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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee required]
For the fiscal year ended December 31, 1995 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No fee required]
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)
(214) 387-7777
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, $.001 par value per share
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
The aggregate market value of the Common Stock of the Registrant held by
nonaffiliates at March 21, 1996 was approximately $57,284,440.
Number of shares of Common Stock outstanding as of March 15, 1996: 8,754,777
shares.
Documents Incorporated by Reference:
Document Location in 10-K
Proxy Statement for 1996 Annual Meeting of Stockholders Part III
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URANIUM RESOURCES, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
TABLE OF CONTENTS
<TABLE>
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PART I
Item 1. Business............................................................................................. 2
General.............................................................................................. 2
Affiliation with and Bankruptcy of Oren L. Benton.................................................... 2
Liquidity Difficulties and New Capital............................................................... 3
The ISL Mining Process............................................................................... 5
Regulations.......................................................................................... 6
Uranium Prices and Competition....................................................................... 7
The Anti-Dumping Suit................................................................................ 8
Amendment to the Russian Suspension Agreements..................................................... 10
Uranium Sales Contracts............................................................................ 11
Item 2. Properties......................................................................................... 12
Company's Total In-Place Reserves.................................................................. 12
South Texas Properties............................................................................. 13
New Mexico Properties.............................................................................. 14
Item 3. Legal Proceedings.................................................................................. 16
Item 4. Submission of Matters to a Vote of Security Holders................................................ 16
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.............................. 17
Market Information................................................................................. 17
Holders............................................................................................ 17
Dividends.......................................................................................... 17
Item 6. Selected Financial Data............................................................................ 18
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 19
Capital Resources and Liquidity.................................................................... 19
Environmental Aspects.............................................................................. 19
Balance Sheet...................................................................................... 19
Results of Operations.............................................................................. 20
Item 8. Financial Statements and Supplementary Data........................................................ 20
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............... 20
</TABLE>
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<TABLE>
<S> <C> <C> <C>
PART III
Item 10. Directors and Executive Officers of the Registrant................................................. 23
Item 11. Executive Compensation............................................................................. 23
Item 12. Security Ownership of Certain Beneficial Owners and Management..................................... 23
Item 13. Certain Relationships and Related Transactions..................................................... 23
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.................................... 24
SIGNATURES.................................................................................................. 25
Index to Consolidated Financial Statements, F-1 to F-21
Auditors' Report, Financial Statements
and Supplemental Data
Index to Exhibits E-1 to E-2
</TABLE>
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URANIUM RESOURCES, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
PART I
ITEM 1. BUSINESS.
GENERAL
Uranium Resources, Inc. (the "Company") was formed in 1977 and incorporated
in the state of Delaware in 1987 to acquire, explore and develop properties for
the mining of uranium (hereinafter sometimes referred to as "U3 08") in the
United States using the in situ leach mining process ("ISL"). The Company has
two developed mining properties - Kingsville Dome and Rosita - both located in
South Texas.
The Kingsville Dome property began production in May 1988, and continued
through September 1990, when the Company halted production due to the decline
in the spot market price for uranium. The Rosita property began production in
October 1990, with the expectation that the production costs at Rosita would be
lower than those at Kingsville Dome. The Company continued production at Rosita
through March 31, 1992, when the project was placed on stand-by, due to the
continued decline in the spot market price for uranium to less than $8 per
pound at that time.
Kingsville Dome was in production for 29 months from May 1988 through
September 1990. During that period it produced 1,473,000 pounds of U3 08 at an
average cost of approximately $12 per pound. Rosita was in production from
October 1990 through March 1992 and during that period produced approximately
1,073,000 pounds of U3 08 at an average cost of approximately $10 per pound.
The combined production from Kingsville Dome and Rosita represented
approximately 6.6% of the total U.S. uranium production during that period.
In June 1995 and March 1996, the Company resumed production at Rosita and
Kingsville Dome, respectively. At February 29, 1996, the spot market price for
uranium was $15.40 per pound. Between June 1995 and December 1995, the Company
produced approximately 610,000 pounds of U3 08 from the Rosita facility at an
average cost of $10.30 per pound.
The Company's primary source of revenue is derived from its sale of
uranium. The Kingsville Dome and Rosita facilities have provided a portion of
the uranium inventory required for such sales while these sites were producing.
The Company has also purchased a significant amount of uranium through a
combination of long-term and spot contracts to secure the inventory necessary
to satisfy the obligations under its uranium sales contracts. In recent years,
such uranium purchases have comprised the major source for the Company's
uranium deliveries but are projected to be less significant with the resumption
of production at Kingsville Dome and Rosita.
Natural uranium's only current commercial use is as fuel for nuclear
powered reactors. Accordingly, the Company's present and potential customers
are electric utilities that operate nuclear power plants. The electric
utilities purchase uranium from the Company for shipment to conversion
facilities. Generally, the Company sells uranium to the utilities under
long-term contracts. These contracts generally provide for minimum prices
which escalate with inflation. See Item 1. Business - Uranium Sales Contracts.
The United States is the world's largest producer of nuclear-generated
electricity. There were 109 nuclear units which generated approximately 22% of
the country's total electricity in 1994. Currently, there are no new nuclear
power plants under construction in the U.S. and accordingly, the number of
potential customers in the U.S. is currently fixed.
At December 31, 1995, the Company had proved in-place uranium reserves
totaling approximately 51.4 million pounds (estimated 33.7 million pounds
recoverable) and probable in-place uranium reserves totaling approximately 18.0
million pounds (estimated 11.8 million pounds recoverable). These reserves are
primarily located at the Kingsville Dome and Rosita properties and at certain
undeveloped New Mexico properties. Recovery of the in-place amounts of between
65% and 80% is expected by the Company. See Item 2 - Properties for a
description of the Company's properties and reserve information.
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As of February 29, 1996, the Company had 118 employees, including its
professional staff consisting of eight geologists, four engineers, two
chemists, two landmen and two certified public accountants. The Company's
principal executive offices are located at 12750 Merit Drive, Suite 1020,
Dallas, Texas 75251 and its telephone number is (214) 387-7777.
The Company maintains regional offices to support its production,
exploration and permitting activities in Corpus Christi, Texas, at the
Kingsville Dome site near Kingsville, Texas, at the Rosita plant site near
Freer, Texas and in Crownpoint, New Mexico. The Company has five wholly-owned
subsidiaries, URI, Inc., a Delaware corporation, Hydro Resources, Inc., a
Delaware corporation, URI Minerals, Inc., a Delaware corporation, Beltline
Resources, Inc., a Texas corporation, and Hydro Restoration Corporation, a
Delaware corporation. The Kingsville Dome and Rosita properties are owned by
URI, Inc., and the undeveloped New Mexico properties are owned by Hydro
Resources, Inc. References herein to the Company include the Company and its
wholly-owned subsidiaries unless the context otherwise requires.
AFFILIATION WITH AND BANKRUPTCY OF OREN L. BENTON
In 1993 the Company was anticipating liquidity problems due to unexpected
reductions in deliveries to its largest customer. Because of the liquidity
problems, the Company began discussions with Oren L. Benton of Denver,
Colorado, and Mr. Benton agreed to restructure the Company's loans with
Citibank N.A. and to provide the Company with additional capital of
approximately $7 million. In addition, in order to provide the Company with
funds while the Citibank restructuring was being negotiated, Mr. Benton
advanced the Company a total of $2,250,000. In consideration of these
undertakings, certain shareholders of the Company, including officers and
directors of the Company, entered into arrangements with Mr. Benton which gave
him the right to acquire their shares or to control the voting of the shares.
Those arrangements gave Mr. Benton, initially, control over 53% of the
outstanding Common Stock of the Company. Effective March 29, 1995 the
arrangements by which Mr. Benton could acquire or exercise control over shares
of the Company's Common Stock held by former officers and directors of the
Company terminated. This information is based on Schedule 13D's filed with the
Securities and Exchange Commission.
The Company and Mr. Benton completed the above restructuring and related
transactions in August 1994 through Nuexco Exchange, A.G., a Swiss company
owned by Mr. Benton ("NEAG"). The restructuring resulted in an indebtedness of
$12,500,000 owed to NEAG (the "NEAG Notes") and repayment of the Citibank Note.
In July and August 1994 a majority of the existing directors of the Company
resigned, and Mr. Benton named their replacements. Mr. Benton consummated the
various transactions individually or through entities which he owned or
controlled, directly or indirectly (hereinafter sometimes referred to
collectively as the "Benton Companies"). On February 23, 1995 Mr. Benton and
certain of the Benton Companies filed for protection under Chapter 11 of the
Federal Bankruptcy Code (the "Bankruptcy Code"). Such bankruptcies are
hereinafter referred to as the "Benton Bankruptcy."
As of April 29, 1996 Mr. Benton was the record owner of 516,040 shares of
the Company's Common Stock, representing 6.4% of the outstanding Common Stock.
On that date CIMM was the record owner of 736,842 shares of Common Stock,
representing 9.2% of the outstanding Common Stock. Mr. Benton may be deemed
the beneficial owner of CIMM's shares. However, the Company has been informed
by counsel to Westinghouse Electric Corporation ("Westinghouse"), that
Westinghouse holds CIMM's 736,842 shares pursuant to a pledge of such shares as
collateral security to Westinghouse by CIMM on December 6, 1994. Of the shares
held of record by Mr. Benton, counsel to Intertech Corporation ("Intertech")
has informed the Company that Intertech, by and through its attorneys, holds
496,040 shares pursuant to a pledge of such shares as collateral security under
a Stipulation and Agreement dated October 28, 1994 agreed and accepted to by
Intertech, Trading and Mr. Benton.
During 1994 and the first quarter of 1995 the Company engaged in several
transactions with Mr. Benton and certain of the Benton Companies which are now
in bankruptcy. In August 1994, the Company purchased uranium from one such
Company and assigned to it the Company's rights under two uranium purchase
contracts. Also in August and September 1994, the Company sold uranium to two
other such companies. On November 18, 1994, another Benton Company assigned to
the Company its rights under a uranium supply contract with a European utility
as payment for the foregoing purchases of uranium and for shares of the
Company's Common Stock.
In January 1995, the Company and a Benton Company entered into an oral
agreement to process approximately 2 million pounds of uranium through a mill
controlled by Benton Companies (the "Mill Joint Venture"). On January 10,
1995, the Company transferred $1 million to certain Benton Companies under that
agreement. The specific Benton Companies which were to be part of the planned
joint venture did not receive the transferred funds. Because of the
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Benton Bankruptcy the realizability of the Company's $1 million investment is
doubtful. On November 18, 1994, the Company entered into a separate agreement
to acquire a partnership interest from a Benton Company for the development of
uranium properties in Wyoming and South Dakota. The Company agreed to issue
360,000 shares of its Common Stock to EFL in exchange for the partnership
interest. Neither the transfer of the partnership interest nor the issuance of
the shares has occurred.
Between January 17, 1995 and January 20, 1995, $1,080,000 of the Company's
funds were transferred to certain of the Benton Companies and an individual
affiliated with Mr. Benton. Such Benton Companies are now in bankruptcy. The
transfer of funds was not authorized by the Company's Board of Directors. The
Company is pursuing various actions to recover the $1,080,000 and has recovered
$300,000 of the total so far. The ability of the Company to recover the
balance is not certain.
The transfer of the $1,080,000 left the Company without funds to pay its
trade creditors and employees. The Benton Bankruptcy will probably delay or
prevent implementation of the Mill Joint Venture. The Benton Bankruptcy may
also have the result of causing certain of the transactions entered into by the
Company with the Benton Companies to be reviewed by the bankrupt estate. Such
review could result in the assertion of claims against the Company. At this
time the Company is not able to assess whether any of the transactions so
described may be adversely affected by the Benton Bankruptcy.
LIQUIDITY DIFFICULTIES AND NEW CAPITAL
In 1994 and early 1995, the Company experienced a severe cash shortage.
Between January 11, 1995 and January 20, 1995 a total of $2,080,000 cash was
transferred from the Company to entities or persons owned, controlled or
affiliated with Mr. Benton. These transfers left the Company without funds to
pay its creditors and employees and facing a liquidity crisis which could be
solved only by raising new capital. In addition to obligations to creditors
and employees, the Company needed $4 million for purposes of bringing its
Rosita property back into production and making pre-production expenditures at
the Company's Kingsville Dome property.
The report (the "Report") of the Company's independent public accountants
(the "Accountants") with respect to the Company's financial statements for the
year ended December 31, 1994, in the Form 10-K stated that such financial
statements were prepared assuming, that the Company would continue as a going
concern. The Report further indicated, however, that as of December 31, 1994,
the Company had a net working capital deficit and had assigned most of its 1995
cash flow from supply contracts to one of the Company's creditors, and that
such assignment raised substantial doubt as to the Company's ability to
generate cash flow and to continue as a going concern. The Report further
noted that the transfer of $2.08 million from the Company to entities
affiliated with Oren L. Benton further exacerbated the Company's liquidity
crisis. For the reasons described below, on January 25, 1996, the Accountants
reissued their opinion and removed the going concern modification.
On May 25, 1995, the Company received $6,000,000 in cash (the "Lindner
Loan") through the issuance of 6.5% secured convertible notes in the aggregate
principal amounts of $1,500,000 and $4,500,000, initially convertible at $4.00
per share into 375,000 and 1,125,000 shares of Common Stock, to Lindner
Investments (on behalf of Lindner Bulwark Fund) ("Bulwark") and Lindner
Dividend Fund, Inc. ("Dividend"), respectively. In addition, the Company
issued immediately exercisable warrants (the "Lindner Warrants") to purchase
375,000 shares and 1,125,000 shares of the Company's Common Stock at an initial
exercise price of $4.00 per share to Lindner Investments (on behalf of Lindner
Bulwark Fund) and Dividend, respectively.
On December 26, 1995, Dividend partially exercised its warrant and
purchased 500,000 shares at a purchase price of $4 per share for a total
consideration of $2 million.
The cash obtained from the Lindner Loan and the partial exercise of the
warrant has substantially improved the Company's net working capital position
and has enabled the Company to put its Rosita property back into production,
effective June 1995, and to put its Kingsville Dome property back in production
in March 1996. The Company's net working capital position at December 31, 1995
was a positive $4,710,000, an improvement of over $7,255,000 from its net
working capital position at December 31, 1994, due primarily to the
consummation of the Lindner Loan, the partial
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exercise of the Lindner warrants, and the resumption of uranium production at
the Company's Rosita facility in South Texas in June 1995. The Company expects
to utilize the cash flow from sales of uranium produced at the Rosita and
Kingsville Dome facilities to fund the Company's short-term liquidity needs.
However, there can be no assurance that such cash flow will be sufficient to
meet such needs. Accordingly, the Company is continuing to review additional
sources of financing and capital to satisfy its future capital requirements.
THE ISL MINING PROCESS
The ISL mining process, also known as solution mining, differs dramatically
from conventional mining techniques. Historically, the majority of U.S.
uranium production resulted from either open pit surface mines or underground
shaft operations. These conventional mining methods are, in many cases, capital
and labor intensive, and U.S. producers that employ such methods generally are
not cost competitive with the majority of non-U.S. conventional producers.
Solution mining was first tested for the production of uranium in the
mid-1960's and was first applied to a commercial-scale project in 1975 in South
Texas. The solution mining method had become well established in the South
Texas uranium district by the late 1970's, where it was employed in connection
with approximately twenty commercial projects, including two operated by the
Company.
In the ISL process, groundwater fortified with oxidizing alkaline
solubilizing agents is pumped into a permeable ore body causing the uranium
contained in the ore to dissolve. The resulting solution is pumped to the
surface where it is further processed.
An ISL project involves several major operational components:
Ore Body Evaluation. Ore bodies which are currently being mined by the ISL
process are associated with groundwater saturated permeable sandstone
formations located between 100 and 2,000 feet below the surface. The uranium
ore is deposited in a roll front configuration where the condition of the
groundwater passing through the permeable deposit changes character from
oxidation to reduction. Some important factors in evaluating an ore body for
the ISL process are permeability, the thickness of the ore zone, depth, size,
grade of ore, shape of the ore body, nature of uranium mineralization, host
rock mineralogy, and the hydrology. These factors are important in determining
the design of the wellfield, the type and flow of the leaching solution, and
the nature of the surface ISL facilities.
Environmental Considerations and Permitting. The production of uranium is
subject to an extensive body of environmental regulations, and to date, the
Company's primary environmental costs have been related to obtaining and
complying with the numerous permits that must be obtained from federal and
state agencies prior to the commencement of uranium mining activities. See Item
1. Business - Regulations below. Environmental considerations include the
prevention of groundwater contamination (through proper design of the wellfield
and monitoring to prevent the escape of leaching solution into the groundwater
outside the mining area) and the treatment and disposal of liquid and/or solid
waste materials generated by the ISL process ("by-product material"). Unlike
conventional uranium mining companies, the Company's mining technology does not
create "tailings". The large majority of by-product material that is generated
is liquid and generally is disposed of either through deep wells or, after
treatment to remove any residual radioactive material, by surface discharge.
Any such disposal must be approved by the regulatory agency having jurisdiction
over that aspect of the Company's activities. Once mining is completed, the
Company is required to reclaim the surface areas and restore underground water
quality to the level of quality mandated by applicable regulations. A small
amount of solid low-level radioactive by-product material generated by the ISL
process is disposed of by delivery to a licensed by-product material site or
conventional uranium mill tailings pile. The costs of such solid by-product
material disposal activities are insignificant relative to total costs of
production and are not a material portion of restoration/reclamation costs.
Estimated future costs of reclamation of surface areas, restoration of
underground water quality and waste disposal are accrued on a per-pound basis
as a part of production costs. See Note 1 - Restoration and Reclamation Costs
of "Notes to Consolidated Financial Statements."
Wellfield Design. The wellfield is the mechanism by which the leaching
solution, or lixiviant, is circulated through the ore body. The wellfield
consists of a series of injection, production (extraction) and monitoring wells
drilled in specified patterns. These patterns will vary primarily with the
configuration of the ore and the hydrologic characteristics of each deposit.
Determining the wellfield pattern is crucial to minimizing costs and maximizing
efficiencies of production. Injection and production wells vary in diameter
from four to six inches. The wells are cased with polyvinyl chloride (PVC) or
fiberglass casings that are cemented in place down to the top of the ore zone.
Generally, the wells
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are drilled down to the bottom of the ore zone (through which the lixiviant
must be circulated to achieve production), and the well is completed using
wellscreen, with or without gravel packing.
Lixiviant Chemistry. The lixiviant, consisting of native groundwater
fortified with an oxidant and an anionic complexing agent, is introduced via
the injection wells to the ore bearing aquifer. The oxidant, gaseous oxygen,
changes the uranium valence state to make it amenable to solubility by the
lixiviant. The lixiviant (sodium bicarbonate) complexes the original uranium
to a soluble ion, uranyl carbonate, and dissolves the uranium as it is
circulated through the ore body. The uranium that has been dissolved into
solution is then pumped to the surface.
Uranium Recovery Process. The uranium recovery process consists of a
lixiviant circuit, an elution/precipitation circuit and sometimes a drying and
packaging process. The lixiviant circuit extracts the uranium from the
lixiviant by absorption of the uranium onto resin beads through ion exchange.
The lixiviant is then refortified with chemicals and reinjected into the ore
body. The uranium is absorbed onto the resin beads. When the resin beads are
loaded with uranium, the resin beads are eluted where the uranium is stripped
off with a salt water solution and precipitated from that solution to produce
slurry. The slurry form is dried and packaged for shipment as U3 O8 powder.
Wellfield Restoration. Wellfield restoration involves returning the
depleted aquifer to a condition consistent with its pre-mining use and removing
evidences of surface disturbance. The restoration of the wellfield can be
accomplished by flushing the ore zone with native ground water and/or using
reverse osmosis to remove ions to provide clean water for reinjection to flush
the ore zone.
REGULATIONS
The production of uranium is subject to a variety of regulations, including
extensive federal and state environmental regulations, that have a material
effect on the economics of the Company's operations and the timing of project
development. In Texas, environmental matters are regulated through the Texas
Natural Resources Conservation Commission (the "TNRCC"), which represents a
consolidation of the previous Texas Water Commission, Texas Air Control Board
and Texas Department of Health, all who had regulations which apply to the
Company. For example, air quality is regulated by the TNRCC through its air
quality permit regulations, which were adopted in conformity with the federal
Clean Air Act, which is administered by the U.S. Environmental Protection
Agency (the "EPA"). Groundwater quality is subject to extensive regulation by
the TNRCC through its Underground Injection Control ("UIC") program. Base UIC
permits are granted for each project which outline basic operating and
monitoring provisions to assure groundwater protection during mining and
restoration. Additionally, after the mining permits are obtained but before
mining can be conducted in individual well fields, the TNRCC issues a
production area authorization that sets forth specific operational and
monitoring parameters and post-mining restoration requirements. The TNRCC also
regulates wastewater disposal at ISL mining projects. The Company generally
utilizes disposal wells or surface discharge, both of which require TNRCC
permits. All of such regulations were promulgated by the TNRCC in conformity
with the UIC provisions of the federal Safe Drinking Water Act, which is also
administered by the EPA. The impact on the environment of the radiological
characteristics of the mining process are also regulated by the TNRCC, which
must issue a license before mining can begin. The TNRCC's radiation protection
regulations are issued in conformity with the provisions of the Atomic Energy
Act and the Uranium Mill Tailings Reclamation and Control Act, which are
administered by the U.S. Nuclear Regulatory Commission (the "NRC").
Similar permits, authorizations and approvals are required in New Mexico;
however, jurisdiction there is shared by the state regulatory agencies and the
EPA and the NRC. Additionally, before mining can occur in New Mexico, the
Company must obtain and perfect through the New Mexico state engineer's office
adequate water rights to accommodate the ISL mining process.
There can be no assurance that the permits or the allocation of water
rights required for any project of the Company will be approved by the relevant
governmental agency in the form contemplated by management, or in any other
form, or within the time periods necessary to commence timely production.
Additionally, regulations and permit requirements are subject to revisions and
changes which may materially affect the Company's operations. Any delay or
failure in obtaining such permits or water rights could materially adversely
affect the business and operations of the Company.
In addition to the costs and responsibilities associated with obtaining and
maintaining permits, and the regulation of production activities, the Company
is subject to those environmental laws and regulations applicable to the
ownership
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and operation of real property in general, including but not limited to the
potential responsibility for the activities of prior owners and operators.
URANIUM PRICES AND COMPETITION
The Company's future results will be significantly affected by the price of
uranium, which is determined primarily by supply and demand on a worldwide
basis, and by the relationship of that price to the Company's costs of
production. There are approximately twelve major uranium producing entities
which compete with the Company for sales of uranium to a worldwide base of
nuclear electric utilities. The Company believes that the operating results
demonstrated at the Kingsville Dome and Rosita projects and the detailed
analysis of anticipated production costs at its New Mexico properties place the
Company's production costs within the lowest quartile worldwide when these
properties are operated at or near full production. In comparison, the spot
price of uranium during the majority of the time since mid-1989 has been near
or below the Company's marginal cost of production at Kingsville Dome and
Rosita. However, since the end of 1995, the price of uranium has risen 26% to
the current level of $15.40 per pound at February 29, 1996.
The following table sets forth the average spot price per pound U3 O8 as
reported by Trade Tech, LLC, formerly Nuexco Information Services ("NUEXCO"),
for the periods indicated.
<TABLE>
<CAPTION>
Average Annual Spot Price Per Pound of Uranium
==============================================
<S> <C> <C> <C>
1978 $43.23 1987 $16.78
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1979 $42.57 1988 $14.55
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1980 $31.79 1989 $10.00
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1981 $24.19 1990 $ 9.76
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1982 $19.90 1991 $8 .70
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1983 $22.98 1992 $ 8.53
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1984 $17.27 1993(1) $ 9.98
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1985 $15.60 1994 $ 9.33
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1986 $17.00 1995 $11.46
==============================================
</TABLE>
(1) All prices beginning in 1993 represent the nonrestricted origin U3 O8
deliveries available to U.S. utilities. Nuexco began reporting a two-tier
price structure soon after the United States and certain republics of the
former Soviet Union agreed to import restrictions on uranium produced in the
Commonwealth of Independent States (the republics of the former Soviet Union)
("CIS"). The foregoing prices reflect those prices available to U.S. utility
consumers.
The spot price fluctuated in 1994 between $9.05 and $9.60 per pound and in
1995 it fluctuated between $9.65 and $12.20 per pound. At February 29, 1996,
the spot price was $15.40. The following table shows U.S. and western world
production and consumption and year-end western world inventory levels for the
years presented.
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PRODUCTION AND CONSUMPTION OF U3 O8(1)
(Western World Countries)
<TABLE>
<CAPTION>
====================================================================================================
TOTAL TOTAL WESTERN YEAR END
WESTERN WORLD WESTERN
YEAR TOTAL U.S. TOTAL U.S. WORLD CONSUMPTION WORLD
PRODUCTION CONSUMPTION PRODUCTION INVENTORY (2)
- ----------------------------------------------------------------------------------------------------
(ALL AMOUNTS ARE MILLION POUNDS OF U3 08)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1979 37.5 21.1 99.6 48.2 280.1
- ----------------------------------------------------------------------------------------------------
1980 43.7 20.7 114.9 42.3 352.7
- ----------------------------------------------------------------------------------------------------
1981 38.5 20.6 114.8 58.3 409.2
- ----------------------------------------------------------------------------------------------------
1982 26.9 20.9 107.7 71.7 445.2
- ----------------------------------------------------------------------------------------------------
1983 21.2 30.5 95.9 80.0 461.1
- ----------------------------------------------------------------------------------------------------
1984 14.9 28.3 101.0 79.1 483.0
- ----------------------------------------------------------------------------------------------------
1985 11.3 34.0 90.6 88.6 485.0
- ----------------------------------------------------------------------------------------------------
1986 13.9 32.3 97.3 93.6 488.7
- ----------------------------------------------------------------------------------------------------
1987 12.4 37.9 95.4 107.4 476.7
- ----------------------------------------------------------------------------------------------------
1988 13.3 39.3 96.8 108.6 464.9
- ----------------------------------------------------------------------------------------------------
1989 13.5 40.2 89.6 120.3 434.2
- ----------------------------------------------------------------------------------------------------
1990 10.2 41.0 74.5 121.8 386.9
- ----------------------------------------------------------------------------------------------------
1991 7.9 42.0 68.2 126.4 328.7
- ----------------------------------------------------------------------------------------------------
1992 5.1 45.5 61.1 124.0 265.8
- ----------------------------------------------------------------------------------------------------
1993 3.0 47.0 57.7 128.7 194.8
- ----------------------------------------------------------------------------------------------------
1994 3.4 39.0 58.3 131.5 121.6
- ----------------------------------------------------------------------------------------------------
1995 (estimate) 5.9 47.1 66.0 133.3 54.3
====================================================================================================
</TABLE>
(1) Sources: Various industry studies and reports.
(2) Does not reflect the estimated exports to the western world from the former
eastern bloc countries and China (as discussed below) of an approximate
cumulative 85-100 million pounds since 1989.
The above table demonstrates the declining production and increasing
consumption of uranium over recent years, on both a U.S. and western world
basis. Inventory levels in the western world and the United States have
declined significantly in recent years. Western world inventory levels peaked
at 8.3 years of consumption at the end of 1980 and since then have declined to
less than two years of consumption currently. Estimates of future production
and consumption indicate that annual consumption on a western world and U.S.
basis during 1996-2000 will average approximately 133 million and 45 million
pounds, respectively.
THE ANTI-DUMPING SUIT
On November 8, 1991, an ad hoc committee of U.S. uranium producers,
including the Company, and the Oil, Chemical and Atomic Workers Union filed an
anti-dumping petition with the International Trade Commission (the "ITC")
against the Soviet Union and each of its republics alleging that voluminous
imports of Soviet uranium were being "dumped" into the U.S. market at prices
significantly below fair value. In December 1991, the ITC commissioners made a
preliminary decision that material injury to the domestic uranium industry may
have occurred and forwarded the matter to the International Trade
Administration of the Department of Commerce.
7
<PAGE> 11
On May 29, 1992, the Department of Commerce (the "DOC") ruled that
imports of uranium from six of the twelve republics that comprised the former
Soviet Union were sold in the United States at less than fair market value.
The dumping margin for uranium exported from these republics was set at 115.82
percent.
Effective October 16, 1992, the DOC announced that it had signed
suspension agreements with all six of the CIS republics against which the May
1992 decision had been rendered. The agreements limited imports for eight
years and provided for an additional two years of monitoring. The agreements
established quantitative restraint agreements with three separate quota
mechanisms related to (1) Market Price Quotas, (2) Highly Enriched Uranium
("HEU") Quotas, and (3) Existing Long-Term Contract Quotas.
(1) MARKET PRICE QUOTA: The agreements limit the volume of
imports to the U.S., based on the U.S. market price for
uranium for the previous six months. Imports from the six
republics are prohibited if the market price is below $13 per
pound. At $13 per pound, a total of 2.9 million pounds
annually from all six republics is allowed. As the price
rises, the quotas increase proportionally and quantities are
unlimited above $21 per pound. The Market Price Quota is as
follows:
<TABLE>
<CAPTION>
PRICE ANNUAL QUOTA LEVELS
($/LB. U3 O8) MILLION LBS. U3 O8 EQUIVALENT
------------- -----------------------------
<S> <C>
$13 2.9
$14 3.5
$15 4.3
$16 5.5
$17 7.7
$18 11.0
$19 12.7
$20 15.8
$21 and up Unlimited
</TABLE>
(2) HEU QUOTA: HEU is included within the agreement but may enter
outside of the above market price quota limitations if
imported by the U.S. Department of Energy ("DOE") or its
successor, The United States Enrichment Corp. ("USEC"), in a
market neutral (i.e., no adverse market affect) manner.
Subsequently, the DOE and the USEC entered into negotiations
with Russia to acquire up to 500 MTS of HEU to be sourced
primarily from the dismantlement of Soviet nuclear weapons.
The full quantity of HEU under the agreement is scheduled to
be delivered over a 20 year period beginning in 1994, subject
to annual pricing negotiations and the availability of the HEU
in a blended-down, acceptable commercial form of low enriched
uranium product. At the end of 1995, approximately six metric
tons of HEU (containing approximately 4.5 million pounds of
uranium) had been received in the U.S., with an additional 12
metric tons of HEU scheduled to be received during 1996.
Provisions in the suspension agreement are intended to ensure
that the contained-feed material in the blended-down HEU will
not have an adverse impact on the U.S. uranium market.
New legislation pending passage in Congress, sets forth the
manner in which the Russian HEU (as well as U.S. government
inventories) material is to enter the market place. The
Company strongly supports this legislation.
(3) EXISTING LONG-TERM CONTRACT QUOTA: Certain long-term
contracts executed prior to March 5, 1992, with U.S. utilities
or Western suppliers for redelivery to U.S. utilities are
"grandfathered" under the suspension agreements. The DOC has
reviewed and approved only specific contracts for this purpose
and will continue to monitor them throughout their duration to
ensure that the market is not adversely impacted by these
"grandfathered" imports. The DOC has announced that total CIS
imports under these long-term contracts will not exceed five
million pounds in any year.
8
<PAGE> 12
The agreements include rigorous anti-circumvention provisions intended
to identify all swaps, loans and other types of displacement. Any CIS uranium
processed (exclusive of the enrichment process) in another country retains its
CIS origin and any other origin which is enriched in the CIS is considered of
CIS origin.
In the first quarter of 1993 Tajikistan and Ukraine, two of the six
CIS republics that signed the suspension agreements requested termination of
their participation in the agreements. Under the original market price quotas
of the agreements Tajikistan did not receive any import quotas and Ukraine was
allotted an import quota of 400,000 pounds per year at the $13 per pound price
level.
On August 6, 1993 the ITC determined that the U.S. uranium industry
had been injured by imports of uranium (other than HEU) from Ukraine and had
not been injured by imports from Tajikistan. The final determination ensures
that all imports of non-HEU uranium from Ukraine would be subject to a dumping
margin of 129.29 percent and that there would be no import duties or quotas
applicable to any Tajikistan uranium products. Tajikistan represented to the
ITC that it had not shipped any Tajikistan origin uranium to the United States
and is ceasing all uranium operations. The ITC's determination on Tajikistan
and Ukraine had no impact on the suspension agreements with the four major
uranium producing republics of the CIS, other than to ensure that no unfairly
traded Ukrainian uranium will interfere with the market recovery from unfair
trading sought by these agreements.
AMENDMENT TO THE RUSSIAN SUSPENSION AGREEMENTS
On March 11, 1994, the U.S. Department of Commerce and the Russian
Federation signed an agreement which amended certain aspects of the Russian
Suspension Agreement (the "Amendment").
Under the Amendment, Russian uranium and SWU (Separative Work Units)
may be imported to the U.S. if such imports are matched with newly mined U.S.
origin uranium and newly produced SWU, respectively, for delivery to and
consumption by U.S. utility end-users. The Amendment spans a ten-year period
from April 1, 1994 to March 31, 2004 and contains annual import quotas as noted
in the following chart:
<TABLE>
<CAPTION>
IMPORT NATURAL URANIUM
YEAR (LBS U3 O8) SWU
---- ----------------- ---
<S> <C> <C>
1994* 6,613,860 2,000,000
1995* 6,613,860 2,000,000
1996 1,930,000 n/a
1997 2,710,000 n/a
1998 3,600,000 n/a
1999 4,040,000 n/a
2000 4,230,000 n/a
2001 4,040,000 n/a
2002 4,890,000 n/a
2003 4,300,000 n/a
</TABLE>
- ---------
*The quota volume in these years apply to sales. Deliveries pursuant
to these contracts may be delivered in subsequent years.
To qualify for importation, each sale to the end-user must be
comprised 50% of Russian uranium (or SWU) exported from the Russian Federation
and 50% of newly mined or produced U.S. uranium (or SWU). The importation of
the Russian material and the mining/production of the U.S. material must take
place after the effective date of the Amendment. The end-user will pay a
combined price (unit price) for each qualifying delivery provided that the
price received by the U.S. producer is higher than the unit price. All sales
must be to U.S. utilities and the contracts must be finalized after April 1994.
The intent of the Amendment is to position U.S. producers in a more
competitive posture, while providing the Russia Federation a controlled but
significant access to the U.S. marketplace. All other provisions, including
the anti-circumvention and reporting requirement measures remain in place per
the suspension agreement of October 16, 1992.
9
<PAGE> 13
The suspension agreement with Kazakhstan was amended effective March
27, 1995 to lower the minimum price for initial import quantities to the U.S.
from $13.00 to $12.00 per pound of U3 O8 in exchange for stopping "bypass"
sales (sales of uranium from Kazakhstan that is enriched outside the U.S. and
Russia and imported without quota restrictions). At prices between $12.00 and
$13.99 per pound of U3 O8, 1 million pounds annually is allowed, one-half of
which can be imported during a six month period pending the DOC price
determination equal to or greater than a threshold of $12.00 per pound. On
October 1, 1995, the DOC published a weighted average market price (includes
spot and long term prices on reported, concluded transactions during the prior
6-month period) of $12.25 per pound.
The suspension agreement with Uzbekistan was amended effective October
13, 1995. This amendment permits deliveries of up to 940,000 pounds per year
in 1995 and 1996, provided the DOC determined price is at or above $12.00 per
pound. After this, the quota will be based on U.S. mine production. As U.S.
production increases, imports of uranium from Uzbekistan may increase. As
under the Kazakhstan agreement "bypass" sales of Uzbekistan U3 O8 are no longer
allowed.
URANIUM SALES CONTRACTS
As of December 31, 1995, the Company had long-term contracts for
approximately $37,824,000 of future sales for deliveries through 2002, as
compared with contracts for approximately $42,974,000 as of December 31, 1994.
These future contracted sales at December 31, 1995 do not include the revenue
related to the sale of Russian uranium under the Amendment. Such sales are
essentially made at prices which approximate their cost to the Company and
their sale will not have a significant impact on the Company's future
profitability. These amounts are calculated based upon contract prices that
have been escalated, in accordance with the terms of the contracts, through
December 31, 1995 and December 31, 1994, respectively. All of the Company's
long-term contract prices will be escalated further for between 80% and 100% of
future inflation. Using an assumption of 2.5% inflation rate through 2002, the
total revenue from these contracts as of December 31, 1995 would increase to
approximately $40,040,000. Certain of the contract prices also increase to
higher levels if spot prices increase above the contracts' escalated floor
prices.
The following table provides detailed information concerning the
Company's sales contracts from 1996 through 2002 (excluding the delivery of
Russian uranium under the Amendment) on the basis of prices as escalated
through December 31, 1995:
<TABLE>
<CAPTION>
1999
TO
1996 1997 1998 2002 TOTAL
------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Number of customers to be delivered to 6 5 4 1 N/A
Total deliveries under long-term contracts
(thousands of pounds) 667 794 484 600 2,545
Total sales in $(in thousands) $10,628 $11,778 6,838 $ 8,580 $37,824
Average minimum sales price per pound $ 15.93 $ 14.83 $ 14.13 $ 14.30 $ 14.86
</TABLE>
- ---------
For deliveries in periods subsequent to 1996 as presented above,
certain buyers have the option to adjust deliveries by 20%. In general, except
for the options of the buyers to decrease deliveries by a specified percentage,
and except for force majeure events, the buyers either must take delivery and
pay for the entire amount contracted for or, if delivery is refused on any
portion of the contract, pay to the Company the difference between the minimum
contract price and the amount received by the Company upon the sale of the
uranium to a third party. Certain of the contracts also provide the buyer with
options to renew beyond the periods reflected in the table.
Should any of the Company's customers be unable to perform its
obligations to purchase and pay for the uranium it has contracted to buy
because of force majeure or otherwise, this could have a material adverse
effect on the Company's results of operations if the Company would not be able
to sell such material under another long-term contract or in a spot market
sale. In the course of its normal uranium marketing activities, the Company
will attempt to enter into additional new contracts which would have the effect
of significantly reducing each individual customer's percentages of total
contracted sales.
Two of the Company's customers under the long-term contracts (Ohio
Edison Company and GPU Nuclear Corporation) individually represented more than
10% of revenues in 1995.
10
<PAGE> 14
As of December 31, 1995, the Company had two outstanding long-term
purchase contract commitments totaling 400,000 pounds for 1996 through 1998.
These purchase contracts have an escalation factor related to future inflation
changes.
ITEM 2. PROPERTIES.
The Company, through its wholly-owned subsidiaries, owns eight uranium
properties in Texas and New Mexico. Its four primary properties, in terms of
value and current and future anticipated production, are Kingsville Dome and
Rosita in Texas and Churchrock and Crownpoint in New Mexico. The Rosita
property resumed uranium production in June 1995 and Kingsville Dome is
currently undergoing a capital expenditure program which resulted in
commencement of production at this facility in March 1996. The combined
production capacity at those two sites exceeds 2 million pounds per year.
Production in 1996 from Rosita and Kingsville Dome is expected to approach 1.7
million pounds. The New Mexico properties are within one to two years of
completion of the permitting process and obtaining perfected water rights, at
which time property development is projected to commence. See Item 1. Business
- - Regulations.
COMPANY'S TOTAL IN-PLACE RESERVES
The Company's proved and probable in-place reserves are located
primarily at its Kingsville Dome, Rosita and New Mexico projects. The table
below shows the Company's interests in the proved and probable reserves at each
property as of December 31, 1995, as calculated by the Company's geologists and
engineers. The amounts shown are the 100% in- place values (of which recovery
of between 65% and 80% is expected by the Company, depending upon geologic
characteristics and the overall economics of the projects in comparison to
selling prices) and the minimum recoverable amounts using a 65% recovery
factor, except as to the reserves at Rosita as to which the Company estimates
75% - 80% recovery factor. The Company believes that the following reserves
are economic at current market prices.
<TABLE>
<CAPTION>
ESTIMATED
IN-PLACE RESERVES AT RECOVERABLE
DECEMBER 31, 1995 RESERVES
-------------------- AT DECEMBER 31,
PROVED PROBABLE 1995(1)
------ -------- ------
(Amounts in thousands of pounds of U3 08)
<S> <C> <C> <C>
Texas Properties
Kingsville Dome 1,534 3,375 3,191
Rosita 2,530 -- 1,992
Vasquez 2,289 1,452 2,432
New Mexico Properties
Churchrock
Section 8 6,529 -- 4,244
Section 17 (Old Churchrock) 3,451 4,992 5,488
Mancos 4,163 -- 2,706
Crownpoint 30,870 8,201 25,396
------ ------ ------
TOTALS 51,366 18,020 45,449
====== ====== ======
</TABLE>
(1) Based upon 65% of proved and probable in-place reserves except as
noted above for Rosita.
11
<PAGE> 15
The foregoing table does not include approximately 27.0 million pounds
of proved and probable in-place reserves (estimated 17.6 million pounds
recoverable) contained on acreage adjoining the Crownpoint property for which
the Company executed leases with the landowners in 1992. These leases are
subject to approval by the U.S. Bureau of Indian Affairs (the "BIA"), with such
approval expected in 1996. See Item 2. Properties - New Mexico Properties -
Crownpoint.
The Company's only two developed properties are Kingsville Dome and
Rosita. Development of other properties in Texas and New Mexico will require
material capital expenditures. The Company is continuing permitting and
licensing activities on these properties and has development plans as described
below.
In addition, uranium mineralization at certain of the Company's
properties is not included in the above reserves because the costs to develop
those properties would cause the projects' resource base to be non-economic at
the prices that currently can be obtained under long-term contracts. The
Company estimates that virtually all of this mineralization would become
economic and therefore be considered as reserves at uranium selling prices of
between $18.00 and $20.00 per pound. Accordingly, substantial price increases
will be necessary before this mineralization could be included in the Company's
reserve base.
Definitions for the reserve categories are as follows:
PROVED: Any material where (a) tonnage is computed from
dimensions revealed in outcrops, trenches, underground workings or
drill holes, (b) grade is computed from results of adequate sampling,
(c) the sites available for inspection, the measurement of the
material and the sampling of the material are so well spaced and the
geological character so well defined that size, shape and mineral
content of the material are established, and (d) the computed tonnage
and grade of the material are judged to be accurate within stated
limits.
PROBABLE: Any material where (a) the tonnage and grade are
computed partly from specific measurement or sample data or both and
partly from projections for a reasonable distance on geological
evidence and (b) the site available for inspection, the measurement of
the material and the sampling of the material are too widely or
inappropriately spaced to outline the material completely or to
establish its grade thoroughly.
SOUTH TEXAS PROPERTIES
Kingsville Dome. The Kingsville Dome property, consisting of 3,807 net
acres, is located in central Kleberg County on Farm Road 1118, 45 miles
southwest of Corpus Christi. Several of the Kingsville Dome leases were
acquired in 1981 from Exxon Corporation. During the period from 1981 through
1983, an exploration program was completed which proved sufficient uranium
reserves to assure the economic commercial viability of the project and
established a high probability of significant reserve potential. The property
contained approximately 4.9 million pounds of proved and probable in-place
reserves at December 31, 1995 (estimated 3.2 million pounds recoverable). The
leases covering these reserves provide for a 6.25% royalty to landowners based
upon uranium sales.
Plant construction and wellfield development on the project began in
September 1987 and was completed in April 1988. The Company commenced
production from the initial production area at Kingsville Dome in May 1988.
Licensing and permitting hearings for a permit area extension have been
completed and all the necessary permits were issued in 1995. Total capital
costs for the plant and the initial wellfield to bring the property to the
production stage were $5,900,000 and $3,400,000, respectively. Production in
the first full year of operation was approximately 1,100,000 pounds of uranium.
In May 1989, due to the continuing decline in the spot price of uranium, the
Company decided to defer development of the next wellfield which would have
gone into production in the fourth quarter of 1989. Thus, the level of
production at Kingsville Dome decreased gradually from approximately 73,000
pounds per month in May 1989 as the existing wellfields were depleted and the
plant was shut-in in September 1990.
Wellfield development activities at Kingsville Dome resumed in
December, 1995 which lead to the commencement of uranium production in March
1996. Capital expenditures at Kingsville Dome in 1995 totaled approximately
$560,000 and are expected to be approximately $5,200,000 in 1996 related
primarily to additional wellfield activity. Annualized production levels at
Kingsville Dome are approximately 1 million pounds and output in 1996 is
expected to top 700,000 pounds.
12
<PAGE> 16
Rosita. The Rosita property, consisting of 3,577 net acres, is located
in northeastern Duval County, one mile from State Highway 44, 60 miles west of
Corpus Christi. The Company acquired the leases in late 1985, and such leases
provide for a 6.25% royalty to landowners based upon uranium sales.
The Company began plant construction and development of the initial
wellfield in the first quarter of 1990 and brought the Rosita property into
production in October 1990. Approximately $9,000,000 was incurred to bring
the Rosita property to the production stage. Total production from Rosita for
the eighteen months through March 31, 1992 was approximately 1,073,000 pounds.
In March 1992, due to low spot prices, the Company decided to halt production
and place the facility on standby as was done with Kingsville Dome in 1989.
Development and production activity resumed at Rosita in 1995, with
over $2,100,000 in costs being incurred in 1995, the majority of which were
primarily related to wellfield development activities. The facility commenced
uranium production in June, 1995 and from that date through year-end 1995
achieved output of approximately 610,000 pounds. At December 31, 1995, the
property contained approximately 2.5 million pounds of proved and probable
in-place reserves (estimated at 2.0 million pounds recoverable). Production
from this site is projected to be approximately 1,000,000 pounds in 1996 and
the Company plans to incur approximately $4,400,000 in capital costs in 1996,
primarily for additional wellfield development on the property.
The Company is obligated to pay a carved-out production payment
royalty of $1.00 per pound on the first 3 million pounds of uranium produced
and sold from either Kingsville Dome or Rosita, of which a total of
approximately $1,909,000 had been paid as of December 31, 1995
Vasquez. The Vasquez property, consisting of 842 net acres in two
leases, is located in southwestern Duval County less than one mile from State
Highway 359. The property contains proved and probable in-place uranium
reserves of 3.7 million pounds (estimated 2.4 million pounds recoverable).
Lease royalties on the two leases are 6.25%. In 1988, the Company conducted
preliminary environmental surveys to be included in the regional environmental
assessment required for the Texas Department of Health licensing, collected
baseline environmental data and conducted a core leach test to demonstrate
leachability and establish restoration characteristics. The permit
applications were completed and submitted to the various regulatory agencies.
The Company expects the permits to be in place prior to the projected
commencement of production in late 1997 or early 1998. Costs related to these
permitting activities and land holding costs are expected to be approximately
$100,000 in 1996. See Item 1. Business - Regulations.
A potential conflict with respect to the mineral rights has arisen on
the Vasquez property. The Company's lease is with the owner of both the
surface of the land and 50% of the minerals in question. The Company believes
the mineable reserves on this property are within 200 feet of the surface. As
a result of the surface lease alone, the Company believes it has the right to
mine 100% of the minerals under Texas law. Another party, however, owns a
portion of the mineral estate and may challenge the Company's ownership of 50%
of the minerals.
NEW MEXICO PROPERTIES
The Company, through its wholly-owned subsidiary, Hydro Resources,
Inc., owns the following uranium properties in New Mexico:
Churchrock Properties. The Company acquired a portion of the
Churchrock properties, known as Section 8 and Mancos, from United Nuclear
Corporation ("UNC") in March 1987, along with the associated water rights that
may be required to produce ore from these properties. In August 1991, the
Company acquired additional properties in the Churchrock region from UNC known
as Section 17 (also known as Old Churchrock).
The Churchrock properties encompass 2,225 acres and are represented by
leases, patented claims and unpatented claims. The properties are located in
northwest New Mexico, in western McKinley County, ten miles northeast of the
City of Gallup.
Reserves on Section 8 and Section 17 consist of approximately 9.9
million pounds of proved and 5.0 million pounds of probable in-place uranium
reserves (estimated 6.5 million pounds and 3.2 million pounds recoverable,
respectively). The Mancos property contains approximately 4.2 million pounds
of proved in-place uranium reserves (estimated 2.7 million pounds recoverable).
The Mancos leases can be held indefinitely by paying annual advance royalties
of $63,798 after the primary term, which expired in 1994. The Section 17
properties' leases expire in 1998.
13
<PAGE> 17
Production at any time will hold the leases until production ceases. The
Section 8 reserves are patented claims, and, accordingly, are held in fee
simple and require no activity to be held indefinitely. The unpatented claims
require an annual payment of $100 per claim payable to the Bureau of Land
Management to remain in full force and effect. Primary royalties vary
slightly, but most are 6.25%, with a few areas carrying an additional 2%
override.
As part of the purchase price of the various properties, UNC received
an assignment of a sliding scale royalty from production starting at 5% of
sales prices up to $19.99, 6% to $21.99, and increasing approximately 1.0%
thereafter for each one dollar of sales price increase up to 25%. The sales
price is adjusted for inflation so there will be no increase above the 5% level
unless selling prices increase significantly above the current prices that can
be obtained under long-term contracts. The measured in-place reserves in
Section 8 and Mancos encompass only a small portion of the properties owned by
the Company. Accordingly, the Company believes that substantial additional
mineralization exists on these properties. Because of greater depths, this
mineralization is estimated to be recoverable at a substantially higher cost.
In order to operate an ISL mine in New Mexico, essentially the same
permits are required as in South Texas. In New Mexico, depending on land
ownership, the UIC permit is granted by either the New Mexico Environmental
Department or the EPA. Radioactive material handling licenses are granted by
the NRC. Surface discharge permits are under the jurisdiction of the EPA. To
date, all background environmental data has been collected and submitted to the
appropriate permitting agencies. The UIC permit for Section 8 was obtained in
the fourth quarter of 1989, and the other permits are expected to be obtained
in 1996 and 1997. The Company projects additional permitting and related costs
to approximate $500,000 to $600,000 in 1996. See Item 1. Business -
Regulations. Production from Section 8 in 1997 is planned, assuming that sales
contracts at appropriate prices can be obtained on a timely basis and that the
Company has adequate financing available on satisfactory terms.
Crownpoint. In August 1988, the Company acquired 163 acres of leases
in the San Juan Basin, 22 miles northeast of the Company's Churchrock deposits.
The Crownpoint property is located 35 miles northeast of Gallup, New Mexico and
is adjacent to the town of Crownpoint. This property was previously held
jointly by Westinghouse Electric Corporation and Conoco, which conducted
extensive exploration drilling and sank three shafts to prepare the area for
underground mining. With the departure from the industry by Conoco in 1982,
Westinghouse acquired a 100% interest in the properties. In August 1988, the
Company acquired the property and related equipment and buildings from
Westinghouse for a total price of $950,000 of which $450,000 remains to be paid
at the commencement of production when 50,000 pounds have been produced.
Additionally, in September, 1993, the Company signed a ten year lease for an
additional 959 acres, which provide for royalties at a rate of 10%. Also in
August 1988, the Company acquired 321 acres of claims in the same area which
were dropped by another party and in February 1991 acquired another 135 acres
in the same area.
Conoco and Westinghouse performed extensive exploration drilling on
the property and the Company has interpreted the resulting data, which
indicates in-place reserves of approximately 11.8 million proved in-place
pounds (estimated 7.7 million pounds recoverable). The Company estimates that
the acreage covered by the leases signed in September 1993 contains an
additional estimated 19.1 million proved in-place pounds (estimated 12.4
million pounds recoverable). The claims acreage contains approximately 8.2
million pounds of probable in-place reserves (estimated 5.3 million pounds
recoverable). Depths of the ore body in the Crownpoint property range from
2,000 to 2,400 feet.
In the first quarter of 1992, the Company acquired an additional 1,414
acres of leases adjoining the Crownpoint property. Leases were signed with the
native Indian allottee owners of the properties who own both the surface and
mineral rights. At the time the leases were signed the Company made payments
of approximately $367,000 to the BIA to secure the rights under each lease.
These funds are being held in trust by the BIA pending the outcome of their
review. The approval of these leases by the BIA is required for the Company
to obtain good title to the minerals. The BIA is expected to review and decide
upon the leases after a review of an environmental impact study of the mining
and production plans involving the properties. This review and determination
is expected in 1996. The Company's management estimates that proved and
probable in-place reserves on the properties total approximately 27.0 million
pounds (estimated 17.6 million pounds recoverable).
Environmental mining permits and water rights must be obtained before
plant construction and wellfield development can commence. See Item 1.
Business and Properties - Regulations. It normally takes approximately two
years from the initiation of action in order to obtain such permits and water
rights. The Company began permitting activities in December 1988, and mining
permit applications were filed in 1992. The Company anticipates this
permitting will be completed by 1998. Production activities will be dependent
on future market conditions and
14
<PAGE> 18
available financing. The Company expects to incur approximately $500,000 to
$600,000 in capital expenditures on this project in 1996, primarily for
continual permitting activities and for land holding costs.
ITEM 3. LEGAL PROCEEDINGS.
On August 28, 1995, Manuel T. Longoria, as owner of the ranch
containing the site of URI's Longoria mine near Bruni in Duval County, Texas,
brought suit against the Company in state district court in Duval County, Texas
asserting claims said to have arisen at various times over the last 18 years.
In the action styled Longoria v. Uranium Resources, Inc., Cause No. 16264,
Longoria claims the Company has leased the site knowing that the proposed
mining would contaminate the site; that the Company had knowingly or
negligently conducted mining operations in a manner which contaminated the
Longoria property with toxic and hazardous material which present a serious
health hazard. The suit asks for remediation of the Longoria property and for
unspecified actual and punitive damages.
With regard to the claim for remediation, the Company, upon the
conclusion of mining at the Longoria site and the nearby sites, began
restoration in the manner required by its permits and by state and federal
regulations. Such restoration is nearing completion and is awaiting
authorization from the state regulatory agency to finalize disposal of the
resulting waste materials and access to the property by the landowner to
complete its work.
The Company has made provisions for the costs of site restoration and
does not believe the settlement of this lawsuit will result in damages that are
materially different than the costs already in the financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The 1995 Annual Meeting of Stockholders was held on December 19, 1995,
in Denver, Colorado. Shares representing 4,600,839 votes (56.5% 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 issuance of up to 3,000,000 shares of the Company's Common Stock
issuable upon the conversion of the Lindner Notes and the exercise of warrants
associated with the Notes, the adoption of the Company's 1995 Stock Incentive
Plan, the approval of the grant of options to purchase an aggregate of 300,000
shares of the Company's stock to the Company's outside directors, the
application for an order to cease as a reporting Company on the British
Columbia Securities Commission ( the "BCSC") and ratified Arthur Andersen LLP
as independent accountants for the Company for 1995. The proposal of the
Lindner Notes stock option issuance was approved by a vote of 4,474,657 shares
in favor, 30,120 opposed and 96,062 abstaining. The adoption of the 1995
Incentive Stock Plan was approved by a vote of 4,449,560 shares in favor,
39,921 opposed and 94,987 abstaining. The proposal to grant options to the
outside directors was approved by a vote of 3,731,845 shares in favor, 752,101
opposed and 100,522 abstaining. The proposal of the application for an order
to cease as a reporting company on the BCSC was approved by a vote of 4,463,541
shares in favor, 20,270 shares opposed and 100,657 share abstaining. The
ratification of Arthur Andersen LLP as independent accountants was approved by
a vote of 4,579,489 shares in favor, 12,350 opposed and 8,600 abstaining.
15
<PAGE> 19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
The Company's Common Stock trades on NASDAQ under the trading symbol
URIX. The following table sets forth the high and low sales prices for the
Common Stock as reported through NASDAQ for the periods indicated:
<TABLE>
<CAPTION>
Common Stock
------------
Fiscal Quarter Ending High Low
--------------------- ----- ----
<S> <C> <C>
December 31, 1995 7 5-1/8
September 30, 1995 8-5/8 4-1/2
June 30, 1995 4-3/4 2-3/4
March 31, 1995 7-1/8 3
December 31, 1994 7-5/8 5
September 30, 1994 5-3/8 4
June 30, 1994 4-1/2 2-7/8
March 31, 1994 4-3/8 3-1/4
</TABLE>
The high and low sales prices for the common stock for the period
January 1, 1996 through March 1, 1996, was $13-3/8 and $5-3/8, respectively.
HOLDERS
As of March 15, 1996, the Company had 8,754,777 shares of Common Stock
outstanding held of record by 172 persons.
DIVIDENDS
The Company did not declare or pay any cash or other dividends on its
Common Stock during the years ending December 31, 1994 or 1995. The Company
does not anticipate paying dividends for the foreseeable future.
16
<PAGE> 20
ITEM 6. SELECTED FINANCIAL DATA (1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue from uranium sales $ 21,829 $ 17,334 $ 13,222 $ 17,824 $ 17,655
Cost of uranium sales (17,235) (13,466) (10,216) (12,334) (9,509)
Writedown of uranium properties (163) -- (1,945) -- --
Loss on acceleration of uranium contract -- (349) -- -- --
Loss on termination of joint venture (1,001) -- -- -- --
Loss on transfer to stockholders (780) -- -- -- --
Corporate expenses (3,496) (2,177) (1,903) (2,285) (2,694)
-------- -------- -------- -------- --------
Income (loss) from operations (846) 1,342 (842) 3,205 5,452
Interest expense, net (525) (42) (22) (499) (624)
Interest and other income, net 201 205 409 105 170
-------- -------- -------- -------- --------
Income (loss) before income taxes (1,170) 1,505 (455) 2,811 4,998
Provision (benefit) for income taxes (234) 300 (107) 408 929
-------- -------- -------- -------- --------
Net income (loss) $ (936) $ 1,205 $ (348) $ 2,403 $ 4,069
-------- -------- -------- -------- --------
Income (loss) per share data:
Primary $ (0.12) $ 0.17 $ (.05) $ 0.36 $ 0.59
Fully diluted (0.12) 0.17 (.05) 0.36 0.59
Weighted average common stock and
equivalents outstanding:
Primary 8,098 7,073 6,640 6,684 7,356
Fully diluted 8,098 7,191 6,640 6,756 7,356
Cash flow provided by $ 5,301 $ 5,080 $ 6,283 $ 9,186 $ 1,344
operations (2)
Cash flow provided by operations,
adjusted to eliminate the effect of
changes in operating working capital
items $ 3,051 $ 3,099 $ 3,018 $ 5,535 $ 8,924
Production of U3 08 (000's of lbs.) 612.4 -- -- 79.7 757.0
BALANCE SHEET DATA:
Working capital (deficit),
excluding current maturities of
long-term debt $ 5,060 $ (2,463) $ 2,479 $ 5,965 $ 11,180
Working capital (deficit),
including current maturities
of long-term debt 4,710 (2,545) (2,777) 2,482 5,973
Uranium properties, net 37,200 37,230 34,420 33,076 31,010
Total assets 48,085 44,850 40,846 41,725 46,231
Long-term indebtedness,
including current maturities 7,488 1,488 11,244 13,518 19,469
Shareholders' equity 29,872 28,218 20,283 20,631 18,231
</TABLE>
- ---------
(1) Amounts in thousands except per share amounts.
(2) See "Consolidated Financial Statements -- Consolidated Statements of
Cash Flows."
17
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
For the year ended December 31, 1995, the Company's cash and cash
equivalents increased $2,188,000 as compared to a decrease of $2,000 for 1994.
The Company's uranium operations generated positive cash flow from operations
of $5,301,000 for the year ended December 31, 1995, in comparison to positive
cash flow from operations in 1994 of $5,080,000. The Company's net working
capital at December 31, 1995, was $4,710,000.
During January 1995, when companies controlled by Oren L. Benton (the
"Benton Companies") held effective control of the common stock of the Company,
the Company transferred $1 million to the Benton Companies in connection with a
planned joint venture to process uranium at a Benton Companies' mill. Because
of the Benton Bankruptcy, the realizability of the Company's $1 million
investment is doubtful. Shortly thereafter, an additional $1,080,000 was
transferred to or for the benefit of Mr. Benton or certain Benton Companies
without the authorization of the Company's Board of Directors. In February
1995, Mr. Benton and certain of the Benton Companies filed for bankruptcy. In
June, 1995 the Company received $300,000 related to the unauthorized transfer,
however the remaining $1.78 million has not been recovered and there can be no
assurance that the Company's efforts to pursue remedies will be successful. A
loss for these transactions was recorded in 1995 which resulted in a reduction
of $1.78 million in the Company's equity.
The Company had begun certain development activities at its Rosita site
in mid-1994 in anticipation of commencing production in mid-1995. Development
halted in January, 1995 subsequent to the unauthorized transfers and the
shortage of liquidity experienced from the Benton Companies transactions. The
Company, through the cash infusion received under the Lindner Notes resumed
capital expenditures at Rosita in May, 1995 and uranium production began in
June, 1995. During 1995, $2,109,000 in development expenditures were incurred
at Rosita. Capital expenditures to be incurred in 1996 at Rosita, primarily
for additional wellfield development, are expected to be $4,414,000.
Significant development activities at the Company's Kingsville Dome facility
began in December, 1995 and resulted in commencement of production at this site
in March, 1996. Capital expenditures at Kingsville Dome totalled $561,000 in
1995 and are expected to be $5,209,000 in 1996. Additional capital
expenditures including permitting, land acquisition and land holding costs at
Churchrock, Crownpoint and Vasquez are expected to amount to $1,185,000 in
1996. Approximately $914,000 in capital expenditures were incurred on these
properties in 1995. The Company expects to fund 1996 operations and capital
expenditures from cash on hand at year end 1995, sales proceeds under 1996
uranium deliveries from its existing long-term contacts, additional spot market
uranium sales and through additional sources of financing or equity infusions.
Long-term operating and capital needs are expected to be satisfied through
future sales proceeds from current and additional uranium delivery commitments
and through additional financing and/or equity sources.
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.
BALANCE SHEET
Cash and cash equivalents at December 31, 1995 increased by $2,188,000
from the balance at December 31, 1994. The Company received $2,000,000 in
December, 1995 from the exercise of 500,000 of the warrants issued in
connection with the Lindner Notes. Receivables at December 31, 1995 increased
by approximately $3,952,000 from the level at December 31, 1994. This increase
resulted primarily from December 1995 uranium sales of approximately
$3,416,000, the proceeds from which were collected in January, 1996
approximately $529,000 from uranium sold under the Russian Suspension
Agreement. Short-term investments increased by approximately $150,000 from
December 31, 1994 to December 31, 1995, primarily due to a purchase of a
certificate of deposit to increase bonding
18
<PAGE> 22
requirements at the Kingsville Dome and Rosita properties. This certificate of
deposit is pledged under these bonding requirements and therefore is not
readily available to the Company. See Note 1 - "Restricted Cash" of the Notes
to Consolidated Financial Statements. Uranium inventory decreased by
approximately $3,368,000 from December 31, 1994 to December 31, 1995 primarily
from the increases in uranium deliveries experienced in 1995 compared to the
prior year. The average per pound inventory values decreased from $9.25 per
pound at December 31, 1994 to $8.78 per pound at December 31, 1995.
Long-term debt, including the current portion of long-term debt,
decreased by approximately $1,739,000 from December 31, 1994. The decrease is
primarily a result of the repayment of the NEAG Notes in 1995 of $7,739,000 and
the issuance of the $6,000,000 Lindner Notes in May, 1995. Accounts payable
increased $1,181,000 at December 31, 1995 compared to the prior year end
primarily due to development and production activities ongoing at the Company's
South Texas facilities in 1995. Unearned revenue (including current and
long-term portions) increased to $860,000 at December 31, 1995 because of the
delivery of quantities of Russian uranium in excess of URI produced uranium
under the Russian Suspension Agreements. This revenue will be recognized upon
the delivery of URI produced uranium under the contract. Approximately
$529,000 of this amount is expected to be recognized in the first half of 1996
with the balance to be deferred to later years. Other accrued liabilities
increased by $655,000 at December 31, 1995 from $247,000 at year end 1994.
This increase is attributable to the increased production activity ongoing at
the Rosita site in 1995.
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. For example, over 70% of total 1995 deliveries and total sales revenues
were generated in the second half of the 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.
Years Ended December 31, 1995, 1994 and 1993
The following is a summary of the key operational and financial
statistics related to the Results of Operations:
<TABLE>
<CAPTION>
(In thousands, except per pound data)
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Uranium sales revenue (1) $ 21,829 $ 17,334 $ 13,222
Total pounds delivered 1,633 1,081 753
Average sales price/pound (2) $ 15.64 $ 16.03 $ 17.56
Pounds produced 612 0 0
Pounds purchased 660 1,329 510
Average production cost of produced pounds $ 10.09 N/A N/A
Average cost of purchased pounds $ 9.52 $ 10.07 $ 11.24
Average cost of produced pounds sold $ 10.28 $ 13.60 $ 12.96
Average cost of purchased pounds sold $ 9.41 $ 10.68 $ 10.88
</TABLE>
(1) 1995 uranium sales revenues include approximately $3.5 million from
the sale of Russian uranium which is sold under the matched sales
Amendment.
(2) Average sales price does not include the sales of Russian material
sold as a "pass through" sale under the matched sales Amendment.
19
<PAGE> 23
Revenue from uranium sales in 1995 increased by $4,495,000 from 1994
levels. Total uranium deliveries in 1995 increased by 552,000 pounds from
those made in the twelve months ended December 31, 1994. This increase was
primarily a result of sales made in 1995 under the Russian Suspension Agreement
(the "Amendment") which totaled 780,000 pounds during the year. The 780,000
pounds delivered in 1995 included 320,000 of URI produced uranium and 460,000
pounds of Russian purchased uranium. No deliveries were made in 1994 under the
Amendment. Sales under the Company's long-term contracts not subject to the
Amendment totaled 715,000 pounds in 1995 compared to deliveries in 1994 of
779,000 pounds. The average sales price per pound for these 1995 deliveries
under URI's long-term contracts was $17.50 and the average sales price for the
1994 long-term contract deliveries was $18.13 per pound. The deliveries in
1995 also included 137,000 pounds sold in the spot market; whereas, 1994
included approximately 302,000 pounds delivered at an average price of $10.64.
Changes in the market price of uranium can have a significant impact on the
Company's results of operations.
Details of the cost of uranium sales were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Cost of purchased uranium $10,315 $10,861 $ 7,200
Royalties 432 37 57
Operating expenses 2,738 1,743 1,825
Provision for restoration and reclamation costs 597 274 292
Depreciation and depletion of uranium properties 3,154 551 842
Loss on termination of joint venture 1,001 -- --
Loss on transfer to stockholders 780 -- --
Writedown of uranium properties 163 -- 1,945
------- ------- -------
Total cost of uranium sales $19,180 $13,466 $12,161
======= ======= =======
</TABLE>
The Company resumed production at its Rosita facility in June, 1995
and produced over 610,000 pounds during the year at an average production cost
of $10.09 per pound. This site was previously in production from October, 1990
through March, 1992 when the facility was placed on standby due to declines in
the spot price of uranium to levels at or below the Company's production costs.
The average cost of uranium purchases made in 1995 was approximately
$9.52 per pound. Deliveries in 1995 consisted of 1,096,000 purchased pounds,
at an average cost per pound of $9.41, and 537,000 produced pounds at $10.28
per pound. Purchases of uranium in 1994 were made at an average cost of
approximately $10.07 per pound. During 1994, the Company delivered 1,017,000
purchased pounds and 64,000 produced pounds from inventory to its customers, at
an average cost per pound of $10.68 and $13.60, respectively. Operating
expenses attributable directly to the sale of the Company's produced pounds
totaled $1,975,000, $495,000 and $577,000, respectively for 1995, 1994 and
1993.
Total operating expenses and depreciation and depletion in 1995, 1994
and 1993 include standby costs for the Kingsville Dome and Rosita facilities.
These costs have been recorded as direct charges to operations. Standby costs
for 1995, 1994 and 1993 (which include only the first five months of the year
for Rosita for 1995) were $875,000, $1,458,000, and $1,486,000, respectively.
Royalties in 1995, 1994, and 1993 totaled $432,000, $37,000, and
$57,000, respectively. The increase in 1995 is directly attributable to the
resumption of production at Rosita and the corresponding increased sales of URI
product when compared to the prior two years.
The provision for restoration and reclamation in 1995 consists of the
provision for Rosita production sold during the year of $499,000 ($0.93 per
pound) and additional increases to the Benavides and Bruni reserves (previous
mining locations) of $97,000. The 1994 provision for restoration and
reclamation consists of the provision for Rosita production sold during the
year of $48,000 ($0.75 per pound) and increases to the Benavides and Bruni
reserves of $226,000. The 1993 provision for restoration and reclamation
consists of the provision for Rosita production sold of $69,000 ($0.75 per
pound) and increases to the Benavides and Bruni reserves of $224,000
The depreciation and depletion provision in 1995 consisted of the
$5.67 rate per pound for Rosita production sold of $3,042,000 and Rosita and
Kingsville Dome depreciation while on standby of $112,000. The
20
<PAGE> 24
1994 provision for depreciation and depletion is comprised of a $5.16 rate per
pound for Rosita production sold of $332,000 and Rosita and Kingsville Dome
depreciation while on standby of $219,000. The provision for depreciation and
depletion in 1993 of $842,000 represents a $6.20 rate per pound for Rosita
production sold plus $277,000 of Rosita and Kingsville Dome depreciation while
on standby. The writedown of uranium properties of $1,945,000 in 1993 consisted
of the abandonment of certain leases in Texas and Wyoming and the termination
of an option to lease certain property in New Mexico. The Company released its
rights to mine these properties in 1993 and accordingly charged against
earnings the previously capitalized costs associated with these properties.
Corporate expenses consisting of general and administrative ("G & A")
expenses increased to $3,496,000 in 1995 from $2,177,000 in 1994. This
increase resulted primarily from approximately $1,020,000 of non-recurring
costs related to the Benton Companies transactions and the Lindner Notes that
were issued in May, 1995. G & A increased to $2,177,000 in 1994 from
$1,903,000 in 1993 primarily from legal fees and costs related to the
restructuring of bank debt with Citibank, N.A.
The loss from operations in 1995 was ($846,000) compared to income
from operations in 1994 of $1,342,000. This change resulted primarily from the
losses from the termination of the joint venture ($1,001,000) and loss on the
unauthorized transfers ($780,000) made in 1995.
Income from operations in 1994 was $1,342,000 compared to a loss in
1993 of $842,000. This increase is attributable to the higher deliveries of
uranium in 1994, along with the non-recurring writedown of uranium properties
and other assets of $1,945,000 in 1993. See the previous discussion regarding
uranium sales revenues and Item 1. Business - Uranium Sales Contracts for
volumes of deliveries and average selling prices in future years under the
Company's long term sales contracts.
Total interest costs in 1995 including capitalized amounts decreased
by $355,000 compared to 1994. This decrease to $536,000 from $891,000 in 1994
resulted from lower average outstanding debt balances related primarily to the
complete payoff of the bank debt with Union Bank of Switzerland by October,
1995. Total interest costs in 1994, including capitalized amounts, decreased
by $303,000 compared to 1993. This decrease from $1,195,000 in 1993 to
$891,000 in 1994, was a result of a lower average outstanding debt balance and
lower interest rates prevailing in the current year. Of the total interest
costs, $11,000, $850,000, and $1,172,000 were capitalized in 1995, 1994, and
1993, respectively.
The Company's tax provision in 1994 and tax benefits in 1995 and 1993
are less than the statutory rate primarily because of percentage depletion.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Information called for by Item 8 appears on pages F-1 through F-23
of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
21
<PAGE> 25
PART III
ITEMS 10, 11, 12 AND 13
In accordance with General Instruction G(3), Items 10, 11, 12, and 13
are hereby incorporated by reference from sections of the Company's definitive
proxy statement entitled "Election of Directors", "Executive Compensation",
"Security Ownership of Principal Stockholders and Management", and "Certain
Transactions with Related Parties". Such definitive proxy statement will be
filed with the Securities and Exchange Commission not later than 120 days after
December 31, 1995.
22
<PAGE> 26
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements.
See the Index to Consolidated Financial Statements on page F-1
for a listing of those financial statements filed as part of
this Annual Report.
(a) (2) Financial Statement Schedules.
See the Index to Consolidated Financial Statements on page F-1
for a listing of those financial statements filed as part of
this Annual Report.
(a) (3) Exhibits
See the Index to Exhibits on page E-1 for a listing of the
exhibits that are filed as part of this Annual Report.
(b) Reports on Form 8-K
No current reports on Form 8-K were filed by the Company
during the quarter ended December 31, 1995.
23
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 27, 1996
URANIUM RESOURCES, INC.
By: /s/ Paul K. Willmott
----------------------------------
Paul K. Willmott, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Date
--------- ----
/s/ Paul K. Willmott March 27, 1996
-------------------------------------
Paul K. Willmott,
Director, President and Chief Executive Officer
/s/ Thomas H. Ehrlich March 27, 1996
-------------------------------------
Thomas H. Ehrlich,
Vice President - Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Leland O. Erdahl March 27, 1996
-------------------------------------
Leland O. Erdahl, Director
/s/ George R. Ireland March 27, 1996
-------------------------------------
George R. Ireland, Director
/s/ James B. Tompkins March 27, 1996
-------------------------------------
James B. Tompkins, Director
24
<PAGE> 28
URANIUM RESOURCES, INC. AND CONSOLIDATED SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants...................................F-2
Consolidated Balance Sheets................................................F-3
Consolidated Statements of Operations......................................F-5
Consolidated Statements of Common Shareholders' Equity.....................F-6
Consolidated Statements of Cash Flows......................................F-7
Notes to Consolidated Financial Statements.................................F-8
The additional financial data referred to below should be read in
conjunction with these financial statements. Schedules not included with this
additional financial data have been omitted because they are not applicable, or
the required information is shown in the financial statements or notes thereto.
The individual financial statements of the subsidiaries of the Company have
been omitted because all such subsidiaries are included in the consolidated
financial statements being filed.
ADDITIONAL FINANCIAL DATA
Financial statement schedules for the years ended
December 31, 1995, 1994 and 1993:
II - Valuation and qualifying accounts and reserves....................F-21
The accounts of the Company are maintained in United States dollars.
All dollar amounts in the financial statements are stated in United States
dollars except where indicated.
F-1
<PAGE> 29
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Uranium Resources, Inc.:
We have audited the accompanying consolidated balance sheets of Uranium
Resources, Inc. (a Delaware Corporation) and subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of operations, common
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1995. These consolidated financial statements and the
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Uranium Resources, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. The schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
state in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Dallas, Texas
February 28, 1996
F-2
<PAGE> 30
URANIUM RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ....................... $ 4,715,942 $ 2,527,600
Short-term investments -
Certificate of deposit, restricted .......... 712,094 562,211
Receivables ..................................... 4,005,191 52,740
Uranium inventory ............................... 663,487 4,031,611
Materials and supplies inventory ................ 126,180 162,417
Prepaid and other current assets ................ 127,519 96,751
------------ ------------
Total current assets ..................... 10,350,413 7,433,330
------------ ------------
Property, plant and equipment, at cost:
Uranium properties .............................. 56,735,549 53,210,132
Other property, plant and equipment ............. 493,879 461,918
Less - accumulated depreciation and depletion ... (19,929,621) (16,345,645)
------------ ------------
Net property, plant and equipment ........ 37,299,807 37,326,405
Other assets ....................................... 434,897 90,491
------------ ------------
$ 48,085,117 $ 44,850,226
============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of
these consolidated balance sheets.
F-3
<PAGE> 31
URANIUM RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Current liabilities:
Accounts payable ................................................. $ 2,464,512 $ 1,283,265
Short-term notes ................................................. -- 7,739,225
Accrued interest payable ......................................... 39,843 27,744
Current portion of long-term debt ................................ 350,000 82,000
Royalties payable ................................................ 811,686 509,606
Unearned revenue ................................................. 528,970 --
Current portion of restoration reserve ........................... 544,000 90,000
Other accrued liabilities ........................................ 901,707 246,790
------------ ------------
Total current liabilities .................................... 5,640,718 9,978,630
------------ ------------
Other long-term liabilities and deferred credits .................... 2,777,351 2,337,624
Long-term debt, less current portion ................................ 7,137,507 1,405,507
Deferred federal income taxes ....................................... 2,658,000 2,910,000
Commitments and contingencies - Note 10
Shareholders' equity:
Common stock, $.001 par value, 12,500,000 shares authorized;
shares issued and outstanding (net of treasury shares):
1995 - 8,645,698; 1994 - 7,954,683 ........................... 8,798 8,142
Paid-in capital .................................................. 17,626,510 15,040,064
Retained earnings ................................................ 12,245,651 13,181,839
------------ ------------
29,880,959 28,230,045
Less: Treasury stock: (1995 - 152,500; 1994 -187,500 shares),
at cost ...................................................... (9,418) (11,580)
------------ ------------
Total shareholders' equity ................................... 29,871,541 28,218,465
------------ ------------
$ 48,085,117 $ 44,850,226
============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of
these consolidated balance sheets.
F-4
<PAGE> 32
URANIUM RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Uranium sales -
Produced uranium .................................. $ 7,194,655 $ 958,569 $ 1,341,219
Purchased uranium ................................. 14,634,591 16,375,328 11,880,873
------------ ------------ ------------
Uranium sales .................................. 21,829,246 17,333,897 13,222,092
Costs and expenses:
Cost of uranium sales -
Direct cost of purchased uranium .................. 10,314,611 10,860,546 7,200,319
Royalties ......................................... 432,050 37,254 56,664
Operating expenses ................................ 2,738,420 1,742,669 1,824,756
Provision for restoration and reclamation costs ... 596,482 274,465 292,200
Depreciation and depletion ........................ 3,153,793 550,802 842,367
Loss on termination of joint venture .............. 1,000,953 -- --
Loss on transfer to stockholder ................... 780,000 -- --
Writedown of uranium properties and other
uranium assets ................................. 163,145 1,944,645
Loss on acceleration of uranium contract ........... -- 349,265 --
Corporate expenses -
General and administrative ........................ 3,467,639 2,146,323 1,866,741
Depreciation ...................................... 28,235 30,588 36,062
------------ ------------ ------------
Total costs and expenses ....................... 22,675,328 15,991,912 14,063,754
------------ ------------ ------------
Earnings (loss) from operations ...................... (846,082) 1,341,985 (841,662
Other income (expense):
Interest expense, net of capitalized interest ...... (525,369) (41,564) (22,213)
Interest and other income, net ..................... 201,263 204,803 409,317
------------ ------------ ------------
Income (loss) before federal income taxes ............ (1,170,188) 1,505,224 (454,558
Federal income tax provision (benefit):
Current ............................................ 18,000 (72) (15,608)
Deferred ........................................... (252,000) 300,000 (91,000)
------------ ------------ ------------
Net income (loss) .................................... $ (936,188) $ 1,205,296 $(347,950 )
============ ============ ============
Net income (loss) per common and
common equivalent share ............................ $ (0.12) $ 0.17 $ (0.05)
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part
of these consolidated statements.
F-5
<PAGE> 33
URANIUM RESOURCES, INC.
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common
Common Stock Stock
--------------------------- Purchase Paid-In Retained Treasury
Shares Amount Warrants Capital Earnings Stock
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1992 ........ 6,640,020 $ 6,828 $ 349,704 $ 7,961,217 $ 12,324,493 $ (11,580)
Net loss ......................... -- -- -- -- (347,950) --
------------ ------------ ------------ ------------ ------------ ------------
Balances, December 31, 1993 ........ 6,640,020 6,828 349,704 7,961,217 11,976,543 (11,580)
Net income ....................... -- -- -- -- 1,205,296 --
Issuance of common stock -
exercise of employee stock
options ......................... 81,781 81 -- 240,475 -- --
Conversion of long-term debt ..... 496,040 496 -- 2,355,693 -- --
Conversion of uranium sales
contract ........................ 736,842 737 -- 3,584,756 -- --
Expiration of common stock
purchase warrants ............... -- -- (349,704) 349,704 -- --
Waiver of loan fees
from affiliate .................. -- -- -- 548,219 -- --
------------ ------------ ------------ ------------ ------------
Balances, December 31, 1994 ........ 7,954,683 8,142 0 15,040,064 13,181,839 (11,580)
Net loss ......................... -- -- -- -- (936,188) --
Issuance of common stock -
exercise of employee/director
stock options ................... 156,015 156 -- 458,908 -- --
exercise of stock warrants ...... 500,000 500 -- 1,999,500 -- --
Treasury shares issued ........... 35,000 -- -- 128,038 -- 2,162
------------ ------------ ------------ ------------ ------------ ------------
Balances, December 31, 1995 ........ 8,645,698 $ 8,798 $ 0 $ 17,626,510 12,245,651 $ (9,418)
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part
of these consolidated statements.
F-6
<PAGE> 34
URANIUM RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operations:
Net income (loss) ........................................ $ (936,188) $ 1,205,296 $ (347,950)
Reconciliation of net income (loss) to cash
provided by operations -
Provision for restoration and reclamation costs ....... 596,482 274,465 292,200
Depreciation and depletion ............................ 3,182,028 581,390 878,429
Loss on acceleration of uranium contract .............. -- 349,265 --
Writedown of uranium properties and other
uranium assets ..................................... 163,145 -- 1,944,645
Amortization of other assets .......................... -- 119,307 298,405
Provision (benefit) for deferred income taxes ......... (252,000) 300,000 (91,000)
Decrease in restoration and reclamation accrual ....... (104,108) (157,374) (299,188)
Other non-cash items, net ............................. 401,711 426,950 342,597
----------- ----------- -----------
Cash flow provided by operations, before changes in
operating working capital items ....................... 3,051,070 3,099,299 3,018,138
Effect of changes in operating working capital items -
Increase in receivables ............................... (3,952,451) (313,197) (501,755)
Decrease in inventories ............................... 3,761,066 3,957,339 2,048,358
Increase in prepaid and other current assets .......... (238,201) (188,749) (203,078)
(Decrease) increase in payables
and accrued liabilities ............................ 2,679,313 (1,474,311) 1,921,244
----------- ----------- -----------
Net cash provided by operations ............................ 5,300,797 5,080,381 6,282,907
----------- ----------- -----------
Investing activities:
(Increase) decrease in investments ....................... (149,883) (522,843) 30,131
Additions to property, plant and equipment -
Kingsville Dome ....................................... (560,772) (125,219) (202,289)
Rosita ................................................ (2,108,508) (1,404,922) (266,486)
Churchrock ............................................ (477,686) (883,678) (1,282,979)
Crownpoint ............................................ (291,394) (682,785) (1,143,135)
Other property ........................................ (144,833) (86,098) (206,572)
Increase in other assets ................................. (99,218) (1,221) (114,678)
----------- ----------- -----------
Net cash used in investing activities ...................... (3,832,294) (3,706,766) (3,186,008)
----------- ----------- -----------
Financing activities:
Proceeds from borrowings ................................. 6,135,000 2,250,000 700,000
Payments and refinancings of principal ................... (7,874,225) (8,017,047) (2,974,401)
Issuance of common stock and warrants, net ............... 2,459,064 240,556 --
Proceeds from sale of uranium sales contract ............. -- 4,150,735 --
----------- ----------- -----------
Net cash provided by (used in) financing activities ........ 719,839 (1,375,756) (2,274,401)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents ....... 2,188,342 (2,141) 822,498
Cash and cash equivalents, beginning of period ............. 2,527,600 2,529,741 1,707,243
----------- ----------- -----------
Cash and cash equivalents, end of period ................... $ 4,715,942 $ 2,527,600 $ 2,529,741
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated statements.
F-7
<PAGE> 35
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND DESCRIPTION OF COMPANY
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles and include the accounts of
Uranium Resources, Inc. ("URI") and its wholly owned subsidiaries (collectively
"the Company"). All significant intercompany transactions have been eliminated
in consolidation.
URI was formed in 1977 and incorporated in Delaware in 1987. The
Company is primarily engaged in the business of acquiring, exploring,
developing and mining uranium properties, using the in situ leach ("ISL") or
solution mining process. The primary customers of the Company are major
utilities who utilize nuclear power to generate electricity. The Company
continuously evaluates the creditworthiness of its customers. The Company has
been, in the past, involved in a number of significant ISL uranium mining joint
venture arrangements and has also provided consulting, plant design and
construction expertise to other companies. At present, the Company owns
uranium interests in South Texas and New Mexico. The Company's Rosita uranium
production facility in South Texas resumed production activities in June, 1995,
and was in full production at December 31, 1995.
INVENTORIES
Uranium inventory consists of uranium concentrates (U3O8) on hand and
at converters awaiting delivery to customers and is valued at the lower of cost
(first-in, first-out) or market. The cost of produced uranium includes all
production costs, and provisions for restoration, depreciation and depletion.
Materials and supplies inventory is valued at the lower of average cost or
market.
BORROWED URANIUM
Uranium is occasionally borrowed from other parties to facilitate
deliveries under sales contracts. Repayment of the loan is normally made from
production or from purchased uranium. The liability for borrowed uranium is
recorded at the latest spot price (estimated replacement cost) and the cost is
adjusted to the actual amount when repaid.
PROPERTY, PLANT AND EQUIPMENT
Uranium Properties
Capitalization of Development Costs - All acquisition, exploration and
development costs (including financing, salary and related overhead costs)
incurred in connection with the various uranium properties are capitalized.
Gains or losses are recognized upon the sale of individual property interests.
All costs incurred in connection with unsuccessful acquisition efforts,
exploration and abandoned interests are charged to expense when known, and
properties with significant acquisition or incurred costs are evaluated for
realizability on a property-by-property basis. Any impairment of such costs is
recognized by providing a valuation allowance (see Note 2 - "Uranium Properties
- - Writedown of Abandoned Property"). Total exploration and evaluation costs
capitalized in the twelve months ended December 31, 1995, 1994 and 1993 were
$4,040, $75,408 and $131,606, respectively.
Depreciation and Depletion - In general, depletion of uranium mineral
interests and related development costs is computed on a property-by-property
basis using the units-of-production method based on the proved and probable
reserves as estimated periodically by the Company's geologists and engineers.
Depreciation and depletion is provided on the investment costs, net of salvage
value, of the various uranium properties' production plants and related
equipment using the estimated production life
F-8
<PAGE> 36
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
of the uranium reserves. Other ancillary plant equipment and vehicles are
depreciated based upon the estimated useful lives of the assets.
Other Property
Other property consists of corporate office equipment, furniture and
fixtures and transportation equipment. Depreciation is computed based upon the
estimated useful lives of the assets. Repairs and maintenance costs are
expensed as incurred. Gain or loss on sale or retirement is recorded as income
or expense.
Capitalization of Interest
The Company capitalizes interest cost with respect to properties
undergoing exploration or development activities that are not subject to
depreciation or depletion. The average interest rate on outstanding borrowings
during the period is used in calculating the amount of interest to be
capitalized. Interest capitalized in the twelve months ended December 31,
1995, 1994 and 1993 amounted to $10,740, $849,661 and $1,172,461, respectively.
Total interest costs in these periods were $536,109, $891,225 and $1,194,674,
respectively.
RESTORATION AND RECLAMATION COSTS
Under various federal and state mining laws and regulations, the
Company is required to reclaim the surface areas and restore underground water
quality to the pre-existing mine area average quality. Accruals for the
estimated future cost of restoration and reclamation are made on a per-pound
basis as part of production costs, or when it is determined by an engineering
study that an adjustment to the accrual is required.
REVENUE RECOGNITION FOR CERTAIN URANIUM SALES
The Company recognizes revenue from sales of uranium under which
substantially all obligations related to the delivery have been completed.
Under certain uranium sales contracts that contain origin specific delivery
requirements, the revenue from the portion of such sales which require the
satisfaction of future obligations are recorded as unearned revenue until such
time that these commitments are satisfied. Commitments that are expected to be
completed within one year are classified as current; all others are recorded as
long-term deferred credits.
EARNINGS PER SHARE
Earnings per share are based on the weighted average number of common
shares and dilutive common stock equivalents outstanding during the period.
The weighted average number of shares used in the earnings per share
calculations were 8,098,000, 7,073,000 and 6,640,000 in 1995, 1994, and 1993,
respectively.
UNAMORTIZED DEBT ISSUANCE COSTS
Debt discount and related expenses arising from the issuance of debt
securities are amortized by the effective interest method.
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
F-9
<PAGE> 37
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
Additional disclosures of cash flow information follow:
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash paid during the period for:
Interest ............................ $524,009 $755,902 $660,677
Income taxes ........................ -- -- 36,392
</TABLE>
The change in uranium inventory in the Consolidated Statements of Cash
Flows during 1995, 1994 and 1993 does not reflect the change in the amounts of
the non-cash capitalized restoration and depreciation and depletion provisions
included in uranium inventory. Such increases (decreases) totaled $391,428,
($389,127)and ($607,674), respectively.
Certain additional non-cash transactions occurred in 1995 and 1994,
and such major transactions are summarized as follows:
<TABLE>
<S> <C>
In May 1995, 35,000 treasury shares were issued to financial advisors
in connection with the Lindner Note (Note 4). $130,200
In November 1994, the Company acquired from Energy Fuels the
Scottish Nuclear Contract in exchange for 736,842 shares of
common stock and the remaining 1994 balance owed to the Company
from Energy Fuels for uranium purchased (Note 3). $4,500,000
In August 1994, the long-term debt and related interest expense owed
to Mr. Oren L. Benton was converted into 496,040 shares of common
stock (Note 4). $2,356,189
In August 1994, Nuexco Exchange, A.G. acquired the Company's
Note due Citibank, N.A. (Note 4). $6,500,000
In August 1994, the accrued fee obligations and related unamortized
debt discount remaining on the Note with Citibank, N.A. were waived by
Nuexco Exchange, A.G. and have been recorded as an increase to
paid-in capital (Note 4). $548,219
In August 1994, Nuexco Exchange, A.G. made an additional loan
to the Company to finance the purchase of uranium inventory (Note 4). $6,000,000
</TABLE>
RESTRICTED CASH
At December 31, 1995, the Company had pledged a certificate of deposit
of $712,094 in order to fund letters of credit for ongoing plugging bonds
related to the Kingsville Dome and Rosita properties. This cash is not readily
available to the Company and thus is not included in cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions. Such estimates and assumptions may affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
F-10
<PAGE> 38
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
FUTURE ACCOUNTING CHANGES
The Company plans to adopt Statement of Financial Accounting Standards
No. 121 ("SFAS No. 121"), "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of", effective January 1, 1996. Under
SFAS No. 121, impairment losses are recognized when information indicates the
carrying amount of long-lived assets will not be recovered through future
operations or sale. Impairment losses for assets to be held or used in
operations will be based on the excess of the carrying amount of the asset over
the asset's fair value. SFAS No. 121 will be applied prospectively from the
date of adoption and, based on current circumstances, management does not
believe the effect of adoption will be material. However, future developments
in the uranium marketplace could impact the full recovery of the carrying cost
of certain long-term assets.
The Company also plans to adopt Statement of Financial Accounting
Standards No. 123 ("SFAS No. 123"), "Accounting for Stock-Based Compensation",
effective January 1, 1996. SFAS No. 123 requires the use of an option pricing
model to calculate the value of stock-based compensation transactions, but then
allows for two alternative methods of reporting the transactions. One method
recognizes this value as a cost of compensation and as an expense for the
current period. The alternative method permits footnote disclosure of the
compensation cost, without charging the amount against current earnings. The
Company intends to implement the method which utilizes the footnote disclosure
alternative and does not expect the adoption of SFAS No. 123 to have any impact
on consolidated results of operations or financial condition of the Company.
2. URANIUM PROPERTIES
KINGSVILLE DOME PROPERTY
In 1981, the Company acquired an exploration property in South Texas,
known as Kingsville Dome, from Exxon Corporation. After significant production
in 1988-1990, the property was put on a standby basis because of low uranium
spot prices and production ceased in September, 1990. Cost of uranium sales in
1995, 1994 and 1993 in the consolidated statements of operations includes
$512,328, $699,804 and $666,101, respectively, of Kingsville Dome standby
costs. At December 31, 1995 the property contained approximately 3,191,000
pounds of estimated recoverable proved and probable reserves, and the net
carrying value of the property was approximately $14,900,000.
ROSITA PROPERTY
In late 1985, the Company acquired several lease holdings in a uranium
prospect ("Rosita") in South Texas. At December 31, 1995, the property
contained approximately 1,992,000 pounds of estimated recoverable proved and
probable uranium reserves. Construction and development activities began in
the first quarter of 1990 and were completed in September 1990 with production
commencing immediately thereafter. The property was originally put on a
standby basis and production ceased in March, 1992.
Capital expenditures began in early 1995 at Rosita which lead to the
resumption of production at the property in June, 1995. Total production for
the period June, 1995 through December 31, 1995 was approximately 610,000
pounds. Cost of uranium sales at December 31, 1995, 1994 and 1993 in the
Consolidated Statements of Operations includes $246,268, $758,688 and $846,031,
respectively, of Rosita standby costs. The net carrying value of the property
at December 31, 1995 was approximately $7,500,000.
F-11
<PAGE> 39
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
CHURCHROCK PROPERTIES
In December 1986, the Company executed an agreement to acquire
properties in the Churchrock region of New Mexico containing approximately
6,950,000 pounds of estimated recoverable proved and probable uranium reserves.
In September 1991, an additional 200 acres of leases were obtained by the
Company. These properties were acquired in exchange for a future production
royalty payment which, based upon the expected selling price of the uranium
production, may vary between 5% and 10%. Preliminary analysis of the drilling
data of the Churchrock properties indicates approximately 5,488,000 pounds of
estimated recoverable proved and probable reserves. Permitting activities are
currently ongoing for the properties. The net carrying value of these
properties at December 31, 1995 was approximately $6,305,000.
CROWNPOINT PROPERTY
In August 1988, the Company acquired the Crownpoint property,
consisting of 163 acres of leases and related equipment and buildings for cash
payments of $550,000, amounts payable in future years of $950,000 and a sliding
scale overriding royalty on future production. The present value of the future
payable amount, $407,054 at December 31, 1995, is recorded as a purchase money
obligation. Additionally, also in 1988, the Company staked 321 acres of claims
in the same area. In August, 1993 the Company acquired approximately 959 acres
of leases adjoining the Crownpoint properties. Initial interpretation of the
drilling data for all the properties acquired in 1988 and 1993 indicate total
estimated recoverable proved and probable uranium reserves of approximately
25,396,000 pounds. The net carrying value of these properties at December 31,
1995 was approximately $6,809,000.
WRITEDOWN OF ABANDONED PROPERTY
In the fourth quarter of 1995, the Company determined that certain
evaluation projects in South Texas would not be pursued toward acquisition.
The costs related to these projects were expensed in 1995 resulting in a
pre-tax charge of approximately $163,000.
In 1993, the Company relinquished ownership rights to certain leases
in Texas and Wyoming and an option to lease certain property in the Churchrock
area of New Mexico. These abandonments resulted in a charge against net
earnings in 1993 of approximately $1,560,000.
3. CONTRACT COMMITMENTS
SALES CONTRACTS
The Company has entered into several long-term contract commitments to
sell uranium. Included in URI's long-term contracts are sales to be made under
the Amendment to the Russian Suspension Agreements (the "Amendment"). Such
sales involve the sale of Russian origin uranium providing it is matched with
U.S. uranium mined after March 11, 1994. Under these arrangements, the Russian
uranium is essentially sold at its approximate purchase price. As a result,
these "pass- through" sales of Russian pounds are not expected to have a
significant impact on the future profitability of the Company's operations.
Total future sales of uranium concentrates (excluding the Russian component of
sales made under the Amendment) of approximately 2,545,000 pounds represent
future revenues of approximately $40,040,000 over the various contract periods
from January 1, 1996 through 2002. The average current price of such future
contracted deliveries, with escalation calculated through December 31, 1995, is
$15.73. All of the contracts contain provisions which provide for escalation
of between 80% and 100% of future inflation indices.
All revenues for the twelve months ended December 31, 1995 were from
sales to ten customers, three of which represented more than 10% of total
revenues. Sales to these three customers totaled $5,040,000, $3,011,000 and
$2,600,000 during 1995. All revenues for the twelve months ended December
F-12
<PAGE> 40
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
31, 1994 were from sales to six customers, five of which represented more than
10% of total revenues. Sales to these five customers totaled $3,847,000,
$3,670,000, $3,286,000, $3,214,000 and $2,094,000 during 1994. Revenues for
the twelve months ended December 31, 1993 were from sales to seven customers,
three of which represented more than 10% of total revenues. Sales to these
three customers totaled $4,899,000, $4,310,000 and $1,345,000 during 1993.
PURCHASE CONTRACT COMMITMENTS
In 1990, the Company entered into a long-term purchase contract to
purchase 250,000 pounds per year from 1992 through 1995, at an original base
price of $10.50 per pound as of January 1, 1990, escalated at the rate of 50%
of the prime rate and 50% of inflation. In 1995, the Company took deliveries
of 200,000 pounds under this contract. On November 29, 1995, the Company and
the supplier both agreed to terminate the contract and forego the delivery of
the remaining 50,000 pounds. In July 1992, the Company entered into a
long-term purchase contract to purchase 200,000 pounds annually from 1993
through 1995. The contract contained spot market pricing considerations and
carries a minimum price of $8.00 per pound escalated at a 6% rate and a maximum
price of $8.00 per pound escalated at an 18% rate. Deliveries under this
contract were completed in 1995.
On August 28, 1995, the Company entered into two long-term purchase
contracts to purchase approximately 50,000 pounds of Russian origin uranium per
year from 1995 through 1998 and a total of approximately 400,000 pounds of
Russian origin uranium to be purchased from 1995 through 1998, respectively.
The original base price of these two purchase commitments is significantly
below current market prices for similar transactions. These contracts are
subject to future price escalations based upon inflation indices.
In addition, the Company entered into an agreement on August 19, 1994
with Energy Fuels Nuclear, Inc. ("EFN"), an affiliated company of Mr. Benton
pursuant to which the Company assigned to EFN its rights under certain uranium
purchase agreements (see Note 5). Through December 31, 1994, the Company
purchased 150,000 pounds of uranium for $1,791,500 under the two agreements and
resold the uranium to EFN for the same price. In a separate transaction, the
Company purchased 100,000 pounds of uranium from a third-party supplier and
resold the same to another company affiliated with Mr. Benton for $940,000. At
December 31, 1994, it was determined that EFN was unable to fulfill its
obligations for the remaining 450,000 pounds under the two agreements and the
Company fulfilled these remaining obligations.
On November 18, 1994, the Company was assigned a long-term sales
contract ("the Scottish Nuclear Contract") from Energy Fuels, Ltd. ("EFL"), an
affiliated company of Mr. Benton, in exchange for 736,842 shares of common
stock and the remaining balance due to the Company in the amount of $881,500
plus accrued interest of $33,006 for 1994 purchases of uranium made by EFN and
another company affiliated with Mr. Benton. The Scottish Nuclear Contract was
valued by the Company and EFL at $4,500,000. The deliveries under the Scottish
Nuclear Contract were accelerated to December 1994 with the Company realizing
proceeds of $4,151,735 in order to fund the current cash requirements of the
Company. The difference from the agreed-upon value of the Scottish Nuclear
Contract and the proceeds received upon accelerating delivery was recorded as a
loss of $349,265 in the December 31, 1994, Consolidated Statements of
Operations.
F-13
<PAGE> 41
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
4. LONG-TERM DEBT
CITIBANK CREDIT AGREEMENT
On May 24, 1990, the Company entered into a Credit Agreement with
Citibank, N.A. ("Citibank"). On August 19, 1994, the Citibank debt agreements
were restructured as discussed below. The balance at the time of the
restructuring was $6,500,000. In connection with the restructuring the Company
received a waiver of accrued fee obligations of $700,000, which was arranged by
one of the Benton Companies. The waiver of these fees was recorded in 1994,
net of the unamortized debt discount remaining on the Citibank debt
(approximately $152,000) as an increase to paid-in capital.
CITIBANK DEBT RESTRUCTURING AND EQUITY CONVERSION
On August 19, 1994 Nuexco Exchange, A.G., ("NEAG"), a company then
owned by Mr. Benton, acquired the note (the "Note") outstanding to Citibank
under the Credit Agreement for $6,500,000. To fund this acquisition of the
Note due Citibank and for the additional loan to the Company, NEAG borrowed
$12,500,000 from Union Bank of Switzerland ("UBS") and made a new loan to the
Company of $6,000,000. The $6,000,000 loaned to the Company was used to
purchase 648,648 pounds of uranium at $9.25 per pound from EFN. The notes due
NEAG ("NEAG Notes") were secured by 599,423 pounds of uranium purchased from
EFN and by the contracts between the Company and certain utilities for delivery
of uranium. NEAG assigned their notes due from the Company and the related
security to UBS. NEAG and UBS released all other collateral that had secured
the original Citibank Note. The balance of the notes was paid in full by
October 1995.
To enable the Company to meet its short-term liquidity requirements
while negotiations with Citibank were in progress, Mr. Benton advanced
$1,125,000 to the Company in January 1994 and $1,125,000 in April 1994. The
advances made to the Company by Mr. Benton accrued interest at Citibank's prime
rate plus 3%. Mr. Benton also guaranteed the Company's payment obligations
through December 31, 1994 on the Citibank Note. On August 19, 1994 the
$2,250,000 in advances together with accrued but unpaid interest of $106,189
were converted into equity by the Company's issuance to Mr. Benton of 496,040
shares of common stock at a valuation of $4.75 per share.
In August 1994, the Company entered into an agreement with an
affiliated company of Mr. Benton ("Benton affiliate") which gave the Company
the right, prior to August 18, 1997 to require the Benton affiliate to purchase
up to $6,996,750 of common stock at a per share price of $4.75 (1,473,000
shares). The Benton affiliate was granted demand and piggy-back registration
rights for such shares. Mr. Benton guaranteed the Benton affiliate's
performance of its obligations under this agreement. The issuance of the
736,842 shares to the Benton affiliate in connection with the assignment of the
long-term sales contract from EFL (Note 3) was credited against this
commitment. The Company does not intend nor does it anticipate that the
balance of the shares will be put to the Benton Companies because of the Benton
bankruptcy.
LINDNER NOTE
On May 25, 1995 the Company entered into an agreement with Lindner
Investments and Lindner Dividend Fund, Inc., (the "Lender") two mutual funds
managed by Ryback & Associates, for a $6 million secured convertible note with
the Company (the "Lindner Note"). The Lindner Note is for a term of three
years and bears interest at an annual rate of 6.5% and is convertible at any
time during the three-year term into 1.5 million shares of the Company's common
stock at an initial conversion price of $4.00 per share. The Lender also
received a three-year warrant to purchase 1.5 million shares of the Company's
common stock at an initial price of $4.00 per share. At December 31, 1995, the
Lender had exercised 500,000 shares of warrants under the agreement for an
infusion of $2.0 million to the Company.
Certain other financial advisors associated with the transaction were
granted warrants and options to purchase up to 150,000 shares at an initial
exercise price of $4.00 per share. The loan is secured by a
F-14
<PAGE> 42
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
mortgage on the Company's Rosita and Kingsville Dome uranium properties in
Texas. Part of the proceeds from the Lindner Note were used to pay down
existing payables and provide funding to complete the production start-up of
the Company's Rosita property. The balance of the proceeds were used to fund
pre-production activities at the Company's Kingsville Dome facility to permit
commencement of production in March, 1996.
PURCHASE MONEY OBLIGATION
In 1987, the Company acquired certain long-term sales contract
delivery rights in exchange for cash plus an assignment of a $3,000,000 future
production payment, at $1.00 per pound of production sold from the Kingsville
Dome and Rosita projects, starting in 1988. The production payment was
recorded as a purchase money obligation at an original calculated present value
of $2,379,839 and the remaining balance owed at December 31, 1995 is
$1,080,453.
SUMMARY OF LONG-TERM DEBT
<TABLE>
<CAPTION>
At December 31,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
Long-term debt of the Company consists of:
Lindner Note ................................. $6,000,000 $ --
Purchase money obligation -
Sales contract acquisitions .............. 1,080,453 1,080,453
Crownpoint property (Note 2) ..................... 407,054 407,054
---------- ----------
7,487,507 1,487,507
Less - Current portion ....................... 350,000 82,000
---------- ----------
Total long-term debt ................... $7,137,507 $1,405,507
========== ==========
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
For the Twelve Months Ended: For the Twelve Months Ended:
- ---------------------------- ----------------------------
<S> <C> <C> <C>
December 31, 1996............. $350,000 December 31, 1999........ $11,000
December 31, 1997............. 359,000 December 31, 2000
December 31, 1998............. 6,360,000 and beyond............... 407,000
</TABLE>
5. RELATED-PARTY TRANSACTIONS/LIQUIDITY ISSUES
During 1994, the Company encountered liquidity problems that resulted
in the Company entering into certain transactions with companies controlled by
Oren L. Benton (the "Benton Companies") whereby the Benton Companies (a)
assisted in the restructuring of the Citibank, N.A. debt (see Note 4), (b)
arranged for an additional $6.0 million loan to the Company to purchase uranium
inventory to secure the restructured debt, (c) advanced the Company $2,250,000
to make debt payments prior to the restructuring, which advances were
subsequently converted to common stock and (d) committed to provide the Company
with an additional $7.0 million of capital (see Note 4). As a consequence of
the debt restructuring, the Company assigned most of the 1995 proceeds from its
contracts with utilities for the delivery of uranium, to the lender. The debt
payments were equal to the Company's expected revenue from these contracts
which resulted in almost no proceeds being received by the Company until the
fourth quarter of 1995, when the restructured debt was paid in full.
Further, during January, 1995, when the Benton Companies held
effective control of the common stock of the Company, the Company transferred
$1.0 million to the Benton Companies in connection with a planned joint venture
to process uranium at a Benton Companies' mill. The specific Benton Companies
which were to be part of the planned joint venture did not receive the
transferred funds. Because of the Benton Bankruptcy, the realizability of the
Company's $1.0 million investment is doubtful. Shortly thereafter,
F-15
<PAGE> 43
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
the then Chairman and CFO of the Company, who were also officers of the Benton
Companies, transferred $1.08 million out of the Company without the
authorization of the Company's Board of Directors. In February, 1995, the
Benton Companies filed for bankruptcy. The Company received $300,000 in June,
1995 from the $1.08 million transfer, but $1.78 million of the initial $2.08
million has not been recovered and there can be no assurance that the Company's
efforts to pursue remedies will be successful. The Company recorded losses
totaling $1.78 million for these transactions in 1995.
The bankruptcy could also cause a review of the transactions entered
into by the Company with the Benton Companies that could potentially result in
claims against the Company. The Company is unable to assess what adverse
consequences, if any, might result from such review.
The Company pursued various options to solve its liquidity problems
and discussions regarding alternative financing arrangements. Such efforts
resulted in the Company entering into a $6.0 million convertible debt agreement
in May, 1995 (see Note 4 - "Long-Term Debt - Lindner Note").
6. SHAREHOLDERS' EQUITY
COMMON STOCK
Issuance of Treasury Shares
On May 25, 1995, the Company issued 35,000 shares of the Company's
common stock which were held as treasury shares to financial advisors in
connection with the Lindner Note as discussed in Note 4.
Conversion of Notes to Oren L. Benton
On August 19, 1994, the long-term debt of $2,250,000 and related
interest owed to Oren L. Benton was converted into 496,040 shares of common
stock at a price of $4.75 per share as discussed in Note 4.
Conversion of Uranium Sales Contract
On November 22, 1994, the Company acquired from EFL a long-term sales
contract (Note 3) in exchange for an amount due from EFN and another company
affiliated with Mr. Benton, and 736,842 shares of common stock.
WARRANTS
Lindner Warrants
In connection with the May 1995 Lindner Note as discussed in Note 4,
the Company issued a three-year warrant to purchase 1.5 million shares of the
Company's common stock at an initial conversion price of $4.00 per share. The
warrants are convertible at any time through May 1998. As of December 31, 1995,
500,000 warrants have been exercised. In addition, the Lindner Note is
convertible at any time during the three year term into 1.5 million shares of
the Company's common stock at an initial conversion price of $4.00 per share.
Financial Advisors' Warrants/Options
On May 25, 1995 the Company issued a three-year warrant to purchase
100,000 shares of the Company's common stock at an initial conversion price of
$4.00 per share to certain financial advisors associated with the Lindner Note
transaction. The warrants are convertible at any time through May 1998. In
addition, the Company granted options to purchase 50,000 shares at an initial
conversion price of $4.00 per share. The options are immediately exercisable
and expire on March 6, 2000. As of December 31, 1995, none of the warrants and
options have been exercised.
F-16
<PAGE> 44
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
Common Stock Purchase Warrants
In conjunction with the March 1990 public offering, 301,875 common
stock purchase warrants were issued. Each warrant was exercisable through
February 26, 1994 to purchase one share of common stock at a price of $5.20 per
share. A total of 82,500 common stock purchase warrants had been exercised as
of December 31, 1993. The remaining warrants expired in accordance with their
terms on February 26, 1994.
Underwriter Warrants
In connection with the March 1990 public offering, the Company issued
to the underwriter, for an aggregate sum of $1,315, Underwriter's Common Stock
Purchase Warrants ("Underwriter Warrants"). The Underwriter Warrants were
exercisable through March 5, 1994 to purchase 32,886 shares of common stock at
a price of $6.60 per share. None of the Underwriter Warrants had been
exercised as of December 31, 1993 and they all expired in accordance with their
terms on March 5, 1994.
STOCK OPTIONS
Directors Stock Options
On May 25, 1995, the Company granted options to certain directors of
URI, to purchase 200,000 shares of the Company's common stock at an exercise
price of $4.50 per share. All such options are immediately exercisable and
expire May 24, 1998, 30 days after the holder ceases to be a director of the
Company or one year after such holder's death, whichever occurs first. None of
these options have been exercised as of December 31, 1995.
On August 16, 1995, the Company granted options to a director of URI,
to purchase 100,000 shares of the Company's common stock at an exercise price
of $8.38 per share which was the fair market value of a share of common stock
on August 16, 1995. Such options are immediately exercisable and expire May
24, 1998, 30 days after the holder ceases to be a director of the Company or
one year after his death, whichever occurs first. None of these options have
been exercised as of December 31, 1995.
Other Stock Options
On July 31, 1995, the Company granted options to a former officer of
the Company to purchase 50,000 shares of the Company's common stock at an
exercise price of $4.75 per share which was the fair market value of a share of
common stock on that date. Such options are immediately exercisable and expire
May 31, 1998. None of these options have been exercised as of December 31,
1995.
F-17
<PAGE> 45
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
7. EMPLOYEE STOCK OPTIONS
The Company has a Directors' Stock Option Plan which provides for the
grant of 20,000 stock options to each of the non-employee directors along with
additional annual grants of stock options upon re-election as directors at the
Company's annual meeting. Currently there are 84,000 stock options outstanding
under the Directors' Stock Option Plan. Also on January 15, 1992, the Board of
Directors approved the grant of 577,248 stock options under the amended plan to
officers and employees. All of the previously outstanding options were
canceled upon the effectiveness of the new options. On August 10, 1994, the
Board of Directors increased the available options under the Employees' Stock
Option Plan and the Directors' Stock Option Plan to 850,000 options and 150,000
options, respectively. On October 11, 1995 the Board of Directors decided to
discontinue grants under the Employees' Stock Option Plan. In addition, the
Board of Directors approved the adoption of a stock incentive plan covering key
employees. The Stock Incentive Plan provides for the grant of 750,000 stock
options. These options may be qualified or nonqualified. As of December 31,
1995, there are 35,000 options outstanding under the Stock Incentive Plan.
Additional details about the options granted under the stock option plans are
as follows:
<TABLE>
<CAPTION>
At December 31, 1995
---------------------------------------------
Options
Exercise Options Available Options Options Options
Date of Grant Price Granted for Exercise Exercised Canceled Outstanding
------------- ----- ------- ------------ --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
January 15, 1992 $ 2.94 617,248 115,714 232,796 185,000 199,452
May 22, 1992 $ 3.00 2,000 -- 1,000 1,000 --
--------- --------- --------- --------- ---------
Balances at December 31, 1992 619,248 115,714 233,796 186,000 199,452
February 26, 1993 $ 2.50 10,000 -- 2,500 7,500 --
May 27, 1993 $ 3.50 2,000 -- 500 1,500 --
--------- --------- --------- --------- ---------
Balances at December 31, 1993 631,248 115,714 236,796 195,000 199,452
July 11, 1994 $ 4.38 20,000 5,000 -- -- 20,000
August 10, 1994 $ 4.25 140,000 4,000 1,000 120,000 19,000
December 15, 1994 $ 5.88 3,000 500 -- 1,000 2,000
--------- --------- --------- --------- ---------
Balances at December 31, 1994 794,248 125,214 237,796 316,000 240,452
February 24, 1995 $ 4.13 210,000 -- -- 110,000 100,000
April 12, 1995 $ 3.88 10,000 -- -- -- 10,000
May 26, 1995 $ 3.75 40,000 -- -- -- 40,000
August 16, 1995 $ 8.38 100,000 -- -- -- 100,000
August 31, 1995 $ 6.88 127,508 -- -- -- 127,508
October 11, 1995 $ 6.94 35,000 -- -- -- 35,000
December 19, 1995 $ 5.50 3,000 -- -- -- 3,000
--------- --------- --------- --------- ---------
Balances at December 31, 1995 1,319,756 125,214 237,796 426,000 655,960
========= ========= ========= ========= =========
</TABLE>
The exercise price for the options granted under the stock option
plans has been the approximate market price of the common stock on the date
granted. The terms of the options provide that no options may be exercised for
one year after grant, and then for ratable exercise over the subsequent
four-year period, with a total exercise period of ten years.
The exercise price for the options granted under the Stock Incentive
Plan has been the approximate market price of the common stock on the date
granted. The terms of the options are determined by the Board of Directors
upon grant; however, no options may be exercised after a period of ten years.
F-18
<PAGE> 46
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
8. FEDERAL INCOME TAXES
The deferred federal income tax liability consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
Property development costs - net of amortization $ 7,933,000 $ 8,358,000
Accelerated depreciation 125,000 114,000
Restoration reserves (1,034,000) (866,000)
Net operating loss carryforwards (5,971,000) (5,417,000)
Valuation allowance and other - net 1,605,000 721,000
----------- -----------
Total deferred income tax liability $ 2,658,000 $ 2,910,000
=========== ===========
</TABLE>
Major items causing the Company's tax provision to differ from the
federal statutory rate of 34% were:
<TABLE>
<CAPTION>
For the Twelve Months Ended December 31,
-----------------------------------------------------------------------------------------------
1995 1994 1993
----------------------------- ----------------------------- -----------------------------
% of Pretax % of Pretax % of Pretax
Amount Income Amount Income Amount Income
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Pretax income (loss) $ (1,170,188) $ 1,505,224 $ (454,558)
------------ ------------ ------------ ------------ ------------ ------------
Pretax income (loss) times
statutory tax rate (398,000) (34.0%) 512,000 34.0% (155,000) (34.0%)
Increases (reductions) in
taxes resulting from:
Percentage depletion 398,000 34.0% (512,000) (34.0%) 155,000 34.0%
Alternative minimum tax (234,000) (20.0%) 299,928 19.9% (106,608) (23.5%)
------------ ------------ ------------ ------------ ------------ ------------
Income tax expense (benefit) $ (234,000) (20.0%) $ 299,928 19.9% $ (106,608) (23.5%)
============ ============ ============ ============ ============ ============
</TABLE>
The Company's book income for regular federal income tax purposes at
December 31, 1995 is entirely sheltered by cumulative percentage depletion and
investment tax credit carryforwards. However, under the Alternative Minimum
Tax ("AMT") system imposed by the 1986 Tax Reform Act ("the 86 ACT"), these
carryforward items may only be utilized on a limited basis resulting in the
above tax provisions, which consists entirely of deferred AMT.
At December 31, 1995, approximately $3,189,000 of percentage depletion
(available for regular tax purposes) had not been utilized to shelter book
income and is available to carry forward to future accounting periods. The
Company made income tax payments in 1993 of $36,392. No tax payments were
required in 1994 or 1995.
The Company has available for regular federal income tax purposes at
December 31, 1995 estimated net operating loss carryforwards of approximately
$17,562,000 which expire primarily in 1998 through 2011, if not previously
utilized. At December 31, 1995, the Company had investment tax credit
carryforwards of approximately $23,000, after adjusting for the reductions
required by the 86 ACT, which expire for regular tax purposes in 1996 through
2000.
F-19
<PAGE> 47
URANIUM RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
9. OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS
Other long-term liabilities and deferred credits on the balance sheet consisted
of:
<TABLE>
<CAPTION>
December 31,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
Reserve for future restoration and reclamation costs,
net of current portion of $544,000 and $90,000 in
1995 and 1994 (Note 1) $2,446,151 $2,337,624
---------- ----------
Unearned revenue from Russian matched sales (Note 1) 331,200 --
---------- ----------
Total other long-term liabilities and deferred credits $2,777,351 $2,337,624
========== ==========
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
The Company's mining operations are subject to federal and state regulations
for the protection of the environment, including water quality. These laws are
constantly changing and generally becoming more restrictive. The ongoing costs
of complying with such regulations has not been significant to the Company's
annual operating costs. Future mine closure and reclamation costs are provided
for as each pound of uranium is produced on a unit-of-production basis. The
Company reviews its reclamation obligations each year and determines the
appropriate unit charge. The Company also evaluates the status of current
environmental laws and their potential impact on their accrual for costs. The
Company believes its operations are in compliance with current environmental
regulations.
The Company is from time to time involved in various legal proceedings of a
character normally incident to its business. Management does not believe that
adverse decisions in any pending or threatened proceedings will have a material
adverse effect on the Company's financial condition or results of operations.
11. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments," requires disclosure about the fair value of
financial instruments. Carrying amounts for all financial instruments
approximate fair value as of December 31, 1995. The fair value of debt is
estimated based on the discounted value of the future cash flows using
borrowing rates currently available to the Company for loans with similar terms
and average maturities.
F-20
<PAGE> 48
SCHEDULE II
URANIUM RESOURCES, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
ADDITIONS
------------------------
CHARGED
BALANCE AT TO COSTS CHARGED TO
BEGINNING AND OTHER BALANCE AT
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS(A) END OF PERIOD
----------- ---------- ---------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Accrued restoration costs ......... $2,427,624 $ 596,482 $70,153 (b) $ 104,108 $2,990,151(d)
Year ended December 31, 1994:
Accrued restoration costs ......... $2,361,297 $ 274,465 $(50,764) (c) $ 157,374 $2,427,624(d)
Year ended December 31, 1993:
Accrued restoration costs ......... $2,448,239 $ 292,200 $(79,954) (c) $ 299,188 $2,361,297(d)
</TABLE>
- ---------
(a) Deductions represent costs incurred in the restoration process.
(b) Increase resulted primarily from the change in the amounts of restoration
provision included in ending uranium inventory.
(c) Decrease resulted primarily from restoration provision amounts in
beginning inventory which were expensed in the current year.
(d) Amounts recorded as current liabilities at December 31, 1995, 1994 and
1993 are $544,000, $90,000 and $31,000 respectively.
F-21
<PAGE> 49
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
<S> <C> <C>
2.1 Note and Warrant Purchase Agreement, dated May 25, 1995, by
and among Uranium Resources, Inc., Lindner Investments, a
Massachusetts business trust (on behalf of its Lindner Bulwark
Fund series), and Lindner Dividend Fund, Inc., a Missouri
corporation (filed with the Company's Current Report on Form
8-K dated May 25, 1995)(1)
3.1 Certificate of Incorporation of the Company (filed with the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1990)(1)
3.2 Bylaws of the Company (filed with the Company's Form 10 -
General Form for Registration of Securities Pursuant to
Section 12(b) or (g) of the Securities Exchange Act of 1934 as
filed with the Securities and Exchange Commission on September
8, 1988)(1)
10.1 Contract dated as of November 17, 1987 and amended as of May
29, 1992 by Hydro Resources, Inc., a wholly-owned subsidiary
of Uranium Resources, Inc., and Public Service Company of New
Mexico (filed with the Company's Form 8 - Amendment to
Application or Report as filed with the Securities and
Exchange Commission on December 9, 1988)(1)(2)
10.2 Contract for the Purchase of Natural Uranium Concentrates
(U3O8) dated April 5, 1994 between Uranium Resources, Inc.,
URI, Inc. and Pacific Gas & Electric Company (filed with the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, including the Company's Form 10-K/A filed
September 1, 1995 and January 30, 1996)(1)(2)
10.3 Agreement for the Sale of Uranium Concentrates dated as of
August 23, 1990 between OES Fuel, Incorporated, Uranium
Resources, Inc., and URI, Inc. (filed with Post-Effective
Amendment No. 3 to the Company's Form S-1 Registration
Statement as filed with the Securities and Exchange Commission
on December 7, 1990)(1)(2)
10.4 U3O8 Sales Agreement dated September 30, 1988 between GPU
Nuclear Corporation and URI, Inc. guaranteed by Uranium
Resources, Inc. (filed with the Company's Form 8 - Amendment
to Application or Report as filed with the Securities and
Exchange Commission on December 9, 1988)(1)(2)
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
<S> <C> <C>
10.5 Summary of Supplemental Health Care Plan (filed with Amendment
No. 1 to the Company's Form S-1 Registration Statement (File
No. 33-32754) as filed with the Securities and Exchange
Commission on February 20, 1990)(1)
10.6 Amended and Restated Directors' Stock Option Plan (filed with
the Registration Statement on Form S-8 (File No. 3330-00349)
on January 22, 1996)(1)
10.7 Amended and Restated Employees' Stock Option Plan (filed with
the Registration Statement on Form S-8 (File No. 333-00403) on
January 22, 1996)(1)
10.8 1995 Stock Incentive Plan (filed with the Company's
Registration Statement (File No. 333- 00405) on Form S-8 on
January 22, 1996)(1)
10.9 Non-Qualified Stock Option Agreement dated August 16, 1995,
between Uranium Resources, Inc. and Leland O. Erdahl(3)
10.10 Non-Qualified Stock Option Agreement dated May 25, 1995,
between Uranium Resources, Inc. and George R. Ireland(3)
10.11 Non-Qualified Stock Option Agreement dated May 25, 1995,
between Uranium Resources, Inc. and James B. Tompkins (3)
10.12 Stock Option Agreement dated March 6, 1995, between Uranium
Resources, Inc. and James P. Congleton, as amended on May 25,
1995(3)
10.13 Warrant to Purchase Common Stock dated May 25, 1995, between
Uranium Resources, Inc. and Grant Bettingen, Inc.(3)
10.14 Non-Qualified Stock Option Agreement dated July 31, 1995,
between Uranium Resources, Inc. and Wallace M. Mays (filed
with the Registration Statement on Form S-8 (File No.
33-64481) on November 21, 1995)(1)
22.1 Subsidiaries of the Company(3)
23.1 Consent of Independent Public Accountants(3)
</TABLE>
(1)Incorporated by reference pursuant to Rule 12b-32 under the
Securities and Exchange Act of 1934, as amended.
(2)Certain provisions have been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for
confidential treatment.
(3)Previously File
