XML 20 R8.htm IDEA: XBRL DOCUMENT v2.4.0.6
Business Condition and Liquidity
12 Months Ended
Dec. 31, 2011
Business Condition and Liquidity [Abstract]  
Business Condition and Liquidity

NOTE 2 – BUSINESS CONDITION AND LIQUIDITY

 

Business condition – The Company has a history of recurring losses with an accumulated deficit of $111,994,492 at December 31, 2011, and a net loss of $5,950,438 for the year then ended. The Company’s working capital has decreased by $1,054,210 from the prior year. Working capital includes inventory which will not be sold for up to three years, and the Company has provided cash flows from operations of $66,919. During 2011, the Company sought to improve future cash flows from operating activities through improving operating cost control measures, obtaining additional quality certifications to permit expanded sales of products, adding a joint-venture business to the Company, and raising capital. The Company’s net loss was $5,950,438 in 2011, compared to a net loss of $6,802,014 in 2010. The decrease in loss of $851,576, or approximately 13%, was the result of capitalizing certain costs related to the planning, licensing, and construction of the proposed de-conversion facility rather than expensing them to research and development expense.

 

In 2004, the Company acquired seven patents for the Fluorine Extraction Process (FEP) and began the design and construction of an FEP pilot plant to produce a fluoride gas. The plant was completed to the extent required to conduct some initial production testing in early 2006. During the remainder of 2006 and 2007, the Company expanded the scale of production testing in order to define the operational parameters for regular commercial production and completed installation of additional ancillary equipment and systems. In 2008, the Company produced qualification samples of fluoride gas to provide to their prospective customer. This pilot plant has successfully demonstrated the technical viability of FEP and its ability to produce high purity fluoride gas, but, because of changing market conditions, is not producing that specific fluoride gas on a commercial scale at this time. Also during 2009 through 2011 the pilot plant was converted to produce another fluoride gas and will be used for the development of various fluoride gas analytical processes and testing certain key components for the planned uranium de-conversion and fluorine extraction processing facility.

 

Beginning in 2008, the Company started a major undertaking to construct the first commercial uranium de-conversion facility in the United States (U.S.). The Company believes this will provide an excellent commercial opportunity because there is one company operating and expanding a new uranium enrichment facility, and there several other proposed new commercial enrichment facilities in various stages of licensing, design, or financing.  Collectively, these new U.S. enrichment facilities will produce a large amount of depleted uranium hexafluoride that must be de-converted for disposal. In the process of de-conversion, the Company plans to use the FEP process to produce high value, high purity, fluoride gases.

 

In April 2010, the Company entered into an agreement with URENCO U.S.A. (UUSA), a wholly-owned subsidiary of URENCO, to provide depleted uranium de-conversion services for its enrichment facility located in Eunice, New Mexico. These services will begin once commercial operations of the Company’s planned de-conversion facility, to be built in Lea County, near Hobbs, New Mexico, are underway. The term of the agreement extends through the first five years of the Company’s operation of the planned uranium de-conversion facility. It will require significant capital and time to design, license, and construct such a uranium de-conversion facility before the Company can recognize revenue under this agreement.

 

In July 2011, the Company announced the selection of Parsons Corporation as the lead design-build contractor for the planned uranium de-conversion facility. The Company plans to execute a design and build contract with Parsons Corporation if and when it secures additional capital to further support the project.

 

In August 2011, the Company announced it had completed the acquisition of property for the planned uranium de-conversion facility with Lea County, New Mexico. The property is a 640 acre parcel that was offered to the Company as part of an incentives package prepared by the Economic Development Corporation of Lea County. Pursuant to a project participation agreement and an industrial revenue bond transaction, the property was transferred to the Company in accordance with the Local Economic Development Act of Lea County, New Mexico. Under the project participation agreement, the Company is required to commence construction of the facility no later than December 2014 and to substantially complete Phase 1 of the facility and have hired at least 75 persons by December 2015. If the Company fails to perform either of these obligations, and at the time of such failure has not secured financing for Phase 1 of the facility and expended at least $200,000 in costs of improvement of the property, then the Company must either reconvey the property to Lea County, New Mexico or purchase the property from Lea County in accordance with the project participation agreement. In accordance with ASC 360-10-Property, Plant and Equipment, the land was recorded at zero basis representing the costs incurred by the Company for the acquisition.  Should the Company not meet its obligations of the project participation agreement thus, requiring the reconveyance or purchase of the land, and should the Company decide to purchase the land, the Company would adjust the carrying value of the land to include the costs paid to Lea County to keep the land.

 

It will require significant capital and time to design, license, and construct such a uranium de-conversion facility. Nonetheless, the Company believes that the commercial opportunity will justify this investment and it has taken several actions in 2010 and 2011 to put this plan in place. In February 2010, the Company issued convertible debentures with an aggregate principal balance of $3,075,000, and in October 2010 completed a private offering generating proceeds of approximately $5,800,000.  In September 2011, the Company authorized an offer to its current warrant holders to encourage them to exercise outstanding warrants. The offer allowed holders of the Company’s outstanding warrants to purchase the Company’s common stock at a discounted warrant exercise price of $0.10 per share until the close of business on September 30, 2011. As a result of the offer, 15,437,501 warrants were exercised and the Company raised approximately $1,540,000. These funds were raised to provide continuing support for the costs associated with the construction and licensing of the de-conversion facility, and it is planned, as funds become available, that significant costs will continue to be incurred.  See Note 9 for further detail regarding this transaction.