expressions generally indicate forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or implied by these forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements include, among others:

the availability of capital to URI;

the spot price and long-term contract price of uranium;

risks associated with our foreign operations;

the ability of the Company to secure stockholder approval for the CSPA with Aspire Capital;

the ability of URI to enter into and successfully close acquisitions or other material transactions, including without limitation the anticipated transaction with Laramide Resources;

government regulation of the mining industry and the nuclear power industry in the United States and the Republic of Turkey;

legislation and other actions by the Navajo Nation;

operating conditions at our mining projects;

the world-wide supply and demand of uranium;

weather conditions;

unanticipated geological, processing, regulatory and legal or other problems we may encounter;

currently pending or new litigation; and

timely receipt of mining and other permits from regulatory agencies

as well as other factors described elsewhere in this Quarterly Report on Form 10-Q, our 2015 Annual Report on Form 10-K and the other reports we file with the SEC. Most of these factors are beyond our ability to predict or control. Future events and actual results could differ materially from those set forth herein, contemplated by or underlying the forward-looking statements. Forward-looking statements speak only as of the date on which they are made. We disclaim any obligation to update any forward-looking statements made herein, except as required by law.


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