SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
Amendment No. 1
ý Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2005 or
o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number 0-17171
URANIUM RESOURCES, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
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DELAWARE |
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75-2212772 |
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(State of Incorporation) |
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(I.R.S. Employer Identification No.) |
650 S. Edmonds Lane, Suite 108, Lewisville, Texas 75067
(Address of Principal Executive Offices)
(972) 219-3330
(Issuer’s Telephone Number, Including Area Code)
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 ý No o
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes o No ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Title of Each Class of Common Stock |
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Number of Shares Outstanding |
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Common Stock, $0.001 par value |
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163,546,705 as of November 11, 2005 |
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-QSB/A amends the Registrant’s Third Quarter 2005 10-QSB, filed with the Securities and Exchange Commission on November 14, 2005, and is being filed (a) to amend the footnotes to the table on page 13 of the 10-QSB, (b) to change the word “in” to “by” in the carryover paragraph at the top of page 14, (c) to change the date from October to November in the second full paragraph on page 14, (d) to delete the third full paragraph on page 14 and (e) to amend the Exhibit List.
URANIUM RESOURCES, INC.
2005 THIRD QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION |
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Item 1. |
Financial Statements |
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Consolidated Balance Sheets-
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Notes to Consolidated Financial Statements
– (Unaudited)
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2
URANIUM RESOURCES, INC.
ASSETS
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September 30, |
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December 31, |
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2005 |
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2004 |
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(Unaudited) |
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(Restated) |
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Current assets: |
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Cash and cash equivalents |
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$ |
10,139,642 |
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$ |
268,866 |
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Receivables, net |
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27,720 |
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369,494 |
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Uranium and materials/supplies inventory |
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380,897 |
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45,151 |
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Prepaid and other current assets |
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141,314 |
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108,799 |
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Total current assets |
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10,689,573 |
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792,310 |
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Property, plant and equipment, at cost: |
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Uranium properties |
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49,188,026 |
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45,456,483 |
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Other property, plant and equipment |
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289,724 |
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276,271 |
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Less-accumulated depreciation, depletion and impairment |
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(42,596,002 |
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(41,424,883 |
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Net property, plant and equipment |
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6,881,748 |
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4,307,871 |
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Other assets |
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710,035 |
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259,532 |
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Long-term investment: |
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Certificate of deposit, restricted |
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1,278,813 |
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1,232,067 |
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$ |
19,560,169 |
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$ |
6,591,780 |
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The accompanying notes to financial statements are an integral part of these consolidated statements.
3
LIABILITIES AND SHAREHOLDERS’ DEFICIT
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September 30,
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December 31,
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(Unaudited) |
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(Restated) |
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Current liabilities: |
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Accounts payable |
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$ |
1,484,392 |
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$ |
505,591 |
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Notes payable, stockholder |
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600,000 |
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— |
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Current portion of restoration reserve |
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1,200,621 |
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1,200,327 |
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Accrued interest and other accrued liabilities |
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371,100 |
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195,604 |
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Unrealized loss on derivatives, current portion |
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— |
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4,406,134 |
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Current portion of long-term debt |
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175,833 |
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135,000 |
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Total current liabilities |
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3,831,946 |
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6,442,656 |
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Other long-term liabilities and deferred credits |
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3,502,533 |
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3,551,844 |
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Unrealized loss on derivatives, net of current portion |
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27,940,414 |
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11,439,976 |
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Long-term debt, less current portion |
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450,000 |
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450,000 |
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Commitments and contingencies (Notes 1 and 2) |
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Shareholders’ deficit: |
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Common stock, $.001 par value, shares authorized: 200,000,000; shares issued and outstanding (net of treasury shares): 2005—162,551,846; 2004—134,507,263 |
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162,704 |
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134,660 |
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Paid-in capital |
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74,088,524 |
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60,530,994 |
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Accumulated deficit |
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(90,406,534 |
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(75,948,932 |
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Less: Treasury stock (152,500 shares), at cost |
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(9,418 |
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(9,418 |
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Total shareholders’ deficit |
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(16,164,724 |
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(15,292,696 |
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$ |
19,560,169 |
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$ |
6,591,780 |
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The accompanying notes to financial statements are an integral part of these consolidated statements.
4
URANIUM RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended
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Nine Months Ended
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2005 |
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2004 |
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2005 |
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2004 |
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(Restated) |
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(Restated) |
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Revenues: |
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Uranium sales— |
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$ |
1,263,381 |
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$ |
— |
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$ |
4,030,293 |
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$ |
— |
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Total revenue |
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1,263,381 |
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0 |
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4,030,293 |
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0 |
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Costs and expenses: |
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Cost of uranium sales— |
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Royalties and commissions |
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85,478 |
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— |
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268,977 |
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— |
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Operating expenses |
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1,226,868 |
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239,847 |
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2,454,685 |
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569,703 |
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Credit for restoration and reclamation costs |
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— |
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64,424 |
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— |
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(6,646 |
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Accretion/amortization of restoration reserve |
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97,133 |
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158,832 |
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268,365 |
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289,687 |
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Depreciation and depletion |
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543,622 |
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8,067 |
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1,107,458 |
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21,238 |
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Writedown of uranium properties/uranium assets |
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— |
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46,188 |
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— |
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46,188 |
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Unrealized loss on derivatives |
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647,935 |
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3,425,895 |
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12,094,304 |
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12,024,693 |
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Total cost of uranium sales |
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2,601,036 |
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3,943,253 |
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16,193,789 |
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12,944,863 |
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Loss from operations before corporate expenses |
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(1,337,655 |
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(3,943,253 |
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(12,163,496 |
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(12,944,863 |
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Corporate expenses— |
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General and administrative |
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708,543 |
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553,941 |
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2,326,748 |
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1,270,832 |
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Depreciation |
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4,447 |
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1,860 |
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12,797 |
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3,560 |
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Total corporate expenses |
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712,990 |
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555,801 |
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2,339,545 |
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1,274,392 |
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Loss from operations |
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(2,050,645 |
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(4,499,054 |
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(14,503,041 |
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(14,219,255 |
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Other income (expense): |
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Interest expense |
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(17,795 |
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(2,042 |
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(37,478 |
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(6,081 |
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Interest and other income, net |
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50,469 |
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6,980 |
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82,917 |
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66,150 |
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Net loss |
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$ |
(2,017,971 |
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$ |
(4,494,116 |
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$ |
(14,457,602 |
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$ |
(14,159,186 |
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Net loss per common share: |
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Basic |
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$ |
(0.01 |
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$ |
(0.04 |
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$ |
(0.10 |
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$ |
(0.13 |
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Diluted |
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$ |
(0.01 |
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$ |
(0.04 |
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$ |
(0.10 |
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$ |
(0.13 |
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Weighted average common shares and common equivalent shares per share date |
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Basic |
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151,618,292 |
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128,281,198 |
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141,021,945 |
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109,427,883 |
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Diluted |
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151,618,292 |
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128,281,198 |
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141,021,945 |
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109,427,883 |
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The accompanying notes to financial statements are an integral part of these consolidated statements.
5
URANIUM RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Nine Months Ended
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2005 |
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2004 |
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(Restated) |
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Cash flows from operations: |
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Net loss |
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$ |
(14,457,602 |
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$ |
(14,159,186 |
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Reconciliation of net earnings (loss) to cash provided by (used in) operations— |
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Fair value loss of derivative financial instrument |
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12,094,304 |
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12,024,693 |
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Credit for restoration and reclamation costs |
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— |
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(6,646 |
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Accretion/amortization of restoration reserve |
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268,365 |
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289,687 |
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Depreciation and depletion |
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1,120,255 |
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24,798 |
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Writedown of uranium properties/uranium assets |
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— |
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46,188 |
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Decrease in restoration and reclamation accrual |
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(715,235 |
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(328,996 |
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Stock compensation expense |
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443,960 |
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— |
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Deferred compensation |
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— |
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132,519 |
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Other non-cash items, net |
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288,254 |
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156,465 |
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Effect of changes in operating working capital items— |
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Decrease (increase) in receivables |
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341,774 |
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(2,469 |
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Increase in inventories |
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(255,378 |
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(2,992 |
) |
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Increase in prepaid and other current assets |
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(255,742 |
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(205,813 |
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Increase in payables and accrued liabilities |
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1,154,297 |
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291,593 |
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Net cash provided by (used in) operations |
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27,252 |
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(1,740,159 |
) |
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Investing activities: |
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Increase in certificate of deposit, restricted |
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(46,746 |
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(829,722 |
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Additions to property, plant and equipment— |
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Kingsville Dome |
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(381,113 |
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(660,712 |
) |
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Rosita |
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(24,028 |
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(35,898 |
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Vasquez |
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(2,709,512 |
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(2,100,526 |
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Churchrock |
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(241,807 |
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(109,948 |
) |
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Crownpoint |
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(342,066 |
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(54,877 |
) |
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Other property |
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(100,168 |
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(52,248 |
) |
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Net cash used in investing activities |
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(3,845,440 |
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(3,843,931 |
) |
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Financing activities: |
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Proceeds from borrowings |
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600,000 |
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— |
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Issuance of common stock, net |
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13,088,964 |
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6,507,759 |
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Net cash provided by financing activities |
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13,688,964 |
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6,507,759 |
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Net increase in cash and cash equivalents |
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9,870,776 |
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923,669 |
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Cash and cash equivalents, beginning of period |
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268,866 |
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309,625 |
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Cash and cash equivalents, end of period |
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$ |
10,139,642 |
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$ |
1,233,294 |
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The accompanying notes to financial statements are an integral part of these consolidated statements.
6
Uranium Resources, Inc.
Notes to Consolidated Financial Statements
September 30, 2005 (Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements. The accompanying statements should be read in conjunction with the audited financial statements included in the Company’s 2004 Annual Report on Form 10-KSB/A. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2005 are not necessarily indicative of the results that may be expected for the full calendar year ending December 31, 2005.
2. DESCRIPTION OF BUSINESS
The financial statements of the Company have been prepared assuming that the Company is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
From mid 1999 until the fourth quarter of 2004, the Company had no revenues and was able to continue to maintain minimal operations, primarily conducting reclamation activities in South Texas, as a result of equity infusions of approximately $6.5million from 2000 through February 2004 and utilization, with the consent of Texas regulators, of cash collateral pledged to secure reclamation obligations.
With the improvement in uranium spot prices from $7.10 in 2000 to $11.00 by mid 2003, the Company began steps to bring its Vasquez property into production.
We signed two long-term contracts, one in August 2003 and another in January 2004, each of which called for deliveries of 600,000 pounds of uranium in each of 2005 through 2008. After amendments, the long-term contracts now call for delivery of 617,650 pounds of uranium in 2005 (or one-half of actual production to each purchaser), 690,000 pounds of uranium in 2006 and 600,000 pounds of uranium in each of the years 2007 through 2008. The Company expects to realize under these two contracts an average base price of $17.90 per pound for its 2005 deliveries $14.40 for its 2006 deliveries and $13.75 per pound for its 2007 through 2008 deliveries. In addition, the Company has entered into two contracts that call for an aggregate of 645,000 pounds of deliveries in 2007 at the then current spot price on the date of delivery less an average discount of $3.80 per pound.
In May 2004, we raised equity of approximately $5.9 million and commenced the development and mining at Vasquez. Production from Vasquez in the first nine months of 2005 was less than projected and totaled approximately 240,000 pounds. Any shortfalls in 2005 deliveries will be made up in 2006.
We have experienced chemical and permeability obstacles in the Vasquez formation that were not experienced at our Kingsville Dome and Rosita properties. In August 2005 we raised $12 million of equity, and we have implemented a plan to address the Vasquez production problems and increase the production rate by constructing a third remote ion exchange plant (satellite plant) and drilling additional production wells in existing wellfields to reduce the distance between our injection and production wells. We have also designed new wellfields to reflect the closer well spacing. In November 2005, we brought online the first new wellfield using closer spaced wells and the third satellite plant. We also plan to bring on additional wellfields to supply feed to a fourth satellite plant in January 2006. These actions are anticipated to achieve production rates that meet the annual scheduled deliveries under our delivery contracts.
7
3. RESTATEMENT OF FINANCIAL STATEMENTS
Restatement of Financial Statements
The financial statements for the year ended December 31, 2004 and 2003 have been restated to give effect for fair value accounting of certain uranium sales contracts under FAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The Company determined that at December 31, 2003 and March 31, 2004, its long-term uranium sales contracts met the definition of derivative financial instruments for financial statement reporting purposes, and the financial statements have been restated as of such date, to record these contracts at fair value.
The impact of such restatements to the financial statements at December 31, 2004 is:
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As Originally
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As Restated |
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Consolidated Balance Sheet |
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Liabilities and Shareholders’ Equity (Deficit) |
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Unrealized loss on derivatives, current portion |
|
$ |
— |
|
$ |
4,406,134 |
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Total current liabilities |
|
$ |
2,036,522 |
|
$ |
6,442,656 |
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|
|
|
|
|
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Unrealized loss on derivatives, net of current portion |
|
$ |
— |
|
$ |
11,439,976 |
|
|
|
|
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Accumulated deficit |
|
$ |
(60,102,822 |
) |
$ |
(75,948,932 |
) |
|
Total shareholder’s equity (deficit) |
|
$ |
553,414 |
|
$ |
(15,292,696 |
) |
The impact of such restatement to the financial statements at September 30, 2004 is:
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Three Months
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Three Months
|
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Nine Months
|
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Nine Months
|
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||||
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Consolidated Statement of Operations |
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||||
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|
||||
|
Unrealized loss on derivatives |
|
$ |
— |
|
$ |
3,425,895 |
|
$ |
— |
|
$ |
12,024,693 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total cost of uranium sales |
|
$ |
517,358 |
|
$ |
3,943,253 |
|
$ |
920,170 |
|
$ |
12,944,863 |
|
|
Loss from operations before corporate expenses |
|
$ |
(517,358 |
) |
$ |
(3,943,253 |
) |
$ |
(920,170 |
) |
$ |
(12,944,863 |
) |
|
Loss from operations |
|
$ |
(1,073,159 |
) |
$ |
(4,499,054 |
) |
$ |
(2,194,562 |
) |
$ |
(14,219,255 |
) |
|
Net loss |
|
$ |
(1,068,221 |
) |
$ |
(4,494,116 |
) |
$ |
(2,134,493 |
) |
$ |
(14,159,186 |
) |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net loss per common share: |
|
|
|
|
|
|
|
|
|
||||
|
Basic and Fully Diluted |
|
$ |
(0.01 |
) |
$ |
(0.04 |
) |
$ |
(0.02 |
) |
$ |
(0.13 |
) |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Consolidated Statement of Cash Flows |
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net loss |
|
|
|
|
|
$ |
(2,134,493 |
) |
$ |
(14,159,186 |
) |
||
|
Unrealized loss on derivatives |
|
|
|
|
|
$ |
— |
|
$ |
12,024,693 |
|
||
8
4. CONTRACT COMMITMENTS
Sales Contracts
The Company currently has two long-term contracts, which call for aggregate deliveries of 617,650 pounds of uranium in 2005 (or one-half of actual 2005 production to each purchaser) , 690,000 pounds of uranium in 2006 and 600,000 pounds of uranium in each of the years 2007 through 2008. The Company expects to realize under these two contracts an average base price of $17.90 per pound for its 2005 deliveries and $13.13 per pound for its 2006 through 2008 deliveries. In both contracts the purchase price is escalated based upon the increase from the fourth quarter of 2003 in the Gross Domestic Product Implicit Price Deflator Index published by the US Department of Commerce. The Index has increased 4.79% since the fourth quarter of 2003 through the second quarter of 2005 which represents the most current GDPIPD data available. In addition, the Company has entered into two contracts that call for an aggregate of 645,000 pounds of deliveries by 2007 at the then current spot price on the date of delivery less an average discount of $3.80 per pound.
Derivative Financial Instruments
The Company has determined that at December 31, 2003 and March 31, 2004, its long-term uranium sales contracts met the definition of derivative financial instruments for financial statement reporting purposes, and the financial statements have been restated as of such date to record these contracts at fair value. The Company does not enter into hedge transactions with respect to its uranium sales contracts and the fair value loss represents the present value of the loss the Company would incur in the event it would be required to purchase uranium in the spot market to satisfy the deliveries under both of its long-term uranium sales contracts.
5. NOTES PAYABLE
Note Purchase Agreement
On March 28, 2005, the Company borrowed $600,000 from five stockholders of the Company, each of whom may be considered an affiliate. The Notes are unsecured, mature on March 24, 2006 and bear interest at the rate of 10% per annum, with interest due at maturity. The proceeds were used to commence the new development plan for Vasquez and for general and administrative expenses. In October 2005, $475,000 of principal and $22,430 of accrued interest were converted into 994,859 shares of Common Stock of the Company at $0.50 per share. In November 2005, the remaining $125,000 of principal and accrued interest of $5,902 were converted into 261,805 shares of Common Stock of the Company at $0.50 per share.
6. STOCK BASED COMPENSATION
The Company has five stock option plans, the Employees’ Stock Option Plan, the 1995 Stock Incentive Plan, the 2004 Stock Incentive Plan, the Directors’ Stock Option Plan and the 2004 Directors’ Stock Option Plan. The Company accounts for these plans under APB Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for these plans been determined consistent with FAS 148, the Company’s net loss and loss per share (“EPS”) for the three and nine months ended September 30, 2005 and 2004 would have been adjusted to the following pro forma amounts:
|
|
|
Three Months Ended
|
|
Nine months ended
|
|
|||||||||
|
|
|
2005 |
|
2004 |
|
2005 |
|
2004 |
|
|||||
|
Net Loss: As reported |
|
$ |
(2,017,971 |
) |
$ |
(4,494,116 |
) |
$ |
(14,457,602 |
) |
$ |
(14,159,186 |
) |
|
|
Pro forma stock based compensation costs under the fair value method, net of tax |
|
(158,723 |
) |
(24,276 |
) |
(168,996 |
) |
(26,905 |
) |
|||||
|
Pro forma |
|
$ |
(2,176,694 |
) |
(4,518,392 |
) |
$ |
(14,626,598 |
) |
$ |
(14,186,091 |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
As reported |
|
$ |
(0.01 |
) |
$ |
(0.04 |
) |
$ |
(0.10 |
) |
$ |
(0.13 |
) |
|
Basic EPS: |
Pro forma |
|
$ |
(0.01 |
) |
$ |
(0.04 |
) |
$ |
(0.10 |
) |
$ |
(0.13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
As reported |
|
$ |
(0.01 |
) |
$ |
(0.04 |
) |
$ |
(0.10 |
) |
$ |
(0.13 |
) |
|
Diluted EPS: |
Pro forma |
|
$ |
(0.01 |
) |
$ |
(0.04 |
) |
$ |
(0.10 |
) |
$ |
(0.13 |
) |
9
The fair value of each option is estimated on the date of grant or the date approved by the stockholders, if later, using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 2005 and options approved in 2005: expected volatility of 150%, 150%, 149% and 150% and risk-free interest rates of 3.93%, 4.02%, 4.03% and 4.40%. Expected lives of 9.1 years, 9.1, 9.3 and 9.2 years were used for options granted to employees and directors, respectively. The weighted average fair value of options granted and approved in 2005 was $0.76.
On June 2, 2004, 6,750,000 options were granted to officers at an exercise price of $0.29 per share. Stock compensation expense of $444,000 was recorded in June 2005 (the date an amendment to the plan was approved by the stockholders) and is reflected in general and administrative expenses. For grants in 2004, the following weighted average assumptions were used: expected volatility of 179% and risk-free interest rates of 4.24%. An expected life of 5.7 years was used for options granted to directors. The weighted average fair value of options granted in 2004 was $0.29.
7. ASSET RETIREMENT OBLIGATIONS
As a result of adoption of FAS 143, the Company recorded a net reduction in its restoration liability of approximately $1.4 million at January 1, 2003. The Company had previously recorded the undiscounted future estimated restoration costs into expense. Under FAS 143, future restoration liabilities are usually added to the carrying value of the related asset but the Company has recorded them to expense because the associated properties had been fully impaired. Under FAS 143 the present value of the restoration costs are recorded instead of the undiscounted amount.
The following table shows the change in the balance of the restoration and reclamation liability during the three months and nine months ended September 30, 2005 and 2004, respectively:
|
|
|
Nine months ended
|
|
||||
|
|
|
2005 |
|
2004 |
|
||
|
Reserve for future restoration and reclamation costs beginning of period |
|
$ |
3,410,293 |
|
$ |
3,480,656 |
|
|
Additions |
|
568,595 |
|
— |
|
||
|
Restoration provision adjustment |
|
— |
|
(405,936 |
) |
||
|
Costs incurred |
|
(715,235 |
) |
— |
|
||
|
Accretion expense |
|
150,273 |
|
289,687 |
|
||
|
Reserve for future restoration and reclamation costs at end of period |
|
$ |
3,413,926 |
|
$ |
3,364,407 |
|
8. SHAREHOLDERS’ EQUITY
Equity Infusions
In 2004 and 2005 the Company sold shares of common stock in the following private placements:
|
Date |
|
Price per Share |
|
Amount |
|
Shares Issued |
|
||
|
|
|
|
|
|
|
|
|
||
|
August 2005 |
|
$ |
0.50 |
|
$ |
12,000,000 |
|
24,000,000 |
|
|
May 2005 |
|
$ |
0.45 |
|
$ |
1,499,999 |
|
3,333,333 |
|
|
May 2004 |
|
$ |
0.15 |
|
$ |
5,897,550 |
|
39,317,005 |
|
|
February 2004 |
|
$ |
0.10 |
|
$ |
325,000 |
|
3,250,000 |
|
|
January 2004 |
|
$ |
0.10 |
|
$ |
350,000 |
|
3,500,000 |
|
In connection with the August 2005 placement the Company paid a fee of $336,000 in cash and 448,000 shares of Common Stock to a placement agent. Two private investment partnerships managed by George R. Ireland, a director of the Company, purchased 1,600,000 shares in the offering. In connection with the May 2005 placement, two private investment partnerships managed by George R. Ireland, a director of the Company, purchased all of the shares in the offering.
The Company has filed a registration statement under the Securities Act of 1933, as amended, to register the resale of the shares issued in these private placements.
10
Increase in Authorized Shares
In January 2005, the Company’s stockholders approved an amendment to the Company’s Restated Certificate of Incorporation to increase the authorized shares of Common Stock, par value $0.001 per share (the “Common Stock”), from 100,000,000 to 200,000,000.
11
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Item 2 contains “forward-looking statements.” These statements include, without limitation, statements relating to liquidity, financing of operations, continued volatility of uranium prices, estimates of future capital expenditures and other such matters. The words “believes,” “anticipates,” “expects,” “projects,” “targets” or “estimates” and similar expressions identify forward-looking statements. The Company does not undertake to update, revise or correct any of the forward-looking information. Readers are cautioned that such forward-looking statements should be read in conjunction with the Company’s disclosures under the heading: “Cautionary Statements” in the Company’s 2004 Annual Report on Form 10-KSB/A.
The financial statements for the year ended December 31, 2004 and the nine months and three months ended September 30, 2004, have been restated to give effect for fair value accounting of our uranium sales contracts under FAS No. 133, Accounting for Derivative Instruments and Hedging Activities . The Company determined that at December 31, 2003 and March 31, 2004, its long-term uranium sales contracts met the definition of derivative financial instruments for financial statement reporting purposes, and the financial statements have been restated as of such date, to record these contracts at fair value.
Financial Condition and Results of Operations
Comparison of Nine Months and Three Months Ended September 30, 2005 and 2004
Production and Sales . During the first nine months of 2004 we had no uranium production or sales. Our first uranium sales occurred in the fourth quarter of 2004. In the first nine months of 2005, we sold 219,000 pounds of Vasquez production, resulting in revenues of $4.0 million (including $253,000 from the renegotiation of the contract price of sales that were made in the fourth quarter of 2004). 74,340 pounds were sold in the third quarter of 2005, resulting in revenues of $1.3 million.
Net Losses. During the first nine months of 2005, we had a net loss of ($14,458,000) compared to a net loss of ($14,159,000) for the corresponding period of 2004. These losses included non-cash unrealized losses on derivatives of ($12.1) million and ($12.0) million, respectively. For the three months ended September 30, 2005 we had a net loss of ($2,018,000) compared to a net loss of ($4,494,000) for the corresponding period of 2004. These losses included non-cash unrealized losses on derivatives of ($648,000) and ($3.4) million respectively.
Operating Expenses . During the first nine months of 2005, operating expenses and related royalties and commissions for Vasquez production sold was $2,672,000. For the third quarter of 2005 those expenses were $1,299,000. During these periods we incurred $52,000 and $16,000, respectively, of stand-by costs at the Rosita project that was charged to operations. During the corresponding nine and three months of 2004, we had no sales and, therefore, no costs of sales, but we did incur $570,000 and $240,000, respectively, of stand-by costs that were charged to operations.
Depreciation and Depletion. During the first nine months of 2005, we incurred depreciation and depletion expense attributable to our Vasquez production of $1,092,000. For the third quarter of 2005 those expenses were $539,000. During these same nine and three month periods, we incurred $11,000 and $3,000, respectively, of stand-by depreciation cost for the Rosita project. In the corresponding nine and three months of 2004, we incurred depreciation related to stand-by activities of $21,000 and $8,000, respectively. The increase reflects the commencement of production at our Vasquez property in the fourth quarter of 2004.
Accretion and Amortization of Future Restoration Costs . During the first nine months of 2005, the accretion and amortization of future restoration costs was $268,000. For the third quarter of 2005 those expenses were $97,000. During the corresponding nine and three months of 2004, these expenses were $290,000 and $159,000, respectively.
General and Administrative Charges . During the first nine months of 2005, general and administrative charges and corporate depreciation were $2,340,000. For the third quarter of 2005 those expenses were $713,000. In the corresponding nine and three months of 2004, these expenses were
12
$1,274,000 and $556,000, respectively. The increase in these charges in 2005 resulted primarily from stock compensation expense of $444,000 incurred in the second quarter of 2005 (see Note 6. “Stock Based Compensation”) and increased personnel costs related to Vasquez, increases in insurance premiums and legal fees as a result of our capital raising activities.
Cash Sources and Uses . In the first nine months of 2005 we had net cash flow from operations of $27,000 and raised $13.7 million from financing activities. $11.6 million of the $13.7 million was raised in the third quarter. Our net cash flow from operations during the third quarter of 2005 was a negative $52,000. In the first nine months of 2005 we spent $2.7 million at Vasquez for property, plant and equipment (of which $1.3 million was spent in the third quarter), $381,000 at Kingsville Dome (of which $175,000 was spent in the third quarter) and $708,000 for other property additions in Texas and New Mexico (of which $441,000 was spent in the third quarter).
In the first nine months of 2004 we had negative cash flow from operations of $1.7 million and we raised $6.5 million from financing activities (of which $38,000 was raised in the third quarter of 2004). In the first nine months of 2004 we spent $2.1 million at Vasquez for property, plant and equipment (of which $1.1 million was spent in the third quarter), $661,000 at Kingsville Dome (of which $303,000 was spent in the third quarter) and $253,000 for other property additions in Texas and New Mexico (of which $118,000 was spent in the third quarter). We also increased by $830,000 our restricted cash used to collateralize letters of credit pledged to secure our reclamation obligations (of which $767,000 was spent in the third quarter), and we used $1,740,000 for working capital (of which $1.1 million was spent in the third quarter).
Selected Production, Price and Cost of Uranium Sold Data
For the three and nine months ended September 30, 2005 and 2004.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
||||||
|
|
|
2005 |
|
2004 |
|
2005 |
|
2004 |
|
||
|
Pounds of uranium produced |
|
65,797 |
|
— |
|
239,738 |
|
— |
|
||
|
Pounds of uranium sold |
|
74,340 |
|
— |
|
219,000 |
|
— |
|
||
|
Average sales price per pound (1) |
|
$ |
16.99 |
|
— |
|
$ |
18.40 |
|
— |
|
|
Cost of produced pounds sold (2) (3) |
|
$ |
23.57 |
|
— |
|
$ |
15.96 |
|
— |
|
|
Royalties/commissions per pound |
|
$ |
1.18 |
|
— |
|
$ |
1.23 |
|
— |
|
(1) Average sales price per pound for the nine months includes approximately $253,000 in revenue recorded in 2005 related to a renegotiation of the contract price completed in the first quarter of 2005 for pounds sold in 2004.
(2) Includes operating expenses (less standby costs of $21,000 for the three months and $67,000 for the nine months) and depreciation and depletion of capital costs. Excludes royalties and commissions, accretion/amortization of restoration reserve and unrealized loss on derivatives. It also excludes our estimated future cost of restoration, reclamation and decommissioning ($1.20/lb) and $2.7 million of Vasquez costs capitalized and written off prior to 2004.
(3) As production from the new wellfields at Vasquez that utilize the closer spaced well patterns ramps up and as additional wellfields at Vasquez come online we expect such production to be breakeven to marginally profitable.
Liquidity - Cash Needs and Sources through the Second Quarter of 2006.
From mid 1999 until the fourth quarter of 2004, the Company had no revenues and was able to continue to maintain minimal operations, primarily conducting reclamation activities in South Texas, as a result of equity infusions and utilization, with the consent of Texas regulators, of cash collateral pledged to secure reclamation obligations. With the improvement in uranium spot prices from $7.10 in 2000 to $11.00 by mid 2003, the Company began steps to bring its Vasquez property into production.
We signed two long-term contracts, one in August 2003 and another in January 2004, each of which called for deliveries of 600,000 pounds of uranium in each of 2005 through 2008. After amendments, the long-term contracts now call for delivery of 617,650 pounds of uranium in 2005 (or one-half of actual production to each purchaser), 690,000 pounds of uranium in 2006 and 600,000 pounds of uranium in each of the years 2007 through 2008. The Company expects to realize under these two contracts an average base price of $17.90 per pound for its 2005 deliveries $14.40 for its 2006 deliveries and $13.75 per pound for its 2007 through 2008 deliveries. In addition, the Company has entered into two
13
contracts that call for an aggregate of 645,000 pounds of deliveries by 2007 at the then current spot price on the date of delivery less an average discount of $3.80 per pound.
In May 2004, we raised equity of approximately $5.9 million and commenced the development and mining at Vasquez. Production from Vasquez in the first nine months of 2005 was less than projected and totaled approximately 240,000 pounds. Any shortfalls in 2005 deliveries will be made up in 2006. We have experienced chemical and permeability obstacles in the Vasquez formation that were not experienced at our Kingsville Dome and Rosita properties.
In August 2005 we raised $12 million of equity, and we have implemented a plan to address the Vasquez production problems and increase the production rate by constructing a third remote ion exchange plant (satellite plant) and drilling additional production wells in existing wellfields to reduce the distance between our injection and production wells. We have also designed new wellfields to reflect the closer well spacing. In November 2005, we brought online the first new wellfield using closer spaced wells and the third satellite plant. Production from this wellfield commenced on November 4, 2005, some four weeks later than previously projected. While the new wellfield is not yet at full capacity, it is producing in accordance with our expectations at this phase in its production cycle. We also plan to bring on additional wellfields to supply feed to a fourth satellite plant in January 2006. These actions are anticipated to achieve production rates that meet the annual scheduled obligations under our delivery contracts.
At September 30, 2005, we had cash on hand of $10.1 million.
Our projected cash requirements for the fourth quarter of 2005 and the first six months of 2006 are approximately $21.7 million. We project that this cash will come from cash on hand at September 30, 2005 of $10.1 million, sales of our Vasquez production of $9.2 million and sales under our existing spot contracts of $3.1 million from production at our Kingsville Dome facility. We expect to spend the $21.7 million as follows:
• $9 million will be used for ongoing Vasquez production, development and related activities (which includes ongoing financial surety requirements of $1.2 million required in the fourth quarter of the year);
• $6.9 million for pre-production and development and production activities to start-up production at Kingsville Dome;
• $1.2 million for other equipment and South Texas working capital;
• $630,000 for ongoing groundwater restoration activities at our Kingsville Dome and Rosita projects;
• $930,000 for land acquisition and holding costs for our Texas and New Mexico properties; and
• $3 million for general and administrative and other working capital costs.
We are actively working towards the completion of the Production Area Authorization #3 at Kingsville Dome, which we expect to be completed by year end 2005, with sales from this production commencing in the second quarter of 2006. We expect the profitability from our Kingsville Dome production will be greater than that seen from our Vasquez production as a result of higher anticipated sales prices. We have entered into two contracts that call for an aggregate of 645,000 pounds of deliveries by 2007 at the then current spot price on the date of delivery less an average discount of $3.80 per pound which are expected to be filled with such production.
Derivative Financial Instruments
We have determined that at December 31, 2003 and March 31, 2004, our long-term uranium sales contracts met the definition of derivative financial instruments for financial statement reporting purposes, and as of such date,
14
are recorded on the balance sheet at fair value. Changes in the fair value of such derivatives recorded on the balance sheet are recorded in the consolidated statements of operation. Such changes in the Company’s derivatives represent non-cash charges to earnings for the present value of the loss the Company would incur in the event it would be required to purchase uranium in the spot market to satisfy the deliveries under both of its long-term uranium sales contracts.
The initial liability recorded on the balance sheet at December 31, 2003 represents the estimated cost difference between the contracted sales price and the price to purchase the quantities the Company is obligated to deliver under each of its uranium sales contracts, present valued to the balance sheet date. The current portion of the unrealized loss on derivatives represents such price difference for those deliveries scheduled within the next year. Future factors such as changes in uranium market prices, amendments to the delivery terms or prices in the sales contracts, the physical delivery of produced uranium to the contracts and others will impact the amount of the liability. As deliveries are made from the Company’s mine production, the amount of the liability will be reduced and a corresponding increase to earnings would result. Changes in uranium prices may have a significant impact on the calculation of the liability in future periods. An increase in uranium market prices will increase the liability related to the estimated cost of purchasing sufficient material to deliver under these contracts in the future and would result in a charge to earnings in the period of such rising prices. A decrease in future uranium market prices would reduce the liability and result in a positive earnings impact in the period of falling prices.
Management applies significant judgment in estimating the fair value of instruments that are highly sensitive to assumptions regarding uranium prices and market volatilities. Variations in these factors could materially affect amounts credited or charged to operations to reflect the changes in fair market value of derivatives.
Off-Balance Sheet Arrangements
We have a combination of bank Letters of Credit (the “L/C’s) and performance bonds issued for our benefit to satisfy financial surety required by the State of Texas regulatory agencies relating to certain of our future restoration and reclamation obligations.
The L/C’s were issued by Bank of America and the performance bonds have been issued by United States Fidelity and Guaranty Company (“USF&G”). The amount of L/C’s issued was $897,000 and $0, at December 31, 2004 and 2003, respectively, and the L/C’s are collateralized in their entirety by certificates of deposit. The amount of performance bonds issued was $2,835,000 on September 30, 2005 and December 31, 2004, and USF&G has required that the Company deposit funds collateralizing a portion of the bonds. The amount of the bond exceeded the amount of collateral by $2,500,000 and $2,434,000 at September 30, 2005 and December 31, 2004, respectively. The Company is responsible for any liability in excess of the collateral.
Our significant accounting policies are described in Note 1 to the consolidated financial statements included in the Company’s 2004 Annual Report on Form 10-KSB/A. We believe our most critical accounting policies involve those requiring the use of significant estimates and assumptions in determining values or projecting future costs.
Specifically regarding our uranium properties, significant estimates were utilized in determining the carrying value of these assets. These assets have been recorded at their estimated net realizable value for impairment purposes on a liquidation basis, which is less than our cost. The actual value realized from these assets may vary significantly from these estimates based upon market conditions, financing availability and other factors.
Regarding our reserve for future restoration and reclamation costs, significant estimates were utilized in determining the future costs to complete the groundwater restoration and surface reclamation at our mine sites. The actual cost to conduct these activities may vary significantly from these estimates.
Such estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.
Impact of Recent Accounting Pronouncements
In March and June 2005, the EITF reached and then modified its consensus on Issue 04-6, “Accounting for Stripping Costs Incurred during Production in the Mining Industry.” Release EITF 04-6 relates to the accounting treatment for certain types of development costs incurred by mining companies after production from a project has commenced. The Company capitalizes development costs related to its mining projects in both the pre-production phase and during the production phase of its projects. The release is effective for the first reporting period in fiscal years beginning after December 15, 2005, with early adoption permitted. We are currently evaluating the application of the concepts of this release and its potential impact to the Company.
15
ITEM 3. CONTROLS AND PROCEDURES
The management of the company has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report (“Evaluation date”) and has concluded that the disclosure controls and procedures are adequate and effective based upon their evaluation as of the Evaluation date with the exception of a weakness in awareness of proper reporting for FAS No. 133 Accounting for Derivative Instruments and Hedging Activities which resulted in restatement of the Company’s financial statements for the years ended December 31, 2004 and 2003. The Company intends to work more diligently to assure that errors of this type do not recur in the future.
There were no significant changes in our internal controls or in other factors that could significantly affect internal controls during our most recent quarter, including any corrective actions with regard to significant deficiencies and material weaknesses.
16
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
None
17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
See the Index to Exhibits on Page E-1 for a listing of the exhibits that are filed as part of this Quarterly Report.
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K dated July 1, 2005 that announced the Company’s Adjourned Annual Meeting of Stockholders was convened on June 30, 2005 and at such meeting the stockholders approved (a) an amendment to the Company’s 1995 Stock Incentive Plan increasing the number available for issuance thereunder to 12 million and (b) the 2004 Stock Incentive Plan pursuant to which options may be granted to purchase up to 7 million shares of common stock.
The Company filed a current report on Form 8-K dated July 15, 2005 announcing it amended certain terms for its 2005 deliveries under one of it long-term contracts. Such amendment provides for our 2005 deliveries to each customer of one-half of our 2005 production up to an aggregate of 618,000 pounds with any shortfall to be delivered in 2006.
The Company filed a current report on Form 8-K dated July 28, 2005 announcing a press release regarding the results for the quarter ended March 31, 2005 and for the years ended December 31, 2004 and 2003 and the filing of an Amended 10-QSB and 10-KSB which included restated financial statements for these periods.
The Company filed a current report on Form 8-K dated August 1, 2005 announcing a press release that it had engaged a placement agent in connection with a best efforts placement of $10 million in value of shares of the Company’s common stock to selected accredited investors.
The Company filed a current report on Form 8-K dated August 12, 2005 announcing a press release that it had closed a private placement of 24,000,000 shares of it common stock at $0.50 per share to accredited investors resulting in gross proceeds of $12 million before expenses of the offering.
18
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
URANIUM RESOURCES, INC. |
||
|
|
|
||
|
|
|
||
|
Dated: November 18, 2005 |
By: |
/S/ Paul K. Willmott |
|
|
|
|
Paul K. Willmott |
|
|
|
|
Director, President and |
|
|
|
|
Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
Dated: November 18, 2005 |
By: |
/S/ Thomas H. Ehrlich |
|
|
|
|
Thomas H. Ehrlich |
|
|
|
|
Vice President - Finance and |
|
|
|
|
Chief Financial Officer |
|
|
|
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(Principal Financial and Accounting Officer) |
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19
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Exhibit Number |
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Description |
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3.1* |
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Restated Certificate of Incorporation of the Company, dated February 15, 2004 (filed with the Company’s Registration Statement on Form SB-2 dated July 26, 2004, SEC File Number 333-117653). |
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3.2* |
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Restated Bylaws of the Company (filed with the Company’s Form 8-K on April 14, 2005). |
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4.1* |
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Common Stock Purchase Agreement dated February 28, 2001 between the Company and Purchasers of the Common Stock of the Company (filed with the Company’s Annual Report on Form 10-KA dated July 26, 2001, SEC File Number 000-17171). |
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10.1* |
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Amended and Restated Directors Stock Option Plan (filed with the Company’s Form S-8 Registration No. 333— 00349 on January 22, 1996). |
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10.2* |
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Amended and Restated Employee’s Stock Option Plan (filed with the Company’s Form S-8 Registration No. 333-00403 on January 24, 1996). |
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10.3* |
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Amended and restated 1995 Stock Incentive Plan (filed with the Company’s Form SB-2 Registration No. 333-117653 on July 26, 2005). |
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10.4* |
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Non-Qualified Stock Option Agreement dated June 19, 2001 between the Company and Leland O. Erdahl (filed with the Company’s 10-QSB dated August 13, 2001, SEC File Number 000-17171). |
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10.5* |
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Non-Qualified Stock Option Agreement dated June 19, 2001 between the Company and George R. Ireland (filed with the Company’s 10-QSB dated August 13, 2001, SEC File Number 000-17171). |
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10.7* |
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Summary of Supplemental Health Care Plan (filed with Amendment No. 1 to the Company’s Form S-1 Registration Statement (File No. 33-32754) as filed with the Securities and Exchange Commission on February 20, 1990). |
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10.9* |
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License to Explore and Option to Purchase dated March 25, 1997 between Santa Fe Pacific Gold Corporation and Uranco, Inc. (filed with the Company’s Annual Report on Form 10-K dated June 30, 1997, SEC File Number 000-17171). |
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10.12* |
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Compensation Agreement dated June 2, 1997 between the Company and Paul K. Willmott (filed with the Company’s Annual Report on Form 10-K dated June 30, 1998, SEC File Number 000-17171). |
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10.13* |
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Compensation Agreement dated June 2, 1997 between the Company and Richard A. Van Horn (filed with the Company’s Annual Report on Form 10-K dated June 30, 1998, SEC File Number 000-17171). |
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10.14* |
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Compensation Agreement dated June 2, 1997 between the Company and Thomas H. Ehrlich (filed with the Company’s Annual Report on Form 10-K dated June 30, 1998, SEC File Number 000-17171). |
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10.15* |
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Compensation Agreement dated June 2, 1997 between the Company and Mark S. Pelizza (filed with the Company’s Annual Report on Form 10-K dated June 30, 1998, SEC File Number 000-17171). |
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10.16* |
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Uranium Resources, Inc. 1999 Deferred Compensation Plan (filed with the Company’s Annual Report on Form 10-K dated June 30, 1999, SEC File Number 000-17171). |
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10.17* |
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2000-2001 Deferred Compensation Plan (filed with the Company’s Annual Report on Form 10-K dated December 31, 2004, SEC File Number 000-17171). |
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10.22* |
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Uranium Resources, Inc. Deferred Compensation Plan for 2002 (filed with the Company’s Quarterly |
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20
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Report on
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10.23* |
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Uranium Resources, Inc. Deferred Compensation
Plan for 2003 (filed with the Company’s Quarterly
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10.26* |
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2004 Directors Stock Option Plan dated June 2, 2004 (filed with the Company’s Registration Statement on Form SB-2 dated July 26, 2004, SEC File Number 333-117653). |
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10.27* |
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Contract with UG U.S.A., Inc. for the Purchase of Natural Uranium Concentrates (U3O8) dated August 12, 2003 (filed with the Company’s Pre-Effective Amendment No.2 to Registration Statement on Form SB-2 dated September 20, 2005, SEC File Number 333-125106).(1) |
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10.27.1* |
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Amendment No. 1 with UG U.S.A., Inc. dated August 30, 2004 to Exhibit 10.27 (filed with the Company’s Pre-Effective Amendment No.2 to Registration Statement on Form SB-2 dated September 20, 2005, SEC File Number 333-125106).(1) |
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10.27.2* |
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Amendment No. 2 with UG U.S.A., Inc. dated April 29, 2005 to Exhibit 10.27 (filed with the Company’s Pre-Effective Amendment No.2 to Registration Statement on Form SB-2 dated September 20, 2005, SEC File Number 333-125106).(1) |
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10.28* |
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Amended and Restated Uranium Supply Contract with Itochu Corporation dated June 7, 2005 (filed with the Company’s Pre-Effective Amendment No.2 to Registration Statement on Form SB-2 dated September 20, 2005, SEC File Number 333-125106).(1) |
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10.31* |
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Note Purchase Agreement dated March 24, 2005 and promissory notes issued thereunder (filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, SEC File Number 000-17171). |
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10.32* |
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Uranium Supply Contract with UG U.S.A., Inc. dated April 29, 2005 (filed with the Company’s Pre-Effective Amendment No.2 to Registration Statement on Form SB-2 dated September 20, 2005, SEC File Number 333-125106).(1) |
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10.33* |
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Uranium Supply Contract with Itochu Corporation dated June 15, 2005 (filed with the Company’s Pre-Effective Amendment No.2 to Registration Statement on Form SB-2 dated September 20, 2005, SEC File Number 333-125106).(1) |
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10.34* |
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Stock Purchase Agreement by and between Uranium Resources, Inc. and accredited investors (filed with the Company’s Current Report on Form 8-K dated August 12, 2005, SEC File No. 000-17171). |
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10.35 |
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Uranium Resources, Inc. 2004 Stock Incentive Plan. |
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14* |
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Uranium Resources, Inc. Code of Ethics for Senior Executives. Filed with the Company’s Annual Report on Form 10-KSB dated March 30, 2004, SEC File Number 000-17171). |
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31.1 |
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2 |
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1 |
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Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2 |
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Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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* Not filed herewith. Incorporated by reference pursuant to Rule 12b-32 under the Securities Exchange Act of 1934.
(1) Certain provisions have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.
21
Exhibit 10.35
URANIUM RESOURCES, INC.
2004 STOCK INCENTIVE PLAN
General . This Stock Incentive Plan (the “Plan”) provides eligible employees of Uranium Resources, Inc., (the “Company”) with the opportunity to acquire or expand their equity interest in the Company by making available for purchase Common Shares, par value $.001 per share, of the Company (“Common Shares”), through the granting of nontransferable options to purchase Common Shares (“Stock Options”). It is intended that key employees may be granted, simultaneously or from time to time, Stock Options that qualify as incentive stock options (“Incentive Stock Options”) under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) or Stock Options that do not so qualify (“Non-qualified Stock Options”). No provision of the Plan is intended or shall be construed to grant employees alternative rights in any Incentive Stock Option granted under the Plan so as to prevent such Option from qualifying under Section 422 of the Code.
1 . Purpose of the Plan . The purpose of the Plan is to provide continuing incentives to key employees of the Company and of any subsidiary corporation of the Company, by encouraging such key employees to acquire new or additional share ownership in the Company, thereby increasing their proprietary interest in the Company’s business and enhancing their personal interest in the Company’s success.
For purposes of the Plan, a “subsidiary corporation” consists of any corporation at least fifty percent (50%) of the voting power of all classes of the stock of which is directly or indirectly owned by the Company.
2 . Effective Date of the Plan . The Plan shall become effective upon its adoption by the Board of Directors, subject to approval by holders of a majority of the outstanding shares of voting capital stock of the Company. If the Plan is not so approved within twelve (12) months after the date the Plan is adopted by the Board of Directors, the Plan and any grants made hereunder shall be null and void. However, if the Plan is so approved, no further stockholder approval shall be required with respect to the making of grants pursuant to the Plan, except as provided in Section 10 hereof.
3 . Administration of the Plan . The Plan shall be administered by the Compensation Committee of the Board of Directors of the Company, or by any other committee selected by such Board of Directors by majority vote, which Compensation Committee or other committee shall be composed solely of no fewer than two (2) members of such Board of Directors who are “outside directors” as defined in Section 162(m) of the Code and the Regulations thereunder (the “Committee”). No person shall be appointed to the Committee who, during the one-year period immediately preceding such person’s appointment to the Committee, has received any grants of Stock Options under the Plan or any similar stock option or stock incentive plan, other than a formula-based plan, maintained by the Company or any subsidiary corporation. A member of the Committee shall not be eligible to participate in this Plan while serving on the Committee.
A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present (or acts unanimously approved in writing by the members of the Committee) shall constitute binding acts of the Committee.
Subject to the terms and conditions of the Plan, the Committee shall be authorized and empowered:
(a) To select the key employees to whom grants may be made;
(b) To determine the number of Common Shares to be covered by any Grant;
(c) To prescribe the terms and conditions of any grants made under the Plan, and the form(s) and agreement(s) used in connection with such grants, which shall include agreements governing the granting of Stock Options;
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(d) To determine the time or times when Stock Options will be granted and when they will terminate in whole or in part;
(e) To determine the time or times when Stock Options that are granted may be exercised;
(f) To determine, at the time a Stock Option is granted under the Plan, whether such Option is an Incentive Stock Option entitled to the benefits of Section 422 of the Code; and
(g) To establish any other Stock Option agreement provisions not inconsistent with the terms and conditions of the Plan or, where the Stock Option is an Incentive Stock Option, with the terms and conditions of Section 422 of the Code.
4 . Employees Eligible for Grants . Grants may be made from time to time to those key employees of the Company or a subsidiary corporation, who are designated by the Committee in its sole and exclusive discretion. Key employees may include, but shall not necessarily be limited to, members of the Board of Directors (excluding members of the Committee), and officers, of the Company and any subsidiary corporation; however, Stock Options intended to qualify as Incentive Stock Options shall only be granted to key employees while actually employed by the Company or a subsidiary corporation. The Committee may grant more than one Stock Option to the same key employee. No Stock Option shall be granted to any key employee during any period of time when such key employee is on a leave of absence.
5 . Shares Subject to the Plan . The shares to be issued pursuant to any Stock Option granted under the Plan shall be Common Shares. Either Common Shares held as treasury stock, or authorized and unissued Common Shares, or both, may be so issued, in such amount or amounts within the maximum limits of the Plan as the Board of Directors shall from time to time determine.
Subject to the provisions of the next succeeding paragraph of this Section 6 and the provisions of Section 7(h), the aggregate number of Common Shares that can be actually issued under the Plan shall be seven million (7,000,000) Common Shares. The number of shares with respect to which options may be granted to any key employee in any calendar year may not exceed 2,000,000 shares.
If, at any time subsequent to the date of adoption of the Plan by the Board of Directors, the number of Common Shares are increased or decreased, or changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation (whether as a result of a stock split, stock dividend, combination or exchange of shares, exchange for other securities, reclassification, reorganization, redesignation, merger, consolidation, recapitalization or otherwise): (i) there shall automatically be substituted for each Common Share subject to an unexercised Stock Option (in whole or in part) granted under the Plan, the number and kind of shares of stock or other securities into which each outstanding Common Share shall be changed or for which each such Common Share shall be exchanged; and (ii) the option price per Common Share or unit of securities shall be increased or decreased proportionately so that the aggregate purchase price for the securities subject to a Stock Option shall remain the same as immediately prior to such event. In addition to the foregoing, the Committee shall be entitled in the event of any such increase, decrease or exchange of Common Shares to make other adjustments to the securities subject to a Stock Option, the provisions of the Plan, and to any related Stock Option agreements (including adjustments which may provide for the elimination of fractional shares), where necessary to preserve the terms and conditions of any grants hereunder.
6 . Stock Option Provisions .
(a) General . The Committee may grant to key employees (also referred to as “optionees”) nontransferable Stock Options that either qualify as Incentive Stock Options under Section 422 of the Code or do not so qualify. However, any Stock Option which is an Incentive Stock Option shall only be granted within 10 years from the earlier of (i) the date this Plan is adopted by the Board of Directors of the Company; or (ii) the date this Plan is approved by the stockholders of the Company.
(b) Stock Option Price . The option price per Common Share which may be purchased under an Incentive Stock Option under the Plan shall be determined by the Committee at the time of Grant, but shall not be less than one hundred percent (100%) of the fair market value of a Common Share, determined as of the date
B-2
such Option is granted; however, if a key employee to whom an Incentive Stock Option is granted, at the time of the grant of such Option, owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any subsidiary corporation within the meaning of Section 422(b)(6) of the Code (a “Substantial Shareholder”), the option price per Common Share of such Option, as determined by the Committee, shall not be less than one hundred ten percent (110%) of the fair market value of a Common Share on the date such Option is granted. The option price per Common Share under each Stock Option granted pursuant to the Plan which is not an Incentive Stock Option shall be determined by the Committee at the time of Grant. Except as specifically provided above, the fair market value of a Common Share shall be determined in accordance with procedures to be established by the Committee. The day on which the Committee approves the granting of a Stock Option shall be considered the date on which such Option is granted.
(c) Period of Stock Option . The Committee shall determine when each Stock Option is to expire. However, no Stock Option shall be exercisable by its terms for a period of more than ten (10) years from the date upon which such Option is granted. Further, no Incentive Stock Option granted to an employee who is a Substantial Shareholder at the time of the grant of such Option shall be exercisable by its terms after the expiration of (5) years from the date of grant of such Option.
(d) Limitation on Exercise and Transfer of Stock Options . Only the key employee to whom a Stock Option is granted may exercise such Option, except where a guardian or other legal representative has been duly appointed for such employee, and except as otherwise provided in the case of such employee’s death. No Stock Option granted hereunder shall be transferable by an optionee other than by will or the laws of descent and distribution. No Stock Option granted hereunder may be pledged or hypothecated, nor shall any such Option be subject to execution, attachment or similar process.
(e) Employment, Holding Period Requirements For Certain Options . The Committee may condition any Stock Option granted hereunder upon the continued employment of the optionee by the Company or by a subsidiary corporation, and may make any such Stock Option immediately exercisable. However, the Committee will require that, from and after the date of grant of any Incentive Stock Option granted hereunder until the day three (3) months prior to the date such Option is exercised, such optionee must be an employee of the Company or of a subsidiary corporation, but always subject to the right of the Company or any such subsidiary corporation to terminate such optionee’s employment during such period. Each Stock Option shall be subject to such additional restrictions as to the time and method of exercise as shall be prescribed by the Committee. Upon completion of such requirements, if any, a Stock Option or the appropriate portion thereof may be exercised in whole or in part from time to time during the option period; however, such exercise right(s) shall be limited to whole shares.
(f) Payment for Stock Option Price . A Stock Option shall be exercised by an optionee giving written notice to the Company of his intention to exercise the same, accompanied by full payment of the purchase price in cash or by check. The Committee may, in its sole discretion, approve other methods of exercise for a Stock Option or payment of the option price, provided that no such method shall cause any option granted under the Plan as an Incentive Stock Option to not qualify under Section 422 of the Code, or cause any Common Share issued in connection with the exercise of an option not to be a fully paid and non-assessable Common Share.
(g) Certain Reissuances of Stock Options . To the extent Common Shares are surrendered by an optionee in connection with the exercise of a Stock Option in accordance with Section 7(f), the Committee may in its sole discretion grant new Stock Options to such optionee (to the extent Common Shares remain available for grants), subject to the following terms and conditions:
(i) The number of Common Shares shall be equal to the number of Common Shares being surrendered by the optionee;
(ii) The option price per Common Share shall be equal to the fair market value of Common Shares, determined on the date of exercise of the Stock Options whose exercise caused such Grant; and
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(iii) The terms and conditions of such Stock Options shall in all other respects replicate such terms and conditions of the Stock Options whose exercise caused such Grant, except to the extent such terms and conditions are determined to not be wholly consistent with the general provisions of this Section 7, or in conflict with the remaining provisions of this Plan.
(h) Limitation on Exercisable Incentive Stock Options . The aggregate fair market value of the Common Shares first becoming subject to exercise as Incentive Stock Options by a key employee during any given calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). Such aggregate fair market value shall be determined as of the date such Option is granted, taking into account, in the order in which granted, any other incentive stock options granted by the Company, or by a parent or subsidiary thereof.
7 . Termination of Employment . If a key employee ceases to be an employee of the Company and every subsidiary corporation, for a reason other than death, retirement, or permanent and total disability, his Stock Options shall, unless extended by the Committee on or before his date of termination of employment, terminate on the effective date of such termination of employment. Neither the key employee nor any other person shall have any right after such date to exercise all or any part of his Stock Options.
If termination of employment is due to death or permanent and total disability, then outstanding Stock Options may be exercised within the one (1) year period ending on the anniversary of such death or permanent and total disability. In the case of death, such outstanding Stock Options shall be exercised by such key employee’s estate, or the person designated by such key employee by will, or as otherwise designated by the laws of descent and distribution. Notwithstanding the foregoing, in no event shall any Stock Option be exercisable after the expiration of the option period, and in the case of exercises made after a key employee’s death, not to any greater extent than the key employee would have been entitled to exercise such Option at the time of his death.
Subject to the discretion of the Committee, in the event a key employee terminates employment with the Company and all subsidiary corporations because of normal or early retirement, any then-outstanding Stock Options held by such key employee shall lapse at the earlier of the end of the term of such Stock Option or three (3) months after such retirement or permanent and total disability.
In the event an employee of the Company or one of its subsidiary corporations is granted a leave of absence by the Company or such subsidiary corporation to enter military service or because of sickness, his employment with the Company or such subsidiary corporation shall not be considered terminated, and he shall be deemed an employee of the Company or such subsidiary corporation during such leave of absence or any extension thereof granted by the Company or such subsidiary corporation.
8 . Change of Control . Upon the occurrence of a Change of Control (as defined below), notwithstanding any other provisions hereof or of any agreement to the contrary, all Stock Options granted under this Plan shall become immediately exercisable in full.
For purposes of this Plan, a Change of Control shall be deemed to have occurred if: (i) a tender offer shall be made and consummated for the ownership of 25% or more of the outstanding voting securities of the Company; (ii) the Company shall be merged or consolidated with another corporation and, as a result of such merger or consolidation, less than 75% of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the former stockholders of the Company as the same shall have existed immediately prior to such merger or consolidation; or (iii) the Company shall sell substantially all of its assets to another corporation which is not a wholly owned subsidiary; or (iv) a person, within the meaning of Section 3(a)(9) or of Section 13(d)(3) (as in effect on the date hereof) of the Exchange Act, shall acquire, other than by reason of inheritance, fifty-one percent (51%) or more of the outstanding voting securities of the Company (whether directly, indirectly, beneficially or of record). In making any such determination, transfers made by a person to an affiliate of such person (as determined by the Board of Directors of the Company), whether by gift, devise or otherwise, shall not be taken into account. For purposes of this Plan, ownership of voting securities shall take into account and shall include ownership as determined by applying the provisions of Rule 13d-3(d)(1)(i) as in effect on the date hereof pursuant to the Exchange Act.
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Notwithstanding the provisions of subparagraph (iv) of this Section 8, “person” is used in that subparagraph shall not include any holder who was the beneficial owner of more than ten percent (10%) of the voting securities of the Company on the date the Plan was adopted by the Board of Directors.
9 . Amendments to Plan . The Committee is authorized to interpret this Plan and from time to time adopt any rules and regulations for carrying out this Plan that it may deem advisable. Subject to the approval of the Board of Directors of the Company, the Committee may at any time amend, modify, suspend or terminate this Plan. In no event, however, without the approval of stockholders, shall any action of the Committee or the Board of Directors result in:
(a) Materially amending, modifying or altering the eligibility requirements provided in Section 4 hereof; or
(b) Materially increasing, except as provided in Section 5 and 6 hereof, the maximum number of shares subject to Stock Options;
except to conform this Plan and any agreements made hereunder to changes in the Code or governing law.
10 . Investment Representation, Approvals and Listing . The Committee may, if it deems appropriate, condition its grant of any Stock Option hereunder upon receipt of the following investment representation from the optionee:
“I agree that any Common Shares of Uranium Resources, Inc., which I may acquire by virtue of this Stock Option shall be acquired for investment purposes only and not with a view to distribution or resale, and may not be transferred, sold, assigned, pledged, hypothecated or otherwise disposed of by me unless (i) a registration statement or post-effective amendment to a registration statement under the Securities Act of 1933, as amended, with respect to said Common Shares has become effective so as to permit the sale or other disposition of said shares by me; or (ii) there is presented to Uranium Resources, Inc., an opinion of counsel satisfactory to Uranium Resources, Inc., to the effect that the sale or other proposed disposition of said Common Shares by me may lawfully be made otherwise than pursuant to an effective registration statement or post-effective amendment to a registration statement relating to the said shares under the Securities Act of 1933, as amended.”
The Company shall not be required to issue any certificate or certificates for Common Shares upon the exercise of any Stock Option granted under this Plan prior to (i) the obtaining of any approval from any governmental agency which the Committee shall, in its sole discretion, determine to be necessary or advisable; (ii) the admission of such shares to listing on any national securities exchange on which the Common Shares may be listed; (iii) the completion of any registration or other qualifications of the Common Shares under any state or federal law or ruling or regulations of any governmental body which the Committee shall, in its sole discretion, determine to be necessary or advisable or the determination by the Committee, in its sole discretion, that any registration or other qualification of the Common Shares is not necessary or advisable; and (iv) the obtaining of an investment representation from the optionee in the form stated above or in such other form as the Committee, in its sole discretion, shall determine to be adequate.
11 . General Provisions . The form and substance of Stock Option agreements made hereunder, whether granted at the same or different times, need not be identical. Nothing in this Plan or in any agreement shall confer upon any employee any right to continue in the employ of the Company or any of its subsidiary corporations, to be entitled to any remuneration or benefits not set forth in this Plan or such Grant, or to interfere with or limit the right of the Company or any subsidiary corporation to terminate his employment at any time, with or without cause. Nothing contained in this Plan or in any Stock Option agreement shall be construed as entitling any optionee to any rights of a stockholder as a result of the grant of a Stock Option, until such time as Common Shares are actually issued to such optionee pursuant to the exercise of such Option. This Plan may be assumed by the successors and assigns of the Company. The liability of the Company under this Plan and any sale made hereunder is limited to the obligations set forth herein with respect to such sale and no term or provision of this Plan shall be construed to impose any liability on the Company in favor of any employee with respect to any loss, cost or expense which the employee may incur in connection with or arising out of any transaction in connection with this Plan. The cash proceeds received by the Company from the issuance of Common Shares pursuant to this Plan will be used for general corporate purposes. The expense of administering this Plan shall be borne by the Company. The captions and section numbers
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appearing in this Plan are inserted only as a matter of convenience. They do not define, limit, construe or describe the scope or intent of the provisions of this Plan.
12 . Termination of This Plan . This Plan shall terminate on November 11, 2014 and thereafter no Stock Options shall be granted hereunder. All Stock Options outstanding at the time of termination of this Plan shall continue in full force and effect according to their terms and the terms and conditions of this Plan.
As adopted on November 12, 2004 by the Board of Directors and approved by the stockholders on , 2005.
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Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Paul K. Willmott, certify that:
1. I have reviewed this report on Form 10-QSB of Uranium Resources, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4. The small business issuer’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter of the annual report) that has materially affected or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and
5. The small business issuer’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of small business issuer’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.
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Date: November 18, 2005 |
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/s/ Paul K. Willmott |
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Title: President and Chief Executive Officer |
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Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Thomas H. Ehrlich, certify that:
1. I have reviewed this report on Form 10-QSB of Uranium Resources, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report.
4. The small business issuer’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter of the annual report) that has materially affected or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and
5. The small business issuer’s other certifying officers and I have disclosed, based on our most recent evaluation, to the small business issuer’s auditors and the audit committee of small business issuer’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.
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Date: November 18, 2005 |
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/s/ Thomas H. Ehrlich |
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Title: Vice President - Finance and Chief Financial Officer |
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Exhibit 32.1
URANIUM RESOURCES, INC.
650 S. Edmonds Lane, Suite 108, Lewisville, TX 75067
972.219.3330 Phone 972.219.3311 Fax
November 18, 2005
Securities and Exchange Commission
450 5 th Street, N.W.
Washington, D.C. 20549
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Paul K. Willmott, President and Chief Executive Officer of Uranium Resources, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Quarterly Report on Form 10-QSB of the Company for the period ended September 30, 2005 which this certification accompanies fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/S/ Paul K. Willmott |
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Paul K. Willmott |
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President and Chief Executive Officer |
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November 18, 2005 |
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Exhibit 32.2
URANIUM RESOURCES, INC.
650 S. Edmonds Lane, Suite 108, Lewisville, TX 75067
972.219.3330 Phone 972.219.3311 Fax
November 18, 2005
Securities and Exchange Commission
450 5 th Street, N.W.
Washington, D.C. 20549
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas H. Ehrlich, Vice President - Finance and Chief Financial Officer of Uranium Resources, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2005 which this certification accompanies fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/S/ Thomas H. Ehrlich |
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Thomas H. Ehrlich |
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Vice President and Chief Financial Officer |
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November 18, 2005 |
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