Filing and business context
The supplied filing is Uranium Resources, Inc.’s unaudited Form 10-Q for the quarter ended June 30, 2013; this does not match the requested company, Westwater Resources, Inc. URI is a uranium exploration, development and production company with Texas and New Mexico projects. None of its properties were in production, and it reported no uranium sales in the quarter or first half.
Financial performance and position
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | $0 in 2013 and 2012 | $0 in 2013 and 2012 |
| Net loss | $3.85 million in 2013; $3.66 million in 2012 | $8.00 million in 2013; $7.27 million in 2012 |
| Loss from operations | $3.83 million in 2013; $3.79 million in 2012 | $7.75 million in 2013; $7.49 million in 2012 |
| Operating cash flow | Not presented for the quarter | -$7.55 million in 2013; -$5.11 million in 2012 |
With no revenue, a meaningful operating margin is not available. At June 30, 2013, cash and cash equivalents were $5.33 million, current assets $5.73 million and current liabilities $3.11 million. Restricted certificates of deposit were $4.01 million. Total liabilities were $7.52 million, including $450,000 of long-term debt; the $5.0 million short-term RCF financing had been repaid. Cash was $4.25 million at July 31, 2013.
Changes versus prior comparable periods
First-half net loss increased by approximately $730,000 year over year, while quarterly net loss increased by approximately $186,000. First-half general and administrative expense fell to $4.66 million from $5.26 million, but total cost of uranium sales rose to $3.09 million from $2.23 million, including higher exploration and land-maintenance expense and asset-retirement accretion. First-half capital additions to uranium properties were $788,000, versus $3.16 million in 2012.
Cash increased from $4.66 million at year-end 2012 to $5.33 million at June 30, largely as $5.48 million of restricted cash was released following a change in surety arrangements. The company also raised $3.6 million net through a March rights offering and used $5.0 million to repay RCF; 1.99 million shares were issued in connection with the loan repayment and 1.55 million through the rights offering. A 1-for-10 reverse stock split was completed in January.
Outlook, risks and unusual items
Management said it did not expect significant uranium sales revenue in 2013 and expected existing cash plus up to $9.0 million available under its ATM equity program to provide liquidity for the year. ATM proceeds depend on market conditions; if unavailable, URI may need to change its business plans. The company was assessing potential uranium-bearing product from Kingsville Dome pond refurbishment, but had not established a clear quantity or quality available for sale.
In July 2013, URI amended its Itochu supply contract: Itochu would purchase one-half of production from specified Texas properties, up to three million pounds, at delivery-date market prices less a 5% discount when the price is $56.50 per pound or less, or a 7% discount above that level. South Texas project assets continued to be impaired; first-half impairment was approximately $680,000, attributed to project costs and uranium-market conditions. Restoration and reclamation obligations totaled $4.34 million.
On August 2, 2013, former CFO Thomas H. Ehrlich sued over alleged breach of a compensation agreement tied to change-in-control payments. URI said it could not estimate timing or amount, but did not expect a material adverse effect and intended to defend the claim. The filing reported no material change to previously disclosed risk factors and stated that disclosure controls were effective.
Most important facts to verify
- Confirm the intended issuer: the supplied filing is for Uranium Resources, Inc., not Westwater Resources, Inc.
- Assess liquidity against ongoing operating cash burn, the lack of production revenue, and the market-dependent availability of ATM financing.
- Verify the status and expected economics of the Kingsville Dome pond project and the amended Itochu contract.
- Review impairment assumptions and reclamation-cost estimates, which depend on uranium prices, project costs and regulatory requirements.
- Track the Ehrlich lawsuit and any resulting compensation exposure; the filing provides no estimated amount.
- Reconcile share counts: the balance sheet reports 20,020,258 shares at June 30, while the cover reports 20,020,058 as outstanding on August 13, 2013.