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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q


x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


For the quarterly period ended June 30, 2016


Or


o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


For the transition period from to


Commission file number 001-33404


                    URANIUM RESOURCES, INC.           

(Exact Name of Issuer as Specified in Its Charter)


DELAWARE

 

75-2212772

(State of Incorporation)

 

(I.R.S. Employer Identification No.)


6950 S. Potomac Street, Suite 300, Centennial, Colorado 80112

(Address of Principal Executive Offices, Including Zip Code)


                                (303) 531-0470                             

(Issuer’s Telephone Number, Including Area Code)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company x

(Do not check if a smaller reporting company)

 

 


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x


Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Title of Each Class of Common Stock

 

Number of Shares Outstanding

Common Stock, $0.001 par value

 

8,564,622 as of August 11, 2016








URANIUM RESOURCES, INC.

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION

1

ITEM 1. FINANCIAL STATEMENTS

1

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

OF OPERATIONS

15

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

25

ITEM 4. CONTROLS AND PROCEDURES

25

PART II - OTHER INFORMATION

26

ITEM 1.  LEGAL PROCEEDINGS

26

ITEM 1A.  RISK FACTORS

27

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

27

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

27

ITEM 4.  MINE SAFETY DISCLOSURES

27

ITEM 5.  OTHER INFORMATION

27

ITEM 6.  EXHIBITS

27

SIGNATURES

28

EXHIBIT INDEX

29











PART I — FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS


URANIUM RESOURCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(expressed in thousands of dollars, except share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

Notes

 

2016

 

2015

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

$         974

 

$         865

Prepaid and other current assets

 

 

 

618

 

1,140

Total Current Assets

 

 

 

1,592

 

2,005

 

 

 

 

 

 

 

Property, plant and equipment, at cost:

 

 

 

 

 

 

Property, plant and equipment

 

 

 

113,927

 

114,496

Less accumulated depreciation, depletion and impairment

 

 

 

(65,778)

 

(65,684)

Net property, plant and equipment

 

3

 

48,149

 

48,812

 

 

 

 

 

 

 

Restricted cash

 

 

 

4,032

 

4,026

Long-term assets held for sale

 

5

 

2,123

 

2,123

Total Assets

 

 

 

$       55,896

 

$       56,966

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

 

 

$            2,858

 

$         3,046

Accrued liabilities

 

 

 

1,525

 

1,569

Convertible loan, net of discount – related party

 

6

 

7,054

 

6,154

Current portion of asset retirement obligations

 

7

 

121

 

121

Total Current Liabilities

 

 

 

11,558

 

10,890

 

 

 

 

 

 

 

Asset retirement obligations, net of current portion

 

7

 

4,433

 

4,242

Other long-term liabilities and deferred credits

 

 

 

750

 

800

Long-term liabilities related to assets held for sale

 

5

 

555

 

555

Total Liabilities

 

 

 

17,296

 

16,487

 

 

 

 

 

 

 

Commitments and Contingencies

 

6,7,11

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

Common stock, 100,000,000 shares authorized, $.001 par value;

 

 

 

 

 

 

Issued shares – 7,526,882 and 4,530,211, respectively

 

 

 

 

 

 

Outstanding shares – 7,518,857 and 4,522,186, respectively

 

8

 

8

 

5

Paid-in capital

 

8,9

 

265,027

 

258,096

Accumulated other comprehensive income

 

 

 

-

 

(67)

Accumulated deficit

 

 

 

(226,177)

 

(217,297)

Treasury stock (8,025 and 8,025 shares, respectively), at cost

 

 

 

(258)

 

(258)

Total Stockholders' Equity

 

 

 

38,600

 

40,479

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Equity

 

 

 

$       55,896

 

$       56,966


The accompanying notes are an integral part of these condensed consolidated financial statements.




1







URANIUM RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(expressed in thousands of dollars, except share and per share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

 

 

Notes

 

2016

 

2015

 

2016

 

2015

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

Mineral property expenses

 

4

 

$              (1,138)

 

$              (1,292)

 

$              (1,869)

 

$              (2,101)

General and administrative

 

 

 

(2,007)

 

(2,406)

 

(4,152)

 

(4,501)

Accretion of asset retirement obligations

 

7

 

(120)

 

(113)

 

(240)

 

(225)

Depreciation and amortization

 

 

 

(50)

 

(84)

 

(132)

 

(169)

Impairment of uranium properties

 

3

 

(534)

 

-

 

(534)

 

-

Total operating expenses

 

 

 

(3,849)

 

(3,895)

 

(6,927)

 

(6,996)

 

 

 

 

 

 

 

 

 

 

 

Non-Operating Income/(Expenses):

 

 

 

 

 

 

 

 

 

 

Commitment fees

 

 

 

-

 

-

 

(333)

 

-

Interest expense

 

6

 

(780)

 

(655)

 

(1,523)

 

(1,330)

Loss on sale of available-for-sale securities

 

 

 

-

 

-

 

(116)

 

-

Other income/(expense), net

 

 

 

22

 

(2)

 

19

 

13

Total non-operating expense

 

 

 

(758)

 

(657)

 

(1,953)

 

(1,317)

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

 

$              (4,607)

 

$              (4,552)

 

$              (8,880)

 

$              (8,313)

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Loss

 

 

 

 

 

 

 

 

 

 

Unrealized fair value decrease on available-for-sale securities

 

 

 

$                        -

 

$                        -

 

$                  (49)

 

$                        -

Transfer to realized loss upon sale of available-for-sale securities

 

 

 

-

 

-

 

116

 

-

Comprehensive Loss

 

 

 

$             (4,607)

 

$             (4,552)

 

$             (8,813)

 

$             (8,313)

 

 

 

 

 

 

 

 

 

 

 

BASIC AND DILUTED LOSS PER SHARE

 

 

 

$                (0.75)

 

$                (1.83)

 

$                (1.60)

 

$                (3.54)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

 

 

 

6,151,858

 

2,482,802

 

5,559,877

 

2,348,613



The accompanying notes are an integral part of these condensed consolidated financial statements.




2







URANIUM RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND SUPPLEMENTAL CASH FLOW INFORMATION

(expressed in thousands of dollars)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

Notes

 

2016

 

2015

 

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

 

Net loss

 

 

 

$   (8,880)

 

$   (8,313)

Reconciliation of net loss to cash used in operations:

 

 

 

 

 

 

Accretion of asset retirement obligations

 

7

 

240

 

225

Amortization of debt discount

 

 

 

900

 

899

Amortization of convertible loan establishment fee

 

 

 

50

 

50

Loss on sale of marketable securities

 

 

 

116

 

-

Common stock issued as payment for commitment fees

 

 

 

333

 

-

Impairment of uranium properties

 

 

 

534

 

-

Costs incurred for restoration and reclamation activities

 

7

 

(49)

 

(88)

Depreciation and amortization

 

 

 

132

 

169

Stock based compensation expense

 

9

 

470

 

625

Gain on disposal of property, plant and equipment

 

 

 

-

 

(18)

Effect of changes in operating working capital items:

 

 

 

 

 

 

(Increase)/decrease in receivables

 

 

 

47

 

(2)

Decrease in prepaid and other current assets

 

 

 

130

 

50

Increase in payables, accrued liabilities and deferred credits

 

 

 

737

 

568

Net Cash Used In Operating Activities

 

 

 

(5,240)

 

(5,835)

 

 

 

 

 

 

 

Cash Flows From Investing Activities:

 

 

 

 

 

 

Proceeds from the sale of investments

 

 

 

247

 

-

Increase in notes receivable

 

 

 

-

 

(780)

Increase in restricted cash

 

 

 

(6)

 

-

Purchases of equipment

 

 

 

 

 

(12)

Proceeds from disposal of property, plant and equipment

 

 

 

-

 

18

Net Cash Provided By/(Used In) Investing Activities

 

 

 

241

 

(774)

 

 

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

 

 

Payments on borrowings

 

 

 

-

 

(4)

Issuance of common stock, net

 

8

 

5,108

 

5,654

Payment of minimum withholding taxes on net share settlements of equity awards  

 

 

 

-

 

(126)

Net Cash Provided By Financing Activities

 

 

 

5,108

 

5,524

 

 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

 

 

109

 

(1,085)

Cash and cash equivalents, beginning of period

 

 

 

865

 

5,570

Cash and Cash Equivalents, End of Period

 

 

 

$       974

 

$       4,485

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

Interest

 

 

 

$            286

 

$            -

Supplemental Non-Cash Information With Respect to Investing and Financing Activities:

 

 

 

 

 

 

Common stock issued for settlement of accounts payable

 

8

 

$          778

 

$               -

Common stock issued for payment of convertible loan interest and fees

 

6,8

 

$          242

 

$          380

Common stock issued for payment of commitment fees

 

8

 

$          523

 

$               -


The accompanying notes are an integral part of these condensed consolidated financial statements.



3









URANIUM RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(expressed in thousands of dollars, except share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

Shares

 

Amount

 

Paid-In Capital

 

Accumulated  Other Comprehensive Loss

 

Accumulated Deficit

 

Treasury Stock

 

Total

Balances, January 1, 2016

4,522,186

 

$  5

 

$    258,096

 

$    (67)

 

$   (217,297)

 

$  (258)

 

$  40,479

Net loss

-

 

-

 

-

 

-

 

(8,880)

 

-

 

(8,880)

Common stock issued, net of issuance costs

2,471,561

 

3

 

4,585

 

-

 

-

 

-

 

4,588

Common stock issued for loan interest

38,086

 

-

 

242

 

-

 

-

 

-

 

242

Common stock issued for settlement of accounts payable

164,326

 

-

 

778

 

-

 

-

 

-

 

778

Common stock issued as payment for commitment fees

315,000

 

-

 

856

 

-

 

-

 

-

 

856

Stock compensation expense and related share issuances

7,698

 

-

 

470

 

-

 

-

 

-

 

470

Reclassification of unrealized holding loss to realized holding loss

-

 

-

 

-

 

67

 

-

 

-

 

67

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, June 30, 2016

7,518,857

 

$  8

 

$  265,027

 

$    -

 

$  (226,177)

 

$  (258)

 

$  38,600



The accompanying notes are an integral part of these condensed consolidated financial statements.




4






URANIUM RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (unaudited)




1. BASIS OF PRESENTATION


The accompanying unaudited condensed consolidated financial statements for Uranium Resources, Inc. (the “Company,” “we,” “us,” or “URI”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying statements should be read in conjunction with the audited financial statements included in Uranium Resources, Inc.’s 2015 Annual Report on Form 10-K. In the opinion of management, all adjustments (which are of a normal, recurring nature) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2016 are not necessarily indicative of the results that may be expected for any other period including the full year ending December 31, 2016.


Recently Issued Accounting Pronouncements


In August 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2014-15 (ASU 2014-15), “Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern”, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity's ability to continue as a going concern. ASU 2014-15 applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted.  We do not expect to early adopt this guidance and do not believe that the adoption of this guidance will have a material impact on our financial statements or related disclosures.


2. LIQUIDITY AND GOING CONCERN


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 acquisition of Anatolia Energy Limited (“Anatolia Energy”) on November 9, 2015, whereby the Company acquired all of the issued and outstanding common stock of Anatolia Energy (the “Anatolia Transaction”),  as the Company incurred higher than expected transaction costs and assumed significant unpaid trade payables from Anatolia Energy.  At June 30, 2016 the Company’s cash balances were $1.0 million and the Company had a working capital deficit of $10.0 million.  Contributing to the working capital deficit was the reclassification of the RCF Loan (defined in Note 6, below) from long-term to short-term liabilities as the RCF Loan matures on December 31, 2016.  Subsequent to the quarter-end, the Company sold 995,100 shares of common stock under the CSPA (defined below) for net proceeds of $1.4 million.  The ending cash balance of $1.0 million along with the proceeds received from the CSPA is expected to provide the Company with sufficient capital to fund its critical operations through September 30, 2016.  The Company anticipates funding from the following sources to sustain its operations beyond September 30, 2016:


·

Laramide Asset Sale


On April 7, 2016, Laramide Resources Ltd. (“Laramide Resources”) and the Company entered into a Share Purchase Agreement (the “Laramide SPA”) for the sale of its wholly-owned subsidiary Hydro Resources Inc., which holds the Company’s Churchrock and Crownpoint properties in New Mexico for $12.5 million.  Under the terms of the Laramide SPA, the Company expects to receive an initial cash payment of $5.25 million upon closing. The closing is subject to certain conditions including completion of a financing by Laramide Resources on commercially reasonable terms and in such amount as is necessary to fund the $5.25 million cash payment. Closing is currently anticipated to occur by the end of the third quarter of 2016.  Either party may terminate the Laramide SPA if the closing has not occurred by September 30, 2016.  See note 5 for further discussion.



5






URANIUM RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (unaudited)




·

Common Stock Purchase Agreement with Aspire Capital


On April 8, 2016, the Company entered into a Common Stock Purchase Agreement (“CSPA”) with Aspire Capital Fund, LLC (“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.  The Company’s shareholders approved the issuance of up to 5.0 million shares of common stock under the CSPA at its Annual General Meeting of Stockholders on June 7, 2016.  As of August 11, 2016 the Company has approximately $8.9 million or 3.0 million shares of common stock available for future sales.  


·

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 $4.5 million available for future sales as of August 11, 2016.  The Company is 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.


The Company’s ability to continue to fund its ongoing operations and continue as a going concern is dependent upon the sources of capital above and the renegotiation of the RCF Loan.  While the Company initially expected that the Laramide SPA would close by June 30, 2016, Laramide Resources has experienced delays in obtaining the necessary funding to close the transaction.  Based on continued discussions with Laramide Resources, the Company believes that the funding will be in place to close by September 30, 2016.  In addition, factors such as the Company’s market capitalization, current share price, volatility of trading volume and potential to fall below the reference price under the CSPA ($0.50 per share) may make it difficult for the Company to fully utilize the $8.9 million and $4.5 million available under the CSPA and ATM Sales Agreement, respectively.  Therefore, the Company may need to raise additional capital from other sources.  The Company is currently evaluating its options with respect to the RCF Loan and continues to explore opportunities to further monetize its non-core assets and identify ways to reduce its 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 the Company 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 materially change its business plans and it could default under the RCF Loan.


3. PROPERTY, PLANT AND EQUIPMENT


 

 

Net Book Value of Property, Plant and Equipment at June 30, 2016

(thousands of dollars)

 

Turkey

 

Texas

 

New Mexico

 

Corporate

 

Total

Uranium plant

 

$                -

 

$       8,626

 

$                -

 

$               -

 

$            8,626

Mineral rights and properties

 

17,968

 

979

 

19,102

 

-

 

38,049

Other property, plant and equipment

22

 

1,289

 

-

 

163

 

1,474

     Total

 

$      17,990

 

$     10,894

 

$      19,102

 

$          163

 

$           48,149

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Book Value of Property, Plant and Equipment at December 31, 2015

(thousands of dollars)

 

Turkey

 

Texas

 

New Mexico

 

Corporate

 

Total

Uranium plant

 

$                -

 

$       8,653

 

$                -

 

$               -

 

$            8,653

Mineral rights and properties

 

17,968

 

1,513

 

19,102

 

-

 

38,583

Other property, plant and equipment

22

 

1,352

 

-

 

202

 

1,576

     Total

 

$      17,990

 

$     11,518

 

$     19,102

 

$          202

 

$          48,812



URANIUM RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (unaudited)




During the quarter ended June 30, 2016, the Company recorded an impairment charge of $0.5 million on its Sejita Dome project which was the result of URI’s Board of Directors and management determining that recent exploration results indicated that the project should be terminated.  As a result, the carrying value of the Sejita Dome project was written down to nil.

 

4. MINERAL PROPERTY EXPENDITURES


Mineral property expenditures by country for the three and six months ended June 30, 2016 and 2015 are as follows:


 

 

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

 

 

2016

 

2015

 

2016

 

2015

 

 

(thousands of dollars)

Temrezli project, Turkey

 

$                   180

 

$                        -

 

$                 421

 

$                    -

     Total Turkey projects

 

180

 

-

 

421

 

-

 

 

 

 

 

 

 

 

 

Kingsville Dome project, Texas

 

176

 

152

 

410

 

389

Rosita project, Texas

 

92

 

134

 

160

 

243

Vasquez project, Texas

 

102

 

131

 

260

 

297

Butler Ranch project, Texas

 

4

 

13

 

9

 

71

Other projects, Texas

 

44

 

322

 

61

 

480

     Total Texas projects

 

418

 

752

 

900

 

1,480

 

 

 

 

 

 

 

 

 

Cebolleta project, New Mexico

 

537

 

537

 

537

 

537

Juan Tafoya project, New Mexico

 

3

 

3

 

11

 

9

Other projects, New Mexico

 

-

 

-

 

-

 

75

     Total New Mexico projects

 

540

 

540

 

548

 

621

 

 

 

 

 

 

 

 

 

Total expense for the period

 

$                   1,138

 

$                   1,292

 

$                 1,869

 

$               2,101


5. ASSETS HELD FOR 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.  Either party may terminate the Laramide SPA if the closing thereunder has not occurred on or before September 30, 2016.  The United States Nuclear Regulatory Commission has approved the transfer of the Company’s license to Laramide Resources, effective at closing.


As a result, the assets and liabilities associated with the Churchrock and Crownpoint projects have been classified as held for sale as of June 30, 2016 and December 31, 2015.  The Company recently acquired a portion of the Churchrock project from Energy Fuels Inc., and recorded the assets at a fair value of $2.1 million.  As the agreed sales proceeds exceed the carrying value, no further fair value adjustment was necessary.  The remaining Churchrock and Crownpoint properties mineral rights were previously impaired and the carrying value is nil.



7






URANIUM RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (unaudited)




6. CONVERTIBLE LOAN, RELATED PARTY


On November 13, 2013, the Company entered into a loan agreement (the “RCF Loan”) with Resource Capital Fund V L.P. (“RCF”), whereby RCF agreed, subject to the terms and conditions set forth in the RCF Loan, to provide a secured convertible loan facility of up to $15.0 million to the Company, which was subsequently amended on April 29, 2014 to reduce the amount available thereunder from $15.0 million to $8.0 million, all of which has been drawn.  No additional amounts may be drawn under the RCF Loan.


Amounts drawn under the RCF Loan mature on December 31, 2016 and bear interest at 10% per annum, payable quarterly in arrears in shares of the Company’s common stock or, at RCF’s election, in cash.  The number of shares to be issued as payment for interest is determined based upon the volume weighted-average price (“VWAP”) of the Company’s common stock for the 20 trading days preceding the last day of each quarter.  Accordingly, the Company issued 38,086 shares of common stock on January 4, 2016 for settlement of interest expense of $0.2 million related to the three-month period ended December 31, 2015.  RCF elected to receive cash in lieu of shares for the March 31, 2016 interest payment.  On June 10, 2016, the Company paid $0.3 million to RCF which included $0.2 million in interest owing from March 31, 2016 and a $0.1 million interest penalty on the late payment.


As of June 30, 2016, interest expense of $0.2 million relating to the three-month period ended June 30, 2016 was included in accrued liabilities on the Company’s Condensed Consolidated Balance Sheets.  The Company subsequently paid this interest in cash on July 8, 2016.


The following table represents the key components of the RCF Loan:


 

 

June 30,

 

December 31,

 

 

2016

 

2015

(thousands of dollars)

 

 

 

 

Debt principal

 

$      8,000

 

$            8,000

Unamortized discount

 

(946)

 

(1,846)

Carrying value of convertible loan, end of period

 

$      7,054

 

$            6,154


For the three- and six-month periods ended June 30, 2016, the Company recorded amortization of the debt discount and establishment fee of $0.5 million and $1.0 million, respectively, which has been included in interest expense in the Company’s Condensed Consolidated Statements of Operations.


RCF may convert amounts drawn under the RCF Loan into shares of the Company’s common stock at any time prior to maturity on December 31, 2016. The conversion price is set at $31.20 per share. As of August 11, 2016, RCF owned 718,137 shares or 8.4% of the Company’s outstanding common stock. If RCF were to convert the entire $8.0 million outstanding under the RCF Loan, RCF would receive 256,410 shares of the Company’s common stock, and RCF’s ownership percentage in the Company would increase to 11.1%.


7. ASSET RETIREMENT OBLIGATIONS  


The following table summarizes the changes in the reserve for future restoration and reclamation costs on the balance sheet:


 

 

June 30,

 

December 31,

 

 

2016

 

2015

(thousands of dollars)

 

 

 

 

Balance, beginning  of period

 

$      4,468

 

$ 4,196

Liabilities settled

 

(49)

 

(178)

Accretion expense

 

240

 

450

Balance, end of period

 

4,659

 

4,468

     Less:  Current portion

 

(121)

 

(121)

     Less:  Liabilities held for sale

 

(105)

 

(105)

Non-current portion

 

$      4,433

 

$ 4,242




8






URANIUM RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (unaudited)




The Company is currently performing surface reclamation activities at its Rosita project located in Duval County, Texas.  The Company’s current liability of $0.1 million consists of the estimated costs associated with current and planned surface reclamation activities through June 2017 at the Company’s Rosita project.  


8. COMMON STOCK


Common Stock Issued, Net of Issuance Costs


Reverse Stock Split


Immediately following the close of trading on March 7, 2016, the Company effected a one-for-twelve reverse stock split of its common stock.  With the reverse stock split, every twelve shares of the Company’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 the Company’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 the Company’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.


Registered Direct Offerings


On February 3, 2016, URI and Aspire Capital entered into a stock purchase agreement whereby URI sold 296,666 shares of its common stock in a registered direct offering for gross and net proceeds of $0.8 million.  There were no underwriting discounts or placement agent fees.  


On April 4, 2016, URI and Aspire Capital completed a registered direct offering whereby URI sold 375,000 shares of its common stock at a price of $2.17 per share and 200,000 pre-funded common stock purchase warrants at a price of $2.16 per warrant, which was paid at closing.  Gross proceeds from the offering were $1.2 million, including $0.4 million from the sale of the pre-funded warrants.  The warrants had an exercise price of $0.01 per share and a term of three years.  On June 3, 2016, Aspire Capital exercised all outstanding common stock purchase warrants and the Company issued 200,000 shares of common stock to Aspire Capital as a result.  


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 market prices at that time.  As consideration for Aspire Capital entering into the purchase agreement, the Company issued 240,000 shares of its common stock to Aspire Capital upon the Company’s receipt of stockholder approval at its Annual General Meeting of Stockholders which was held on June 7, 2016.  Following effectiveness of an S-1 registration statement relating to the resale of the shares subject to the CSPA on June 3, 2016 and receipt of stockholder approval for the issuance of up to 5.0 million shares of its common stock on June 7, 2016, the Company began selling shares of its common stock to Aspire Capital under the terms of the CSPA.


During the six months ended June 30, 2016, the Company sold 1,000,000 shares of common stock for net proceeds of $1.7 million under the CSPA.  Subsequent to June 30, 2016, the Company sold 995,100 shares of common stock for net proceeds of approximately $1.4 million under the CSPA.  As of August 11, 2016, approximately $8.9 million of the aggregate $12.0 million remained available for future sales under the CSPA.



9






URANIUM RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (unaudited)




At-the-Market Sales


On October 31, 2011, the Company entered into an At-The-Market Sales Agreement with BTIG LLC (the “ATM Sales Agreement”), a major global securities trading firm that acts as our sales agent. Under the ATM Sales Agreement, the Company may from time to time sell shares of its common stock having an aggregate offering amount up to $15.0 million in “at-the-market” offerings, which shares are registered under the Company’s currently effective registration statement on Form S-3. The Company filed a prospectus supplement dated November 17, 2015 with the Securities and Exchange Commission in connection with the offering, relating to shares of its common stock having an aggregate offering price of up to $6.0 million. The Company pays BTIG a commission equal to 3.0% of the gross proceeds from the sale of any shares pursuant to the ATM Sales Agreement.


During the six months ended June 30, 2016 the Company sold 599,896 shares of common stock for net proceeds of $1.4 million under the ATM Sales Agreement.  As of August 11, 2016, approximately $4.5 million of the aggregate $15.0 million remained available for future sales under the ATM Sales Agreement.

Option Agreement

On February 3, 2016, the Company issued 75,000 shares of our common stock, with a fair value on the date of issuance of $0.3 million, to Aspire Capital as consideration for Aspire Capital entering into an option agreement (the “Option Agreement”) by which Aspire Capital granted the Company 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 at such times and in such amounts as elected by the Company under the terms of the option agreement.  The parties terminated the Option Agreement upon entering into the CSPA.


Common Stock Issued for Loan Interest and Fees


As discussed in Note 6 above, unless RCF elects to receive cash, RCF receives common shares of the Company for the payment of interest owing on the RCF Loan.  For the six months ended June 30, 2016, the Company issued 38,086 shares of common stock for the payment of $0.2 million in accrued interest and fees for the three-month period ended December 31, 2015.


Common Stock Issued for Anatolia Energy transaction fees


On January 8, 2016, the Company issued 117,097 shares with a fair market value per share of $6.00 in satisfaction of $0.7 million in required termination payments related to the Anatolia Transaction.  


On June 30, 2016, the Company issued 47,229 shares of common stock with a fair value per share of $1.60 in satisfaction of $0.1 million in fees related to the Anatolia Transaction.


9. STOCK-BASED COMPENSATION


Stock-based compensation awards consist of stock options, restricted stock units (“RSUs”) and restricted stock awards (“RSAs”) issued under the Company’s equity incentive plans which include: the 2013 Omnibus Incentive Plan (the “2013 Plan”); the 2007 Restricted Stock Plan (the “2007 Plan”); the Amended and Restated 2004 Directors’ Stock Option and Restricted Stock Plan (the “2004 Directors’ Plan”); and the 2004 Stock Incentive Plan (the “2004 Plan”). Upon approval of the 2013 Plan by the Company’s stockholders on June 4, 2013, the Company’s authority to grant new awards under all plans other than the 2013 Plan was terminated.  As of June 30, 2016, 44,085 shares were available for future issuances under the 2013 Plan.  For the three months ending June 30, 2016 and 2015, the Company recorded stock-based compensation expense of $0.3 million and $0.2 million, respectively.  For the six months ending June 30, 2016 and 2015, the Company recorded stock-based compensation of $0.5 million and $0.6 million respectively.  Stock-based compensation is included in general and administrative expense.




10






URANIUM RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (unaudited)



In addition to the plans above, upon completion of the Anatolia Transaction, the Company issued 374,749 replacement options and performance shares to the option holders and performance shareholders of Anatolia Energy.  The number of replacement options and performance shares was based upon the Black-Scholes value with the exercise prices of the replacement options and performance shares determined using the exchange rate of 0.00548.  The options and performance shares were issued with the same terms and conditions as were applicable prior to the Anatolia Transaction.  During the six months ended June 30, 2016 all of the performance shares expired without the performance condition being satisfied.


Bonus Shares


The Company did not award any bonus shares during the six-month period ending June 30, 2016.


In March 2015, in accordance with the Company’s short-term incentive plan, the Company awarded its executives bonuses that were paid out in common stock of the Company.  The bonus shares vested immediately and had a fair value of $0.3 million which was determined using the closing share price of the Company’s common stock on the date of grant.  


Stock Options


The following table summarizes stock options outstanding and changes for the six-month periods ending June 30, 2016 and 2015:


 

 

June 30,

 

June 30,

 

 

2016

 

2015

 

 

Number of Stock Options

 

Weighted Average Exercise Price

 

Number of Stock Options

 

Weighted Average Exercise Price

Stock options outstanding at beginning of period

 

326,424

 

$           24.90

 

13,396

 

$         303.36

Expired

 

(4,724)

 

438.89

 

(208)

 

394.80

Stock options outstanding at end of period

 

321,700

 

$           18.82

 

13,188

 

$         300.72

Stock options exercisable at end of period

 

321,491

 

$           18.81

 

11,139

 

$         349.56



The following table summarizes stock options outstanding and exercisable by stock option plan at June 30, 2016:


 

 

Outstanding Stock Options

 

Exercisable Stock Options

Stock Option Plan

 

Number of Outstanding Stock Options

 

Weighted Average Exercise  Price

 

Number of

Exercisable

Stock Options

 

Weighted Average Exercise  Price

2004 Plan

 

5,792

 

$             121.17

 

5,792

 

$              121.17

2004 Directors’ Plan

 

1,390

 

629.52

 

1,390

 

629.52

2013 Plan

 

417

 

35.88

 

208

 

35.88

Replacement Stock Options

 

314,101

 

14.21

 

314,101

 

14.21

 

 

321,700

 

18.82

 

321,491

 

18.81


Total estimated unrecognized compensation cost from unvested stock options as of June 30, 2016 was approximately $7,870, which is expected to be recognized during the quarter ended September 30, 2016.


Restricted Stock Units


Time-based and performance-based RSUs are valued using the closing share price of the Company’s common stock on the date of grant. The final number of shares issued under performance-based RSUs is generally based on the Company’s prior year performance as determined by the Compensation Committee of the Board of Directors at each vesting date, and the valuation of such awards assumes full satisfaction of all performance criteria.



11






URANIUM RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (unaudited)




The following table summarizes RSU activity for the six-month periods ended June 30, 2016 and 2015:



 

 

June 30,

 

June 30,

 

 

2016

 

2015

 

 

Number of RSUs

 

Weighted-Average Grant Date Fair Value

 

Number of RSUs

 

Weighted-Average Grant Date Fair Value

Unvested RSUs at beginning of period

 

32,699

 

$           34.25

 

45,401

 

$           34.08

Granted

 

-

 

-

 

-

 

-

Forfeited

 

(3,334)

 

32.21

 

-

 

-

Vested

 

(7,698)

 

29.45

 

(11,032)

 

34.08

Unvested RSUs at end of period

 

21,667

 

$           36.27

 

34,369

 

$           34.20


Total estimated unrecognized compensation cost from unvested RSUs as of June 30, 2016 was approximately $0.4 million, which is expected to be recognized over a weighted-average period of 0.87 years.


Restricted Stock Awards


Time-based and performance-based RSAs are valued using the closing share price of the Company’s common stock on the date of grant. Vesting based on performance criteria is generally based on the Company’s prior year performance as determined by the Compensation Committee of the Board of Directors at each vesting date, and the valuation of such grants assumes full satisfaction of all performance criteria. Employee participants who receive restricted stock awards have all of the rights of a shareholder, including the right to vote shares of restricted stock that are the subject of the grant and the right to receive any regular cash dividends paid out of current earnings.


The following table summarizes RSA activity for the six-month periods ended June 30, 2016 and 2015:


 

 

June 30,

 

June 30,

 

 

2016

 

2015

 

 

Number of RSAs

 

Weighted-Average Grant Date Fair Value

 

Number of RSAs

 

Weighted-Average Grant Date Fair Value

Unvested RSAs at beginning of period

 

1,366

 

$           40.01

 

2,223

 

$           62.52

Granted

 

-

 

-

 

-

 

-

Forfeited

 

(104)

 

80.40

 

-

 

-

Vested

 

(336)

 

47.51

 

(752)

 

101.04

Unvested RSAs at end of period

 

926

 

$           32.76

 

1,471

 

$           42.84


10. EARNINGS PER SHARE


Basic and diluted loss per common share have been calculated based on the weighted-average shares outstanding during the period.  Potentially dilutive shares of 1,049,849 were excluded from the calculation of earnings per share because the effect on the basic loss per share would be anti-dilutive due to our net loss position for the three and six months ended June 30, 2016.



12






URANIUM RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (unaudited)




11. COMMITMENTS AND CONTINGENCIES


The Company’s uranium recovery operations are subject to federal and state regulations for the protection of the environment, including water quality. These laws frequently change and generally become more restrictive.  The Company reviews its reclamation obligations each year and determines the appropriate unit charge. The Company also evaluates the status of current environmental laws and their potential impact on the Company’s accrual for costs. The Company believes its operations are in substantial compliance with current federal and state environmental regulations.


As discussed in Part II. Item 1. “Legal Proceedings,” below, the Company and a former contractor agreed to settle a complaint filed against the Company whereby the former contractor alleged that the Company breached a compensation agreement between the Company and the contractor. The Company and the former contractor agreed to a settlement amount equal to $90,000 in three installments:  $10,000 to be paid within five business days of executing a settlement agreement; $40,000 to be paid on or before June 30, 2016; and the remaining $40,000 to be paid on or before September 30, 2016.  


12. GEOGRAPHIC AND SEGMENT INFORMATION


The Company has one reportable operating segment, consisting of uranium exploration and development activities.  These activities are focused principally in the United States and the Republic of Turkey.  We reported no revenues during the three- and six-month periods ended June 30, 2016 and 2015.  Geographic location of property, plant and equipment, including mineral rights, and mineral property expenses, is provided in Notes 3 and 4, above.





13






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 and six months ended June 30, 2016 has been prepared based on information available to us as of August 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 also 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 approximately 12,000 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.



14






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 issued 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 which was held on June 7, 2016.  These shares had a fair value of $2.18 per share, which has been included as additional paid in capital in the Company’s Balance Sheet as of June 30, 2016.  Also following receipt of shareholder approval for the issuance of up to 5.0 million shares of common stock under the CSPA and effectiveness of the S-1 registration statement relating to the resale of the shares subject to the CSPA, the Company began selling shares of its common stock to Aspire Capital under the terms of the CSPA.   As of June 30, 2016, the Company had sold 1,000,000 shares of common stock for net proceeds of $1.7 million under the CSPA.


Registered Direct Offerings


On April 4, 2016, the Company completed a registered direct offering with Aspire Capital for gross proceeds of $1.25 million.  The Company 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, which was paid at closing.  The warrants had an exercise price of $0.01 and a term of three years.  On June 3, 2016, Aspire Capital exercised all 200,000 outstanding warrants for shares of the Company’s common stock.


On February 3, 2016, the Company completed a registered direct offering with Aspire Capital 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 Company initially expected that the Laramide SPA would close by June 30, 2016, but Laramide Resources has experienced delays in obtaining the necessary funding to close the transaction. Based on continuing discussions with Laramide Resources, the Company believes that the funding will be in place to close by the September 30, 2016 deadline contained in the agreement.  Either party may terminate the Laramide SPA if the closing thereunder has not occurred on or before September 30, 2016.  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 June 30, 2016 was $4.6 million or $0.75 per share which was approximately level with our consolidated net loss of $4.6 million, or $1.83 per share for the same period in 2015.  




15






Our consolidated net loss for the six months ended June 30, 2016 was $8.9 million or $1.60 per share as compared with $8.3 million or $3.54 per share for the same period in 2015.  For the six months ended June 30, 2016, the increase in our consolidated net loss of $0.6 million from the respective prior period was mostly the result of an impairment charge of $0.5 million which was recorded upon termination of the Sejita Dome project, commitment fees of $0.3 million paid to Aspire Capital in accordance with the terms of the Option Agreement and a $0.1 million loss on the sale of available-for-sale securities.  


Mineral Property Expenses


Mineral property expenses for the three and six months ended June 30, 2016 were $1.1 million and $1.9 million, as compared with $1.3 million and $2.1 million for the 2015 periods.


The following table details our mineral property expenses for the three and six months ended June 30, 2016 and 2015:


 

For the Three Months Ended June 30,

 

For the Six Months Ended  June 30,

 

2016

 

2015

 

2016

 

2015

 

(thousands of dollars)

Restoration/Recovery expenses

 

 

 

 

 

 

 

     Kingsville Dome Project

$                   -

 

$                     -

 

$                 -

 

$               -

     Rosita Project

6

 

34

 

(12)

 

43

     Vasquez Project

-

 

-

 

-

 

-

          Total restoration/recovery expenses

6

 

34

 

(12)

 

43

 

 

 

 

 

 

 

 

Standby care and maintenance expenses

 

 

 

 

 

 

 

     Kingsville Dome Project

159

 

152

 

301

 

280

     Rosita Project

79

 

94

 

161

 

188

     Vasquez Project

88

 

119

 

170

 

208

     Temrezli Project

180

 

-

 

421

 

-

          Total standby care and maintenance expenses

506

 

365

 

1,053

 

676

 

 

 

 

 

 

 

 

Exploration and evaluation costs

-

 

186

 

7

 

406

 

 

 

 

 

 

 

 

Land maintenance and holding costs

626

 

707

 

821

 

976

 

 

 

 

 

 

 

 

Total mineral property expenses

$              1,138

 

$              1,292

 

$              1,869

 

$            2,101



For the three months ended June 30, 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 were partially offset by an increase in costs associated with our Temrezli project of $0.2 million which was acquired in November 2015.


For the six months ended June 30, 2016, mineral property expenses decreased by $0.2 million as compared with the corresponding period in 2015.  This decrease is mostly due to a decrease in exploration and evaluation costs of $0.4 million and land holding costs of $0.2 million, which were partially offset by an increase in costs associated with our Temrezli project of $0.4 million.



16







General and Administrative Expenses


Significant expenditures for general and administrative expenses for the three and six months ended June 30, 2016 and 2015 were:


 

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

 

2016

 

2015

 

2016

 

2015

 

{thousands of dollars)

Stock compensation expense

$          287

 

$          172

 

$       470

 

$       625

Salaries and payroll burden

604

 

566

 

1,298

 

1,141

Legal, accounting, public company expenses

760

 

973

 

1,628

 

1,596

Insurance and bank fees

141

 

148

 

278

 

294

Consulting and professional services

49

 

376

 

162

 

488

Office expenses

136

 

132

 

266

 

274

Other expenses

30

 

39

 

50

 

83

Total

$       2,007

 

$       2,406

 

$    4,152

 

$   4,501


For the three months ended June 30, 2016, general and administrative charges decreased by $0.4 million as compared with the corresponding period in 2015.  This decrease was due to decreases in consulting and professional services of $0.3 million and legal, accounting, public company expenses of $0.2 million both of which were mostly the result of decreased M&A activities during the three months ended June 30, 2016 and the Company’s efforts to reduce expenditures.


For the six months ended June 30, 2016, general and administrative charges decreased by $0.3 million as compared with the corresponding period in 2015.  This decrease was due to a decrease in consulting and professional services of $0.3 million which was the result of the Company’s efforts to reduce expenditures.


Other Income and Expenses


Interest Expense


Interest expense of $0.8 million for the three months ended June 30, 2016 consisted of interest of $0.3 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 June 30, 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.


Interest expense of $1.5 million for the six months ended June 30, 2016 consisted of interest of $0.5 million payable to RCF, amortization of the debt discount of $1.0 million and amortization of the establishment fee of $50,000.  


Interest expense of $1.3 million for the six months ended June 30, 2015 consisted of interest expense of $0.3 million payable to RCF, amortization of the debt discount of $0.9 million and amortization of the establishment fee of $50,000.


Commitment Fees


Commitment fees expense of $0.3 million for the six months ended June 30, 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 the Option Agreement.  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.    



17







Financial Position


Operating Activities


Net cash used in operating activities was $5.2 million for the six months ended June 30, 2016, as compared with $5.8 million for the same period in 2015. The decrease of $0.6 million in cash used is primarily due to an increase in non-cash expenditures of $0.9 million offset by an increase in cash paid for interest expense of $0.3 million due to RCF’s election to receive cash for the March 31, 2016 interest payment.


Investing Activities


Net cash provided by investing activities was $0.2 million for the six months ended June 30, 2016, as compared with cash used by investing activities of $0.8 million for the same period in 2015.  For the 2016 period, the Company received $0.2 million from the sale of short-term investments.  For the 2015 period, the Company loaned $0.8 million to Anatolia to ensure working capital needs were met prior to the closing of the Anatolia Transaction.  


Financing Activities


Net cash provided by financing activities was $5.1 million for the six months ended June 30, 2016.  For the six months ended June 30, 2016, net cash proceeds of $0.8 million and $1.2 million were received upon the February 16, 2016 and April 4, 2016 registered direct offerings, respectively, $1.7 million in net proceeds were received from the sale of common stock to Aspire Capital under the terms of the CSPA and $1.4 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 six months ended June 30, 2015.  For the six months ended June 30, 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 on November 9, 2015, as the Company incurred higher than expected transaction costs and assumed significant unpaid trade payables from Anatolia Energy.  At June 30, 2016 the Company’s cash balances were $1.0 million and the Company had a working capital deficit of $10.0 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.  Subsequent to the quarter-end, the Company sold 995,100 shares of common stock under the CSPA for net proceeds of $1.4 million.  The ending cash balance of $1.0 million along with the proceeds received from the CSPA is expected to provide the Company with sufficient capital to fund its critical operations through September 30, 2016.  The Company anticipates funding from the following sources to sustain its operations beyond September 30, 2016:


·

Laramide Asset Sale


On April 7, 2016, Laramide Resources and the Company entered into the Laramide SPA for the sale of its wholly-owned subsidiary Hydro Resources Inc., which holds the Company’s Churchrock and Crownpoint properties in New Mexico for $12.5 million.  Under the terms of the Laramide SPA, the Company expects to receive an initial cash payment of $5.25 million upon closing. The closing is subject to certain conditions including completion of a financing by Laramide Resources on commercially reasonable terms and in such amount as is necessary to fund the $5.25 million cash payment. Closing is currently anticipated to occur by the end of the third quarter of 2016.  Either party may terminate the Laramide SPA if the closing has not occurred by September 30, 2016.  



18







·

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.  The Company’s shareholders approved the issuance of up to 5.0 million shares of common stock under the CSPA at its Annual General Meeting of Shareholders on June 7, 2016.  As of August 11, 2016 the Company has approximately $8.9 million or 3.0 million shares of common stock available for future sales.  


·

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 $4.5 million available for future sales as of August 11, 2016.  The Company is 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.


The Company’s ability to continue to fund its ongoing operations and continue as a going concern is dependent upon the sources of capital above and the renegotiation of the RCF Loan.  While the Company initially expected that the Laramide SPA would close by June 30, 2016, Laramide Resources has experienced delays in obtaining the necessary funding to close the transaction.  Based on continued discussions with Laramide Resources, the Company believes that the funding will be in place to close by September 30, 2016.  In addition, factors such as the Company’s market capitalization, current share price, volatility of trading volume and potential to fall below the reference price under the CSPA ($0.50 per share) may make it difficult for the Company to fully utilize the $8.9 million and $4.5 million available under the CSPA and ATM Sales Agreement, respectively.  Therefore, the Company may need to raise additional capital from other sources.  The Company is currently evaluating its options with respect to the RCF Loan and continues to explore opportunities to further monetize its non-core assets and identify ways to reduce its 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 the Company 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 materially change its business plans and it could default under the RCF Loan.


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 third quarter of 2016 and beyond, the closing of the Laramide SPA, the repayment or renegotiation of the RCF Loan, 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:




19






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 URI to enter into and successfully close acquisitions or other material transactions, including without limitation the 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.



20







ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


As a smaller reporting company, we are not required to provide this information in our Quarterly Reports.


ITEM 4. CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures


The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its filings with the Securities and Exchange Commission (“SEC”) is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management has recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply judgment in evaluating the Company’s controls and procedures.


During the fiscal period covered by this report, the Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 30, 2016.


Changes in Internal Controls


During the three months ended June 30, 2016, no changes have been made in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



21







PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS


Information regarding reportable legal proceedings is contained in Part I, Item 3., “Legal Proceedings,” in our Annual Report on Form 10-K for the year ended December 31, 2015.  The following disclosure updates certain legal proceedings set forth under the headings “— Dispute over Kleberg Settlement Agreement” and “— Litigation by Former Contractor” in the 2015 Form 10-K to reflect developments during the six months ended June 30, 2016 and should be read together with the corresponding disclosure in the 2015 Form 10-K..


Dispute over Kleberg Settlement Agreement


On March 14, 2016, URI, Inc. filed a motion for rehearing and reconsideration en banc before the 13th Court of Appeals of Texas.  URI, Inc. argued that the Court should grant rehearing or reconsideration because its prior opinion, which added new terms to the 2004 Settlement Agreement, ignored established precedent and improperly violated the prohibition against consideration of extraneous matters when interpreting unambiguous contracts.  On March 30, 2016, the 13th Court of Appeals denied the motion for rehearing en banc.  On June 15, 2016, URI, Inc. filed a petition for review with the Texas Supreme Court raising the issue of whether a court may alter the explicit terms of an unambiguous contract based on one party’s subjective belief regarding whether certain data meets the requirements of the contract as well as other related issues.  The petition is under review by the Texas Supreme Court.

Litigation by Former Contractor


On April 14, 2016, Company representatives and a former contractor of the Company (both assisted by counsel) participated in a mediation session and agreed to resolve the dispute.  On May 4, 2016, the Company and its former contractor executed a settlement agreement in which the Company agreed to pay its former contractor an amount equal to $90,000 in three installments:  $10,000 to be paid within five business days of executing a settlement agreement; $40,000 to be paid on or before June 30, 2016; and the remaining $40,000 to be paid on or before September 30, 2016.  In exchange, the Company’s former contractor agreed to dismiss the lawsuit within two business days of executing a settlement agreement and also agreed to release all claims against the Company after the three payments have been made.  Counsel for the parties have filed with the District Court a stipulated motion to dismiss the lawsuit with prejudice, and the Court issued an order dismissing the case on May 11, 2016.

TCEQ Adjudicatory Proceeding for the Kingsville Facility

In late 2012, the Company’s Texas-based subsidiary, URI Inc., filed an application to renew a radioactive material license for reclamation activities at the Kingsville Dome facility in South Texas with the Texas Commission on Environmental Quality (TCEQ) as well as a new application to conduct ISR mining activities at the Kingsville Dome facility.  In July 2015 the TCEQ staff concluded that the applications satisfied regulatory requirements and recommended that the permits should be issued or renewed.  In October 2015, TCEQ held initial hearings on the matter and referred the matter to an administrative law judge for further consideration.  On March 3, 2016, the administrative law judge held a preliminary hearing, granted standing to numerous landowners and set a schedule for the proceeding.  On June 15, 2016, URI, Inc. filed a motion to abate the proceedings and a request to withdraw the permit application without prejudice pursuant to TCEQ rules and offered to pay other parties expenses (other than attorney’s fees) as required by TCEQ rules.  The parties are in the process of presenting their expenses for consideration for payment by URI, Inc.



ITEM 1A.  RISK FACTORS.


Other than as set forth below, there have been no material changes from those risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2015.


Closing of our previously announced transaction for the sale of the Company’s Churchrock and Crownpoint projects to Laramide Resources has not yet occurred and no assurances can be given that this transaction will close. If we do not raise sufficient additional capital in the very near term, our business, liquidity and financial condition would be materially adversely affected.


As of the date of this filing, the conditions to the closing of our previously announced transaction with Laramide Resources have not been satisfied, and in particular, Laramide Resources has not yet completed a financing on commercially reasonable terms to fund the $5.25 million cash payment due to the Company at closing. As a result, the closing of the transaction has extended beyond the Company’s original anticipated closing date of June 30, 2016, and no assurances can be given that this transaction will ever close. Each party may terminate the Laramide SPA if the closing thereunder has not occurred on or before September 30, 2016.



22







As discussed above under “Liquidity and Capital Resources”, the Company faces an ongoing need to raise capital. Funds from the closing of the Laramide SPA are a material component of the Company’s current funding plans, and if we are unable to close the transaction with Laramide Resources, we anticipate that we will need to raise significant amounts of capital from alternative sources in the very near term


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 materially change its business plans and it could default under the RCF Loan.


ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.


None.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.


None.


ITEM 4.  MINE SAFETY DISCLOSURES.


Not applicable.


ITEM 5.  OTHER INFORMATION.


None


ITEM 6.  EXHIBITS.


See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a listing of the exhibits that are filed as part of this Quarterly Report.



23







SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 

URANIUM RESOURCES, INC.

 

 

Dated: August 11, 2016

By:

/s/ Christopher M. Jones

 

 

Christopher M. Jones

 

 

President and Chief Executive Officer

(Principal Executive Officer)

 

 

 

Dated: August 11,  2016

By:

/s/ Jeffrey L. Vigil

 

 

Jeffrey L. Vigil

 

 

Vice President - Finance and Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)





24







EXHIBIT INDEX


Exhibit

Number

 

Description

 

 

 

2.1

 

Share Purchase Agreement, dated April 7, 2016, between the Company, Hydro Resources, Inc. and Laramide Resources Ltd. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on April 8, 2016).

 

 

 

4.1

 

Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 8, 2016).

 

 

 

10.1

 

Securities Purchase Agreement, dated April 4, 2016, between the Company and Aspire Capital Fund, LLC. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 4, 2016).

 

 

 

10.2

 

Common Stock Purchase Agreement, dated April 8, 2016, between the Company and Aspire Capital Fund, LLC. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 11, 2016).

 

 

 

31.1

 

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

31.2

 

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1

 

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.2

 

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

101.INS:

 

XBRL Instance Document

 

 

 

101.SCH:

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL:

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF:

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB:

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE:

 

XBRL Taxonomy Extension Presentation Linkbase Document




25