10-Q 1 uec20201031_10q.htm FORM 10-Q uec20201031_10q.htm
 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

  For the quarterly period ended October 31, 2020

 

or

 

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: 001-33706

 

URANIUM ENERGY CORP.

(Exact name of registrant as specified in its charter)

 

Nevada

 

98-0399476

 

(State or other jurisdiction of incorporation of organization)

 

 (I.R.S. Employer Identification No.)

 
       
1030 West Georgia Street, Suite 1830, Vancouver, B.C., Canada    V6E 2Y3  
(Address of principal executive offices)   (Zip Code)  

 

 

(604) 682-9775

 
 

(Registrant’s telephone number, including area code)

 
     
  N/A  
  (Former name, former address and former fiscal year, if changed since last report)  

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

UEC

NYSE American

 

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 ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒   No ☐

 

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

 

☐ Large accelerated filer  ☐ Accelerated filer
   
☒ Non-accelerated filer ☒ Smaller reporting company
   
☐ Emerging growth company  

         

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐   No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 198,893,130 shares of common stock outstanding as of December 11, 2020

 

 

 

 

 

 URANIUM ENERGY CORP.

 

TABLE OF CONTENTS

 

 

PART I – FINANCIAL INFORMATION

3

     

Item 1.

Financial Statements

3

     

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

21

     

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

     

Item 4.

Controls and Procedures

29

     

PART II – OTHER INFORMATION

30

     

Item 1.

Legal Proceedings

30

     

Item 1A. 

Risk Factors

31

     

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

     

Item 3.

Defaults Upon Senior Securities

41

     

Item 4.

Mine Safety Disclosures

41

     

Item 5.

Other Information

41

     

Item 6.

Exhibits

42

SIGNATURES

43

 

2

 

 

PART I – FINANCIAL INFORMATION

 

Item 1.     Financial Statements

 

3

 

 

 

 

 

 

URANIUM ENERGY CORP.

 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

FOR THE THREE MONTHS ENDED OCTOBER 31, 2020

 

(Unaudited – Expressed in U.S. Dollars)

 

 

 

 

 

4

 

 

URANIUM ENERGY CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited – Expressed in U.S. Dollars)


 

   

Note(s)

   

October 31, 2020

   

July 31, 2020

 
                         

CURRENT ASSETS

                       

Cash and cash equivalents

    6     $ 6,700,603     $ 5,147,703  

Term deposits

    3       10,000,000       -  

Inventories

            211,662       211,662  

Prepaid expenses and deposits

            1,118,616       1,111,152  

Other current assets

            112,659       119,362  

TOTAL CURRENT ASSETS

            18,143,540       6,589,879  
                         

MINERAL RIGHTS AND PROPERTIES

    4       63,655,128       63,655,503  

PROPERTY, PLANT AND EQUIPMENT

    5       6,974,999       7,019,817  

RESTRICTED CASH

    6       1,839,260       1,839,216  

EQUITY-ACCOUNTED INVESTMENT

    7       10,874,483       11,515,327  

OTHER NON-CURRENT ASSETS

            726,351       769,875  

TOTAL ASSETS

          $ 102,213,761     $ 91,389,617  
                         
                         

CURRENT LIABILITIES

                       

Accounts payable and accrued liabilities

          $ 1,702,598     $ 1,858,499  

Due to a related party

    8       16,557       31,334  

Other current liabilities

    11       103,128       147,569  

Current portion of long-term debt

    9       2,000,000       -  

TOTAL CURRENT LIABILITIES

            3,822,283       2,037,402  
                         

LONG-TERM DEBT

    9       18,313,344       19,869,477  

GOVERNMENT LOAN PAYABLE

    15       307,285       307,092  

ASSET RETIREMENT OBLIGATIONS

    10       3,785,399       3,734,314  

OTHER NON-CURRENT LIABILITIES

    11       482,694       479,714  

DEFERRED TAX LIABILITIES

            544,184       545,000  

TOTAL LIABILITIES

            27,255,189       26,972,999  
                         

STOCKHOLDERS' EQUITY

                       

Capital stock

                       

Common stock $0.001 par value: 750,000,000 shares authorized, 197,376,792 shares issued and outstanding (July 31, 2020 - 184,635,870)

    12       197,377       184,636  

Additional paid-in capital

            356,459,640       341,059,972  

Share issuance obligation

            133,875       103,554  

Accumulated deficit

            (281,774,837 )     (276,811,300 )

Accumulated other comprehensive loss

            (57,483 )     (120,244 )

TOTAL EQUITY

            74,958,572       64,416,618  

TOTAL LIABILITIES AND EQUITY

          $ 102,213,761     $ 91,389,617  
                         

SUBSEQUENT EVENTS

    9,15                  

 

 

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

 

5

 

 

URANIUM ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited – Expressed in U.S. Dollars)


 

           

Three Months Ended October 31,

 
   

Note(s)

   

2020

   

2019

 

COSTS AND EXPENSES

                       

Mineral property expenditures

    4     $ 701,761     $ 1,523,451  

General and administrative

    8,12       2,585,689       2,315,170  

Depreciation, amortization and accretion

    4,5,10       99,180       76,386  

LOSS FROM OPERATIONS

            (3,386,630 )     (3,915,007 )
                         

OTHER INCOME (EXPENSES)

                       

Interest income

            5,610       89,181  

Interest expenses and finance costs

    9       (890,914 )     (885,125 )

Loss from equity-accounted investment

    7       (703,605 )     (340,597 )

Other income

            11,186       7,293  

OTHER EXPENSES

            (1,577,723 )     (1,129,248 )

LOSS BEFORE INCOME TAXES

            (4,964,353 )     (5,044,255 )
                         

DEFERRED TAX BENEFITS

            816       1,678  

NET LOSS FOR THE PERIOD

            (4,963,537 )     (5,042,577 )
                         

OTHER COMPREHENSIVE INCOME (LOSS),

                       

NET OF INCOME TAXES

    7       62,761       (9,894 )

TOTAL COMPREHENSIVE LOSS FOR THE PERIOD

          $ (4,900,776 )   $ (5,052,471 )
                         

NET LOSS PER SHARE, BASIC AND DILUTED

    13     $ (0.03 )   $ (0.03 )
                         

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED

            189,955,499       181,240,702  

 

 

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

 

6

 

 

URANIUM ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (Unaudited – Expressed in U.S. Dollars)


 

           

Three Months Ended October 31,

 
   

Note(s)

   

2020

   

2019

 

NET CASH PROVIDED BY (USED IN):

                       
                         

OPERATING ACTIVITIES

                       

Net loss for the period

          $ (4,963,537 )   $ (5,042,577 )

Adjustments to reconcile net loss to cash flows in operating activities

                       

Stock-based compensation

    12       1,378,515       917,386  

Depreciation, amortization and accretion

    4,5,10       99,180       76,386  

Amortization of long-term debt discount

    9       443,867       432,221  

Loss from equity-accounted investment

    7       703,605       340,597  

Deferred tax benefits

            (816 )     (1,678 )

Foreign exchange loss

            193       -  
Changes in operating assets and liabilities                        

Prepaid expenses and deposits

            (78,730 )     (85,062 )

Other current assets

            6,704       128,043  

Accounts payable and accrued liabilities

            (155,901 )     (1,361,171 )

Due to a related party

    8       (14,777 )     (68,600 )

Other liabilities

            6,579       (78,977 )

NET CASH USED IN OPERATING ACTIVITIES

            (2,575,118 )     (4,743,432 )
                         

FINANCING ACTIVITIES

                       

Proceeds from share issuance, net of issuance costs

    12       14,130,965       -  

NET CASH PROVIDED BY FINANCING ACTIVITIES

            14,130,965       -  
                         

INVESTING ACTIVITIES

                       

Purchase of property, plant and equipment

            (2,903 )     (26,827 )

Investment in term deposits

    3       (10,000,000 )     -  

Proceeds from redemption of term deposits

            -       11,831,671  

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

            (10,002,903 )     11,804,844  
                         

NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

            1,552,944       7,061,412  

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

      6,986,919       7,879,578  

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD

    6     $ 8,539,863     $ 14,940,990  

 

 

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

 

7

 

 

URANIUM ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited – Expressed in U.S. Dollars)


 

 

   

Common Stock

   

Additional Paid-

   

Share Issuance

   

Accumulated

   

Accumulated Other Comprehensive

   

Stockholders'

 
   

Shares

   

Amount

    in Capital     Obligation     Deficit     Income (Loss)     Equity  

Balance, July 31, 2020

    184,635,870     $ 184,636     $ 341,059,972     $ 103,554     $ (276,811,300 )   $ (120,244 )   $ 64,416,618  

Common stock

                                                       

Issued for equity financing, net of issuance costs

    12,500,000       12,500       12,455,787       -       -       -       12,468,287  

Issued upon exercise of stock options

    13,532       15       9,294       -       -       -       9,309  

Stock-based compensation

                                                       

Common stock issued under Stock Incentive Plan

    227,390       226       235,043       30,321       -       -       265,590  

Amortization of stock-based compensation

    -       -       1,046,175       -       -       -       1,046,175  

Warrants

                                                       

Issued for equity financing

    -       -       1,518,432       -       -       -       1,518,432  

Issued for equity financing as issuance costs

    -       -       134,937       -       -       -       134,937  

Net loss for the period

    -       -       -       -       (4,963,537 )     -       (4,963,537 )

Other comprehensive income

    -       -       -       -       -       62,761       62,761  

Balance, October 31, 2020

    197,376,792     $ 197,377     $ 356,459,640     $ 133,875     $ (281,774,837 )   $ (57,483 )   $ 74,958,572  

 

 

   

Common Stock

   

Additional Paid-in

   

Share Issuance

   

Accumulated

   

Accumulated Other Comprehensive

   

Stockholders'

 
   

Shares

   

Amount

    Capital     Obligation     Deficit     Income (Loss)     Equity  

Balance, July 31, 2019

    180,896,431     $ 180,896     $ 336,047,595     $ 187,100     $ (262,200,784 )   $ 12,461     $ 74,227,268  

Stock-based compensation

                                                       

Common stock issued for consulting services

    29,167       29       31,763       -       -       -       31,792  

Common stock issued under Stock Incentive Plan

    435,348       436       410,026       (187,100 )     -       -       223,362  

Amortization of stock-based compensation

    -       -       662,232       -       -       -       662,232  

Net loss for the period

    -       -       -       -       (5,042,577 )     -       (5,042,577 )

Other comprehensive loss

    -       -       -       -       -       (9,894 )     (9,894 )

Balance, October 31, 2019

    181,360,946     $ 181,361     $ 337,151,616     $ -     $ (267,243,361 )   $ 2,567     $ 70,092,183  

 

 

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

 

 
8


 

 

NOTE 1:

NATURE OF OPERATIONS

 

Uranium Energy Corp. was incorporated in the State of Nevada on May 16, 2003. Uranium Energy Corp. and its subsidiary companies and a controlled partnership (collectively, the “Company” or “we”) are engaged in uranium and titanium mining and related activities, including exploration, pre-extraction, extraction and processing of uranium concentrates and titanium minerals, on projects located in the United States, Canada and the Republic of Paraguay.

 

At October 31, 2020, we had a working capital of $14.3 million including cash and cash equivalents of $6.7 million and term deposits of $10.0 million. Our existing cash resources are expected to provide sufficient funds to carry out our planned operations for 12 months from the date that our condensed consolidated financial statements are issued. Our continuation as a going concern for a period beyond those 12 months will be dependent upon our ability to obtain adequate additional financing, as our operations are capital intensive and future capital expenditures are expected to be substantial.

 

Historically, we have been reliant primarily on equity financings from the sale of our common stock and on debt financing in order to fund our operations, and this reliance is expected to continue for the foreseeable future. Our continued operations, including the recoverability of the carrying values of our assets, are dependent ultimately on our ability to achieve and maintain profitability and positive cash flow from our operations.

 

 

NOTE 2:

SUMMARY OF SIGNIFICANT POLICIES

 

Basis of Presentation

 

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”) for interim financial information and are presented in U.S. dollars. Accordingly, they do not include all of the information and footnotes required under U.S. GAAP for complete financial statements. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended July 31, 2020 (“Fiscal 2020”). In the opinion of management, all adjustments of a normal recurring nature and considered necessary for a fair presentation have been made. Operating results for the three months ended October 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2021 (“Fiscal 2021”).

 

Exploration Stage

 

We have established the existence of mineralized materials for certain uranium projects, including for our Palangana Mine.  We have not established proven or probable reserves, as defined by the United States Securities and Exchange Commission (the “SEC”) under Industry Guide 7 (“Industry Guide 7”), through the completion of a “final” or “bankable” feasibility study for any of our uranium projects, including the Palangana Mine.  Furthermore, we have no plans to establish proven or probable reserves for any of our uranium projects for which we plan on utilizing in-situ recovery (“ISR”) mining, such as the Palangana Mine.  As a result, and despite the fact that we commenced extraction of mineralized materials at the Palangana Mine in November 2010, we remain in the Exploration Stage, as defined under Industry Guide 7, and will continue to remain in the Exploration Stage until such time that proven or probable reserves have been established.

 

Since we commenced the extraction of mineralized materials at the Palangana Mine without having established proven or probable reserves, any mineralized materials established or extracted from the Palangana Mine should not in any way be associated with having established or produced from proven or probable reserves.

 

In accordance with U.S. GAAP, expenditures relating to the acquisition of mineral rights are initially capitalized as incurred while exploration and pre-extraction expenditures are expensed as incurred until such time we exit the Exploration Stage by establishing proven or probable reserves.  Expenditures relating to exploration activities such as drilling programs to establish mineralized materials are expensed as incurred. Expenditures relating to pre-extraction activities such as the construction of mine wellfields, ion exchange facilities and disposal wells are expensed as incurred until such time proven or probable reserves are established for that project, after which expenditures relating to mine development activities for that particular project are capitalized as incurred.

 

9

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020
(Unaudited – Expressed in U.S. Dollars)

 

Companies in the Production Stage, as defined under Industry Guide 7, having established proven and probable reserves and exited the Exploration Stage, typically capitalize expenditures relating to ongoing development activities, with corresponding depletion calculated over proven and probable reserves using the units-of-production method and allocated to future reporting periods to inventory and, as that inventory is sold, to cost of goods sold. We are in the Exploration Stage which has resulted in us reporting larger losses than if we had been in the Production Stage due to the expensing, rather than capitalizing, of expenditures relating to ongoing mill and mine development activities. Additionally, there would be no corresponding amortization allocated to future reporting periods of our Company since those costs would have been expensed previously, resulting in both lower inventory costs and cost of goods sold and results of operations with higher gross profits and lower losses than if we had been in the Production Stage. Any capitalized costs, such as expenditures relating to the acquisition of mineral rights, are depleted over the estimated extraction life using the straight-line method. As a result, our consolidated financial statements may not be directly comparable to the financial statements of companies in the Production Stage.

 

 

NOTE 3:

TERM DEPOSITS

 

At October 31, 2020, term deposits totaled $10,000,000 (July 31, 2020: $Nil), which are held at a major financial institution and have a term of four months with interest rate of 0.33%.

 

 

NOTE 4:

MINERAL RIGHTS AND PROPERTIES

 

Mineral Rights

 

At October 31, 2020, we had mineral rights in the States of Arizona, Colorado, New Mexico, Wyoming and Texas, in Canada and in the Republic of Paraguay.  These mineral rights were acquired through staking, purchase or lease agreements and are subject to varying royalty interests, some of which are indexed to the sale price of uranium and titanium.  At October 31, 2020, annual maintenance payments of approximately $2.4 million will be required to maintain these mineral rights.

 

10

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020
(Unaudited – Expressed in U.S. Dollars)

 

Mineral rights and property acquisition costs consisted of the following:

    

   

October 31, 2020

   

July 31, 2020

 

Mineral Rights and Properties

               

Palangana Mine

  $ 6,027,784     $ 6,027,784  

Goliad Project

    8,689,127       8,689,127  

Burke Hollow Project

    1,495,750       1,495,750  

Longhorn Project

    116,870       116,870  

Salvo Project

    14,905       14,905  

Anderson Project

    3,470,373       3,470,373  

Workman Creek Project

    799,854       799,854  

Los Cuatros Project

    257,250       257,250  

Slick Rock Project

    30,000       30,000  

Reno Creek Project

    31,527,870       31,527,870  

Diabase Project

    546,938       546,938  

Yuty Project

    11,947,144       11,947,144  

Oviedo Project

    1,133,412       1,133,412  

Alto Paraná Titanium Project

    1,433,030       1,433,030  

Other Property Acquisitions

    91,080       91,080  
      67,581,387       67,581,387  

Accumulated Depletion

    (3,929,884 )     (3,929,884 )
      63,651,503       63,651,503  
                 

Databases and Land Use Agreements

    2,458,808       2,458,808  

Accumulated Amortization

    (2,455,183 )     (2,454,808 )
      3,625       4,000  
    $ 63,655,128     $ 63,655,503  

 

We have not established proven or probable reserves, as defined by the SEC under Industry Guide 7, for any of our mineral projects. We have established the existence of mineralized materials for certain mineral projects, including our Palangana Mine. Since we commenced uranium extraction at the Palangana Mine without having established proven or probable reserves, there may be greater inherent uncertainty as to whether or not any mineralized material can be economically extracted as originally planned and anticipated.

 

During the three months ended October 31, 2020 and 2019, we continued with reduced operations at the Palangana Mine to capture residual uranium only. As a result, no depletion for the Palangana Mine was recorded on our Condensed Consolidated Financial Statements for the three months ended October 31, 2020 and 2019.

 

11

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020
(Unaudited – Expressed in U.S. Dollars)

 

Mineral property expenditures incurred on our projects were as follows:

 

   

Three Months Ended October 31,

 
   

2020

   

2019

 

Mineral Property Expenditures

               

Palangana Mine

  $ 198,802     $ 320,027  

Goliad Project

    45,789       59,965  

Burke Hollow Project

    129,778       648,861  

Longhorn Project

    2,288       10,157  

Salvo Project

    8,192       7,269  

Anderson Project

    19,466       16,053  

Workman Creek Project

    8,198       8,198  

Slick Rock Project

    13,136       13,134  

Reno Creek Project

    100,490       148,043  

Yuty Project

    5,994       14,196  

Oviedo Project

    47,611       105,938  

Alto Paraná Titanium Project

    16,451       56,248  

Other Mineral Property Expenditures

    105,566       115,362  
    $ 701,761     $ 1,523,451  

 

 

NOTE 5:

PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment consisted of the following:

 

   

October 31, 2020

   

July 31, 2020

 
   

Cost

   

Accumulated
Depreciation

   

Net Book
Value

   

Cost

   

Accumulated
Depreciation

   

Net Book
Value

 

Hobson Processing Facility

  $ 6,642,835     $ (793,218 )   $ 5,849,617     $ 6,642,835     $ (773,933 )   $ 5,868,902  

Mining Equipment

    2,393,579       (2,346,194 )     47,385       2,393,579       (2,342,518 )     51,061  

Logging Equipment and Vehicles

    1,924,969       (1,749,674 )     175,295       1,924,969       (1,736,806 )     188,163  

Computer Equipment

    553,146       (494,497 )     58,649       550,243       (486,467 )     63,776  

Furniture and Fixtures

    170,701       (170,089 )     612       170,701       (169,946 )     755  

Land and Buildings

    889,606       (46,165 )     843,441       889,606       (42,446 )     847,160  
    $ 12,574,836     $ (5,599,837 )   $ 6,974,999     $ 12,571,933     $ (5,552,116 )   $ 7,019,817  

 

 

NOTE 6:

RESTRICTED CASH

 

Restricted cash includes cash and cash equivalents and money market funds as collateral for various bonds posted in favor of applicable state regulatory agencies in Arizona, Texas and Wyoming, and for estimated reclamation costs associated with our Anderson Project, Palangana Mine, Hobson Processing Facility and Reno Creek Project. Restricted cash will be released upon completion of reclamation of a mineral property or restructuring of a surety and collateral arrangement.

 

   

October 31, 2020

   

July 31, 2020

 

Restricted cash, beginning of period

  $ 1,839,216     $ 1,821,392  

Interest received

    44       17,824  

Restricted cash, end of period

  $ 1,839,260     $ 1,839,216  

 

12

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020
(Unaudited – Expressed in U.S. Dollars)

 

Cash, cash equivalents and restricted cash are included in the following accounts at October 31, 2020 and 2019:

  

   

October 31, 2020

   

October 31, 2019

 

Cash and cash equivalents

  $ 6,700,603     $ 13,112,069  

Restricted cash

    1,839,260       1,828,921  

Total cash, cash equivalents and restricted cash

  $ 8,539,863     $ 14,940,990  

 

 

NOTE 7:

EQUITY-ACCOUNTED INVESTMENT

 

At October 31, 2020, we owned 14,000,000 shares of Uranium Royalty Corp. (“URC”), representing a 19.5% (July 31, 2020: 19.5%) interest in URC. In addition, two of our officers are members of URC’s board of directors, one of which is also an officer of URC. As a consequence, our ability to exercise significant influence over URC’s operating and financing policies continued to exist during the three months ended October 31, 2020. URC is a public company listed on the TSX Venture Exchange with the trading symbol “URC.V”.

 

At October 31, 2020, the fair value of our investment in URC was approximately $11.6 million.

 

During the three months ended October 31, 2020, the change in carrying value of our investment in URC is summarized as follows:

 

Balance, July 31, 2020

  $ 11,515,327  

Share of loss from URC

    (703,605 )

Translation gain

    62,761  

Balance, October 31, 2020

  $ 10,874,483  

 

 

NOTE 8:

RELATED PARTY TRANSACTIONS

 

During the three months ended October 31, 2020 and 2019, we incurred $16,677 and $32,833, respectively, in general and administrative costs paid to Blender Media Inc. (“Blender”), a company controlled by Arash Adnani, a direct family member of our President and Chief Executive Officer, for various services, including information technology, corporate branding, media, website design, maintenance and hosting, provided to the Company.

 

At October 31, 2020, the amount owing to Blender was $16,557 (July 31, 2020: $31,334).

 

 

NOTE 9:

LONG-TERM DEBT

 

As at October 31, 2020, our long-term debt consisted of the following:

 

   

October 31, 2020

   

July 31, 2020

 

Principal amount

  $ 20,000,000     $ 20,000,000  

Unamortized discount and accrued fees

    313,344       (130,523 )

Long-term debt, net of unamortized discount

    20,313,344       19,869,477  

Current portion

    2,000,000       -  

Long-term debt, net of current portion

  $ 18,313,344     $ 19,869,477  

 

During the three months ended October 31, 2020 and 2019, amortization of debt discount totaled $443,867 and $432,221, respectively, which was recorded as interest expense and included in our Condensed Consolidated Statements of Operations and Comprehensive Loss. During the three months ended October 31, 2020 and 2019, we paid $408,889 and $408,889, respectively, in cash to our lenders (the “Lenders”) for interest on the long-term debt.

 

13

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020
(Unaudited – Expressed in U.S. Dollars)

 

The Company’s credit facility (the “Credit Facility”) with our Lenders has a maturity date on January 31, 2022, with an interest rate of 8% per annum and an underlying effective interest rate of 16.67%.

 

At October 31, 2020, we had a working capital ratio of 4.7:1, which was in compliance with the debt covenant requirement under our Credit Facility being a working capital ratio of not less than 1:1.

 

The aggregate yearly maturities of long-term debt based on principal amounts outstanding at October 31, 2020 are as follows:

 

Fiscal 2021

  $ -  

Fiscal 2022

    20,000,000  

Total

  $ 20,000,000  

 

Subsequent to October 31, 2020, we made a voluntary principal repayment of $2,000,000 to one of our Lenders, which decreased the principal outstanding to $18,000,000 under the Credit Facility.

 

Subsequent to October 31, 2020, and pursuant to the terms of our Third Amended and Restated Credit Agreement with our Lenders, we issued an aggregate of 1,249,039 shares with a fair value of $1,170,000, representing 6.5% of the $18,000,000 principal balance outstanding, as payment of anniversary fees to our Lenders.

 

 

NOTE 10:

ASSET RETIREMENT OBLIGATIONS

 

Asset retirement obligations (“ARO”s) relate to future remediation and decommissioning activities at our Palangana Mine, Hobson Processing Facility, Reno Creek Project and Alto Paraná Titanium Project.

 

Balance, July 31, 2020

  $ 3,734,314  

Accretion

    51,085  

Balance, October 31, 2020

  $ 3,785,399  

 

The estimated amounts and timing of cash flows and assumptions used for ARO estimates are as follows:

  

   

October 31, 2020

   

July 31, 2020

 

Undiscounted amount of estimated cash flows

  $ 8,221,018     $ 8,221,018  
                         

Payable in years

    9 to 21       9 to 21  

Inflation rate

    1.56% to 2.17 %     1.56% to 2.17 %

Discount rate

    5.50% to 5.96 %     5.50% to 5.96 %

 

The undiscounted amounts of estimated cash flows for the next five fiscal years and beyond are as follows:

 

Fiscal 2022

  $ -  

Fiscal 2023

    -  

Fiscal 2024

    -  

Fiscal 2025

    -  

Fiscal 2026

    -  

Remaining balance

    8,221,018  
    $ 8,221,018  

 

14

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020
(Unaudited – Expressed in U.S. Dollars)

 

 

NOTE 11:

LEASE LIABILITIES

 

The Company primarily has operating leases for corporate offices and a processing facility with a remaining term of 0.4 to 18.6 years. The lease for the processing facility has an evergreen option that can continue for so long as it is in operation.

 

During the three months ended October 31, 2020, total lease expenses include the following components:

 

 

   

Three Months Ended October 31,

 
   

2020

   

2019

 

Operating leases

  $ 54,461     $ 59,630  

Short-term leases

    22,642       373,513  

Total Lease Expenses

  $ 77,103     $ 433,143  

 

As at October 31, 2020, the weighted average remaining lease term was 16.1 years and the weighted average discount rate was 4.75%.

 

During the three months ended October 31, 2020, cash paid for amounts included in the measurement of operating lease liabilities totaled $53,051.

 

Minimum future lease payments under operating leases with terms longer than one year are as follows:

 

Fiscal 2021

  $ 115,830  

Fiscal 2022

    220,000  

Fiscal 2023

    20,000  

Fiscal 2024

    20,000  

Fiscal 2025

    20,000  

Thereafter

    300,000  

Total lease payments

    695,830  

Less: imputed interest

    (157,962 )

Present value of lease liabilities

  $ 537,868  
         

Currrent portion of lease liabilities

  $ 94,440  

Non-curent portion of lease liabilities

  $ 443,428  

 

Current lease liabilities are included in Other Current Liabilities, and non-current liabilities are included in Other Non-Current Liabilities in our Consolidated Balance Sheets.

 

 

NOTE 12:

CAPITAL STOCK

 

Equity Financing

 

On September 23, 2020, we completed a public offering of 12,500,000 units at a price of $1.20 per unit for gross proceeds of $15,000,000 (the “September 2020 Offering”). Each unit was comprised of one share of our Company and one-half of one share purchase warrant, and each whole warrant entitles its holder to acquire one share of our Company at an exercise price of $1.80 per share and expiring 24 months from the date of issuance. In connection with the September 2020 Offering, we also issued compensation share purchase warrants to agents as part of share issuance costs to purchase 583,333 shares of our Company exercisable at an exercise price of $1.80 per share and expiring 24 months from the date of issuance.

 

15

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020
(Unaudited – Expressed in U.S. Dollars)

 

The shares were valued at the Company’s closing price of $0.96 per share at September 23, 2020. The share purchase warrants were valued using the Black-Scholes option pricing model with the following assumptions.

 

Expected Risk Free Interest Rate

    0.14 %

Expected Annual Volatility

    76.81 %

Expected Contractual Life in Years

    2.00  

Expected Annual Dividend Yield

    0.00 %

 

The net proceeds from the September 2020 Offering were allocated to the fair values of the shares and share purchase warrants as presented below.

 

Fair Value of Shares

  $ 12,000,000  

Fair Value of Share Purchase Warrants

    1,445,756  

Total Fair Value Before Allocation to Net Proceeds

  $ 13,445,756  
         

Gross Proceeds

  $ 15,000,000  

Share Issuance Costs - Cash

    (878,344 )

Net Cash Proceeds Received

  $ 14,121,656  
         

Relative Fair Value Allocation to:

       

Shares

  $ 12,603,224  

Share Purchase Warrants

    1,518,432  
    $ 14,121,656  

 

Share Purchase Warrants

 

A continuity schedule of outstanding share purchase warrants for the three months ended October 31, 2020, is as follows:

 

   

Number of
Warrants

   

Weighted Average
Exercise Price

 

Balance, July 31, 2020

    7,721,981     $ 2.03  

Issued in connection with September 2020 Offering

    6,833,333       1.80  

Balance, October 31, 2020

    14,555,314     $ 1.92  

 

A summary of share purchase warrants outstanding and exercisable at October 31, 2020, is as follows:

 

Weighted Average
Exercise Price

   

Number of Warrants
Outstanding

   

Weighted Average

Remaining Contractual
Life (Years)

 

Expiry Date

$ 1.25       150,000       0.15  

December 23, 2020

  1.50       150,000       0.15  

December 23, 2020

  2.05       7,063,253       0.42  

April 3, 2021

  2.30       308,728       1.77  

August 9, 2022

  1.64       50,000       2.55  

May 21, 2023

  1.80       6,833,333       1.89  

September 23, 2022

$ 1.92       14,555,314       1.14    

 

16

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020
(Unaudited – Expressed in U.S. Dollars)

 

Stock Options

 

At October 31, 2020, we had one stock option plan, our 2020 Stock Incentive Plan, which superseded and replaced our 2019 Stock Incentive Plan.

 

A continuity schedule of outstanding stock options for the underlying shares for the three months ended October 31, 2020, is as follows:

 

   

Number of Stock

Options

   

Weighted Average

Exercise Price

 

Balance, July 31, 2020

    15,514,750     $ 1.13  

Exercised

    (28,500 )     0.93  

Expired

    (1,315,000 )     1.43  

Balance, October 31, 2020

    14,171,250     $ 1.10  

 

During the three months ended October 31, 2020, 28,500 stock options were exercised, of which 18,500 stock options were exercised on a forfeiture basis, resulting in 3,532 shares being issued and 14,968 shares being forfeited as payment of exercise costs.  The balance of 10,000 stock options were exercised on a cash basis where we received $9,309 in cash proceeds. The total intrinsic value of these stock options exercised was $6,378.

 

A continuity schedule of outstanding unvested stock options at October 31, 2020, and the changes during the period, is as follows:

 

   

Number of Unvested

Stock Options

   

Weighted Average

Grant-Date Fair Value

 

Balance, July 31, 2020

    6,797,471     $ 0.46  

Vested

    (718,755 )     0.46  

Balance, October 31, 2020

    6,078,716     $ 0.46  

 

At October 31, 2020, unrecognized stock-based compensation expense related to the unvested portion of stock options totaled $1,763,358 to be recognized over the next 1.25 years.

 

At October 31, 2020, the aggregate intrinsic value under the provisions of ASC 718 of all outstanding stock options was estimated at $11,020 (vested: $5,510 and unvested: $5,510).

 

A summary of stock options outstanding and exercisable at October 31, 2020, is as follows:

 

 

     

Options Outstanding

   

Options Exercisable

 

Range of Exercise

Prices

 

Outstanding at October 31, 2020

   

Weighted Average Exercise Price

   

Weighted Average Remaining Contractual Term (Years)

   

Exercisable at
October 31, 2020

   

Weighted Average Exercise Price

   

Weighted Average Remaining Contractual Term (Years)

 

$0.80

to $0.99     8,141,000     $ 0.92       7.38       3,487,284     $ 0.93       4.77  

$1.00

to $1.49     3,900,000       1.19       4.58       2,475,000       1.25       1.84  

$1.50

to $2.81     2,130,250       1.64       2.56       2,130,250       1.64       2.56  
          14,171,250     $ 1.10       5.88       8,092,534     $ 1.21       3.29  

 

17

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020
(Unaudited – Expressed in U.S. Dollars)

 

Restricted Stock Units

 

A summary of outstanding and unvested restricted stock units (“RSU”s) at October 31, 2020, is as follows:

 

Grant Date

 

Number of Restricted

Stock Units

   

Grant Date

Fair Value

   

Remaining Life

(Years)

   

Aggregate

Intrinsic Value

 

July 30, 2019

    310,000     $ 0.94       1.75     $ 267,406  

July 16, 2020

    1,305,000       0.91       2.71       1,125,693  
      1,615,000     $ 0.92       2.52     $ 1,393,099  

 

During the three months ended October 31, 2020 and 2019, stock-based compensation relating to the RSUs totaled $271,834 and $66,928, respectively.  At October 31, 2020, outstanding unvested RSUs totaled 1,615,000 (July 31, 2020: 1,615,000), and unrecognized compensation costs relating to unvested RSUs totaled $1,043,666, which is expected to be recognized over a period of approximately 1.29 years.

 

Performance Based Restricted Stock Units

 

During the three months ended October 31, 2020 and 2019, stock-based compensation relating to target performance based restricted stock units (“PRSU”s) totaled $37,544 and $68,165, respectively.  At October 31, 2020, outstanding unvested PRSUs totaled 333,750 (July 31, 2020: 333,750), and unrecognized compensation costs relating to unvested PRSUs totaled $201,808, which is expected to be recognized over a period of approximately 1.01 years.

 

Stock-Based Compensation

 

A summary of stock-based compensation expense is as follows:

 

   

Three Months Ended October 31,

 
   

2020

   

2019

 

Stock-Based Compensation for Consultants

               

Common stock issued to consultants

  $ 119,470     $ 107,608  

Amortization of stock option expenses

    103,928       46,971  
      223,398       154,579  

Stock-Based Compensation for Management

               

Common stock issued to management

    -       34,707  

Amortization of stock option expenses

    253,731       243,377  

Amortization of RSU & PRSU expenses

    309,378       135,093  
      563,109       413,177  

Stock-Based Compensation for Employees

               

Common stock issued to employees

    212,870       128,028  

Amortization of stock option expenses

    379,138       236,791  
      592,008       364,819  
                 

Settlement of share issuance obligation

    -       (15,189 )
    $ 1,378,515     $ 917,386  

 

18

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020
(Unaudited – Expressed in U.S. Dollars)

 

 

NOTE 13:

LOSS PER SHARE

 

The following table reconciles the weighted average number of shares used in the calculation of the basic and diluted loss per share:

 

   

Three Months Ended October 31,

 
   

2020

   

2019

 

Numerator

               

Net Loss for the Period

  $ (4,963,537 )   $ (5,042,577 )
                 

Denominator

               

Basic Weighted Average Number of Shares

    189,955,499       181,240,702  

Dilutive Stock Options, RSUs, PRSUs and Warrants

    -       -  

Diluted Weighted Average Number of Shares

    189,955,499       181,240,702  
                 

Net Loss per Share, Basic and Diluted

  $ (0.03 )   $ (0.03 )

 

For the three months ended October 31, 2020 and 2019 all outstanding stock options, RSUs, PRSUs and share purchase warrants were excluded from the calculation of the diluted loss per share since their effects would be anti-dilutive.

 

 

NOTE 14:

SEGMENTED INFORMATION

 

We currently operate in one reportable segment which is focused on uranium mining and related activities, including exploration, pre-extraction, extraction and processing of uranium concentrates.

 

At October 31, 2020, our long-term assets located in the United States totaled $57,718,067 or 69% of our total long-term assets of $84,070,221.

 

The table below provides a breakdown of the long-term assets by geographic segments:

 

   

October 31, 2020

 
   

United States

   

 

   

 

   

 

 
Balance Sheet Items  

Texas

   

Arizona

   

Wyoming

   

Other States

      Canada     Paraguay       Total  

Mineral Rights and Properties

  $ 12,422,286     $ 4,527,477     $ 31,527,870     $ 116,971     $ 546,938     $ 14,513,586     $ 63,655,128  

Property, Plant and Equipment

    6,261,873       -       323,920       -       28,272       360,934       6,974,999  

Restricted Cash

    1,750,287       15,000       73,973       -       -       -       1,839,260  

Equity-Accounted Investment

    -       -       -       -       10,874,483       -       10,874,483  

Other Non-Current Assets

    677,910       -       20,500       -       27,941       -       726,351  

Total Long-Term Assets

  $ 21,112,356     $ 4,542,477     $ 31,946,263     $ 116,971     $ 11,477,634     $ 14,874,520     $ 84,070,221  

 

  

   

July 31, 2020

 
   

United States

   

 

   

 

   

 

 
Balance Sheet Items  

Texas

   

Arizona

   

Wyoming

   

Other States

    Canada     Paraguay     Total  

Mineral Rights and Properties

  $ 12,422,661     $ 4,527,477     $ 31,527,870     $ 116,971     $ 546,938     $ 14,513,586     $ 63,655,503  

Property, Plant and Equipment

    6,299,786       -       327,639       -       29,677       362,715       7,019,817  

Restricted Cash

    1,750,243       15,000       73,973       -       -       -       1,839,216  

Equity-Accounted Investment

    -       -       -       -       11,515,327       -       11,515,327  
Other Non-Current Assets     703,312       -       22,000       -       44,563       -       769,875  

Total Long-Term Assets

  $ 21,176,002     $ 4,542,477     $ 31,951,482     $ 116,971     $ 12,136,505     $ 14,876,301     $ 84,799,738  

 

19

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020
(Unaudited – Expressed in U.S. Dollars)

 

The tables below provide a breakdown of our operating results by geographic segments for the three months ended October 31, 2020 and 2019.  All intercompany transactions have been eliminated.

 

   

Three months ended October 31, 2020

 

 

 

United States

                         
 Statement of Operations  

Texas

   

Arizona

   

Wyoming

   

Other States

    Canada     Paraguay     Total  

Costs and Expenses:

                                                       

Mineral property expenditures

  $ 477,330     $ 31,024     $ 100,490     $ 20,069     $ 2,792     $ 70,056     $ 701,761  

General and administrative

    2,167,359       3,720       17,470       373       385,208       11,559       2,585,689  

Depreciation, amortization and accretion

    89,372       -       3,719       -       4,308       1,781       99,180  

Loss from operations

    (2,734,061 )     (34,744 )     (121,679 )     (20,442 )     (392,308 )     (83,396 )     (3,386,630 )
                                                         

Other income (expenses)

    (880,214 )     (4,767 )     200       -       (697,995 )     5,053       (1,577,723 )

Loss before income taxes

  $ (3,614,275 )   $ (39,511 )   $ (121,479 )   $ (20,442 )   $ (1,090,303 )   $ (78,343 )   $ (4,964,353 )

 

 

   

Three months ended October 31, 2019

 

 

 

United States

                         
 Statement of Operations  

Texas

   

Arizona

   

Wyoming

   

Other States

    Canada     Paraguay     Total  

Costs and Expenses:

                                                       

Mineral property expenditures

  $ 1,154,342     $ 24,572     $ 148,043     $ 20,111     $ -     $ 176,383     $ 1,523,451  

General and administrative

    1,700,877       3,389       34,713       652       553,706       21,833       2,315,170  

Depreciation, amortization and accretion

    67,496       -       3,717       249       2,589       2,335       76,386  

Loss from operations

    (2,922,715 )     (27,961 )     (186,473 )     (21,012 )     (556,295 )     (200,551 )     (3,915,007 )
                                                         

Other income (expenses)

    (1,215,203 )     (4,767 )     -       -       89,181       1,541       (1,129,248 )

Loss before income taxes

  $ (4,137,918 )   $ (32,728 )   $ (186,473 )   $ (21,012 )   $ (467,114 )   $ (199,010 )   $ (5,044,255 )

 

 

NOTE 15:

SUBSEQUENT EVENTS

 

Subsequent to October 31, 2020, we received a Notice of Paycheck Protection Program Forgiveness Payment from the Small Business Administration regarding the approval of our application for forgiveness of our Paycheck Protection Program loan of $277,250 (the “PPP Loan”); for which we applied for and received the proceeds during Fiscal 2020.  We will recognize a gain on extinguishment of the PPP Loan during the three months ending January 31, 2021.

 

Subsequent to October 31, 2020, we purchased 100 acres of land within our Goliad Project located in Goliad County, Texas, for total consideration of $487,995. In connection with this land purchase, we entered into a promissory note with a principal amount of $380,000 due to Mar G B Ranch LLC (the “Promissory Note”).  The Promissory Note carries an interest rate of 5% per annum with principal and interest payable in 24 monthly installments with a maturity date of November 1, 2022.  We may prepay the Promissory Note in any amount at any time before the maturity date without penalty or premium.

 

 

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Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following management’s discussion and analysis of the Company’s financial condition and results of operations (the “MD&A”) contain forward-looking statements that involve risks, uncertainties and assumptions including, among others, statements regarding our capital needs, business plans and expectations. In evaluating these statements you should consider various factors, including the risks, uncertainties and assumptions set forth in reports and other documents we have filed with or furnished to the SEC and, including, without limitation, this Form 10-Q Quarterly Report for the three months ended October 31, 2020, and our Form 10-K Annual Report for the fiscal year ended July 31, 2020, including the consolidated financial statements and related notes contained therein. These factors, or any one of them, may cause our actual results or actions in the future to differ materially from any forward-looking statement made in this Quarterly Report. Refer to “Cautionary Note Regarding Forward-looking Statements” as disclosed in our Form 10-K Annual Report for the fiscal year ended July 31, 2020, and Item 1A, Risk Factors, under Part II - Other Information, of this Quarterly Report.

 

Introduction

 

This MD&A is focused on material changes in our financial condition from July 31, 2020, our most recently completed year end, to October 31, 2020, and our results of operations for the three months ended October 31, 2020, and should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, as contained in our Form 10-K Annual Report for Fiscal 2020.

 

Business

 

We are pre-dominantly engaged in uranium mining and related activities, including exploration, pre-extraction, extraction and processing, on uranium projects located in the United States and Paraguay, as more fully described in our Form 10-K Annual Report for Fiscal 2020.

 

We utilize in-situ recovery (“ISR”) mining where possible which we believe, when compared to conventional open pit or underground mining, requires lower capital and operating expenditures with a shorter lead time to extraction and a reduced impact on the environment.  We have one uranium mine located in the State of Texas, the Palangana Mine, which utilizes ISR mining and commenced extraction of uranium concentrates (“U3O8”), or yellowcake, in November 2010.  We have one uranium processing facility located in the State of Texas, the Hobson Processing Facility, which processes material from the Palangana Mine into drums of U3O8, our only sales product and source of revenue, for shipping to a third-party storage and sales facility.  At October 31, 2020, we had no uranium supply or off-take agreements in place.

 

Our fully-licensed and 100%-owned Hobson Processing Facility forms the basis for our regional operating strategy in the State of Texas, specifically the South Texas Uranium Belt where we utilize ISR mining. We utilize a “hub-and-spoke” strategy whereby the Hobson Processing Facility acts as the central processing site (the “hub”) for the Palangana Mine and future satellite uranium mining activities, such as our Burke Hollow and Goliad Projects, located within the South Texas Uranium Belt (the “spokes”). The Hobson Processing Facility has a physical capacity to process uranium-loaded resins up to a total of two million pounds of U3O8 annually and is licensed to process up to one million pounds of U3O8 annually.

 

We acquired the fully permitted Reno Creek Project in August 2017 and expanded our operations to the strategic Powder River Basin in Wyoming.

 

We also hold certain mineral rights in various stages of development in the States of Arizona, Colorado, New Mexico, Texas and Wyoming, in Canada and in the Republic of Paraguay, many of which are located in historically successful mining areas and have been the subject of past exploration and pre-extraction activities by other mining companies. We do not expect, however, to utilize ISR mining for all of the uranium mineral rights in which case we would expect to rely on conventional open pit and/or underground mining techniques.

 

Since we completed the acquisition of the Alto Paraná Titanium Project located in Paraguay in July 2017, we are also involved in titanium mining and related activities, including exploration, development, extraction and processing of titanium minerals such as ilmenite.

 

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Our operating and strategic framework is based on expanding our uranium and titanium extraction activities, which includes advancing certain projects with established mineralized materials towards extraction and establishing additional mineralized materials on our existing uranium and titanium projects or through the acquisition of additional projects.

 

Uranium Market Update

 

Over the past few years, global uranium market fundamentals have been improving as the market works to transition from being inventory driven to more production driven. The spot market bottomed in November 2016 at about $17.75 per pound U3O8 and has since rallied as much as 92% to a $34.19 per pound high in May 2020, although it has pulled back some since that high, closing at $29.72 per pound as of October 31, 2020. Part of the advance is attributable to significant reductions in production from several global producers. The overall fundamentals appear to be pushing the total supply demand balance toward a structural deficit in upcoming years as secondary market supplies are reduced and other project resources are depleted. In March 2020, the COVID-19 pandemic resulted in about 50% of the world’s uranium production being taken off-line, further exacerbating the difference between utility requirements and produced supply. Those COVID-19 production halts have accelerated the market rebalancing process and resulted in about 20 million pounds of production removed from the 2020 supply base that will not be made up. In aggregate terms, this is expected to drop 2020 global uranium production close to 122 million pounds, leaving an approximate 60-million-pound gap that must be filled from finite inventory and other secondary market sources to meet utility requirements.

 

On the demand side of the equation, the global nuclear energy industry continues steady growth, with 50 new reactors connected to the grid since the start of 2013 and another 53 reactors under construction as of October 2020.  Nuclear generation has continuously grown over the past years, expanding by more than 9% since 2012. Total worldwide nuclear electricity generation approached record levels in 2019, returning to pre-Fukushima production volumes (and uranium demand).  Further upside market pressure also appears likely as utilities finally return to a longer-term contracting cycle to replace expiring contracts, something the market has not experienced for several years.

 

In the U.S. significant political developments are improving the outlook for American uranium producers. In September 2020, for the first time in 48 years, the Democratic Party platform endorsed nuclear power, creating a solid base of bipartisan political support for the nuclear industry.  In October 2020, the U.S. Department of Commerce concluded an amendment to the Agreement Suspending the Antidumping Investigation on Uranium from the Russian Federation that reduces America’s dependence on Russian natural uranium concentrates up to 75% from prior levels. More recently, the Senate Appropriations Committee included $150 million for 2021 funding of the strategic Uranium Reserve outlined in the Nuclear Fuel Working Group report and the U.S. Government’s 2021 Budget.  On December 2, 2020, the Senate Committee on Environment and Public Works approved the bipartisan American Nuclear Infrastructure Act that includes provisions for the U.S. Uranium Reserve Program.

 

Response to COVID-19 Pandemic

 

In response to the COVID-19 pandemic, we have taken proactive steps to lower our operating expenses and to adjust our timing on capital expenditures. For the protection of our employees, we have arranged for our teams at our Vancouver, Corpus Christi and Paraguay offices to work remotely. In addition, previous plans to resume last year’s successful drilling program at our Burke Hollow Project have been postponed along with the associated capital outlays until market conditions normalize. In the meantime, we continued to operate our Palangana Mine at a reduced pace to capture residual uranium only, and continue to advance our ISR projects with engineering and geologic evaluations that support the Company’s extraction readiness strategy.

 

Results of Operations

 

For the three months ended October 31, 2020 and 2019, we recorded net losses of $4,963,537 ($0.03 per share) and $5,042,577 ($0.03 per share) and losses from operations of $3,386,630 and $3,915,007, respectively.

 

During the three months ended October 31, 2020, in response to the significant financial market uncertainty as a result of the COVID-19 pandemic, we continued our efforts of corporate-wide cost-cutting and cash saving measures including deferral of capital expenditures to reduce cash outlays.  In the meantime, we continued with our strategic plan for reduced operations at the Palangana Mine to capture residual pounds of U3O8 only.  As a result, no U3O8 extraction or processing costs were capitalized to inventories during the three months ended October 31, 2020.  At October 31, 2020, the total value of inventories was $211,662 (July 31, 2020: $211,662).

 

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Costs and Expenses

 

For the three months ended October 31, 2020 and 2019, costs and expenses totaled $3,386,630 and $3,915,007, respectively, which were comprised of mineral property expenditures of $701,761 and $1,523,451, general and administrative expenses of $2,585,689 and $2,315,170 and depreciation, amortization and accretion of $99,180 and $76,386, respectively.

 

Mineral Property Expenditures

 

Mineral property expenditures primarily consisted of costs relating to permitting, property maintenance, exploration and pre-extraction activities and other non-extraction related activities on our projects.

 

During the three months ended October 31, 2020 and 2019, mineral property expenditures totaled $701,761 and $1,523,451, respectively, of which $198,020 and $349,135 were directly related to maintaining operational readiness and permitting compliance for our Palangana Mine and Hobson Processing Facility, respectively.

 

The following table provides mineral property expenditures on our projects for the periods indicated:

 

   

Three Months Ended October 31,

 
   

2020

   

2019

 

Mineral Property Expenditures

               

Palangana Mine

  $ 198,802     $ 320,027  

Goliad Project

    45,789       59,965  

Burke Hollow Project

    129,778       648,861  

Longhorn Project

    2,288       10,157  

Salvo Project

    8,192       7,269  

Anderson Project

    19,466       16,053  

Workman Creek Project

    8,198       8,198  

Slick Rock Project

    13,136       13,134  

Reno Creek Project

    100,490       148,043  

Yuty Project

    5,994       14,196  

Oviedo Project

    47,611       105,938  

Alto Paraná Titanium Project

    16,451       56,248  

Other Mineral Property Expenditures

    105,566       115,362  
    $ 701,761     $ 1,523,451  

 

General and Administrative

 

During the three months ended October 31, 2020, general and administrative expenses totaled $2,585,689, which increased by $270,519 compared to $2,315,170 for the three months ended October 31, 2019, primarily as a result of increased stock-based compensation expenses.

 

The following summary provides a discussion of the major expense categories including analyses of the factors that caused significant variances compared to the same period last year:

 

 

for the three months ended October 31, 2020, salaries and management fees totaled $365,503, which decreased by $98,535 compared to $464,038 for the three months ended October 31, 2019, primarily as a result of corporate-wide reduction in salaries and fees;

 

 

for the three months ended October 31, 2020, office, insurance, filing and listing fees, investor relations, corporate development and travel expenses totaled $719,764, which were consistent with $799,113 for the three months ended October 31, 2019;

 

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for the three months ended October 31, 2020, professional fees totaled $121,907, which were consistent with $134,633 for the three months ended October 31, 2019. Professional fees are primarily comprised of legal services related to certain transactional activities, regulatory compliance and ongoing legal claims, in addition to audit and tax services; and

 

 

for the three months ended October 31, 2020, stock-based compensation totaled $1,378,515, which increased by $461,129 compared to $917,386 for the three months ended October 31, 2019. During the three months ended October 31, 2020, in response to the financial market uncertainty as a result of the COVID-19 pandemic, we continued our efforts of corporate-wide cost-cutting and cash saving measures implemented in Fiscal 2020, where we expanded the scope of equity-based payments to compensate certain employees and consultants to reduce cash outlays. In addition, during Fiscal 2020 we granted approximately 6.2 million stock options to our directors, officers, employees and certain consultants and awarded 1.3 million RSUs to certain of our directors and officers. The changes in stock-based compensation expenses represented the fair value of compensation shares issued and the amortization of the fair value of the stock awards using graded vesting method, resulting in a higher stock-based compensation expense being recognized at the beginning of the vesting periods than at the end of the vesting periods.

 

Depreciation, Amortization and Accretion

 

During the three months ended October 31, 2020, depreciation, amortization and accretion totaled $99,180, which increased by $22,794 compared to $76,386 for the three months ended October 31, 2019.

 

Depreciation, amortization and accretion include depreciation and amortization of long-term assets acquired in the normal course of operations and accretion of asset retirement obligations.

 

Other Income and Expenses

 

Interest and Finance Costs

 

During the three months ended October 31, 2020, interest and finance costs totaled $890,914, which were consistent with $885,125 for the three months ended October 31, 2019.

 

For the three months ended October 31, 2020 and 2019, interest and finance costs were primarily comprised of interest paid on long-term debt of $408,889 and $408,889, amortization of debt discount of $443,867 and $432,221 and amortization of annual surety bond premiums of $29,070 and $34,626, respectively.

 

Income or Loss from Equity-Accounted Investment

 

During the three months ended October 31, 2020, we recorded a loss of $703,605 as a result of loss pick up from URC’s operations. During the three months ended October 31, 2019, we recorded a loss of $669,227 as a result of loss pick up from URC’s operations, offset by a dilution gain of $328,630 due to change of our ownership interest in URC.

 

Summary of Quarterly Results

    

   

For the Quarters Ended

 
   

October 31, 2020

   

July 31, 2020

   

April 30, 2020

   

January 31, 2020

 

Net loss

  $ (4,963,537 )   $ (4,405,634 )   $ (3,273,644 )   $ (1,888,661 )

Total comprehensive loss

    (4,900,776 )     (4,009,649 )     (3,752,792 )     (1,928,309 )

Basic and diluted loss per share

    (0.03 )     (0.02 )     (0.02 )     (0.01 )

Total assets

    102,213,761       91,389,617       93,647,447       96,514,311  

 

   

For the Quarters Ended

 
   

October 31, 2019

   

July 31, 2019

   

April 30, 2019

   

January 31, 2019

 

Net loss

  $ (5,042,577 )   $ (6,334,132 )   $ (5,017,557 )   $ (2,349,674 )

Total comprehensive loss

    (5,052,471 )     (6,199,949 )     (5,177,511 )     (2,311,442 )

Basic and diluted loss per share

    (0.03 )     (0.04 )     (0.03 )     (0.01 )

Total assets

    96,696,496       101,040,242       105,055,912       106,958,178  

 

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Liquidity and Capital Resources

  

   

October 31, 2020

   

July 31, 2020

 

Cash and cash equivalents

  $ 6,700,603     $ 5,147,703  

Term deposits

    10,000,000       -  

Current assets

    18,143,540       6,589,879  

Current liabilities

    3,822,283       2,037,402  

Working capital

    14,321,257       4,552,477  

 

During the three months ended October 31, 2020, we completed our September 2020 Offering of 12,500,000 units at a price of $1.20 per unit for net proceeds of $14,121,656, which substantially increased our cash and cash equivalent and improved our working capital position. At October 31, 2020, we had cash and cash equivalents of $6,700,603, term deposits of $10,000,000 and a working capital position of $14,321,257, which increased by $9,768,780 from the working capital of $4,552,477 at July 31, 2020. As a result, our existing cash resources are expected to provide sufficient funds to carry out our planned operations for 12 months from the date of this Quarterly Report. Our continuation as a going concern beyond 12 months from the date this Quarterly Report will be dependent upon our ability to obtain adequate additional financing, as our operations are capital intensive and future capital expenditures are expected to be substantial.

 

Historically we have been reliant primarily on equity financings from the sale of our common stock and on debt financings in order to fund our operations. We have also relied, to a limited extent, on cash flows generated from our mining activities during the year ended July 31, 2015 (“Fiscal 2015), 2013 (“Fiscal 2013) and 2012 (“Fiscal 2012”). However, we have yet to achieve profitability or develop positive cash flow from operations and we do not expect to achieve profitability or develop positive cash flow from operations in the near term. Our reliance on equity and debt financings is expected to continue for the foreseeable future, and their availability whenever such additional financing is required, will be dependent on many factors beyond our control including, but not limited to, the market price of uranium, the continuing public support of nuclear power as a viable source of electrical generation, the volatility in the global financial markets affecting our stock price and the status of the worldwide economy, any one of which may cause significant challenges in our ability to access additional financing, including access to the equity and credit markets. We may also be required to seek other forms of financing, such as asset divestitures or joint venture arrangements, to continue advancing our uranium projects which would depend entirely on finding a suitable third party willing to enter into such an arrangement, typically involving an assignment of a percentage interest in the mineral project. However, there is no assurance that we will be successful in securing any form of additional financing when required and on terms favorable to us.

 

Our operations are capital intensive and future capital expenditures are expected to be substantial. We will require significant additional financing to fund our operations, including continuing with our exploration and pre-extraction activities and acquiring additional mineral projects. In the absence of such additional financing, we would not be able to fund our operations, including continuing with our exploration and pre-extraction activities, which may result in delays, curtailment or abandonment of any one or all of our mineral projects.

 

Our anticipated operations, including exploration and pre-extraction activities, will be dependent on and may change as a result of our financial position, the market price of uranium and other considerations, and such change may include accelerating the pace or broadening the scope of reducing our operations as originally announced in September 2013.

 

Our ability to secure adequate funding for these activities will be impacted by our operating performance, other uses of cash, the market price of commodities, the market price of our common stock and other factors which may be beyond our control. Specific examples of such factors include, but are not limited to:

 

 

if the market price of uranium weakens;

 

if the weakness in the market price of our common stock continues;

 

if we default on making scheduled payments of fees and complying with the restrictive covenants as required under our Credit Facility resulting in accelerated repayment of our indebtedness and/or enforcement by the Lenders against our key assets securing our indebtedness;

 

if the COVID-19 pandemic worsens or continues over an extended period and causes further financial market uncertainty; and

 

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if a nuclear incident, such as the events that occurred at Fukushima in March 2011, is to occur, continuing public support of nuclear power as a viable source of electrical generation may be adversely affected, which may result in significant and adverse effects on both the nuclear and uranium industries.

 

Our long-term success, including the recoverability of the carrying values of our assets and our ability to acquire additional mineral projects and to continue with exploration and pre-extraction activities and mining activities on our existing mineral projects, will depend ultimately on our ability to achieve and maintain profitability and positive cash flow from our operations by establishing ore bodies that contain commercially recoverable minerals and to develop these into profitable mining activities.

 

Equity Financings

 

We filed a Form S-3 shelf registration statement under the United States Securities Act of 1933, as amended (the “Securities Act”) on March 10, 2017 (the “2017 Shelf”), providing for the public offer and sale of certain securities of our Company from time to time, at our discretion, of up to an aggregate offering amount of $100 million.

 

On April 9, 2019, we entered into an At The Market Offering Agreement (the “Offering Agreement”) with H.C. Wainwright & Co., LLC (as the “Lead Manager”) and the co-managers set forth on the signature page of the Offering Agreement (each, a “Co-Manager” and, collectively, with the Lead Manager, the “Managers”); under which the Company may, from time to time, sell shares of its common stock having an aggregate offering price of up to $37.9 million through the Managers (collectively, the “ATM”). In connection with the ATM, on April 9, 2019, we filed a prospectus supplement to the 2017 Shelf providing for the public offer and sale of the Company’s shares having an aggregate offering price of up to $37.9 million through one or more at-the-market offerings pursuant to the ATM.

 

On February 21, 2020, we filed a Form S-3 shelf registration statement under the Securities Act which was declared effective by the SEC on March 3, 2020 (the “2020 Shelf”) providing for the public offer and sale of certain securities of the Company from time to time, at our discretion, up to an aggregate offering amount of $100 million. As a result of the 2020 Shelf, our 2017 Shelf was then deemed terminated and, as consequence, our then ATM terminated unless renewed under the 2020 Shelf.

 

On March 19, 2020, we entered into an Amending Agreement to the Offering Agreement with the Managers under which the Company may, from time to time, sell shares of its common stock having an aggregate offering price of up to $30 million through the Managers under its ATM through the 2020 Shelf.  At October 31, 2020, no public offer or sale of the Company’s shares has been completed under the ATM.

 

On September 23, 2020, we completed our September 2020 Offering of 12,500,000 units at a price of $1.20 per unit for gross proceeds of $15,000,000.  Each unit was comprised of one share of the Company and one-half of one share purchase warrant, and each whole warrant entitles its holder to acquire one share at an exercise price of $1.80 per share exercisable immediately upon issuance and expiring 24 months from the date of issuance.  In connection with the September 2020 Offering, we also issued compensation share purchase warrants to agents as part of share issuance costs to purchase 583,333 shares of our Company exercisable at an exercise price of $1.80 per share and expiring 24 months from the date of issuance.

 

At October 31, 2020, $30 million of the 2020 Shelf was utilized for the ATM and $27.3 million was utilized for the September 2020 Offering; and therefore, as at October 31, 2020, there was $42.7 million available under the 2020 Shelf.

 

Credit Facility

 

On December 5, 2018, we entered into the Third Amended and Restated Credit Agreement with our Lenders, whereby we and the Lenders agreed to certain further amendments to the Credit Facility, under which initial funding of $10,000,000 was received by the Company upon closing of the Credit Facility on July 30, 2013, and additional funding of $10,000,000 was received by the Company upon closing of the amended Credit Facility on March 13, 2014. The Credit Facility is non-revolving with an amended term of 8.5 years since inception maturing on January 31, 2022, subject to an interest rate of 8% per annum, compounded and payable on a monthly basis.

 

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The Third Amended and Restated Credit Agreement superseded, in their entirety, our Second Amended and Restated Credit Agreement dated and effective February 9, 2016, our Amended and Restated Credit Agreement dated and effective March 13, 2014 and our Credit Agreement dated and effective July 30, 2013 with our Lenders.

 

Subsequent to October 31, 2020, we made a voluntary principal repayment of $2,000,000 to one of our Lenders, which decreased the principal outstanding amount to $18,000,000.

 

Subsequent to October 31, 2020, and pursuant to the terms of the Third Amended and Restated Credit Agreement, we issued an aggregate of 1,249,039 shares with a fair value of $1,170,000, representing 6.5% of the $18,000,000 principal balance outstanding, as payment of anniversary fees to our Lenders.

 

Refer to Note 9: Long-Term Debt of the Notes to the Condensed Consolidated Financial Statements for the three months ended October 31, 2020 and Note 9: Long-Term Debt of the Notes to the Consolidated Financial Statements for Fiscal 2020.

 

Government Loans

 

In April 2020, our Canadian subsidiary received a loan of $30,035 (CAD$40,000) under the Canadian Emergency Business Account Program (“CEBA”), which provides financial relief for Canadian small businesses during the COVID-19 pandemic (the “CEBA Loan”).  The CEBA Loan has an initial term date on December 31, 2022 (the “Initial Term Date”) and may be extended to December 31, 2025.  The CEBA Loan is non-revolving, with an interest rate being 0% per annum prior to the Initial Term Date and 5% per annum thereafter during any extended term.

 

On April 28, 2020, we entered into a business loan agreement with Kleberg Bank, N.A., under the Paycheck Protection Program administered by the Small Business Administration, which is a part of the Coronavirus Aid, Relief, and Economic Security Act  enacted by the U.S. Congress in response to the COVID-19 pandemic.  The total PPP Loan amount we qualified for was $277,250, which was received on May 5, 2020.

 

Subsequent to October 31, 2020, we received a Notice of Paycheck Protection Program Forgiveness Payment from the Small Business Administration regarding the approval of our application for forgiveness of the PPP Loan amount of $277,250.

 

Operating Activities

 

Net cash used in operating activities during the three months ended October 31, 2020 and 2019 was $2,575,118 and $4,743,432, respectively. Significant operating expenditures included mineral property expenditures, general and administrative expenses and interest payments.

 

Financing Activities

 

During the three months ended October 31, 2020, net cash provided by financing activities totaled $14,130,965. On September 23, 2020, we completed our September 2020 Offering of 12,500,000 units at a price of $1.20 per unit and received net proceeds of $14,121,656. In addition, we received net proceeds of $9,309 from the exercise of stock options. No cash was provided by financing activities during the three months ended October 31, 2019.

 

Investing Activities

 

During the three months ended October 31, 2020, net cash used by the investing activities totaled $10,002,903, primarily for cash used for the investment in term deposits of $10,000,000 and cash used for the purchase of property, plant and equipment of $2,903. During the three months ended October 31, 2019, net cash provided by the investing activities totaled $11,804,844, primarily from cash received from the redemption of term deposits totaling $11,831,671, offset by $26,827 cash used for the purchase of property, plant and equipment.

 

Stock Options and Warrants

 

At October 31, 2020, we had stock options outstanding representing 14,171,250 shares at a weighted-average exercise price of $1.10 per share, and share purchase warrants outstanding representing 14,555,314 shares at a weighted-average exercise price of $1.92 per share.  At October 31, 2020, outstanding stock options and warrants represented a total 28,726,564 shares issuable for gross proceeds of approximately $43.5 million should these stock options and warrants be exercised in full on a cash basis. At October 31, 2020, outstanding in-the-money stock options represented a total of 200,000 shares exercisable for gross proceeds of approximately $0.2 million should these in-the-money stock options be exercised in full on a cash basis.  The exercise of stock options and warrants is at the discretion of the respective holders and, accordingly, there is no assurance that any of the stock options or warrants will be exercised in the future.

 

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Transactions with a Related Party

 

During the three months ended October 31, 2020 and 2019, we incurred $16,677 and $32,833, respectively, in general and administrative costs, paid to Blender, a company controlled by Arash Adnani, a direct family member of our President and Chief Executive Officer, for various services, including information technology, corporate branding, media, website design, maintenance and hosting, provided to the Company.

 

At October 31, 2020, the amount owing to Blender was $16,557 (July 31, 2020: $31,334).

 

Material Commitments

 

Long-Term Debt Obligations

 

At October 31, 2020 we have made all scheduled payments and complied with all covenants under our Credit Facility, and we expect to continue complying with all scheduled payments and covenants during Fiscal 2021.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Critical Accounting Policies

 

For a complete summary of all of our significant accounting policies refer to Note 2: Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements as presented under Item 8, Financial Statements and Supplementary Data, in our Annual Report on Form 10-K for Fiscal 2020.

 

Refer to “Critical Accounting Policies” under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for Fiscal 2020.

 

Subsequent Events

 

Subsequent to October 31, 2020, we made a voluntary principal repayment of $2,000,000 to one of our Lenders, which decreased the principal outstanding to $18,000,000 under the Credit Facility.

 

Subsequent to October 31, 2020, and pursuant to the terms of the Third Amended and Restated Credit Agreement, we issued an aggregate of 1,249,039 shares with a fair value of $1,170,000 to our Lenders.

 

Subsequent to October 31, 2020, we received a Notice of Paycheck Protection Program Forgiveness Payment from the Small Business Administration regarding the approval of our application for forgiveness of the PPP Loan of $277,250.

 

Subsequent to October 31, 2020, we purchased 100 acres of land within our Goliad Project located in Goliad County, Texas, for total consideration of $487,995. In connection with this land purchase, we entered into a Promissory Note with a principal amount of $380,000 with Mar G B Ranch LLC.  The Promissory Note carries an interest rate of 5% per annum with principal and interest payable in 24 monthly installments with a maturity date of November 1, 2022.  We may prepay the Promissory Note in any amount at any time before the maturity date without penalty or premium.

 

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Item 3.     Quantitative and Qualitative Disclosures About Market Risk

 

Refer to Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for Fiscal 2020.

 

Item 4.      Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our internal controls over financial reporting and disclosure controls and procedures (as such terms are defined in Rules 13a-15(e) and 15d-15(e) under the United States Securities Exchange Act of 1933, as amended (the “Exchange Act”) and, as of the end of the period covered by this Quarterly Report, our Principal Executive Officer and Principal Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective.

 

It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness, and there can be no assurance that any design will succeed in achieving its stated goals.

 

Changes in Internal Controls

 

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our fiscal quarter ended October 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II – OTHER INFORMATION

 

Item 1.     Legal Proceedings

 

As of the date of this Quarterly Report, other than as disclosed below, there are no material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which the Company or any of its subsidiaries is a party or of which any of their property is subject, and no director, officer, affiliate or record or beneficial owner of more than 5% of our common stock, or any associate or any such director, officer, affiliate or security holder is: (i) a party adverse to us or any of our subsidiaries in any legal proceeding; or (ii) has an adverse interest to us or any of our subsidiaries in any legal proceeding. Other than as disclosed below, management is not aware of any other material legal proceedings pending or that have been threatened against us or our properties.

 

On or about March 9, 2011, the Texas Commission on Environmental Quality (the “TCEQ”) granted the Company’s applications for a Class III Injection Well Permit, Production Area Authorization and Aquifer Exemption for its Goliad Project.  On or about December 4, 2012, the U.S. Environmental Protection Agency (the “EPA”) concurred with the TCEQ issuance of the Aquifer Exemption permit (the “AE”).  With the receipt of this concurrence, the final authorization required for uranium extraction, the Goliad Project achieved fully-permitted status. On or about May 24, 2011, a group of petitioners, inclusive of Goliad County, appealed the TCEQ action to the 250th District Court in Travis County, Texas.  A motion filed by the Company to intervene in this matter was granted.  The petitioners’ appeal lay dormant until on or about June 14, 2013, when the petitioners filed their initial brief in support of their position.  On or about January 18, 2013, a different group of petitioners, exclusive of Goliad County, filed a petition for review with the Court of Appeals for the Fifth Circuit in the United States (the “Fifth Circuit”) to appeal the EPA’s decision.  On or about March 5, 2013, a motion filed by the Company to intervene in this matter was granted.  The parties attempted to resolve both appeals, to facilitate discussions and avoid further legal costs.  The parties jointly agreed, through mediation initially conducted through the Fifth Circuit on or about August 8, 2013, to abate the proceedings in the State District Court.  On or about August 21, 2013, the State District Court agreed to abate the proceedings.  The EPA subsequently filed a motion to remand without vacatur with the Fifth Circuit wherein the EPA’s stated purpose was to elicit additional public input and further explain its rationale for the approval.  In requesting the remand without vacatur, which would allow the AE to remain in place during the review period, the EPA denied the existence of legal error and stated that it was unaware of any additional information that would merit reversal of the AE.  The Company and the TCEQ filed a request to the Fifth Circuit for the motion to remand without vacatur, and if granted, to be limited to a 60-day review period.  On December 9, 2013, by way of a procedural order from a three-judge panel of the Fifth Circuit, the Court granted the remand without vacatur and initially limited the review period to 60 days.  In March of 2014, at the EPA’s request, the Fifth Circuit extended the EPA’s time period for review and additionally, during that same period, the Company conducted a joint groundwater survey of the site, the result of which reaffirmed the Company’s previously filed groundwater direction studies.  On or about June 17, 2014, the EPA reaffirmed its earlier decision to uphold the granting of the Company’s existing AE, with the exception of a northwestern portion containing less than 10% of the uranium resource which was withdrawn, but not denied, from the AE area until additional information is provided in the normal course of mine development.  On or about September 9, 2014, the petitioners filed a status report with the State District Court which included a request to remove the stay agreed to in August 2013 and to set a briefing schedule (the “Status Report”).  In that Status Report the petitioners also stated that they had decided not to pursue their appeal at the Fifth Circuit.  The Company continues to believe that the pending appeal is without merit and is continuing as planned towards uranium extraction at its fully-permitted Goliad Project.

 

The Company has had communications and filings with the Ministry of Public Works and Communications (the “MOPC”), the mining regulator in Paraguay, whereby the MOPC is taking the position that certain concessions forming part of the Company’s Yuty Project and Alto Parana Project are not eligible for extension as to exploration or continuation to exploitation in their current stages.  While we remain fully committed to its development path forward in Paraguay, we have filed certain applications and appeals in Paraguay to reverse the MOPC’s position in order to protect the Company’s continuing rights in those concessions. 

 

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Item 1A.     Risk Factors

 

In addition to the information contained in our Annual Report on Form 10-K for Fiscal 2020, and this Quarterly Report on Form 10-Q, we have identified the following material risks and uncertainties which reflect our outlook and conditions known to us as of the date of this Quarterly Report. These material risks and uncertainties should be carefully reviewed by our stockholders and any potential investors in evaluating the Company, our business and the market value of our common stock. Furthermore, any one of these material risks and uncertainties has the potential to cause actual results, performance, achievements or events to be materially different from any future results, performance, achievements or events implied, suggested or expressed by any forward-looking statements made by us or by persons acting on our behalf. Refer to “Cautionary Note Regarding Forward-looking Statements” as disclosed in our Annual Report on Form 10-K for Fiscal 2020.

 

There is no assurance that we will be successful in preventing the material adverse effects that any one or more of the following material risks and uncertainties may cause on our business, prospects, financial condition and operating results, which may result in a significant decrease in the market price of our common stock. Furthermore, there is no assurance that these material risks and uncertainties represent a complete list of the material risks and uncertainties facing us. There may be additional risks and uncertainties of a material nature that, as of the date of this Quarterly Report, we are unaware of or that we consider immaterial that may become material in the future, any one or more of which may result in a material adverse effect on us. You could lose all or a significant portion of your investment due to any one of these material risks and uncertainties.

 

Risks Related to Our Company and Business

 

Evaluating our future performance may be difficult since we have a limited financial and operating history, with significant negative operating cash flow and an accumulated deficit to date. Our long-term success will depend ultimately on our ability to achieve and maintain profitability and to develop positive cash flow from our mining activities.

 

As more fully described under Item 1, Business, in our Annual Report on Form 10-K for Fiscal 2020, Uranium Energy Corp. was incorporated under the laws of the State of Nevada on May 16, 2003, and since 2004 we have been engaged in uranium mining and related activities, including exploration, pre-extraction, extraction and processing, on projects located in the United States, Canada and Paraguay.  In November 2010 we commenced uranium extraction for the first time at our Palangana Mine utilizing ISR methods and processed those materials at our Hobson Processing Facility into drums of U3O8, our only sales product and source of revenue.  We also hold uranium projects in various stages of exploration and pre-extraction in the States of Arizona, Colorado, New Mexico, Texas and Wyoming, in Canada and the Republic of Paraguay.  Since we completed the acquisition of our Alto Paraná Project located in the Republic of Paraguay in July 2017, we are also involved in mining and related activities, including exploration, pre-extraction, extraction and processing, of titanium minerals.

 

As more fully described under “Liquidity and Capital Resources” of Item 2, Management’s Discussion and Analysis of Financial Condition and Result of Operations, we have a history of significant negative cash flow and net losses, with an accumulated deficit balance of $281.7 million at October 31, 2020. Historically, we have been reliant primarily on equity financings from the sale of our common stock and on debt financing in order to fund our operations. Although we generated revenues from sales of U3O8 during Fiscal 2015, Fiscal 2013 and Fiscal 2012 of $3.1 million, $9.0 million and $13.8 million, respectively, we have yet to achieve profitability or develop positive cash flow from our operations, and we do not expect to achieve profitability or develop positive cash flow from operations in the near term. As a result of our limited financial and operating history, including our significant negative cash flow and net losses to date, it may be difficult to evaluate our future performance.

 

At October 31, 2020, we had a working capital of $14.3 million including cash and cash equivalents of $6.7 million and term deposits of $10.0 million. Our existing cash resources are expected to provide sufficient funds to carry out our planned operations for 12 months from the date of this Quarterly Report. Our continuation as a going concern beyond those 12 months will be dependent upon our ability to obtain adequate additional financing as our operations are capital intensive and future capital expenditures are expected to be substantial. Our continued operations, including the recoverability of the carrying values of our assets, are dependent ultimately on our ability to achieve and maintain profitability and positive cash flow from our operations.

 

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Our reliance on equity and debt financings is expected to continue for the foreseeable future, and their availability whenever such additional financing is required will be dependent on many factors beyond our control including, but not limited to, the market price of uranium, the continuing public support of nuclear power as a viable source of electrical generation, the volatility in the global financial markets affecting our stock price and the status of the worldwide economy, any one of which may cause significant challenges in our ability to access additional financing, including access to the equity and credit markets. We may also be required to seek other forms of financing, such as asset divestitures or joint venture arrangements, to continue advancing our uranium projects which would depend entirely on finding a suitable third party willing to enter into such an arrangement, typically involving an assignment of a percentage interest in the mineral project.

 

Our long-term success, including the recoverability of the carrying values of our assets and our ability to acquire additional uranium projects and continue with exploration and pre-extraction activities and mining activities on our existing uranium projects, will depend ultimately on our ability to achieve and maintain profitability and positive cash flow from our operations by establishing ore bodies that contain commercially recoverable uranium and to develop these into profitable mining activities.  The economic viability of our mining activities, including the expected duration and profitability of our Palangana Mine and of any future satellite ISR mines, such as our Burke Hollow and Goliad Projects, located within the South Texas Uranium Belt, and our Reno Creek Project located in the Powder River Basin, Wyoming, and our projects in Canada and in the Republic of Paraguay, have many risks and uncertainties.  These include, but are not limited to: (i) a significant, prolonged decrease in the market price of uranium and titanium minerals; (ii) difficulty in marketing and/or selling uranium concentrates; (iii) significantly higher than expected capital costs to construct the mine and/or processing plant; (iv) significantly higher than expected extraction costs; (v) significantly lower than expected mineral extraction; (vi) significant delays, reductions or stoppages of uranium extraction activities; and (vii) the introduction of significantly more stringent regulatory laws and regulations.  Our mining activities may change as a result of any one or more of these risks and uncertainties and there is no assurance that any ore body that we extract mineralized materials from will result in achieving and maintaining profitability and developing positive cash flow.

 

Our operations are capital intensive and we will require significant additional financing to acquire additional mineral projects and continue with our exploration and pre-extraction activities on our existing projects.

 

Our operations are capital intensive and future capital expenditures are expected to be substantial. We will require significant additional financing to fund our operations, including acquiring additional mineral projects and continuing with our exploration and pre-extraction activities which include assaying, drilling, geological and geochemical analysis and mine construction costs. In the absence of such additional financing we would not be able to fund our operations or continue with our exploration and pre-extraction activities, which may result in delays, curtailment or abandonment of any one or all of our projects.

 

If we are unable to service our indebtedness, we may be faced with accelerated repayments or lose the assets securing our indebtedness. Furthermore, restrictive covenants governing our indebtedness may restrict our ability to pursue our business strategies.

 

During Fiscal 2019, we entered into the Third Amended and Restated Credit Agreement with our Lenders under which we had previously drawn down the maximum $20 million in principal. The Credit Facility requires monthly interest payments calculated at 8% per annum and other periodic fees. Our ability to continue making these scheduled payments will be