Westwater Resources, Inc. (then Uranium Resources, Inc.) — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016. The filing identifies the issuer as Uranium Resources, Inc. (URI). URI was an exploration and development company focused on advancing its Temrezli ISR project in Turkey and maintaining uranium properties in Texas and New Mexico; none of its properties was in production.
Financial results and position
| Metric | Q1 2016 / March 31, 2016 | Comparable period / December 31, 2015 |
|---|---|---|
| Revenue | No revenue | No revenue in Q1 2015 |
| Operating expenses | $3.078 million | $3.101 million in Q1 2015 |
| Net loss | $4.273 million; $0.86 per share | $3.761 million; $1.70 per share in Q1 2015 |
| Cash used in operating activities | $2.205 million | $2.699 million in Q1 2015 |
| Cash and cash equivalents | $0.094 million | $0.865 million |
| Working capital | $10.1 million deficit | Not stated here |
| Total assets | $56.188 million | $56.966 million |
| Total liabilities | $17.102 million | $16.487 million |
Margins are not meaningful because the company reported no revenue. No capital expenditures are separately identified in the provided filing text. Operating cash use was partly offset by increased payables and accrued liabilities. Cash flows from investing activities provided $0.241 million; financing activities provided $1.193 million, principally from equity sales.
The RCF secured convertible loan had $8.0 million of principal outstanding, a $6.604 million carrying value after unamortized discount, a 10% annual interest rate, and a December 31, 2016 maturity. It was classified as current. Interest may be paid in shares or cash at RCF’s election; RCF elected cash for Q1 interest of approximately $0.2 million, due May 31, 2016.
Material changes and notable items
- Net loss increased by $0.512 million year over year, primarily due to a $0.333 million Aspire Capital commitment fee and a $0.116 million loss on sale of marketable securities. The reported loss per share declined from $1.70 to $0.86; weighted-average shares increased to 4.968 million from 2.213 million, and a one-for-twelve reverse split took effect in March 2016. Share data was retroactively adjusted.
- General and administrative expense rose to $2.145 million from $2.095 million, including higher legal and public-company costs and a $90,000 provision for a former-contractor settlement; lower stock compensation partly offset the increase.
- URI issued shares through registered and at-the-market offerings, and issued shares to settle loan interest, transaction-related payables, and commitment fees. Outstanding shares were 5.236 million at March 31, versus 4.522 million at year-end; 5.771 million were reported outstanding as of May 11.
- On April 7, URI agreed to sell its Churchrock and Crownpoint properties to Laramide for $5.25 million cash and a secured $7.25 million promissory note, subject to financing, consents and other closing conditions. The note has a three-year term, with stated interest initially at 5%, rising to 10% upon a specified commercial-production decision, and scheduled principal installments of approximately $2.4 million in 2017–2019.
Liquidity, outlook, and risks
Management stated that conditions raise substantial doubt about URI’s ability to continue as a going concern. The company reported only $0.1 million of cash and a $10.1 million working-capital deficit at quarter-end, citing weak capital markets, higher-than-expected Anatolia acquisition costs, and assumed unpaid trade payables. Management expected quarter-end cash plus the April 4 offering proceeds of $1.25 million and subsequent ATM proceeds of about $0.3 million to fund critical operations through June 30, 2016.
Management said the Laramide sale, an Aspire Capital purchase agreement for up to $12.0 million of stock over 30 months, and approximately $5.0 million remaining under the ATM program could support operations and debt repayment through year-end. These sources were not assured: the Laramide transaction remained conditional, the Aspire agreement required shareholder approval and an effective registration statement, and market capitalization, trading volume, and share-price conditions could limit equity sales. URI said it might need additional capital or to renegotiate the RCF loan; failure to obtain funds could require changes to plans or result in default.
Other matters include environmental and reclamation obligations of $4.549 million, a $90,000 former-contractor settlement payable in installments, and continuing litigation over the Kleberg Settlement Agreement. The company reported substantial compliance with current environmental regulations and no material changes to risk factors from its 2015 Form 10-K. Management concluded disclosure controls were effective as of March 31, 2016.
Investor verification priorities
- Whether the Laramide sale closes, including receipt and collectability of the $5.25 million cash payment and secured note, and satisfaction of required financing, consents, and RCF releases.
- Whether URI secures shareholder approval and registration effectiveness for the Aspire agreement, and can practically access the Aspire and ATM equity capacity without excessive dilution.
- How URI will meet the RCF loan’s December 2016 maturity and interest obligations, given the going-concern warning and limited quarter-end cash.
- Actual cash burn, payment of acquired Anatolia payables, and progress in reducing monthly expenditures or monetizing other assets.
- Developments in the Kleberg dispute, reclamation obligations, and other permitting, regulatory, uranium-market, and foreign-operation risks.