UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

or

Commission File Number: 001-33706

URANIUM ENERGY CORP.

(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒   No ☐

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

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

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

Yes ☐   No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 179,523,915 shares of common stock outstanding as of March 8, 2019.

URANIUM ENERGY CORP.

TABLE OF CONTENTS

NOTE 1: NATURE OF OPERATIONS

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

Although planned principal operations have commenced from which significant revenues from sales of uranium concentrates were realized for the fiscal years ended July 31, 2015 (“Fiscal 2015”), July 31, 2013 (“Fiscal 2013”) and July 31, 2012 (“Fiscal 2012”), we have yet to achieve profitability and have had a history of operating losses resulting in an accumulated deficit balance since inception. No revenue from uranium sales was realized for the six months ended January 31, 2019, or for the fiscal years ended July 31, 2018 (“Fiscal 2018”), July 31, 2017 (“Fiscal 2017”), July 31, 2016 (“Fiscal 2016”) or July 31, 2014 (“Fiscal 2014”). Historically, we have been reliant primarily on equity financings from the sale of our common stock and, during Fiscal 2014 and Fiscal 2013, on debt financing in order to fund our operations, and this reliance is expected to continue for the foreseeable future.

During the six months ended January 31, 2019, we completed a public offering of 12,613,049 units at a price of $1.60 per unit for gross proceeds of $20.2 million, and received cash proceeds of $2.6 million from the exercise of stock options and warrants, which substantially increased our cash and cash equivalent and improved our working capital position. At January 31, 2019, we had working capital of $22.3 million including cash and cash equivalents of $4.0 million and short-term investments of $18.0 million. On December 5, 2018, we entered into a third amended and restated credit agreement (the “Third Amended and Restated Credit Agreement”), whereby we and our lenders agreed to certain further amendments to our $20 million senior secured credit facility (the “Credit Facility”), whereby the maturity date was extended from January 1, 2020 to January 31, 2022, and whereby the prior monthly principal payments were deferred until the new maturity date of January 31, 2022. As a result, the $15.0 million principal amounts reported as current-portion of long-term debt at October 31, 2018 has been removed from our capital resource requirement for the next 12 months. As a consequence, our existing cash resources as at January 31, 2019 are expected to provide sufficient funds to carry our planned operations for the next 12 months from the date that our condensed consolidated financial statements are issued.  Our continuation as a going concern for a period beyond 12 months will be dependent upon our ability to obtain adequate additional financing, as our operations are capital intensive and future capital expenditures are expected to be substantial. Our continued operations, including the recoverability of the carrying values of our assets, are dependent ultimately on our ability to achieve and maintain profitability and positive cash flow from our operations.

NOTE 2: BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”) for interim financial information and are presented in U.S. dollars. Accordingly, they do not include all of the information and footnotes required under U.S. GAAP for complete financial statements. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for Fiscal 2018. In the opinion of management, all adjustments of a normal recurring nature and considered necessary for a fair presentation, have been made. Operating results for the six months ended January 31, 2019, are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2019 (“Fiscal 2019”).

Exploration Stage

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

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2019
(Unaudited)

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

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

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

Recently Adopted Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, as amended by ASU No. 2016-12, “Revenue from Contracts with Customers (“Topic 606”)”, which requires revenue to be recognized based on the amount an entity is expected to be entitled to for promised goods or services provided to customers. The standard also requires expanded disclosures regarding contracts with customers. The guidance in this standard supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition”, and most industry-specific guidance. Adoption of the standard may be applied retrospectively to each prior period presented (the full retrospective method) or retrospectively with the cumulative effect recognized as of the date of initial application (the modified retrospective method). The standard is effective for fiscal periods beginning after December 15, 2017 and early adoption is not permitted. Accordingly, we have adopted this standard effective August 1, 2018 and have elected to apply the modified retrospective method.

We have performed an assessment of the impact of implementation of ASU No. 2014-09, and concluded it will not change the timing of revenue recognition or amounts of revenue recognized compared to how we recognize revenue under our current policies. Our revenue was generated from the sale of uranium concentrates to customers. These sales contain a single delivery element and revenue is recognized at a single point in time when ownership, risk and rewards transfer to the buyer.

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2019
(Unaudited)

In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities (“Topic 825”)”, which requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income. This new guidance also updates certain disclosure requirements for these investments. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Upon adoption, the cumulative effect adjustment should be recorded at the beginning of the fiscal year in which the guidance is adopted. We adopted this standard effective August 1, 2018. Upon adoption, we reclassified $103,641 unrealized gains and losses, net of taxes, related to investments in marketable securities by our company or through our equity-accounted investee, from accumulated other comprehensive income to accumulative deficit in our consolidated balance sheets.

In November 2016, the FASB issued ASU 2016-18, “Restricted Cash”, which requires the statement of cash flows present the change in restricted cash and restricted cash equivalents during the period. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. We retrospectively adopted this standard effective August 1, 2018. Upon adoption, we included a reconciliation of cash and cash equivalents and restricted cash (previously “reclamation deposits”) reported within our consolidated balance sheets to the total shown in the consolidated statements of cash flows. Adoption of this guidance had no other impact on our consolidated financial statements or disclosures.

In June 2018, the FASB issued ASU No. 2018-07, “Improvement to Nonemployee Share-Based Payment Accounting”, with amendments to expand the scope of Accounting Standard Codification (“ASC”), Topic 718, Compensation – Stock Compensation (“Topic 718”), to include share-based payment transactions for acquiring goods and services from nonemployees, which were previously covered under ASC 505, “Equity-Based Payments to Non-Employees”. According to ASU No. 2018-07, nonemployee share-based payment awards within the scope of Topic 718 are measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. The amendments in ASU No. 2018-07 are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. We have early adopted this standard effective August 1, 2018 along with the adoption of Topic 606, and early adoption of this standard has not had a significant impact on our condensed consolidated financial statements.

NOTE 3: PREPAID EXPENSES AND DEPOSITS

At January 31, 2019, prepaid expenses and deposits consisted of the following:

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2019
(Unaudited) 

NOTE 4: MINERAL RIGHTS AND PROPERTIES

Mineral Rights

At January 31, 2019, we had mineral rights in the States of Arizona, Colorado, New Mexico, Wyoming and Texas, in Canada and in the Republic of Paraguay. These mineral rights were acquired through staking, purchase or lease agreements and are subject to varying royalty interests, some of which are indexed to the sale price of uranium and titanium. At January 31, 2019, annual maintenance payments of approximately $2,484,000 will be required to maintain these mineral rights.

Mineral rights and property acquisition costs consisted of the following:

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

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2019
(Unaudited)

During the six months ended January 31, 2019, we entered into a royalty purchase agreement (the "Royalty Purchase Agreement") with Uranium Royalty Corp. (“URC”), a private entity investing in the uranium sector, in connection with the proposed purchase by URC from our Company of a one percent (1%) net smelter return royalty (collectively, the "Royalties") for uranium only, on each of our Slick Rock, Workman Creek and Anderson projects. On December 4, 2018, we closed the Royalty Purchase Agreement and received 12,000,000 common shares of URC (the “Consideration Shares”) with a fair value of $9,077,842.

The fair value of Consideration Shares, net of transaction costs of $55,787, was allocated to the respective underlying projects based on their identified mineral resources as follows:

The net consideration allocation amounts have reduced the carrying value of the Anderson Project by $5,683,895, Workman Creek Project reduced by $1,082,646 and the Slick Rock Project by $676,650. The net consideration of $2,255,514 allocated to the Slick Rock Project exceeded its carrying value of $676,650 by $1,578,864, which was recorded as a gain on disposition of asset and included in the condensed consolidated statement of operations for the three and six months ended January 31, 2019.

During the six months ended January 31, 2019 and 2018, we continued with reduced operations at the Palangana Mine to capture residual uranium only. As a result, no depletion for the Palangana Mine was recorded on our condensed consolidated financial statements for the three and six months ended January 31, 2019 and 2018, respectively.

Mineral property expenditures incurred by major projects were as follows:

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2019
(Unaudited)

During the three and six months ended January 31, 2018, and in connection with the acquisition of the Reno Creek Project, we issued 353,160 shares as settlement of the reimbursable expenses totalling $483,829, which was included in the mineral property expenditures on our condensed consolidated statements of operations for the six months ended January 31, 2018.

NOTE 5: PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

During the six months ended January 31, 2019 and 2018, no uranium concentrate was processed at our Hobson Processing Facility due to the reduced operations at our Palangana Mine. As a result, no depreciation for the Hobson Processing Facility was recorded on our consolidated financial statements for the three and six months ended January 31, 2019 and 2018, respectively.

NOTE 6:  RESTRICTED CASH

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

Cash, cash equivalents and restricted cash are included in the following accounts at January 31, 2019 and 2018:

NOTE 7:  EQUITY-ACCOUNTED INVESTMENT

On December 4, 2018, we closed the Royalty Purchase Agreement and received 12,000,000 common shares of URC with a fair value of $9,077,842. Refer to Note 4: Mineral Rights and Properties. As a result, we own 14,000,000 shares of URC, representing a 33.7% interest in URC as at January 31, 2019. In addition, certain of our officers collectively own an interest in URC and one of our officers is a member of the board of directors of URC. As a consequence, our ability to exercise significant influence over URC’s operating and financing policies continued to exist during the three and six months ended January 31, 2019.

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2019
(Unaudited)

During the six months ended January 31, 2019, the change in carrying value of the investment in URC is summarized as follows:

NOTE 8: RELATED PARTY TRANSACTIONS

During the three months ended January 31, 2019 and 2018, we incurred $40,017 and $39,329 (six months ended January 31, 2019 and 2018: $77,721 and $76,640), respectively, in general and administrative costs paid to Blender Media Inc. (“Blender”), a company controlled by Arash Adnani, a direct family member of our President and Chief Executive Officer, for various services including information technology, corporate branding, media, website design, maintenance and hosting, provided to the Company.

During the six months ended January 31, 2018, we issued 104,706 shares to Blender with a fair value of $141,678 as settlement of the equivalent amounts owed to Blender.

At January 31, 2019, the amount owing to Blender was $28,338 (July 31, 2018: $807).

NOTE 9:      LONG-TERM DEBT     

On December 5, 2018, we entered into the Third Amended and Restated Credit Agreement with each of Sprott Resource Lending Partnership, as agent, and our remaining lenders and participants (collectively, the “Lenders”), whereby we and the Lenders agreed to certain further amendments to the $20,000,000 Credit Facility.

The key terms of the Third Amended and Restated Credit Agreement are summarized as follows:

Under the terms of the Third Amended and Restated Credit Agreement, the Credit Facility remains non-revolving with an amended term of 8.5 years maturing on January 31, 2022, subject to an interest a rate of 8% per annum, compounded and payable on a monthly basis. An underlying effective interest rate of 16.67% has been calculated under the assumption that the Company will carry the full principal balance of $20,000,000 to its contractual maturity on January 31, 2022 without exercising the prepayment feature; and therefore, the anniversary fee payments of $1,400,000, $1,300,000 and $1,200,000, which are calculated on the principal balance then outstanding and can be made in shares or cash at the Company’s discretion, will become due on each of November 30, 2019, 2020 and 2021, respectively.

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2019
(Unaudited)

The Third Amended and Restated Credit Agreement supersedes, in their entirety, the prior Second Amended and Restated Credit Agreement dated and effective February 9, 2016, the prior Amended and Restated Credit Agreement dated and effective March 13, 2014 and the prior Credit Agreement dated and effective July 30, 2013.

As at January 31, 2019, our long-term debt consisted of the following:

For the three and six months ended January 31, 2019, the amortization of debt discount totaled $358,349 and $666,120 (three and six months ended January 31, 2018: $308,409 and $605,831), respectively, which was recorded as interest expense and included in our condensed consolidated statements of operations and comprehensive loss.

NOTE 10: ASSET RETIREMENT OBLIGATIONS

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

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

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

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2019
(Unaudited)

NOTE 11: CAPITAL STOCK

Equity Financing

On October 3, 2018, we completed a public offering of 12,613,049 units at a price of $1.60 per unit for gross proceeds of $20,180,878 (the “October 2018 Offering”). Each unit was comprised of one share of the Company and one-half of one share purchase warrant. Each whole warrant entitles its holder to acquire one share at an exercise price of $2.05 per share, exercisable immediately upon issuance and expiring 30 months from the date of issuance. In connection with the October 2018 Offering, we also issued compensation share purchase warrants to agents as part of share issuance costs to purchase 756,782 shares of our Company, exercisable at an exercise price of $2.05 per share and expiring 30 months from the date of issuance.

The shares were valued at the Company’s closing price of $1.54 per share at October 3, 2018. The share purchase warrants were valued using the Black-Scholes option pricing model with the following assumptions:

The net proceeds from the October 2018 Offering were allocated to the fair values of the shares and share purchase warrants as presented below:

 URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2019
(Unaudited)

Share Transactions

A summary of the share transactions for the six months ended January 31, 2019 are as follows:

Share Purchase Warrants

A continuity schedule of outstanding share purchase warrants is as follows:

A summary of share purchase warrants outstanding and exercisable at January 31, 2019 are as follows:

Subsequent to January 31, 2019, we received cash proceeds totaling $2,325,740 from the exercise of 1,938,117 share purchase warrants with an exercise price of $1.20 per share.

 URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2019
(Unaudited)

NOTE 12: STOCK-BASED COMPENSATION

At January 31, 2019, we had one stock option plan, the 2018 Stock Incentive Plan, which superseded and replaced our prior equity compensation plan, being our 2017 Stock Incentive Plan (collectively, the “Stock Incentive Plan”).

Stock Options

During the three months ended January 31, 2019, we granted stock options under the 2018 Plan to certain employees to purchase a total of 40,000 shares of the Company exercisable at $1.25 per share with a term of five years.

These stock options are subject to a 24-month vesting provision whereby at the end of the first three and six months after the grant date, 12.5% of the total stock options become exercisable, and whereby at the end of each of 12, 18 and 24 months after the grant date, 25% of the total stock options become exercisable.

 
A summary of stock options granted by the Company during the six months ended January 31, 2019, including corresponding grant date fair values and assumptions using the Black Scholes option pricing model is as follows:

A continuity schedule of outstanding stock options for the underlying shares for the six months ended January 31, 2019 is as follows:

During the six months ended January 31, 2019, we issued 117,386 shares upon exercise of stock options, of which 66,250 stock options were exercised in cash for proceeds of $72,363, and 142,250 stock options were exercised on a forfeiture basis resulting in 51,136 net shares issued. The intrinsic value of these exercised options totaled $121,927.

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2019
(Unaudited)

A continuity schedule of outstanding un-vested stock options at January 31, 2019, and the changes during the periods, is as follows:

At January 31, 2019, the aggregate intrinsic value under the provisions of ASC 718 of all outstanding stock options was estimated at $944,258 (vested: $924,993 and unvested: $19,265).

At January 31, 2019, unrecognized stock-based compensation expense related to the unvested portion of stock options totaled $752,717 to be recognized over the next 1.0 year.

A summary of stock options outstanding and exercisable at January 31, 2019 is as follows:

Stock-Based Compensation

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

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2019
(Unaudited)

NOTE 13: LOSS PER SHARE

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

For the three and six months ended January 31, 2019 and 2018, all outstanding stock options and share purchase warrants were excluded from the calculation of the diluted loss per share since we reported net losses for those periods and their effects would be anti-dilutive.

NOTE 14:  SEGMENTED INFORMATION

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

At January 31, 2019, our long-term assets located in the United States totaled $57,596,055 or 69% of our total long-term assets of $83,121,755.

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

URANIUM ENERGY CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2019
(Unaudited)

The tables below provide a breakdown of our operating results by geographic segments for the three and six months ended January 31, 2019 and 2018. All intercompany transactions have been eliminated.