UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,
2015
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________________ to
_________________________
Commission file number: 001-32974
URANERZ ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA |
98-0365605 |
(State or other jurisdiction of incorporation or |
(I.R.S. Employer Identification No.) |
organization) |
|
|
|
1701 East E Street, PO Box 50850 |
|
Casper, Wyoming |
82605-0850 |
(Address of principal executive offices) |
(Zip Code) |
(307) 265-8900
(Registrants telephone
number, including area code)
_____________________________________________________________
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate by check mark 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 preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes
[X] No [ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
Large accelerated filer [ ] |
Accelerated
filer [X]
|
Non-accelerated filer [ ] |
Smaller reporting company [ ]
|
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act)
Yes [
] No[X]
Number of shares of issuers common stock outstanding at
May 8, 2015: 95,912,806
INDEX
Item 1. Financial Statements (unaudited)
Uranerz Energy Corporation
March 31, 2015
Uranerz Energy Corporation
Consolidated Balance Sheets
(Expressed in US dollars)
|
|
March 31, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
|
|
(Unaudited) |
|
|
(Audited) |
|
ASSETS |
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
Cash |
|
4,771,849 |
|
|
6,017,594 |
|
Accounts receivable (Note 3)
|
|
3,400,000 |
|
|
6,106,673 |
|
Prepaid expenses and deposits (Note 7(a)) |
|
1,144,997 |
|
|
1,435,669 |
|
Inventory (Note 4) |
|
2,321,083 |
|
|
1,957,423 |
|
Other
current assets |
|
89,553 |
|
|
67,710 |
|
Total Current Assets |
|
11,727,482 |
|
|
15,585,069 |
|
Debt Issuance Costs (Note 9) |
|
205,980 |
|
|
226,208 |
|
Prepaid Expenses and Deposits (Note 7(a))
|
|
362,144 |
|
|
397,561 |
|
Mineral Property Reclamation Surety Deposits (Note 10) |
|
2,100,385 |
|
|
2,081,196 |
|
Property and Equipment (Note 5) |
|
815,471 |
|
|
768,363 |
|
Total Assets |
|
15,211,462 |
|
|
19,058,397 |
|
|
|
|
|
|
|
|
LIABILITIES AND DEFICIT |
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
Accounts payable |
|
1,378,714 |
|
|
741,163 |
|
Accrued liabilities (Note
7(b)) |
|
2,034,424 |
|
|
2,745,986 |
|
Current portion of note payable (Note 9) |
|
2,203,761 |
|
|
2,172,530 |
|
Due to related parties (Note 8(a)) |
|
14,702 |
|
|
10,782 |
|
Total Current Liabilities |
|
5,631,601 |
|
|
5,670,461 |
|
Note Payable (Note 9) |
|
16,378,624 |
|
|
17,123,720 |
|
Asset Retirement
Obligations (Note 10) |
|
2,320,570 |
|
|
2,100,090 |
|
Total Liabilities |
|
24,330,795 |
|
|
24,894,271 |
|
|
|
|
|
|
|
|
Commitments and Contingencies (Notes 6 and
15) |
|
|
|
|
|
|
Subsequent Events (Note 17) |
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
Preferred Stock, 10,000,000 shares authorized, $0.001 par
value; No shares issued and outstanding |
|
|
|
|
|
|
Common Stock, 750,000,000 shares
authorized, $0.001 par value; 95,912,806 and 95,895,306 shares issued
and outstanding, respectively |
|
95,913 |
|
|
95,895 |
|
Additional Paid-in Capital |
|
170,460,862 |
|
|
169,498,862 |
|
Accumulated Deficit |
|
(179,794,094 |
) |
|
(175,539,285 |
) |
Uranerz Stockholders Deficit |
|
(9,237,319 |
) |
|
(5,944,528 |
) |
Non-controlling Interest |
|
117,986 |
|
|
108,654 |
|
Total Deficit |
|
(9,119,333 |
) |
|
(5,835,874 |
) |
Total Liabilities and Deficit |
|
15,211,462 |
|
|
19,058,397 |
|
(The accompanying notes are an integral part of these
consolidated financial statements)
F-1
Uranerz Energy Corporation
Consolidated Statements of
Comprehensive Loss
(Expressed in US dollars)
(Unaudited)
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Revenue |
|
3,400,000 |
|
|
|
|
Cost of Sales |
|
1,910,779 |
|
|
|
|
Gross Profit |
|
1,489,221 |
|
|
|
|
Expenses |
|
|
|
|
|
|
Depreciation |
|
9,774 |
|
|
51,412 |
|
Accretion of Asset Retirement Obligation (Note
10) |
|
52,335 |
|
|
21,831 |
|
Foreign Exchange Loss (Gain) |
|
5,439 |
|
|
(40,925 |
) |
General and Administrative (Notes 8 and 12) |
|
2,739,884 |
|
|
1,355,240 |
|
Mineral Property Expenditures (Notes 6(j) and
12) |
|
2,741,614 |
|
|
3,319,813 |
|
Total Operating
Expenses |
|
5,549,046 |
|
|
4,707,371 |
|
Loss Before Other Items |
|
(4,059,825 |
) |
|
(4,707,371 |
) |
Other Income (Expense) |
|
|
|
|
|
|
Interest Income |
|
4,092 |
|
|
7,472 |
|
Interest Expense |
|
(301,612 |
) |
|
(307,728 |
) |
Other Income |
|
|
|
|
18,323 |
|
Total Other Income
(Expense) |
|
(297,520 |
) |
|
(281,933 |
) |
Net Loss and Comprehensive Loss |
|
(4,357,345 |
) |
|
(4,989,304 |
) |
Net Loss and
Comprehensive Loss Attributable to Non-controlling Interest |
|
102,536 |
|
|
80,027 |
|
Net Loss and Comprehensive Loss Attributable to Uranerz
Stockholders |
|
(4,254,809 |
) |
|
(4,909,277 |
) |
Net Loss Per
Common Share Basic and Diluted |
|
(0.04 |
) |
|
(0.06 |
) |
Weighted Average Number of Shares Outstanding |
|
95,911,000 |
|
|
85,903,000 |
|
(The accompanying notes are an integral part of these
consolidated financial statements)
F-2
Uranerz Energy Corporation
Consolidated Statements of Cash
Flows
(Expressed in US dollars)
(Unaudited)
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Operating Activities |
|
|
|
|
|
|
Net loss |
|
(4,357,345 |
) |
|
(4,989,304 |
) |
Adjustments for
non-cash items to reconcile net loss to |
|
|
|
|
|
|
cash used in operating activities: |
|
|
|
|
|
|
Depreciation |
|
9,774 |
|
|
51,412 |
|
Accretion of asset
retirement obligation |
|
52,335 |
|
|
21,831 |
|
Amortization of financing costs |
|
20,228 |
|
|
20,228 |
|
Asset retirement
cost |
|
168,145 |
|
|
|
|
Other expense (income) |
|
|
|
|
(18,323 |
) |
Stock-based
compensation |
|
946,410 |
|
|
337,671 |
|
Changes in operating
assets and liabilities: |
|
|
|
|
|
|
Accounts
receivable |
|
2,706,673 |
|
|
|
|
Prepaid expenses and deposits |
|
306,899 |
|
|
224,453 |
|
Inventory |
|
(316,312 |
) |
|
|
|
Other current assets |
|
(21,842 |
) |
|
15,342 |
|
Accounts payable
and accrued liabilities |
|
(74,010 |
) |
|
(1,109,406 |
) |
Due to related
parties |
|
3,920 |
|
|
14,525 |
|
Net Cash Used in
Operating Activities |
|
(555,125 |
) |
|
(5,431,571 |
) |
Investing Activities |
|
|
|
|
|
|
Purchase of property and equipment |
|
(104,230 |
) |
|
(132,198 |
) |
Net Cash Used in Investing Activities |
|
(104,230 |
) |
|
(132,198 |
) |
Financing Activities |
|
|
|
|
|
|
Repayment of notes
payable |
|
(713,866 |
) |
|
|
|
Contributions from non-controlling
interest |
|
111,868 |
|
|
70,947 |
|
Proceeds from issuance
of common stock |
|
19,775 |
|
|
392,731 |
|
Share issuance costs |
|
(4,167 |
) |
|
|
|
Net Cash Provided by (used in) Financing Activities |
|
(586,390 |
) |
|
463,678 |
|
Decrease In Cash |
|
(1,245,745 |
) |
|
(5,100,091 |
) |
Cash - Beginning of Period |
|
6,017,594 |
|
|
11,915,676 |
|
Cash - End of
Period |
|
4,771,849 |
|
|
6,815,585 |
|
Non-cash Investing and Financing Activities |
|
|
|
|
|
|
Stock options issued for mineral property expenditures |
|
61,117 |
|
|
63,518 |
|
Supplemental Disclosures |
|
|
|
|
|
|
Interest paid |
|
277,384 |
|
|
|
|
Income taxes paid |
|
|
|
|
|
|
(The accompanying notes are an integral part of these
consolidated financial statements)
F-3
Uranerz Energy Corporation
Consolidated Statements of
Changes in Equity (Deficit)
For the Three Months Ended March 31, 2015
(Expressed in US dollars)
|
|
|
|
|
|
|
|
Additional |
|
|
Accumulated |
|
|
Non- |
|
|
|
|
|
|
Common Stock |
|
|
Paid-in |
|
|
Deficit |
|
|
Controlling |
|
|
Total Equity |
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
|
|
|
Interest |
|
|
(Deficit) |
|
|
|
# |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2014 |
|
95,895,306 |
|
|
95,895 |
|
|
169,498,862 |
|
|
(175,539,285 |
) |
|
108,654 |
|
|
(5,835,874 |
) |
Stock-based compensation |
|
|
|
|
|
|
|
946,410 |
|
|
|
|
|
|
|
|
946,410 |
|
Shares issued upon the exercise of options |
|
17,500 |
|
|
18 |
|
|
19,757 |
|
|
|
|
|
|
|
|
19,775 |
|
Share issuance costs |
|
|
|
|
|
|
|
(4,167 |
) |
|
|
|
|
|
|
|
(4,167 |
) |
Contribution from non-controlling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
111,868 |
|
|
111,868 |
|
Net loss and
comprehensive loss for the period |
|
|
|
|
|
|
|
|
|
|
(4,254,809 |
) |
|
(102,536 |
) |
|
(4,357,345 |
) |
Balance March 31, 2015 |
|
95,912,806 |
|
|
95,913 |
|
|
170,460,862 |
|
|
(179,794,094 |
) |
|
117,986 |
|
|
(9,119,333 |
) |
(The accompanying notes are an integral part of these
consolidated financial statements)
F-4
Uranerz Energy Corporation
Notes to the Consolidated
Financial Statements
Three Months Ended March 31, 2015 and 2014
(Expressed in US dollars)
1. |
Nature of Operations |
|
|
|
|
Uranerz Energy Corporation (the Company) was
incorporated in the State of Nevada, U.S.A. on May 26, 1999. The Company
has mineral property interests in the United States and its principal
business is the acquisition, exploration and extraction of uranium and
mineral resources. In 2014, the Company commenced mining uranium at its
Nichols Ranch ISR Uranium Project in Wyoming. |
|
|
|
2. |
Summary of Significant Accounting Policies |
|
|
|
|
a) |
Basis of Presentation and Principles of
Consolidation |
|
|
|
|
|
These unaudited interim consolidated financial statements
and related notes are presented in accordance with accounting principles
generally accepted in the United States, and are expressed in US dollars.
These unaudited interim consolidated financial statements include the
accounts of the Company and the accounts of an unincorporated venture,
Arkose Mining Venture (Arkose) in which the Company holds an 81%
interest and maintains majority voting control. The Companys fiscal
year-end is December 31. |
|
|
|
|
|
The Company has established the existence of mineralized
materials at its Nichols Ranch Project but has not established, and has no
plans to establish, the existence of proven and probable reserves at this
site. The Company has not established proven or probable reserves, as
defined by the Securities and Exchange Commission (SEC) under Industry
Guide 7, through the completion of a final or bankable feasibility study
for any of its uranium projects. As a result, and despite the fact that
the Company commenced extraction of mineralized materials during 2014, the
Company remains in the Exploration Stage as defined under SEC Industry
Guide 7, and will continue to remain in the Exploration Stage until such
time proven or probable reserves have been established. Development
expenditures, which might otherwise be capitalized, will continue to be
expensed in accordance with the SEC Industry Guide 7. In the opinion of
management, the unaudited interim consolidated financial statements have
been prepared on the same basis as the annual financial statements and
reflect all adjustments, which include only normal recurring adjustments,
necessary to present fairly the financial position as of March 31, 2015,
and the results of operations and cash flows for the period then ended.
The financial data and other information disclosed in the notes to the
interim consolidated financial statements related to this period are
unaudited. The results for the three-month period ended March 31, 2015 are
not necessarily indicative of the results to be expected for any
subsequent quarter or the entire year ending December 31, 2015. The
unaudited interim consolidated financial statements have been condensed
pursuant to the SEC's rules and regulations and do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. Therefore, these unaudited
interim consolidated financial statements should be read in conjunction
with the Companys annual audited consolidated financial statements and
notes thereto for the year ended December 31, 2014, included in the
Companys Annual Report on Form 10-K filed on March 16, 2015 with the
SEC. |
F-5
Uranerz Energy Corporation
Notes to the Consolidated
Financial Statements
Three Months Ended March 31, 2015 and 2014
(Expressed in US dollars)
2. |
Summary of Significant Accounting Policies
(continued) |
|
|
|
|
b) |
Use of Estimates |
|
|
|
|
|
The preparation of these consolidated statements in
accordance with United States generally accepted accounting principles
(U.S GAAP) requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenue and
expenses during the reporting period. The Company regularly evaluates
estimates and assumptions related to estimates of recoverable uranium in
in-process inventory and finished goods, useful life and recoverability of
long-lived assets, stock-based compensation, asset retirement obligations,
deferred income tax asset valuations, fair values of financial instruments
and loss contingencies. The Company bases its estimates and assumptions on
current facts, historical experience and various other factors that it
believes to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets
and liabilities and the accrual of costs and expenses that are not readily
apparent from other sources. The actual results experienced by the Company
may differ materially and adversely from the Companys estimates. To the
extent there are material differences between the estimates and the actual
results, future results of operations will be affected. |
|
|
|
|
c) |
Cash and Cash Equivalents |
|
|
|
|
|
The Company considers all highly liquid instruments with
maturities of three months or less at the time of issuance to be cash
equivalents. |
|
|
|
|
d) |
Inventory |
|
|
|
|
|
Inventories of uranium concentrates (U3O8) are classified
as in-process (solutions) and finished goods. In- process inventory
represents U3O8 that has been extracted from the wellfield and captured in
the Nichols Ranch processing plant. The captured U3O8 is then transferred
to the toll processor where the uranium concentrate is extracted, purified
and dried into yellowcake before being drummed. The U3O8 becomes finished
goods inventory once it is packaged in drums. The finished goods inventory
is then shipped to the conversion facility. Inventory sent and accepted at
the conversion facility is available for the Company to sell to its
customers. |
|
|
|
|
|
The Company uses solution flow rates and measured
concentration of U3O8 in the processing plants ion exchange columns and
assays of pregnant resin at its toll processor to calculate the amount of
in-process inventory. The amount of finished goods is determined by
weighing and assaying the amount of U3O8 packaged into drums at the toll
processor and at the conversion facility. The amount of U3O8 in the
finished goods inventory is subject to final weighing and assay
adjustments at the conversion facility. |
|
|
|
|
|
The Company values its concentrates at the lower of
weighted average cost or net realizable value at the end of each reporting
period. Costs include direct labor, materials and other mining and
processing costs and depreciation related to extraction of
uranium. |
|
|
|
|
e) |
Property and Equipment |
|
|
|
|
|
Property and equipment consists of computers, office
equipment and field equipment. These assets are recorded at cost and are
depreciated on a straight-line basis over their estimated lives of 5 years
for computers and office equipment, and 5 to 10 years for field
equipment. |
|
|
|
|
f) |
Financial Instruments/Concentrations |
|
|
|
|
|
Financial instruments consist principally of cash,
accounts receivable, mineral property reclamation surety deposits,
accounts payable, due to related parties and notes payable. Pursuant to
ASC 820, Fair Value Measurements and Disclosures and ASC 825,
Financial Instruments the fair value of cash is determined based on
Level 1 inputs, which consist of quoted prices in active markets for
identical assets. The mineral property reclamation security deposits are
deposits mainly invested at major financial institutions and their fair
value was estimated to approximate their carrying value. The recorded
values of all other financial instruments approximate their current fair
values because of their nature and respective relatively short maturity
dates and current market rates for similar instruments. The Company's
activities are conducted primarily in United States dollars and as a
result, the Company is not subject to significant exposure to market risks
from changes in foreign currency rates. The Company is exposed to credit
risk through its cash and accounts receivable, but mitigates this risk by
keeping deposits at major financial institutions and advancing credit only
to bona fide creditworthy entities. At March 31, 2015, the account
receivable is due from one customer. The maximum amount of credit risk is
equal to the carrying amount. |
F-6
Uranerz Energy Corporation
Notes to the Consolidated
Financial Statements
Three Months Ended March 31, 2015 and 2014
(Expressed in US dollars)
2. |
Summary of Significant Accounting Policies
(continued) |
|
|
|
|
g) |
Fair Value Measurements |
|
|
|
|
|
ASC 820, Fair Value Measurements, specifies a
valuation hierarchy based on whether the inputs to those valuation
techniques are observable or unobservable. Observable inputs reflect
market data obtained from independent sources, while unobservable inputs
reflect the Companys own assumptions. These two types of inputs have
created the following fair value hierarchy: |
|
|
Level 1 Quoted prices for identical instruments in
active markets; |
|
|
|
|
|
Level 2 Quoted prices for similar instruments in active
markets, quoted prices for identical or similar instruments in markets
that are not active, and model-derived valuations in which all significant
inputs and significant value drivers are observable in active markets; and
|
|
|
|
|
|
Level 3 Valuations derived from valuation techniques in
which one or more significant inputs or significant value drivers are
unobservable. |
As at March 31, 2015 and December 31,
2014, cash is the Company's only financial instrument that is measured at fair
value on a recurring basis within Level 1 of the fair value hierarchy. The
Company does not have any Level 2 or Level 3 financial instruments measured at
fair value on a recurring basis.
|
h) |
Mineral Property Costs |
|
|
|
|
|
The Company is primarily engaged in the acquisition,
exploration and exploitation of mineral properties with the objective of
extracting minerals from these properties. |
|
|
|
|
|
Mineral property exploration and evaluation costs are
expensed as incurred. Development costs are expensed as incurred until
proven and probable reserves are established. Subsequent development costs
are capitalized. Costs for acquired mineral properties and mineral rights
are initially capitalized when incurred, then assessed quarterly for
impairment under ASC 360, Property, Plant and Equipment. The
Company has not established proven or probable reserves for any of its
mineral projects. |
|
|
|
|
i) |
Asset Retirement Obligations |
|
|
|
|
|
United States regulatory authorities require the Company
to restore and reclaim its mine area after mining is completed. Pursuant
to ASC 410, Asset Retirement and Environmental Obligations, the
fair value of asset retirement obligation is recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made.
Upon initial recognition of a liability, the fair value of the retirement
cost is added to the carrying amount of the associated asset, if any, and
this additional carrying amount is depreciated over the life of the asset,
otherwise, the asset retirement cost is charged to earnings. Future
reclamation and remediation costs are accrued based on management's best
estimate at the end of each period of the costs expected to be incurred to
remediate each project. |
|
|
|
|
|
Estimations and assumptions used in applying the expected
present value technique to determine fair values are reviewed
periodically. Estimated site restoration costs for exploration activities
are accrued when incurred. Costs for environmental remediation are
estimated each period by management based on current regulations, actual
expenses incurred, available technology and industry standards. Any change
in these estimates is included in mineral property expenditures during the
period and the actual restoration expenditures incurred are offset against
the accumulated asset retirement obligation provision as the restoration
work is completed. |
|
|
|
|
j) |
Deferred Financing Costs |
|
|
|
|
|
The Company capitalizes direct costs incurred to obtain
financings and amortize these costs over the terms of the related debt
instrument using the effective interest method. Upon the extinguishment of
the related debt, any unamortized deferred financing costs are immediately
expensed. |
F-7
Uranerz Energy Corporation
Notes to the Consolidated
Financial Statements
Three Months Ended March 31, 2015 and 2014
(Expressed in US dollars)
2. |
Summary of Significant Accounting Policies
(continued) |
|
|
|
|
k) |
Long-lived Assets |
|
|
|
|
|
In accordance with ASC 360, Property Plant and
Equipment the Company tests long-lived assets or asset groups for
recoverability when events or changes in circumstances indicate that their
carrying amount may not be recoverable. Circumstances which could trigger
a review include, but are not limited to: significant decreases in the
market price of the asset; significant adverse changes in the business
climate or legal factors; accumulation of costs significantly in excess of
the amount originally expected for the acquisition or construction of the
asset; decreases in current period cash flows or operating losses,
combined with a history of losses or a forecast of continuing losses
associated with the use of the asset; and a current expectation that the
asset will more likely than not be sold or disposed significantly before
the end of its estimated useful life. |
|
|
|
|
|
The impairment test is carried out in two steps. In the
first step, the entity tests the long-lived asset or asset group for
recoverability by comparing the carrying amount of the long-lived asset or
asset group with the sum of the undiscounted future cash flows and the
eventual disposal of the asset. If the carrying amount of the long-lived
asset or asset group is determined to be greater than the sum of the
undiscounted future cash flows, the entity would perform the second
step. |
|
|
|
|
|
If the long-lived asset or asset group fails the
recoverability test in the first step, the entity must record an
impairment expense for the difference between the carrying amount and the
fair value of the long-lived asset or asset group. |
|
|
|
|
l) |
Contingent Liabilities - Off Balance Sheet
Arrangements |
|
|
|
|
|
The Company has obtained financial surety relating to
certain of its future restoration and reclamation obligations as required
by regulatory agencies. The Company has bank Letters of Credit and
performance bonds issued for the benefit of the Company to satisfy these
regulatory requirements. |
|
|
|
|
m) |
Revenue Recognition |
|
|
|
|
|
Revenue is recognized from a sale when persuasive
evidence of an arrangement exists, the price is determinable, the title
has been transferred to the customer and collection of the sales price is
reasonably assured. The Company delivers its uranium concentrates to a
uranium storage facility and once the product is confirmed to meet the
required specifications, the Company receives credit for a specified
quantity measured in pounds. Future sales of uranium concentrates are
expected to generally occur under uranium supply agreements or through the
uranium spot market. Once a sale of uranium concentrates is negotiated,
the Company will notify the uranium storage facility with instructions for
a title transfer to the customer. Revenue is recognized once a title
transfer of the uranium concentrates is confirmed by the uranium storage
facility. |
|
|
|
|
n) |
Foreign Currency Translation |
|
|
|
|
|
The functional and reporting currency of the Company is
the United States dollar. Monetary assets and liabilities denominated in
foreign currencies are translated to United States dollars in accordance
with ASC 740, Foreign Currency Translation Matters, using the
exchange rate prevailing at the balance sheet date. Gains and losses
arising on translation or settlement of foreign currency denominated
transactions or balances are included in the determination of net income
or loss. Foreign currency transactions are primarily undertaken in
Canadian dollars. The Company has not, to the date of these consolidated
financial statements, entered into derivative instruments to offset the
impact of foreign currency fluctuations. |
|
|
|
|
o) |
Stock-based Compensation |
|
|
|
|
|
The Company records stock-based compensation in
accordance with ASC 718, Compensation Stock Based Compensation,
which requires the measurement and recognition of compensation expense
based on estimated fair values for all share-based awards made to
employees and directors, including stock options. |
|
|
|
|
|
ASC 718 requires companies to estimate the fair value of
share-based awards on the date of grant using an option-pricing model. The
Company uses the Black-Scholes option-pricing model as its method of
determining fair value. This model is affected by the Companys stock
price as well as assumptions regarding a number of subjective variables.
These subjective variables include, but are not limited to the Companys
expected stock price volatility over the term of the awards, and actual
and projected employee stock option exercise behaviours. The value of the
portion of the award that is ultimately expected to vest is recognized as
an expense in the statement of consolidated comprehensive loss over the
requisite service period. |
|
|
|
|
|
Options granted to consultants are valued at the fair
value of the equity instruments issued, or the fair value of the services
received, whichever is more reliably measureable. |
F-8
Uranerz Energy Corporation
Notes to the Consolidated
Financial Statements
Three Months Ended March 31, 2015 and 2014
(Expressed in US dollars)
2. |
Summary of Significant Accounting Policies
(continued) |
|
|
|
|
p) |
Income Taxes |
|
|
|
|
|
The Company uses the asset and liability method of
accounting for income taxes under which deferred tax assets and
liabilities are recognized for the future tax consequences of temporary
differences between the accounting bases and the tax bases of the
Companys assets and liabilities. The deferred tax assets and liabilities
are computed using enacted tax rates in effect for the year in which the
temporary differences are expected to reverse. |
|
|
|
|
|
The Companys policy is to recognize penalties and
interest, if any, related to uncertain tax positions as general and
administrative expense. The Company files income tax returns in the U.S.
federal jurisdiction and various states. There are currently no federal or
state income tax examinations underway for these jurisdictions. |
|
|
|
|
q) |
Recently Adopted Accounting Pronouncements |
|
|
|
|
|
The Company has implemented all new accounting
pronouncements that are in effect and that may impact its consolidated
financial statements. |
|
|
|
|
|
In June 2014, ASU guidance was issued to resolve the
diversity of practice relating to the accounting for stock based
performance awards that the performance target could be achieved after the
employee completes the required service period. The update is effective
prospectively or retrospectively for annual reporting periods beginning
December 15, 2015. The adoption of the pronouncement is not expected to
have a material effect on the Companys consolidated financial
statements. |
|
|
|
|
|
In May 2014, ASU guidance was issued related to revenue
from contracts with customers. The new standard provides a five-step
approach to be applied to all contracts with customers and also requires
expanded disclosures about revenue recognition. The ASU is effective for
annual reporting periods beginning after December 15, 2016, including
interim periods and is to be retrospectively applied. Early adoption is
not permitted. On April 29, 2015, the FASB issued a proposal to defer the
effective date of this standard by one year. The Company is currently
evaluating this guidance and the impact it will have on its consolidated
financial statements. |
|
|
|
|
r) |
Reclassifications |
|
|
|
|
|
Certain reclassifications have been made to the prior
years consolidated financial statements to conform to the current years
presentation. |
3. |
Accounts Receivable |
|
|
|
The Companys accounts receivable consists of trade
accounts receivable from one customer. |
|
|
4. |
Inventory |
|
|
|
The Companys inventory consists of the
following: |
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
$ |
|
|
$ |
|
|
In-process |
|
856,835 |
|
|
713,480 |
|
|
Finished goods |
|
1,464,248 |
|
|
1,243,943 |
|
|
|
|
2,321,083 |
|
|
1,957,423 |
|
5. |
Property and Equipment |
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
Accumulated |
|
|
Net Carrying |
|
|
Net Carrying |
|
|
|
|
Cost |
|
|
Depreciation |
|
|
Value |
|
|
Value |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Computers and office equipment |
|
398,724 |
|
|
293,198 |
|
|
105,526 |
|
|
102,070 |
|
|
Field equipment |
|
1,854,620 |
|
|
1,144,675 |
|
|
709,945 |
|
|
666,293 |
|
|
|
|
2,253,344 |
|
|
1,437,873 |
|
|
815,471 |
|
|
768,363 |
|
F-9
Uranerz Energy Corporation
Notes to the Consolidated
Financial Statements
Three Months Ended March 31, 2015 and 2014
(Expressed in US dollars)
6. |
Mineral Properties |
|
|
|
|
a) |
On November 18, 2005, the Company entered into an
agreement to acquire a 100% interest in 10 mining claims located in the
Powder River Basin area, Wyoming, in consideration of advanced royalty
payment of $250,000. The amounts were paid in installments and completed
by January 2007. These mining claims are mainly located on the Nichols
Ranch ISR Uranium Project. Subsequently, on December 9, 2005, the Company
entered into an option agreement to acquire a 100% interest in 44 mining
claims, which included the 10 mining claims in the November 18, 2005
agreement, within six mineral properties located in the Powder River Basin
area, Wyoming. As at December 31, 2007 all requirements of this option
agreement were satisfied and a deed for the 44 claims was received. A
royalty fee of between 6% - 8% is payable for uranium extracted, based on
the average quarterly spot price for uranium. |
|
|
|
|
b) |
On February 1, 2007, the Company acquired three mineral
properties consisting of 138 unpatented lode mining claims located in
Campbell County, Wyoming for a total purchase price of
$3,120,000. |
|
|
|
|
c) |
On January 15, 2008, the Company acquired an undivided
eighty-one percent (81%) interest in approximately 82,000 acres (33,100
hectares) of mineral properties located in the central Powder River Basin
of Wyoming, and entered into a venture agreement (the Arkose Mining
Venture) with the vendor pursuant to which the Company will explore the
properties. |
|
|
|
|
d) |
On August 20, 2008, the Company, on behalf of the Arkose
Mining Venture, leased 6,073 acres of mineral properties within Arkoses
area of interest in Wyoming, subsequently reduced to 1,826 acres, for
annual advance royalty payments which amount to $723,439 as of March 31,
2015. |
|
|
|
|
e) |
On September 18, 2008, the Company leased 984 acres of
surface rights within the Companys North Reno Creek project area in
Wyoming. Refer to Note 15(b). |
|
|
|
|
f) |
On September 25, 2008, the Company leased 657 mineral
acres within the Companys Reno Creek project for annual advance royalty
payments which amount to $214,350 as of March 31, 2015. |
|
|
|
|
g) |
On December 3, 2008, the Company, on behalf of the Arkose
Mining Venture, leased 1,680 acres of mineral properties within Arkoses
area of interest in Wyoming for a five year payment of $83,950. The lease
was renewed to December 3, 2018 for an additional payment of
$112,406. |
|
|
|
|
h) |
On November 24, 2009, the Company leased 160 acres of
mineral properties within the Arkose area of interest in Wyoming for
annual advance royalty payments which amount to $24,000 as of March 31,
2015. |
|
|
|
|
i) |
On January 26, 2010, the Company acquired Geological Data
on the North Reno Creek uranium prospect located in Campbell County,
Wyoming for a total purchase price of $600,000. |
|
|
|
|
j) |
During the three months ended March 31, 2015, mineral
property expenditures totaling $2,741,614 (2014 - $3,319,813) were
expensed, including $2,270,680 (2014 $2,950,035) of wellfield and
construction costs related to the Companys Nichols Ranch ISR Uranium
Project. |
F-10
Uranerz Energy Corporation
Notes to the Consolidated
Financial Statements
Three Months Ended March 31, 2015 and 2014
(Expressed in US dollars)
|
a) |
The components of prepaid expenses and deposits are as
follows: |
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Insurance |
|
304,855 |
|
|
440,749 |
|
|
Lease costs |
|
252,751 |
|
|
402,314 |
|
|
Reclamation bonding |
|
165,170 |
|
|
200,988 |
|
|
Current portion power supply advance |
|
17,316 |
|
|
16,524 |
|
|
Surface use and damage costs |
|
209,073 |
|
|
276,017 |
|
|
Listing fees |
|
49,275 |
|
|
|
|
|
Professional fees |
|
90,000 |
|
|
50,000 |
|
|
Other |
|
56,557 |
|
|
49,077 |
|
|
Current prepaid expenses and deposits |
|
1,144,997 |
|
|
1,435,669 |
|
|
|
|
|
|
|
|
|
|
Deposits |
|
29,998 |
|
|
29,998 |
|
|
Power supply advance |
|
161,699 |
|
|
166,675 |
|
|
Surface use and damage costs |
|
170,447 |
|
|
200,888 |
|
|
|
|
|
|
|
|
|
|
Non-current prepaid expenses and deposits |
|
362,144 |
|
|
397,561 |
|
|
b) |
The components of accrued liabilities are as
follows: |
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Mineral exploration expenses |
|
92,816 |
|
|
55,572 |
|
|
Employee costs |
|
329,335 |
|
|
311,587 |
|
|
Executive and employee compensation |
|
- |
|
|
564,750 |
|
|
Operational expenses |
|
100,000 |
|
|
100,000 |
|
|
Professional fees |
|
241,426 |
|
|
114,747 |
|
|
Property taxes |
|
129,202 |
|
|
86,134 |
|
|
Reclamation costs (Note 10) |
|
39,000 |
|
|
39,000 |
|
|
Taxes and royalties |
|
1,091,348 |
|
|
1,467,771 |
|
|
Other |
|
11,297 |
|
|
6,425 |
|
|
|
|
|
|
|
|
|
|
Total accrued liabilities |
|
2,034,424 |
|
|
2,745,986 |
|
8. |
Related Party Transactions / Balances |
|
|
|
|
a) |
During the three months ended March 31, 2015, the Company
incurred $213,756 (2014 - $211,714) for consulting services (included in
general and administrative expenses) provided by Officers. Other general
and administrative expenses were reimbursed in the normal course of
business. At March 31, 2015, consulting services and expenditures incurred
on behalf of the Company of $14,702 (December 31, 2014 - $10,782) are owed
to these Officers, and these amounts are unsecured, non-interest bearing,
and due on demand. |
|
|
|
|
b) |
During the three months ended March 31, 2015, the Company
paid fees of $48,125 (2014 - $33,325) to non- executive Directors of the
Company for their services as Directors. Other general and administrative
expenses were reimbursed to the directors in the normal course of
business. |
|
|
|
|
c) |
During the three months ended March 31, 2015, the Company
paid $390,525 (2014 - $322,500) for bonuses (included in prior years
general and administrative expenses) to related party
Officers. |
F-11
Uranerz Energy Corporation
Notes to the Consolidated
Financial Statements
Three Months Ended March 31, 2015 and 2014
(Expressed in US dollars)
9. |
Notes Payable |
|
|
|
|
a) |
On December 3, 2013 the Company obtained a $20,000,000
loan through the Wyoming Industrial Development Revenue Bond program (the
"Loan"). The Loan has an annual interest rate of 5.75% and is repayable
over seven years, maturing on October 15, 2020. The Loan calls for the
payment of interest only for the first year, with the amortization of
principal plus interest over the remaining six years. The Loan can be
repaid earlier than its maturity date if the Company so chooses without
penalty or premium. The Loan is secured by a charge on most of the assets
of the Company including the Companys mineral properties, processing
facility, and equipment as well as an assignment of all of the Companys
right, title and interest in and to the Product Sales Contracts and
Processing Agreement, which are referenced in Note 15. |
|
|
|
|
|
The Company incurred financing costs of $327,348, and as
of March 31, 2015, the Company had unamortized debt issuance costs of
$205,980 (December 31, 2014 - $226,208) which are being amortized over the
life of the note payable. |
|
|
|
|
|
The Company will make the following principal
repayments: |
Year Ended: |
|
|
|
December 31, 2015 |
$ |
1,458,665 |
|
December 31, 2016 |
|
3,045,266 |
|
December 31, 2017 |
|
3,224,181 |
|
December 31, 2018 |
|
3,413,608 |
|
December 31, 2019 |
|
3,614,163 |
|
December 31, 2020 |
|
3,826,502 |
|
Total |
|
18,582,385 |
|
Less: current portion |
|
(2,203,761 |
) |
|
|
|
|
Long-term portion |
$ |
16,378,624 |
|
10. |
Asset Retirement Obligations |
|
|
|
The following summary sets forth the annual changes to
the Companys asset retirement obligation relating to the Companys
Nichols Ranch ISR Uranium Project in Wyoming: |
Balance at December 31, 2014 |
$ |
2,100,090 |
|
Liabilities incurred |
|
52,335 |
|
Accretion expense |
|
168,145 |
|
Balance at March
31, 2015 |
$ |
2,320,570 |
|
The current portion of reclamation and
remediation liabilities of $39,000 and $39,000 at March 31, 2015 and December
31, 2014, respectively, are included in accrued liabilities (see Note 7(b)).
In 2008 the Company provided a bond in
the amount of $622,500 to the State of Wyoming, Department of Environmental
Quality or the Secretary of the Interior, United States Government. The bond is
in lieu of depositing cash to guarantee reclamation of exploration drill holes
in the Arkose Mining Venture and surety was provided by an insurance company.
The bond applies to 250 drill holes on a revolving basis.
In December 2010, the Company provided
a $1,700,000 cash security to support a bond in the amount of $6,800,000 to the
State of Wyoming, Department of Environmental Quality or the Secretary of the
Interior, United States Government. The bond is in lieu of depositing cash to
guarantee mine reclamation and surety was provided by an insurance company. The
bond applies to the operation of the Companys Nichols Ranch ISR Uranium Project
and estimates are reviewed annually. This amount together with other surety
deposits of $381,196 have been classified as mineral property reclamation surety
deposits.
F-12
Uranerz Energy Corporation
Notes to the Consolidated
Financial Statements
Three Months Ended March 31, 2015 and 2014
(Expressed in US dollars)
11. |
Common Stock |
|
|
|
During January 2015, the Company issued 17,500 shares of
common stock pursuant to the exercise of stock options for proceeds of
$19,775. |
|
|
12. |
Stock-based Compensation |
|
|
|
The Company adopted a Stock Option Plan dated November 7,
2005 under which the Company is authorized to grant stock options to
acquire up to a total of 10,000,000 shares of common stock. No options
shall be issued under the Stock Option Plan at a price per share less than
the defined Market Price. On June 11, 2008, the Company modified the Stock
Option Plan to define Market Price as the volume weighted average trading
price of the Companys common shares for the five trading days before the
date of grant on the Toronto Stock Exchange or American Stock Exchange,
now the NYSE MKT, whichever has the greater trading volume. On June 15,
2011, the Company amended the 2005 Non-Qualified Stock Option Plan to
increase the number of shares authorized for issuance under the plan from
10,000,000 to 30,000,000 and extend the plan termination date for an
additional 10 years. |
|
|
|
During the three months ended March 31, 2015, the Company
granted the following options: |
|
|
1,185,000 stock options at an exercise price of $1.14 per
share for 10 years that vest 40% on January 17, 2015, 30% on April 17,
2015 and 30% on July 17, 2015; |
|
|
15,000 stock options at an exercise price of $1.14 for 5
years that vest immediately; and |
|
|
50,000 stock options at an exercise price of $1.16 per
share for 10 years that vest 40% on September 2, 2015, 30% on March 2,
2016 and 30% on March 2, 2017. |
During the three months ended March 31,
2015, the Company modified the terms of 330,500 outstanding vested options held
by two former employees of the Company. The options were set to expire and the
Company extended the expiration date of the vested options to December 31, 2015.
The weighted average grant date fair value of the modified stock options was
$0.17 and the Company recognized an additional $55,422 stock-based compensation
expense which is included in general and administrative expense related to the
modification of these options.
During the three months ended March 31,
2015, the Company recorded stock-based compensation for the vesting of options
of $619,649 as general and administrative expense, $61,117 as mineral property
expenditures and $210,222 as production costs. During the three months ended
March 31, 2014, the Company recorded stock-based compensation for the vesting of
stock options of $223,153 as general and administrative expense and $63,518 as
mineral property expenditures.
At March 31, 2015, the Company had
17,736,328 shares of common stock available to be issued under the Stock Option
Plan.
The weighted average grant date fair
value of stock options granted during the three months ended March 31, 2015 and
2014, was $0.97, and $1.32 per share, respectively. The total intrinsic value of
stock options exercised during the three months ended March 31, 2015 and 2014
was $1,925, and $60,952, respectively.
The fair value of stock options granted
was calculated using the Black-Scholes option-pricing model based on the
following assumptions:
Risk-Free Interest Rate: Based
on the implied yield currently available on U.S. Treasury zero-coupon issues
with a remaining term equivalent to the expected term of the options being
valued.
Dividend Yield: Based on the
projection of future stock prices and dividends expected to be paid.
Expected Term: Represents the
period of time that stock options are expected to be outstanding based on
historic exercise behavior.
Expected Volatility: Based on
the Company's historical stock prices for a period of time equal to the expected
term of the award.
The weighted average assumptions used
for each of the three months ended March 31, are as follows:
|
|
2015 |
2014 |
|
Expected dividend yield |
0% |
0% |
|
Risk-free interest rate |
1.83% |
2.71% |
|
Expected volatility |
88% |
90% |
|
Expected option life (in years) |
9.94 |
10.00 |
F-13
Uranerz Energy Corporation
Notes to the Consolidated
Financial Statements
Three Months Ended March 31, 2015 and 2014
(Expressed in US dollars)
12. |
Stock-based Compensation (continued) |
|
|
|
The following table summarizes the continuity of the
Companys stock options: |
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
|
Number of |
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
|
|
|
Options |
|
|
Price |
|
|
Term (years) |
|
|
Value |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
Outstanding, December 31, 2014 |
|
7,311,680 |
|
|
1.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
1,250,000 |
|
|
1.14 |
|
|
|
|
|
|
|
|
Exercised |
|
(17,500 |
) |
|
1.13 |
|
|
|
|
|
|
|
|
Expired |
|
(347,500 |
) |
|
1.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, March 31, 2015 |
|
8,196,680 |
|
|
1.56 |
|
|
5.94 |
|
|
259,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, March 31, 2015 |
|
6,814,180 |
|
|
1.65 |
|
|
5.30 |
|
|
250,460 |
|
A summary of the changes of the
Companys non-vested stock options is presented below:
|
|
|
|
|
|
Weighted Average |
|
|
|
|
Number of |
|
|
Grant Date |
|
|
Non-vested stock options |
|
Options |
|
|
Fair Value |
|
|
|
|
|
|
|
$ |
|
|
Non-vested at December 31, 2014 |
|
704,750 |
|
|
1.01 |
|
|
Granted |
|
1,250,000 |
|
|
0.97 |
|
|
Vested |
|
(501,000 |
) |
|
0.96 |
|
|
Expired |
|
(71,250 |
) |
|
1.02 |
|
|
|
|
|
|
|
|
|
|
Non-vested at
March 31, 2015 |
|
1,382,500 |
|
|
0.99 |
|
As at March 31, 2015, there was
$737,891 of unrecognized compensation cost related to non-vested stock option
agreements. This cost is expected to be recognized over a weighted average
period of 0.34 years.
As at March 31, 2015, the following
stock options were outstanding and exercisable:
|
|
|
Weighted Average |
Weighted Average |
|
|
|
Remaining |
Remaining |
|
Number of Stock |
Number of Stock |
Contractual Life |
Contractual Life |
Exercise Price |
Options |
Options |
(Years) for Options |
(Years) for Options |
$ |
Outstanding |
Exercisable |
Outstanding |
Exercisable |
0.00 0.99 |
660,000 |
645,000 |
2.13 |
1.98 |
1.00 1.99 |
6,307,180 |
4,939,680 |
6.51 |
5.79 |
2.00 2.99 |
743,000 |
743,000 |
2.50 |
2.50 |
3.00 3.99 |
436,500 |
436,500 |
5.32 |
5.32 |
4.00 4.99 |
50,000 |
50,000 |
2.28 |
2.28 |
|
8,196,680 |
6,814,180 |
5.94
|
5.30
|
F-14
Uranerz Energy Corporation
Notes to the Consolidated
Financial Statements
Three Months Ended March 31, 2015 and 2014
(Expressed in US dollars)
13. |
Stock Purchase Warrants |
|
|
|
|
a) |
In July, 2014, as a component of a public offering of
Units, the Company issued 4,800,000 common share purchase warrants,
exercisable for $1.60 per share during the thirty-month period ending
January 25, 2017. The Company has the right to accelerate the expiry date
of the warrants in the event that the underlying common shares trade at a
closing price on the NYSE MKT of greater than $2.75 per share for a period
of 20 consecutive trading days. No warrants have been exercised as at
March 31, 2015. |
|
|
|
|
b) |
In September, 2013, as a component of a public offering
of Units, the Company issued 4,275,000 common share purchase warrants,
exercisable for $1.60 per share during the thirty-month period ending
March 5, 2016. The Company has the right to accelerate the expiry date of
the warrants in the event that the underlying common shares trade at a
closing price on the NYSE MKT of greater than $2.75 per share for a period
of 20 consecutive trading days. As at March 31, 2015, 125,000 warrants
have been exercised. |
|
|
|
|
c) |
In June, 2013 as additional consideration for a loan, the
Company issued non-transferable common stock purchase warrants entitling
the holders to purchase from the Company 1,600,000 common shares at an
exercise price of $1.60 per share, of which 1,200,000 warrants were
immediately exercisable and 400,000 additional warrants exercisable only
if the Notes remain outstanding after August 15, 2013. The loan was repaid
in December 2013. The warrants expire 30 months from the date of issue,
subject to an acceleration option exercisable by the Company in the event
that the Companys common shares trade at a closing price on the NYSE MKT
of greater than $2.75 per share for 20 consecutive trading days. No
warrants have been exercised as at March 31,
2015. |
13. |
Stock Purchase Warrants
(continued) |
As at March 31, 2015, the following
common share purchase warrants were outstanding and exercisable:
Number of Warrants |
Exercise Price |
Expiry Date |
|
$ |
|
1,600,000 |
1.60 |
December 5, 2015 |
4,150,000 |
1.60 |
March 5, 2016 |
4,800,000 |
1.60 |
January 25, 2017
|
14. |
Shareholder Rights Plan |
|
|
|
|
The Company has adopted a Shareholder Rights Plan (the
"Plan") effective August 25, 2010 and reconfirmed it on July 10, 2013. The
Plan confers one right per share to shareholders (a "Right") for each of
the Companys outstanding shares of common stock, as at August 25, 2010
and for shares of common stock issued thereafter. Each Right will be
evidenced by the Company's shares of common stock and will trade with the
Company's shares of common stock. Under the terms of the Plan, the Rights
separate and become exercisable upon a flip- in event: A flip-in event
occurs if a person or group acquires 20% or more of the Company's common
stock other than through a take-over bid which meets certain requirements,
among them that the take-over bid offer be extended to all shareholders,
that it remain open for 60 days, and that it receive approval of not less
than 50% of independent shareholders. If a flip-in event occurs as
described in the Plan, the Rights entitle the holder of each Right to
purchase, for $8.75 per share (the exercise price), that number of
shares of common stock of the Company which has a market value of twice
the exercise price, subject to certain adjustments as provided under the
Plan. The Plan is effective for a three-year period, until the close of
the Companys 2016 Annual General Meeting. |
|
|
|
15. |
Commitments and Contingencies |
|
|
|
|
a) |
The Company has employment or consulting services
agreements with each of its executive officers. Officers with contracts
for services have notice requirements following a change in control of the
Company and those requirements include a payment in lieu of notice and a
termination payment. |
|
|
|
|
b) |
On September 18, 2008, the Company signed two mining
lease agreements which require 10 annual payments of $75,000. As of March
31, 2015, the first six annual payments have been made. Refer to Note
6(e). |
|
|
|
|
c) |
Refer to Note 10 for commitments pertaining to mineral
property reclamation surety deposits. |
|
|
|
|
d) |
On May 7, 2013, the Company signed an office premises
lease for a period of three years commencing September 1, 2013. Rent is
approximately $46,750 (Cdn$55,000) per annum. |
F-15
Uranerz Energy Corporation
Notes to the Consolidated
Financial Statements
Three Months Ended March 31, 2015 and 2014
(Expressed in US dollars)
15. |
Commitments and Contingencies (continued) |
|
|
|
|
e) |
On January 22, 2014 the Company renewed an office lease
for a primary term of two years, beginning February 1, 2014 and ending
January 31, 2016. Rent consideration is $142,010 per annum. The lease
agreement may be renewed for two additional years. |
|
|
|
|
f) |
The Company is party to a processing agreement under
which it is committed to a minimum payment of $450,000 for 2015. |
|
|
|
|
g) |
The Company is committed under two sales agreements to
supply triuranium octoxide (U3O8) over a three or four year period. One
sales agreement has defined pricing each year and the second agreement has
pricing which contains spot market referenced prices to set the sales
price, with a floor and ceiling. |
|
|
|
|
h) |
In 2013 the Company signed a third sales agreement to
supply triuranium octoxide (U3O8) over a five year period commencing in
2016. The agreement has pricing which contains a base with an escalation
factor. |
|
|
|
|
i) |
On December 24, 2014 the Company signed a Financial
Advisor agreement respecting any transaction with an Other Party affecting
the control of the Company. The agreement provides for the payment of: a)
a Transaction Announcement Fee of $150,000 (which was earned and paid in
January 2015); and b) a success fee payable upon completion of the
Transaction equal to the greater of: (A) $1,000,000; or (B) 1.5% of the
first $50 million of the Transaction Value plus 0.75% of the Transaction
Value less $50 million; up to a maximum of $2,000,000. The Success Fee is
payable in shares of the Other Party. |
|
|
|
|
j) |
On January 4, 2015, the Company entered into an Agreement
and Plan of Merger (the Merger) with Energy Fuels Inc. (Energy Fuels),
an Ontario corporation, and EFR Nevada Corp., a Nevada corporation and
indirectly wholly-owned subsidiary of Energy Fuels. The Merger provides
for a business combination whereby EFR Nevada Corp. will merge with and
into the Company and as a result the Company will continue as the
surviving operating corporation and as an indirectly wholly-owned
subsidiary of Energy Fuels. Each issued and outstanding share of common
stock of the Company will be canceled and extinguished and automatically
converted into the right to receive 0.255 common shares of Energy
Fuels. |
|
|
|
|
|
The completion of the Merger will be subject to customary
closing conditions and the approval of at least a majority of the holders
of the outstanding common shares of the Company, as well as at least a
majority of the votes cast by the Companys shareholders, excluding
directors and officers of the Company, at a special meeting to be called
to consider the Merger. The transaction will become effective when all
conditions are met and a Statement of Transaction is filed with the State
of Nevada, or at a later date and time specified in the Statement of
Transaction. The Merger, as amended, provides that, upon consummation of
the Merger, Energy Fuels shall cause two nominees of the Company to be
appointed to the Board of Directors of Energy Fuels. The announcement of
this Agreement on January 5, 2015 caused the Transaction Announcement Fee
to become due and payable. Refer to Note 15(i). |
|
|
|
|
k) |
Since the announcement of the Merger on January 5, 2015,
a number of putative shareholder class action complaints have been filed
against the Companys Board of Directors, Energy Fuels, Inc. and EFR
Nevada Corp. in the District Court, Clark County, Nevada and the District
Court, Washoe County, Nevada, by purported Uranerz shareholders
challenging the Merger and seeking, among other things, damages,
attorneys' and experts' fees and injunctive relief concerning the alleged
breaches of fiduciary duty and to prohibit the defendants from
consummating the Merger. The Company believes the claims asserted in the
complaints have no merit, and it and all of the members of the Board of
Directors intend to defend vigorously against them. The future impact on
the Companys consolidated financial statements is not determinable at
this time. |
|
|
|
|
l) |
At March 31, 2015 the Company has operational and
construction purchase orders outstanding for approximately
$630,000. |
F-16
Uranerz Energy Corporation
Notes to the Consolidated
Financial Statements
Three Months Ended March 31, 2015 and 2014
(Expressed in US dollars)
16. |
Segment Disclosures and Major Customers |
|
|
|
The Company currently operates in a single reportable
segment involving uranium exploration, extraction and
processing. |
|
|
|
Factors used to identify the Companys reportable
segments include the organizational structure of the Company and the
financial information available for evaluation by the chief operating
decision-maker in making decisions about how to allocate resources and
assess performance. The Company operates in one geographical area, the
United States. |
|
|
|
The Chief Executive Officer is the Companys Chief
Operating Decision Maker (CODM) as defined by ASC 280, Segment
Reporting. The CODM allocates resources and assesses the performance
of the Company based on the results of operations. |
|
|
|
For the period ended March 31, 2015, revenue consisted of
sales from one customer. |
F-17
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains
forward-looking-statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements concern our
anticipated results and developments in our operations in future periods,
planned exploration and, if warranted, development of our properties, plans
related to our business and other matters that may occur in the future. These
statements relate to analyses and other information that are based on forecasts
of future results, estimates of amounts not yet determinable and assumptions of
management.
Any statements that express or involve discussions with respect
to predictions, expectations, beliefs, plans, projections, objectives,
assumptions or future events or performance (often, but not always, using words
or phrases such as believes, expects or does not expect, is expected,
anticipates or does not anticipate, plans, estimates or intends, or
stating that certain actions, events or results : may, could, would,
might or will be taken, occur or be achieved) are not statements of
historical fact and may be forward-looking statements. Forward-looking
statements are subject to a variety of known and unknown risks, uncertainties
and other factors which could cause actual events or results to differ from
those expressed or implied by the forward-looking statements, including, without
limitation:
- risks related to our proposed merger with Energy Fuels Inc.;
- risks related to litigation commenced in connection with the Energy Fuels
Inc. merger;
- risks related to our limited working capital and current negative cash
flow from operations;
- risks related to the market price of uranium;
- risks related to our limited operating history;
- risks related to the probability that our properties contain reserves;
- risks related to our past losses and expected losses in the near future;
- risks related to our need for qualified personnel for exploration and
operating a mine;
- risks related to our lack of known reserves;
- risks related to the fluctuation of uranium prices;
- risks related to demand for uranium;
- risks related to environmental laws and regulations and environmental
risks;
- risks related to using our in-situ recovery mining process;
- risks related to exploration and, if warranted, development of our
properties;
- risks related to our ability to acquire necessary mining licenses or
permits;
- risks related to our ability to make property payment obligations;
- risks related to our ability to obtain financing when required;
- risks related to the competitive nature of the mining industry;
- risks related to our dependence on key personnel;
- risks related to requirements for new personnel;
- risks related to securities regulations;
- risks related to stock price and volume volatility;
- risks related to dilution;
- risks related to our lack of dividends;
- risks related to our ability to access capital markets;
- risks related to security of our cash and investments;
- risks related to our issuance of additional shares of common stock;
- risks related to acquisition and integration issues;
- risks related to defects in title to our mineral properties; and
- risks related to our outstanding notes.
This list is not exhaustive of the factors that may affect our
forward-looking statements. Some of the important risks and uncertainties that
could affect forward-looking statements are described further under the section
titled Risk Factors contained in our annual report on Form 10-K for the year
ended December 31, 2014 and filed with the Securities and Exchange Commission
(the SEC) on March 16, 2015 and as described below in this Quarterly Report under the heading Quantitative and Qualitative
Disclosures About Market Risk. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, believed, estimated
or expected. We caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. We disclaim
any obligation subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events, except as required by
law.
General
We are a U.S.-based uranium company focused on exploration and
in-situ recovery (ISR) of uranium. ISR is a mining process that uses a
leaching solution to dissolve uranium from sandstone uranium deposits; it is
the generally accepted extraction technology used in the Powder River Basin area
of Wyoming. We control a large strategic land position in the central Powder
River Basin. Our management team has specialized expertise in the ISR uranium
mining method, and has a record of licensing, constructing, and operating ISR
uranium projects. In 2014 we commenced extracting uranium from properties
without proven reserves, and made our first sales of U3O8,
at the Nichols Ranch Unit of our Nichols Ranch ISR Uranium Project. The
projects processing facility will serve as a platform to advance our other
Powder River Basin properties with potential enhanced economics for adjacent and
satellite projects.
On January 4, 2015, the Company entered into an Agreement and
Plan of Merger (the Merger) with Energy Fuels Inc. (Energy Fuels), an
Ontario corporation, and EFR Nevada Corp., a Nevada corporation and indirectly
wholly-owned subsidiary of Energy Fuels (the “Merger Agreement”). The Merger Agreement provides for a business
combination whereby EFR Nevada Corp. will merge with and into the Company and as
a result the Company will continue as the surviving operating corporation and as
an indirectly wholly-owned subsidiary of Energy Fuels. Each issued and
outstanding share of common stock of the Company will be canceled and
extinguished and automatically converted into the right to receive 0.255 common
shares of Energy Fuels. An amendment to the Merger Agreement was entered into on May 8, 2015.
The completion of the Merger will be subject to customary
closing conditions and the approval of the shareholders of Energy Fuels and at
least a majority of the holders of the outstanding common shares of the Company,
as well as at least a majority of the votes cast by the Companys shareholders,
excluding directors and officers of the Company, at a special meeting to be
called to consider the Merger. The transaction will become effective when all
conditions are met and a Statement of Transaction is filed with the State of
Nevada, or at a later date and time specified in the Statement of Transaction.
The Merger, as amended, provides that, upon consummation of the Merger, Energy
Fuels shall cause two nominees of the Company to be appointed to the Board of
Directors of Energy Fuels.
Our Powder River Basin properties include:
- our 100% owned properties that totaled 19,801 acres as of March 31, 2015;
and
- our 81% interest in Arkose Mining Venture properties that totaled 52,818
acres as of March 31, 2015.
Ownership Interests
Our ownership interests in the properties within the Powder
River Basin are summarized as follows:
100% Owned Properties
Our 100% owned properties are comprised of unpatented lode
mining claims, state leases and fee (private) mineral leases, as summarized as
follows:
|
Ownership |
Number of |
|
|
Interest |
Claims/ |
Acreage |
Property Composition |
(1) |
Leases |
(Approximate) |
Unpatented Lode Mining Claims |
100% |
826 |
16,520
|
State Leases |
100% |
3 |
1,360 |
Fee (private) Mineral Leases |
100% |
40 |
1,921 |
Total |
|
869 |
19,801
|
(1) Subject to royalties.
These 100% owned properties in the Powder River Basin include
the following core property units:
Property |
No. Claims |
Acreage |
|
|
(Approximate) |
Jane Dough (Doughstick)* |
22 |
440 |
Collins Draw |
32 |
640 |
North Rolling Pin |
54 |
1,080 |
Hank * |
66 |
1,320 |
Nichols Ranch * |
36 |
720 |
Willow Creek |
11 |
220 |
West North-Butte |
125 |
2,500 |
East Nichols |
44 |
880 |
North Nichols |
107 |
2,140 |
TOTAL |
497 |
9,940 |
* included in the Nichols Ranch ISR Uranium Project
Our 100% owned property interests were acquired through
staking, leasing and purchase over a seven year period. The costs, exploratory
in nature, were expensed as incurred as mineral property expenditures. We
continue to look for more prospective lands in the Powder River Basin and as a
result may locate, purchase or lease additional unpatented lode mining claims;
and/or purchase or lease additional fee mineral (private) lands during the next
twelve months, however there is no assurance any additional properties will be
acquired.
Arkose Mining Venture
The Arkose Mining Venture properties (also called the
Arkose Property) are comprised of unpatented lode mining claims, state
leases and fee (private) mineral leases, as summarized as follows:
Property |
Ownership Interest |
Number of
Claims/ |
Acreage |
Composition |
(1) |
Leases |
(Approximate) |
Unpatented Lode Mining Claims
|
81% |
2,414 |
39,493 |
State Leases |
81% |
3 |
2,080 |
Fee (private) Mineral Leases
|
81% |
61 |
11,245 |
TOTAL |
|
2,478 |
52,818 |
(1) Subject to royalties.
Through a combination of claim staking, purchasing and leasing,
we have also acquired interests in projects that lie within the Powder River
Basin but outside of the project areas discussed above. These additional
properties include the Verna Ann, Niles Ranch and Reno Creek projects. However,
due to our focus on other activities, we have not yet made any development
decisions on these projects. None of our projects has proven or probable
reserves as defined in the SECs Industry Guide 7 and our operations on our
projects and properties are, therefore, deemed exploratory in nature under
Industry Guide 7 standards.
Information regarding the location of and access to our Wyoming
properties, together with the history of operations, present condition and
geology of each of our significant properties, is presented in Item 2 of our
Annual Report on Form 10-K for the year ended December 31, 2014 under the
heading Description of Properties, previously filed with the SEC on March 16,
2015.
During this quarter we continued to extract uranium through
four header houses in our first wellfield at our Nichols Ranch ISR Uranium
Project in the Powder River Basin. The timing of our plans to expand the number
of producing wells has been lengthened by deferring drilling to reduce costs; an
action deemed prudent in light of our pending merger and failure of the market
price of uranium to improve. This deferral of mine expansion will limit our
short term production plans to amounts necessary to meet our
contracted deliveries of uranium which are at prices in excess of the current
spot market. Overall production will be dependent upon the extraction efficiency
at our wellfield, funds available for development and market factors. Our
proposed merger, when effected, may change our short term strategy as other
market opportunities may result.
Concurrently, we are proceeding with the environmental permit
and license applications for the Jane Dough Unit, which is adjacent to the
operating Nichols Ranch Unit and will share its infrastructure. Our applications
have been submitted and are being evaluated by the relevant regulators. When
approved, we will have the option to revise our plan of operations to bring our
Jane Dough Unit into recovery operations before the Hank Unit of our Nichols
Ranch Mine; Jane Dough fluids can be delivered to our Nichols Ranch Mine
processing facility by pipeline, thus eliminating the need to build a satellite
processing facility. Jane Dough includes the Doughstick, South Doughstick and
North Jane properties. Additional units may be added as we assess our geological
data. Other strategies are also being considered for Hank, possibly in concert
with other properties. We may continue the exploration and, if warranted, the
potential future development and strategic planning of our other Wyoming Powder
River Basin properties.
During the first quarter of 2015 we:
- produced 55,000 pounds of uranium oxide and sold 50,000 pounds to meet
contracted deliveries;
- added injection and recovery wells in Nichols Ranch Production Area #1;
- drilled delineation and pilot holes for expanded production wells;
- successfully completed a NRC in-production inspection;
- continued processing our permit applications for the Jane Dough Unit; and
- entered into an Agreement and Plan of Merger with Energy Fuels Inc.
Financial Position
The Company's overall financial position is disclosed in the
Company's Annual Report on Form 10-K for the year ended December 31, 2014 filed
with the SEC on March 16, 2015 and the unaudited consolidated Financial
Statements at March 31, 2015 as provided herein under the section heading
Financial Statements above.
Liquidity and Capital Resources
We are carrying out a limited exploration, environmental and
uranium recovery program in 2015 as reported in our Annual Report. This plan
anticipated continuation of uranium extraction and expansion of our wellfields
at our Nichols Ranch Unit. The plan is proceeding with lower than projected
production and market prices, and the proposed merger with Energy Fuels has
incurred substantial non-operational expenses for due diligence, legal and
transactional activities. This has reduced cash available for operations and, in
conjunction with low spot prices, has resulted in the decision to curtail
certain non-essential activities, e.g. wellfield and production expansion beyond
that required to meet uranium delivery commitments. Accordingly, wellfield
development plans are being scaled back with a corresponding reduction in
planned production, sales and revenue.
We commenced uranium extraction activities in mid-2014 and,
accordingly, our results to date reflect a start-up mode of operation and are
not reasonably comparable to prior periods, nor are current results indicative
of the future. Our mining operation extracted approximately 55,000 pounds of
U3O8 in the three months ended March 31, 2015; of which
50,000 pounds was sold. Inventory of approximately 55,000 pounds at March 31,
2015 includes 19,000 pounds in process.
During the three months ended March 31, 2015 all operational
expenditures incurred, excluding inventory costs, were $5,549,046. These
expenditures include construction costs incurred for the Nichols Ranch project
totaling $2,270,680, all of which have been expensed.
On March 31, 2015 we had cash of $4,771,849 and working capital
of $6,095,881, as compared to cash of $6,017,594 and working capital of
$9,914,608 as of December 31, 2014. Our cash is invested in bank savings
accounts and is available on demand.
Net cash used in operating activities was $555,125 for the three months ended March 31, 2015, compared to $5,431,571 for the corresponding period in 2014. Net cash used to purchase property and equipment was $104,230 for the three months
ended March 31, 2015, compared to $132,198 used in the corresponding period in 2014.
Net cash used for financing activities amounted to $586,390 for the three months ended March 31, 2015, primarily reducing notes payable, compared to $463,678 provided in the corresponding period in 2014, primarily from issuance of common
stock.
During the twelve-month period following the date of this quarterly report we anticipate that, although we will generate a modest amount of revenue, we will continue to be cash flow negative. The Nichols Ranch ISR Uranium Project is not currently
providing sufficient cash flow to maintain desirable expenditures for wellfield expansion and corporate general and administrative costs in 2015. We anticipate that these expenditures will be paid for from cash on hand, operations and/or debt or equity financing. We currently have sufficient working capital to fund limited activities for the next twelve months. If the proposed merger does not become effective and/or uranium markets do not improve in 2015 we may
have to restrain operations until alternate funding is obtained.
To date, our primary source of funds has been equity financings and a loan from the State of Wyoming, and this method is expected to continue together with gross profits from recovery operations. Our operational and exploration plans will be
continually evaluated and modified as markets, exploration and environmental results become available. General and administrative expenses, planning and environmental expenses are incurred throughout the year; most of our exploration expenditures
are incurred during the drilling period of March through November. Modifications to our plans will be based on many factors including results of operations, exploration, assessment of data, weather conditions, exploration costs, the market for
uranium, and available capital.
Should the proposed merger with Energy Fuels not be effected, we anticipate that any additional financing may be in the form of equity financing from the sale of our common stock and the exercise of share purchase options and/or debt, depending on
capital markets. We cannot provide assurance that additional financing will be available to us in amounts sufficient to meet our needs or on terms acceptable to us, if at all. In 2014 we filed a new Form S-3 “shelf registration
statement”, in the amount of $100 million which was drawn upon, in part, during our July 2014 equity issuance.
Our cash has not been devalued by the current stock market disruptions as it is held in low risk savings accounts in a Canadian Chartered Bank. Rates of return, however, are at historic lows. Management and the board of directors periodically meet
to review the status of our investments and determine investment strategies, taking into account current market conditions and the short and long term capital needs of the Company.
Results of Operations
Three-month period ended March 31, 2015 compared to three-month period ended March 31, 2014
Revenue and Operating Expenses
We earned $3,400,000 from sales to a utility in this quarter and we anticipate that we will generate additional revenues from the sale of uranium concentrates during the twelve-month period following the date of this quarterly report. Gross
profit was $1,489,221 compared to Nil for the comparable three-month period in 2014.
We incurred total operating expenses of approximately $5,549,046 for the three-month period ended March 31, 2015, as compared to $4,707,371 for the corresponding period in 2014. The increase of operating expenses in the amount of
$841,675 was primarily attributable to a $1,384,644 increase in general and administrative expenses offset by a $578,199 decrease in mineral property expenses, reflecting reduced development expenditures related to the Nichols Ranch ISR
Uranium Project. The increase in general and administrative expenses includes a $396,496 increase in stock based compensation and $791,939 of one-time merger related expenses.
Our financing expense for the three-month period ended March 31, 2015 was $301,612, as compared to $307,728 for the corresponding period in 2014. Our interest income was $4,092 for the three-month period ended March 31,
2015 compared to $7,472 in 2014 when cash balances were higher. The financing expense is related to our Note payable, issued in December 2013.
Net loss for the three-month period ended March 31, 2015 was approximately $4,254,809, as compared to approximately $4,909,277 for the corresponding period in 2014. The $654,466 decrease in net loss was primarily attributable to the
gross profit from operations of $1,489,221 and a $578,199 decrease in mineral property expenditures as we conducted extraction activities, offset by the $1,384,644 increase in general and administrative expenses.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to stockholders except as disclosed in the unaudited Financial Statements at March 31, 2015. The Company has had no material changes to its off-balance sheet arrangements as disclosed in the
Company's Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 16, 2015 and the unaudited Financial Statements at March 31, 2015 as provided herein under the section heading “Financial Statements”
above.
Critical Accounting Policies
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements
and the reported amounts of net revenue and expenses in the reporting period. We regularly evaluate our estimates and assumptions related to the useful life and recoverability of long-lived assets, stock-based compensation and deferred income tax
asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent
there are material differences between our estimates and the actual results, our future results of operations will be affected.
We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements.
Revenue Recognition
Revenue is recognized from a sale when persuasive evidence of an arrangement exists, the price is determinable, the title has been transferred to the customer and collection of the sales price is reasonably assured. The Company delivers its uranium
concentrates to a uranium storage facility and once the product is confirmed to meet the required specifications, the Company receives credit for a specified quantity measured in pounds. Future sales of uranium concentrates are expected to generally
occur under uranium supply agreements or through the uranium spot market. Once a sale of uranium concentrates is negotiated, the Company will notify the uranium storage facility with instructions for a title transfer to the customer. Revenue is
recognized once a title transfer of the uranium concentrates is confirmed by the uranium storage facility.
Mineral Property Costs
The Company is primarily engaged in the acquisition, exploration and exploitation of mineral properties with the objective of extracting minerals from these properties.
Mineral property exploration and evaluation costs are expensed as incurred. Development costs are expensed as incurred until proven and probable reserves are established. Subsequent development costs are capitalized. Costs for acquired mineral
properties and mineral rights are initially capitalized when incurred, then assessed quarterly for impairment under ASC 360, Property, Plant and Equipment. The Company has not established proven or probable reserves on any of its mineral
projects.
Inventory
Inventories of uranium concentrates are recorded in-process (solutions) and finished goods. The Company values its concentrates at the lower of cost or net realizable value at the end of each reporting period. Costs include direct labor, materials
and other mining and processing costs and depreciation related to extraction of uranium concentrate. Inventories are charged to cost of sales using the average costing method.
Asset Retirement Obligations
United States regulatory authorities require the Company to restore and reclaim its mine area after mining is completed. Pursuant to ASC 410, Asset Retirement and Environmental Obligations, the fair value of asset retirement obligation is
recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. Upon initial recognition of a liability, the fair value of the liability is added to the carrying amount of the associated asset and this additional
carrying amount is depreciated over the life of the asset. Future reclamation and remediation costs are accrued based on management's best estimate at the end of each period of the costs expected to be incurred at each project.
Estimations and assumptions involved in using the expected present value technique to determine fair values are reviewed periodically.
Stock-based Compensation
The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Based Compensation, which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based
awards made to employees and directors, including stock options.
ASC 718 requires companies to estimate the fair value of share-based awards on the date of grant using an option-pricing model. The Company uses the Black-Scholes option-pricing model as its method of determining fair value. This model is affected
by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and
actual and projected employee stock option exercise behaviours. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the statement of operations over the requisite service period.
Options granted to consultants are valued based at the fair value of the service received by the Company unless the amount is not readily determinable, in which case they are valued using the Black-Scholes model.
Contractual Obligations
The Company has had no material changes to its contractual obligations as disclosed in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2015 and the unaudited Financial Statements at March 31,
2015 as provided herein under the section heading “Financial Statements” above.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to risks associated with commodity prices, interest rates and credit. Commodity price risk is defined as the potential loss that we may incur as a result of changes in the market value of uranium. Interest rate risk results
from our debt and equity instruments that we issue to provide financing and liquidity for our business. Credit risk arises from the extension of credit throughout all aspects of our business. Industry-wide risks can also affect our general ability
to finance exploration, and development of exploitable resources; such effects are not predictable or quantifiable.
Commodity Price Risk
The Company is subject to market risk related to the market price of U3O8. Our supply contracts with favorable pricing above current spot and long term prices cover only a portion of our planned extraction. Revenue beyond our current contracts will be affected by both spot and long-term U3O8 price fluctuations which are beyond our control, and are not predictable. The Company is restraining its mine development as it monitors the market.
Interest Rate Risk
The Company is exposed to interest rate risk on its cash equivalents, deposits, and debt. Our interest earned is not material; thus not subject to significant risk. Our Note Payable has a fixed interest rate over its seven year life, removing
variability. Changes in market interest rates could affect future debt issues, if any.
Credit Risk
The Company’s primary customers are large North American utilities and commodity trading enterprises with high quality credit ratings.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
At the end of the period covered by this report, an evaluation was carried out under the supervision of and with the participation of the Company's management, including its Chief Executive Officer (“CEO”), Glenn Catchpole, and Chief
Financial Officer (“CFO”), Benjamin Leboe, of the effectiveness of the design and operations of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act). Based on that
evaluation, the CEO and the CFO have concluded that as of the end of the period covered by this report, the Company's disclosure controls and procedures were effective in ensuring that: (i) information required to be disclosed by the Company in
reports that it files or submits to the Securities and Exchange Commission under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms; and (ii) material information required
to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in
our reports filed under the Exchange Act is accumulated and communicated to management, including our CEO and CFO, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During our most recently completed fiscal quarter ended March 31, 2015, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to affect, our internal control over financial
reporting.
The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant's principal executive and principal financial officers, or persons performing similar functions, and
effected by the registrant's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and procedures that:
(a) |
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;
|
| |
(b) |
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
registrant are being made only in accordance with authorizations of management and directors of the registrant; and
|
| |
(c) |
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant's assets that could have a material effect on the financial statements.
|
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Since the announcement of our Merger on January 5, 2015, a number of putative shareholder class action complaints have been filed against the Company, the Company’s Board of Directors, Energy Fuels, Inc. and EFR Nevada Corp. in the District Court, Clark
County, Nevada and one in the District Court, Washoe County, Nevada, by purported Uranerz shareholders challenging the Merger. All of the cases in Clark County have been consolidated. The plaintiffs seek, among other things, damages, attorneys' and
experts' fees and injunctive relief concerning the alleged breaches of fiduciary duty and to prohibit the defendants from consummating the Merger. The Company believes the claims asserted in the complaints have no merit, and it and all of the
members of the Board of Directors intend to defend vigorously against them. The future impact on the Company’s consolidated financial statements is not determinable at this time.
Item 1A. Risk Factors
There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 16, 2015.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosure
Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United
States, and that is subject to regulation by the Federal Mine Safety and Health Administration under the Mine Safety and Health Act of 1977 (“Mine Safety Act”), are required to disclose in their periodic reports filed with the SEC
information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the quarter ended March 31, 2015, the Company’s mineral properties were not
subject to regulation by the Federal Mine Safety and Health Administration under the Mine Safety Act.
Item 5. Other Information
None.
Item 6. Exhibits
The following exhibits are attached to this Quarterly Report on
Form 10-Q:
Exhibit |
|
Number |
Description |
2.1 |
Agreement and Plan of Merger, dated as of January 4,
2015, by and between the Company, Energy Fuels Inc. and EFR Nevada
Corp.(1) |
3.1 |
Articles of Incorporation (2) |
3.2 |
Bylaws, as amended (2) |
3.3 |
Articles of Amendment filed July 5, 2005 (3) |
3.4 |
Articles of Amendment filed August 8, 2008(4) |
3.5 |
Articles of Amendment filed July 8, 2009(5) |
3.6 |
Articles of Amendment filed August 8, 2011(6) |
10.1 |
Form of Voting Agreement between the Company and the
directors and the directors and certain officers of Energy Fuels
Inc.(1) |
10.2 |
Form of Voting Agreement between Energy Fuels Inc. and
the directors and certain officers of the Company(1) |
31.1 |
Certification of Chief Executive Officer pursuant to Rule
13a-14(a) of the Exchange Act |
31.2 |
Certification of Chief Financial Officer pursuant to Rule
13a-14(a) of the Exchange Act |
32.1 |
Certification of Chief Executive Officer pursuant to Rule
13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 |
Certification of Chief Financial Officer pursuant to Rule
13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101.INS |
XBRL Instance Document |
101.SCH |
XBRL Taxonomy Extension Schema |
101.CAL |
XBRL Taxonomy Extension Calculations |
101.DEF |
XBRL Taxonomy Extension Definitions |
101.LAB |
XBRL Taxonomy Extension Labels |
(1) |
Previously filed as an exhibit to the Registrants Form
8-K, filed January 12, 2015 |
(2) |
Previously filed as an exhibit to the Registrants Form
SB-2 filed March 15, 2002 |
(3) |
Previously filed as an exhibit to the Registrants Annual
Report on Form 10-KSB filed April 14, 2006 |
(4) |
Previously filed as an exhibit to the Registrants
Quarterly Report on Form 10-Q filed August 11, 2008 |
(5) |
Previously filed as an exhibit to the Registrants Form
S-3 filed July 9, 2009 |
(6) |
Previously filed as an exhibit to the Registrants Form
8-K, filed August 12, 2011 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
URANERZ ENERGY CORPORATION
By: /s/ Benjamin Leboe |
By: /s/ Glenn Catchpole |
|
|
Benjamin Leboe, Senior Vice President, Finance and |
Glenn Catchpole, Chief Executive |
Chief Financial Officer |
Officer, Director |
(Principal Financial and Accounting Officer) |
(Principal Executive Officer) |
|
|
Date: May 8, 2015 |
Date: May 8, 2015 |
EXHIBIT 31.1
I, Glenn Catchpole, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of
Uranerz Energy Corporation: |
|
|
|
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 registrant as of, and for, the periods presented in this
report; |
|
|
|
4. |
The registrants other certifying officer 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)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant 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
registrant, 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. |
Designed such internal control over financial reporting,
or caused such internal controls over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles; |
|
|
|
|
c. |
Evaluated the effectiveness of the registrants
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 |
|
|
|
|
d. |
Disclosed in this report any change in the registrants
internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrants internal
control over financial reporting; and |
|
|
|
5. |
The registrants other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrants auditors and the audit committee
of the registrants 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 registrants 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
registrants internal control over financial
reporting. |
Date: May 8, 2015
/s/ Glenn Catchpole
Glenn
Catchpole, Chief Executive
Officer, Director
(Principal Executive
Officer)
EXHIBIT 31.2
I, Benjamin Leboe, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of
Uranerz Energy Corporation: |
|
|
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 registrant as of, and for, the periods presented in this
report; |
|
|
4. |
The registrants other certifying officer 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)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant 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
registrant, 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. |
Designed such internal control over financial reporting,
or caused such internal controls over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles; |
|
|
|
|
c. |
Evaluated the effectiveness of the registrants
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 |
|
|
|
|
d. |
Disclosed in this report any change in the registrants
internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrants internal
control over financial reporting; and |
5. |
The registrants other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrants auditors and the audit committee
of the registrants 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 registrants 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
registrants internal control over financial
reporting. |
Date: May 8, 2015
/s/ Benjamin Leboe
Benjamin Leboe,
Senior Vice President,
Finance and Chief Financial Officer
(Principal
Financial and Accounting Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code), the
undersigned officer of Uranerz Energy Corporation, (the Company) does hereby
certify with respect to the Quarterly Report of the Company on Form 10-Q for the
period ended March 31, 2015 (the Report) that:
|
1. |
The Report 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. |
Date: May 8, 2015
/s/ Glenn
Catchpole
Glenn Catchpole, Chief Executive
Officer, Director
(Principal
Executive Officer)
The foregoing certification is being furnished solely pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of
Title 18 of the United States Code) and is not being filed as part of the Report
or as a separate disclosure document.
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code), the
undersigned officer of Uranerz Energy Corporation, (the Company) does hereby
certify with respect to the Quarterly Report of the Company on Form 10-Q for the
period ended March 31, 2015 (the Report) that:
|
1. |
The Report 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. |
Date: May 8, 2015
/s/ Benjamin
Leboe
Benjamin Leboe, Senior Vice President,
Finance and Chief Financial
Officer
(Principal Financial and Accounting Officer)
The foregoing certification is being furnished solely pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of
Title 18 of the United States Code) and is not being filed as part of the Report
or as a separate disclosure document.