-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ig++N4HlKEoUA/bCBhRs5cuM3Jb6HGL4xM4PzSNAp9GSctGEsni3U5dYMzJZYh0Y IDZOgy/BTZo1WFypC14NOw== 0000950134-98-007109.txt : 19980820 0000950134-98-007109.hdr.sgml : 19980820 ACCESSION NUMBER: 0000950134-98-007109 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980819 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: URANIUM RESOURCES INC /DE/ CENTRAL INDEX KEY: 0000839470 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-METALS, MINERALS (NO PETROLEUM) [5050] IRS NUMBER: 752212772 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-17171 FILM NUMBER: 98694083 BUSINESS ADDRESS: STREET 1: 12750 MERIT DRIVE STREET 2: SUITE 1210 CITY: DALLAS STATE: TX ZIP: 75251 BUSINESS PHONE: 2143877777 MAIL ADDRESS: STREET 1: 12750 MERIT DRIVE STREET 2: SUITE 1210 CITY: DALLAS STATE: TX ZIP: 75251 10-Q 1 FORM 10-Q FOR QUARTER ENDED JUNE 30, 1998 1 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X Quarterly report pursuant to Section 13 or 15(d) of the Securities - ---- Exchange Act of 1934 For the quarterly period ended June 30, 1998 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 0-17171 URANIUM RESOURCES, INC. (exact name of Registrant as specified in its Charter) DELAWARE 75-2212772 (State of Incorporation) (I.R.S. Employer Identification No.) 12750 MERIT DRIVE, SUITE 1020, DALLAS, TEXAS 75251 (Address of principal executive offices, including zip code) (972) 387-7777 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Title of Each Class of Common Stock Number of Shares Outstanding ----------------------------------- ---------------------------- Common Stock, $.001 par value 12,053,027 as of August 17, 1998 - -------------------------------------------------------------------------------- 2 URANIUM RESOURCES, INC. 1998 SECOND QUARTERLY REPORT ON FORM 10-Q TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - June 30, 1998 (Unaudited) and December 31, 1997 3 Consolidated Statements of Operations - Six Months and Three Months Ended June 30, 1998 and 1997 (Unaudited) 5 Consolidated Statements of Cash Flows - Six Months Ended June 30, 1998 and 1997 (Unaudited) 6 Notes to Consolidated Financial Statements - June 30, 1998 (Unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II -- OTHER INFORMATION 12 SIGNATURES 13 INDEX TO EXHIBITS E-1
2 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS URANIUM RESOURCES, INC. CONSOLIDATED BALANCE SHEETS JUNE 30, 1998 AND DECEMBER 31, 1997 (NOTE 1) ASSETS
June 30, December 31, ------------- ------------- 1998 1997 ------------- ------------- (Unaudited) Current assets: Cash and cash equivalents $ 1,493,050 $ 2,325,158 Short-term investment: Certificate of deposit, restricted 3,527,663 3,304,195 Receivables, net 58,591 4,507,090 Uranium inventory 2,599,667 2,260,200 Materials and supplies inventory 97,475 91,047 Prepaid and other current assets 197,639 253,910 ------------- ------------- Total current assets 7,974,085 12,741,600 ------------- ------------- Property, plant and equipment, at cost: Uranium properties 101,603,498 97,100,015 Other property, plant and equipment 580,967 580,676 Less-accumulated depreciation and depletion (39,356,559) (36,235,274) ------------- ------------- Net property, plant and equipment 62,827,906 61,445,417 Other assets 714,585 676,952 ------------- ------------- $ 71,516,576 $ 74,863,969 ============= =============
The accompanying notes to financial statements are an integral part of these consolidated balance sheets. 3 4 URANIUM RESOURCES, INC. CONSOLIDATED BALANCE SHEETS JUNE 30, 1998 AND DECEMBER 31, 1997 (NOTE 1) LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, December 31, ------------ ------------ 1998 1997 ------------ ------------ (Unaudited) Current liabilities: Accounts payable $ 937,584 $ 3,233,277 Notes payable 1,610,000 1,950,000 Accrued interest payable 4,600 5,035 Current portion of long-term debt 7,000 7,000 Royalties payable 538,183 630,284 Current portion of restoration reserve 311,000 511,000 Other accrued liabilities 422,914 405,814 ------------ ------------ Total current liabilities 3,831,281 6,742,410 ------------ ------------ Other long-term liabilities and deferred credits 5,331,126 4,787,427 Long-term debt, less current portion 6,099,904 6,462,343 Deferred federal income taxes 4,796,810 4,967,000 Shareholders' equity: Common stock, $.001 par value, shares authorized: 25,000,000 shares issued and outstanding (net of treasury shares): 1998 - 12,053,027 1997 - 12,053,027 12,205 12,205 Paid-in capital 40,629,923 40,222,359 Retained earnings 10,824,745 11,679,643 Less: Treasury stock (152,500 shares), at cost (9,418) (9,418) ------------ ------------ Total shareholders' equity 51,457,455 51,904,789 ------------ ------------ $ 71,516,576 $ 74,863,969 ============ ============
The accompanying notes to financial statements are an integral part of these consolidated balance sheets. 4 5 URANIUM RESOURCES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 1998 AND 1997 (NOTE 1) (UNAUDITED)
Three Months Ended Six Months Ended June 30, June 30, ------------------------------ ------------------------------ 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Revenues: Uranium sales - Produced uranium $ 1,175,260 $ 3,184,780 $ 6,110,426 $ 6,981,180 Purchased uranium 1,270,500 -- 2,397,300 3,413 ------------ ------------ ------------ ------------ Uranium sales 2,445,760 3,184,780 8,507,726 6,984,593 Costs and expenses: Cost of uranium sales - Direct cost of purchased uranium 1,054,733 -- 2,016,670 -- Royalties 51,247 171,005 275,517 390,548 Operating expenses 940,128 1,312,348 2,620,901 2,488,635 Provision for restoration and reclamation costs 64,593 191,445 327,434 439,503 Depreciation and depletion 865,616 1,492,673 3,069,284 3,334,922 ------------ ------------ ------------ ------------ Total cost of uranium sales 2,976,317 3,167,471 8,309,806 6,653,608 ------------ ------------ ------------ ------------ Earnings (loss) from operations before corporate expenses (530,557) 17,309 197,920 330,985 Corporate expenses - General and administrative 680,955 647,838 1,275,483 1,491,912 Depreciation 4,809 5,952 9,732 11,661 ------------ ------------ ------------ ------------ Total corporate expenses 685,764 653,790 1,285,215 1,503,573 ------------ ------------ ------------ ------------ Loss from operations (1,216,321) (636,481) (1,087,295) (1,172,588) Other income (expense): Interest expense, net of capitalized interest (39,587) (32,704) (76,407) (99,622) Interest and other income, net 49,911 690,008 96,804 857,292 ------------ ------------ ------------ ------------ Total other income 10,324 657,304 20,397 757,670 ------------ ------------ ------------ ------------ Earnings (loss) before federal income taxes (1,205,997) 20,823 (1,066,898) (414,918) Federal income tax benefit: Current -- (225) -- (225) Deferred (240,000) 4,000 (212,000) (83,000) ------------ ------------ ------------ ------------ Net earnings (loss) $ (965,997) $ 17,048 $ (854,898) $ (331,693) ============ ============ ============ ============ Net earnings (loss) per common share and common equivalent (basic and diluted) $ (0.08) $ 0.00 $ (0.07) $ (0.03) ============ ============ ============ ============ Weighted average common shares and common equivalent shares per share data Basic 12,053,027 12,027,527 12,053,027 11,475,676 ============ ============ ============ ============ Diluted 12,053,027 12,546,875 12,053,027 11,475,676 ============ ============ ============ ============
The accompanying notes to financial statements are an integral part of these consolidated statements. 5 6 URANIUM RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (NOTE 1) (UNAUDITED)
June 30, ------------------------------ 1998 1997 ------------ ------------ Cash flows from operations: Net loss $ (854,898) $ (331,693) Reconciliation of net income to cash provided by operations- Provision for restoration and reclamation costs 327,434 439,503 Depreciation and depletion 3,079,016 3,346,583 Credit for deferred income taxes (212,000) (83,000) Decrease in restoration and reclamation accrual (11,367) (203,902) Other non-cash items, net 829,712 (77,558) ------------ ------------ Cash flow provided by operations, before changes in operating working capital items 3,157,897 3,089,933 Effect of changes in operating working capital items- (Increase) decrease in receivables 4,448,499 (104,120) Increase in inventories (774,164) (810,161) Increase in prepaid and other current assets (134,192) (285,886) Decrease in payables and accrued liabilities (2,371,129) (1,755,276) ------------ ------------ Net cash provided by operations 4,326,911 134,490 ------------ ------------ Investing activities: Increase in investments (223,468) (300,320) Additions to property, plant and equipment - Kingsville Dome (2,643,826) (3,959,755) Rosita (216,944) (1,423,464) Vasquez (394,543) (92,412) Alta Mesa (30,525) (196,708) Churchrock (608,367) (379,596) Crownpoint (350,900) (513,088) Other property (323,117) (222,841) Increase in other assets (23,712) (12,199) ------------ ------------ Net cash used in investing activities (4,815,402) (7,100,383) ------------ ------------ Financing activities: Payments and refinancings of principal (5,453,617) (6,170,074) Proceeds from borrowings 5,110,000 -- Issuance of common stock and warrants, net -- 57,999 ------------ ------------ Net cash used in financing activities (343,617) (6,112,075) ------------ ------------ Net decrease in cash and cash equivalents (832,108) (13,077,968) Cash and cash equivalents, beginning of period 2,325,158 16,934,276 ------------ ------------ Cash and cash equivalents, end of period $ 1,493,050 $ 3,856,308 ============ ============
The accompanying notes to financial statements are an integral part of these consolidated statements. 6 7 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying statements should be read in conjunction with the audited financial statements included in the Company's 1997 Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended June 30, 1998 are not necessarily indicative of the results that may be expected for the full calendar year ending December 31, 1998. 2. LONG-TERM DEBT EXTENSION OF NOTE TERMS In March 1998, the Company entered into an agreement to extend the maturity date from May 31, 1998 to May 31, 2000 on the $6,000,000 secured convertible note that was issued from mutual funds managed by Ryback Management Company. The note is convertible into shares of the Company's common stock. In exchange for the extension in the term of the note, the conversion price was adjusted from $4.00 per share to $3.00 per share. In the same transaction, the exercise price for warrants held by the lenders to purchase 1,000,000 shares of the Company's common stock has also been adjusted from $4.00 to $3.00 per share, and the expiration date of the warrants has been extended from May 31, 1998 to May 31, 2000. In connection with this transaction the Company allocated $408,000 for the value of the warrants resulting in an effective rate of 10% on the refinanced note. CAPITALIZED INTEREST Interest capitalized in the six months ended June 30, 1998 and 1997 was $300,000 and $166,000, respectively. Total interest costs in these periods were $377,000 and $266,000, respectively. 3. URANIUM INVENTORY Uranium inventory consists of uranium concentrates (U3O8) located at the Company's Rosita and Kingsville Dome sites and also at converters awaiting delivery to customers. All uranium inventories are valued at the lower of cost (first-in, first-out) or market. In June 1998, the Company reduced the carrying value of its uranium inventory by $841,000 reflecting an adjustment to the lower of its cost or market value. This adjustment increased operating expenses by $490,000 and depreciation and depletion by $351,000 in the second quarter of 1998. 4. URANIUM PROPERTY REALIZABILITY The Company's ability to recover its investment in its uranium properties is dependent upon a number of factors, including, the sales price of uranium, the Company's ability to deliver profitable uranium production to its existing and future sales contracts and the Company's ability to access the financing/capital that may be necessary to develop and produce future projects. The market price of uranium has been volatile in recent years and there can be no assurance that the Company can continue to enter into new sales contracts at prices that are above the Company's existing or future production costs or that it will be able to recover its investment in its uranium properties. 7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward Looking Statements This Item 2 contains "forward-looking statements" which are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements relating to liquidity, financing of operations, continued volatility of uranium prices, estimates of future capital expenditures, proved undeveloped reserves and other such matters. The words "believes," "expects," "projects," "targets," or "estimates" and similar expressions identify forward-looking statements. The Company does not undertake to update, revise or correct any of the forward-looking information. Readers are cautioned that such forward-looking statements should be read in conjunction with the Company's disclosures under the heading: "Cautionary Statement for the Purposes of the `Safe Harbor' Provisions of the Private Securities Litigation Reform Act of 1995" in the Company's 1997 Annual Report on Form 10-K. CAPITAL RESOURCES AND LIQUIDITY Operating Cash Flows For the quarter ended June 30, 1998, the Company's cash and cash equivalents were $1,493,000 an increase of $905,000 as compared to a decrease of $3,146,000 for the second quarter of 1997. Cash and cash equivalents decreased by $832,000 for the six months ended June 30, 1998 compared to a decrease of $13,078,000 for the same period of 1997. The Company's uranium operations generated cash flow from operations of $3,804,000 for the quarter ended June 30, 1998, in comparison to a cash flow from operations in the same period in 1997 of $593,000. Net cash provided by uranium operations for the six months ended June 30, 1998 was $4,327,000 compared to cash flow from operations of $134,000 for the same period in 1997. The Company's net working capital at June 30, 1998 was $4,143,000. Investing Cash Flows South Texas Projects During the six months ending June 30, 1998, development expenditures totaling $2,644,000 and $217,000 were incurred at the Company's Kingsville Dome and Rosita sites, respectively. The expenditures at the Kingsville Dome project were primarily for development of new wellfields in PAA #3 and on the acquisition and construction of the remote ion exchange plants to be used in production from PAA #3. Capital expenditures incurred at the Vasquez project for the six months ended June 30, 1998 were $395,000 and were related primarily to permitting and licensing activities. Capital expenditures incurred on the Alta Mesa project for the six months ended June 30, 1998 were minimal and were related primarily to permitting and licensing activities. The Company expects to fund its 1998 operating and capital expenditures at its Kingsville Dome, Rosita, Vasquez and Alta Mesa projects from cash on hand, sales proceeds under its 1998 uranium deliveries and through existing financing arrangements. Funding of future development at the Company's South Texas projects will be dependent upon uranium prices. (See Dependence on Uranium Prices). New Mexico Projects Capital expenditures at the Company's Churchrock and Crownpoint projects for permitting and land holding costs totaled approximately $959,000 for the six months ending June 30, 1998 compared to costs of $893,000 for the same period in 1997. Capital requirements for 1998 and beyond for these projects are expected to be met through future sales proceeds from current and additional uranium delivery contracts and through future sources of debt and/or equity financing, all of which will be dependent on uranium prices. (See Dependence on Uranium Prices). 8 9 Financing Cash Flows In May 1996, the Company entered into a $3.0 million revolving credit facility. This facility was renewed and expanded for a two year term to a $5.0 million credit facility in July 1997. This facility is secured by the Company's uranium inventory and/or by receivables from its uranium sales contracts. Principal and interest payments under the loan are due monthly, with interest on the loan accruing at the prime rate plus 1%. Borrowings under this facility at June 30, 1998 totaled $1,610,000. In June 1996, the Company received $4.0 million in proceeds from the one-year note entered into with the Lindner Dividend Fund. The terms of the note provided for the payment of both the principal and accrued interest by June 1997 with interest on the note accruing at a rate of 6.5% per annum. The $4.0 million principal amount and accrued interest on this note was paid in January 1997. The Company was obligated to pay a production payment royalty of $1.00 per pound on the first three million pounds of uranium produced and sold from either Kingsville Dome or Rosita. The Company has cumulatively produced in excess of three million pounds of uranium from these properties and made the final payment of approximately $730,000 on this obligation in January 1997. In the first half of 1997 the Company generated $58,000 from the issuance of 14,500 shares of common stock associated with the exercise of certain stock warrants. Other Non-Cash Transactions In March 1997, the Company acquired from Santa Fe Pacific Gold Corporation ("Santa Fe") certain mineral interests covering approximately 500,000 acres in northwestern New Mexico in exchange for 1.2 million shares of the Company's common stock and a commitment for certain exploration expenditures. Approximately one-third of the acreage comprises uranium mineral rights and the remaining acreage comprises exploration rights with rights to purchase and develop any uranium mineral interests found. Included in the purchase is an existing royalty obligation from the Company to Santa Fe on certain properties currently under lease from Santa Fe. The Company estimates that there is approximately 14.7 million pounds of proven in-place uranium reserves on 37,000 acres of the property on which it acquired the entire mineral estate (excluding coal). Also included in the 500,000 acres is the fee interest in uranium on approximately 140,000 acres and the exclusive uranium rights, for 17 years, on approximately 346,000 acres. DEPENDENCE ON URANIUM PRICES The Company's operations are dependent on the price of uranium and its relationship to the Company's cost of production. Historically, uranium prices have demonstrated significant volatility and have been and will continue to be affected by factors outside of the Company's control. The most recent factor which may have a significant impact on the uranium industry and on uranium prices was the privatization by the U.S. Government of United States Enrichment Corp. ("USEC") (the entity which produces and sells uranium fuel enrichment services for commercial nuclear power plants and natural uranium) and the disclosure of substantial uranium inventories held by USEC which could be available for sale into the uranium market. USEC has disclosed that it holds approximately 75 million pounds of uranium and uranium equivalent products of which some 33 million pounds may have been transferred to USEC by the United States Department of Energy over and above what was provided for in the USEC Privatization Act of 1996. While the ultimate impact and timing to the uranium markets of the USEC privatization and the potential disposition of their newly disclosed uranium inventory levels is uncertain, there is potential for this event along with the ultimate disposition of the highly enriched Russian uranium and U.S. Government uranium stockpiles to depress current uranium prices below the $10.50 per pound level or to inhibit prices from rising to higher levels over the next several years. The prospect of potentially depressed uranium prices for continued periods could adversely impact the Company's ability to secure additional long-term sales contracts at prices that exceed the Company's overall costs as well as its ability to continue to develop additional wellfields at its existing projects and development of new properties. The Company will continue to evaluate its existing and future operations and its uranium holdings in Texas and New Mexico to optimize the value of each of its assets to the Company. 9 10 ENVIRONMENTAL ASPECTS The Company utilizes ISL solution mining technology as its only mining method. Unlike conventional uranium mining companies, the Company's mining technology does not create "tailings". Nevertheless, the Company is highly regulated. Its primary environmental costs to date have been related to obtaining and complying with environmental mining permits and, once mining is completed, the reclamation and restoration of the surface areas and underground water quality to a condition consistent with applicable requirements. Accruals for the estimated future cost of such activities are made on a per-pound basis as part of production costs. See the Consolidated Statements of Operations for the applicable provisions for such future costs. See also Note 1 - "Restoration and Reclamation Costs" of Notes to Consolidated Financial Statements in the Company's Form 10-K as of December 31, 1997. RESULTS OF OPERATIONS Revenues, earnings from operations and net income for the Company can fluctuate significantly on a quarter to quarter basis during the year because of the timing of deliveries requested by its utility customers. The Company's customers have generally elected, where possible, to take delivery of the bulk of the annual deliveries under their long-term sales contracts later in each year. Accordingly, operating results for any quarter or year-to-date period are not necessarily comparable and may not be indicative of the results which may be expected for future quarters or for the entire year. Three Months and Six Months Ended June 30, 1998 and 1997 The following is a summary of the key operational and financial statistics related to the Results of Operations:
Three Months Ended Six Months Ended June 30, June 30, ------------------------- ------------------------- 1998 1997 1998 1997 ------------------------- ------------------------- (In thousands, except per (In thousands, except per share data) share data) Uranium sales revenue $ 2,466 $ 3,185 $ 8,508 $ 6,985 Total pounds delivered 162 202 532 434 Average sales price/pound $ 15.14 $ 15.75 $ 16.00 $ 16.09 Pounds produced 130 200 357 424 Pounds purchased 100 -- 200 -- Average production cost of produced pounds $ 20.28 $ 17.83 $ 17.48 $ 16.40 Average cost of purchased pounds $ 10.81 $ -- $ 10.66 $ -- Average cost of produced pounds sold (1) $ 16.01 $ 14.82 $ 15.09 $ 14.36 Average cost of purchased pounds sold $ 10.81 $ -- $ 10.66 $ --
(1) Per pound costs in 1998 exclude an adjustment made in June 1998 to reduce the carrying value of the Company's uranium inventory to the lower of its cost or market value by approximately $841,000. 10 11 Revenue from uranium sales in the second quarter of 1998 decreased by $739,000 from 1997 amounts. The average sales price for total uranium deliveries in the second quarter ending June 30, 1998 and 1997 was $15.14 per pound and $15.75 per pound, respectively. Total uranium deliveries in the second quarter of 1998 of 162,000 pounds was 40,000 pounds lower than those made in the same period in 1997. Revenue from uranium sales in the first half of 1998 increased by $1,523,000 from 1997 levels. The average sales price for total uranium deliveries in the first half of 1998 and 1997 was $16.00 per pound and $16.09 per pound, respectively. Total uranium deliveries in the first half of 1998 of 532,000 pounds was 98,000 pounds higher than those made in the same period in 1997. Details of the cost of uranium sales were as follows:
Three Months Ended Six Months Ended June 30, June 30, ----------------- ----------------- 1998 1997 1998 1997 ------ ------ ------ ------ (In thousands) (In thousands) Cost of purchased uranium $1,055 $ -- $2,017 $ -- Royalties 52 171 276 391 Operating expenses 940 1,312 2,621 2,489 Provision for restoration and reclamation costs 65 191 327 439 Depreciation and depletion of uranium properties 865 1,493 3,069 3,335 ------ ------ ------ ------ Total cost of uranium sales $2,977 $3,167 $8,310 $6,654 ====== ====== ====== ======
The Company produced 130,000 pounds of uranium from the Rosita and Kingsville Dome facilities in the three months ending June 30, 1998, compared to 200,000 pounds in the same quarter of 1997. The average per pound production cost for the second quarter of 1998 was $20.28, compared to $17.83 in the same quarter in 1997. For the six month period ending June 30, 1998, the Company produced 357,000 pounds compared to 424,000 pounds in the same period during 1997. The average per pound production cost for the first half of 1998 was $17.48 compared to $16.40 in the same period in 1997. In January 1998, the Company received the necessary regulatory permits at Kingsville Dome to expand its production into PAA #3, located northwest of the current production fields. This new production area is expected to contain approximately 2.0 million in-place pounds (70% of which are projected to be produced). Production in the first wellfield commenced in June 1998. Beginning with the first wellfield in PAA #3, the Company has implemented new operating techniques utilizing a remote ion exchange plant concept. This change in technique has demonstrated an increased production efficiency and is expected to reduce overall production costs, however, there can be no assurance that such positive results will be sustainable over the Company's future wellfields. Operating expenses attributable directly to the sale of Kingsville Dome and Rosita produced pounds totaled $2,131,000 ($6.22 per pound) in the first six months ended June 30, 1998 compared to $2,489,000 ($5.73 per pound) for Kingsville Dome and Rosita produced pounds that were sold in the same period in 1997. The provision for restoration and reclamation in the first six months ended June 30, 1998 consists of $323,000 ($0.94 per pound) for production sold during 1998 and $4,000 for costs associated with reclamation activities related to the Benavides project (a previous mining location). The provision for restoration and reclamation in the six months ended June 30, 1997 consists of $411,000 ($0.95 per pound) for production sold and $29,000 for costs associated with reclamation at the Benavides project. The depreciation and depletion provision in the six months ended June 30, 1998 consisted of $2,718,000 ($7.93 per pound) for Rosita and Kingsville Dome production sold. The depreciation and depletion provision in the first six months of 1997 consisted of $3,335,000 ($7.68 per pound) for Rosita and Kingsville Dome production sold. 11 12 In June 1998, the carrying value of the Company's uranium inventory was reduced by $841,000 reflecting a lower of cost or market ("LCM") adjustment. The uranium inventory at June 30, 1998 totaled approximately 173,000 lbs. and was valued at a price of $14.35 per pound. The LCM adjustment had the effect of increasing operating expenses and depreciation and depletion in the second quarter of 1998 by $490,000 and $351,000, respectively. Royalty expenses in the first six months of 1998 totaled $51,000 compared to $171,000 in 1997. The decrease in 1998 is directly attributable to the reduction in sales of produced uranium and a lower spot market price compared to 1997. The average cost of uranium purchases made in the first half of 1998 was $10.66. No pounds were purchased in the same period in 1997. Total deliveries in the first six months of 1998 consisted of 343,000 produced pounds at an average cost per pound of $16.54 and 189,000 purchased pounds at a cost of $10.66 per pound. During the same period in 1997, the Company delivered 434,000 produced pounds, at an average cost per pound of $14.36. No purchased pounds were delivered during the first half of 1997. Corporate expenses consisting of general and administrative ("G&A") expenses decreased to $1,285,000 in the first half of 1998 from $1,504,000 in the first half of 1997. This reduction resulted primarily from employee incentive awards paid in the first half of 1997 of $170,000 compared to $4,000 in 1998. Total other income for the first six months of 1998 decreased by $737,000 from the same period in 1997. This change resulted from the settlement in June 1997 of the Company's lawsuit against The Professional Bank of Denver, Colorado ($575,000) and from lower interest income and was offset by a reduction in net interest of $179,000 and $23,000 respectively for the first six months of 1998. The lower interest income resulted from reductions in average available cash and investment balances which were generated from the Company's equity placement in December 1996. YEAR 2000 READINESS The Company currently utilizes computer software in the management of its operations and in accounting for its operating results that could be affected by the date change in the year 2000. All critical software utilized by the Company has been purchased from and is supported by third party vendors. The Company conducted a review of the potential impact of the year 2000, and believes that it will not encounter significant operational or financial costs related to compliance with this issue. 12 13 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On July 20, 1998, the Company as a member of the United Producers of America (the "UPA"), a trade group representing U.S. uranium mining production companies, filed a lawsuit in the U.S. District Court of Wyoming. In the suit, the UPA members seek declaratory and injunctive relief designed to halt the U.S. Department of Energy (the "DOE") from transferring significant amounts of uranium to United States Enrichment Corporation ("USEC") (the former government entity which was privatized in July 1998.) The UPA believes that the DOE violated federal law intended to protect domestic uranium producers through the transfer of large quantities of uranium from government stockpiles to USEC in direct violation of restrictions set by Congress in the USEC Privatization Act of 1996 and the Energy Policy Act of 1992. (See Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Dependence on Uranium Prices.) ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The 1998 Annual Meeting of Stockholders was held on June 5, 1998 in Dallas, Texas. Shares representing 11,119,549 votes (92.3% of total outstanding) were present in person or by proxy. At the meeting, the Stockholders of the Company elected Leland O. Erdahl, Paul K. Willmott, George R. Ireland, and James B. Tompkins to the Board of Directors for a one-year term. In addition, the Company's stockholders approved the amendment to the Company's 1995 Stock Incentive Plan to increase the number of shares of the Company's Common Stock, $.001 par value per share, eligible for issuance under the Plan from 750,000 shares to 1,250,000 shares and ratified Arthur Andersen LLP as independent accountants for the company for 1998. The proposal to increase the eligible shares under the Plan was approved by a vote of 7,124,982 shares in favor, 3,921,382 opposed and 41,803 abstaining. The ratification of Arthur Andersen LLP as independent accountants was approved by a vote of 11,081,094 shares in favor, 18,683 opposed and 19,772 abstaining. ITEM 5. OTHER INFORMATION. Effective July 28, 1998, James B. Tompkins resigned his position as a Director of the Company. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. Financial Data Schedule 13 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. URANIUM RESOURCES, INC. Dated: August 19, 1998 By: /s/ Paul K. Willmott ------------------------- Paul K. Willmott Director, President and Chief Executive Officer Dated: August 19, 1998 By: /s/ Thomas H. Ehrlich -------------------------- Thomas H. Ehrlich Vice President - Finance and Chief Financial Officer (Principal Financial and Accounting Officer) 14 15 INDEX TO EXHIBITS EXHIBIT DESCRIPTION - ------- ----------- 27 FINANCIAL DATA SCHEDULE E-1 EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1998 JUN-30-1998 1,493,050 3,527,663 58,591 0 2,599,667 7,974,085 102,184,465 (39,356,559) 71,516,576 3,831,281 6,099,904 0 0 12,205 51,445,250 71,516,576 8,507,726 8,507,726 8,309,806 9,595,021 0 0 76,407 (1,066,898) (212,000) (854,898) 0 0 0 (854,898) (.07) (.07)
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