UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2017
2019
Or
o☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number 001-33404001‑33404
WESTWATER RESOURCES, INC.
(Exact Name of IssuerRegistrant as Specified in Its Charter)
DELAWARE |
|
|
(State of Incorporation) |
| (I.R.S. Employer Identification No.) |
6950 S. Potomac Street, Suite 300, Centennial, Colorado 80112
(Address of Principal Executive Offices, Including Zip Code)
(303) 531-0518 531‑0516
(Issuer’sRegistrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
Common Stock, $0.001 par value | WWR | Nasdaq Capital Market |
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. Yesx ☒ Noo
☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx ☒ Noo
☐
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-212b‑2 of the Exchange Act.
Large accelerated filer |
| Accelerated filer |
|
|
|
Non-accelerated filer |
| Smaller reporting company |
|
|
|
|
| Emerging growth company |
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. o
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-212b‑2 of the Exchange Act). Yeso ☐ Nox ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Title of Each Class of Common Stock |
| Number of Shares Outstanding |
Common Stock, $0.001 par value |
|
|
WESTWATER RESOURCES, INC.
2
PART I — FINANCIAL INFORMATION
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
23
ITEM 4. CONTROLS AND PROCEDURES
23
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
ITEM 4. MINE SAFETY DISCLOSURES.
PART I — FINANCIAL INFORMATION
WESTWATER RESOURCES, INC.
WESTWATER RESOURCES, INC. (formerly Uranium Resources, Inc.) | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
(expressed in thousands of dollars, except share amounts) | ||||||
(unaudited) | ||||||
|
|
|
| September 30, |
| December 31, |
|
| Notes |
| 2017 |
| 2016 |
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
|
| $ 7,200 |
| $ 3,309 |
Marketable securities |
| 3 |
| 1,060 |
| - |
Notes receivable – current |
| 3 |
| 1,500 |
| - |
Prepaid and other current assets |
|
|
| 831 |
| 602 |
Total Current Assets |
|
|
| 10,591 |
| 3,911 |
|
|
|
|
|
|
|
Property, plant and equipment, at cost: |
|
|
|
|
|
|
Property, plant and equipment |
|
|
| 112,560 |
| 112,964 |
Less accumulated depreciation, depletion and impairment |
|
|
| (65,677) |
| (66,048) |
Net property, plant and equipment |
| 5 |
| 46,883 |
| 46,916 |
|
|
|
|
|
|
|
Restricted cash |
|
|
| 3,668 |
| 3,964 |
Notes receivable – non-current |
| 3 |
| 2,554 |
| - |
Long-term assets held for sale |
|
|
| - |
| 2,123 |
Total Assets |
|
|
| $ 63,696 |
| $ 56,914 |
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
Accounts payable |
|
|
| $ 860 |
| $ 610 |
Accrued liabilities |
|
|
| 1,450 |
| 1,981 |
Convertible loan, net of discount – related party |
| 7 |
| - |
| 5,431 |
Current portion of asset retirement obligations |
| 8 |
| 121 |
| 121 |
Total Current Liabilities |
|
|
| 2,431 |
| 8,143 |
|
|
|
|
|
|
|
Asset retirement obligations, net of current portion |
| 8 |
| 5,025 |
| 4,668 |
Other long-term liabilities and deferred credits |
|
|
| 500 |
| 500 |
Long-term liabilities related to assets held for sale |
|
|
| - |
| 555 |
Total Liabilities |
|
|
| 7,956 |
| 13,866 |
|
|
|
|
|
|
|
Commitments and Contingencies |
| 12 |
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity: |
|
|
|
|
|
|
Common stock, 100,000,000 shares authorized, $.001 par value; |
|
|
|
|
|
|
Issued shares – 27,484,935 and 16,675,419, respectively |
|
|
|
|
|
|
Outstanding shares – 27,476,910 and 16,667,394, respectively |
| 9 |
| 28 |
| 17 |
Paid-in capital |
| 9,10 |
| 296,937 |
| 280,191 |
Accumulated other comprehensive income |
|
|
| (287) |
| - |
Accumulated deficit |
|
|
| (240,680) |
| (236,902) |
Treasury stock (8,025 and 8,025 shares, respectively), at cost |
|
|
| (258) |
| (258) |
Total Stockholders' Equity |
|
|
| 55,740 |
| 43,048 |
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity |
|
|
| $ 63,696 |
| $ 56,914 |
The accompanying notes are an integral partCONDENSED CONSOLIDATED BALANCE SHEETS
(expressed in thousands of these condensed consolidated financial statements.dollars, except share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, | ||
|
| Notes |
| 2019 |
| 2018 | ||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| 1 |
| $ | 716 |
| $ | 1,577 |
Marketable securities |
| 6 |
|
| — |
|
| 415 |
Assets held for sale |
| 4,5 |
|
| — |
|
| 1,545 |
Prepaid and other current assets |
|
|
|
| 634 |
|
| 643 |
Total Current Assets |
|
|
|
| 1,350 |
|
| 4,180 |
|
|
|
|
|
|
|
|
|
Property, plant and equipment, at cost: |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
| 91,770 |
|
| 91,772 |
Less accumulated depreciation and depletion |
|
|
|
| (71,289) |
|
| (71,219) |
Net property, plant and equipment |
| 7 |
|
| 20,481 |
|
| 20,553 |
Operating lease right-of-use assets |
| 14 |
|
| 513 |
|
| — |
Restricted cash |
| 1,6 |
|
| 3,784 |
|
| 3,732 |
Assets held for sale, non-current |
| 4 |
|
| — |
|
| 1,493 |
Total Assets |
|
|
| $ | 26,128 |
| $ | 29,958 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
| $ | 1,247 |
| $ | 776 |
Accrued liabilities |
|
|
|
| 1,658 |
|
| 1,688 |
Current portion of asset retirement obligations |
| 9 |
|
| 895 |
|
| 708 |
Operating lease liability - current |
| 14 |
|
| 152 |
|
| — |
Total Current Liabilities |
|
|
|
| 3,952 |
|
| 3,172 |
|
|
|
|
|
|
|
|
|
Asset retirement obligations, net of current portion |
| 9 |
|
| 5,327 |
|
| 5,495 |
Other long-term liabilities |
|
|
|
| 500 |
|
| 500 |
Operating lease liability, net of current |
| 14 |
|
| 369 |
|
| — |
Total Liabilities |
|
|
|
| 10,148 |
|
| 9,167 |
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
| 13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity: |
|
|
|
|
|
|
|
|
Common stock, 100,000,000 shares authorized, $.001 par value; |
|
|
|
|
|
|
|
|
Issued shares - 2,125,156 and 1,436,555 respectively |
|
|
|
|
|
|
|
|
Outstanding shares - 2,124,995 and 1,436,394 respectively |
| 10 |
|
| 2 |
|
| 1 |
Paid-in capital |
| 10,11 |
|
| 315,893 |
|
| 313,012 |
Accumulated other comprehensive loss |
|
|
|
| — |
|
| (90) |
Accumulated deficit |
|
|
|
| (299,657) |
|
| (291,874) |
Less: Treasury stock (161 and 161 shares, respectively), at cost |
|
|
|
| (258) |
|
| (258) |
Total Stockholders’ Equity |
|
|
|
| 15,980 |
|
| 20,791 |
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity |
|
|
| $ | 26,128 |
| $ | 29,958 |
WESTWATER RESOURCES, INC. (formerly Uranium Resources, Inc.) | ||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||
(expressed in thousands of dollars, except share and per share amounts) | ||||||||||
(unaudited) | ||||||||||
|
|
|
| For the Three Months Ended Sep 30, |
| For the Nine Months Ended Sep 30, | ||||
|
| Notes |
| 2017 |
| 2016 |
| 2017 |
| 2016 |
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
Mineral property expenses |
| 6 |
| $ (1,316) |
| $ (1,039) |
| $ (3,637) |
| $ (2,908) |
General and administrative |
|
|
| (1,700) |
| (1,883) |
| (4,976) |
| (6,035) |
Accretion of asset retirement obligations |
| 8 |
| (132) |
| (120) |
| (395) |
| (360) |
Depreciation and amortization |
|
|
| (27) |
| (56) |
| (104) |
| (188) |
Impairment of uranium properties |
|
|
| - |
| - |
| - |
| (534) |
Total operating expenses |
|
|
| (3,175) |
| (3,098) |
| (9,112) |
| (10,025) |
|
|
|
|
|
|
|
|
|
|
|
Non-Operating Income/(Expenses): |
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of convertible debt |
|
|
| - |
| - |
| (39) |
| - |
Interest income/(expense) |
| 3,7 |
| 186 |
| (671) |
| 424 |
| (2,194) |
Commitment fees |
|
|
| - |
| - |
| - |
| (333) |
Loss on sale of marketable securities |
|
|
| - |
| - |
| - |
| (116) |
Gain on disposal of uranium properties |
| 3 |
| - |
|
|
| 4,927 |
| - |
Other income, net |
|
|
| 6 |
| 25 |
| 22 |
| 44 |
Total other income/(expense) |
|
|
| 192 |
| (646) |
| 5,334 |
| (2,599) |
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
|
| $ (2,983) |
| $ (3,744) |
| $ (3,778) |
| $ (12,624) |
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Loss |
|
|
|
|
|
|
|
|
|
|
Unrealized fair value decrease on marketable securities |
|
|
| $ (126) |
| $ - |
| $ (287) |
| $ (49) |
Transfer to realized loss upon sale of available-for-sale securities |
|
|
| - |
| - |
| - |
| 116 |
Comprehensive Loss |
|
|
| $ (3,109) |
| $ (3,744) |
| $ (4,065) |
| $ (12,557) |
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED LOSS PER SHARE |
| $ (0.12) |
| $ (0.38) |
| $ (0.16) |
| $ (1.81) | ||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |
|
|
| 25,037,203 |
| 9,741,331 |
| 23,763,842 |
| 6,963,869 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
WESTWATER RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(expressed in thousands of dollars, except share and per share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Three Months Ended |
| For the Nine Months Ended |
| ||||||||
|
|
|
| September 30, |
| September 30, |
| ||||||||
|
| Notes |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral property expenses |
| 8 |
| $ | (851) |
| $ | (955) |
| $ | (2,309) |
| $ | (2,706) |
|
General and administrative expenses |
|
|
|
| (1,359) |
|
| (1,705) |
|
| (4,764) |
|
| (5,437) |
|
Arbitration costs |
|
|
|
| (146) |
|
| (98) |
|
| (631) |
|
| (225) |
|
Acquisition related costs |
| 3 |
|
| — |
|
| — |
|
| — |
|
| (333) |
|
Accretion of asset retirement obligations |
| 9 |
|
| (197) |
|
| (133) |
|
| (353) |
|
| (401) |
|
Depreciation and amortization |
|
|
|
| (23) |
|
| (27) |
|
| (71) |
|
| (94) |
|
Impairment of uranium properties |
| 7 |
|
| — |
|
| — |
|
| — |
|
| (17,968) |
|
Total operating expenses |
|
|
|
| (2,576) |
|
| (2,918) |
|
| (8,128) |
|
| (27,164) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Operating Income/(Expenses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of marketable securities |
| 4 |
|
| — |
|
| (391) |
|
| (720) |
|
| (484) |
|
Interest income |
| 4 |
|
| 13 |
|
| 167 |
|
| 347 |
|
| 513 |
|
Gain on disposal of uranium assets |
| 5 |
|
| 729 |
|
| — |
|
| 729 |
|
| — |
|
Other income (expense) |
|
|
|
| — |
|
| 5 |
|
| (11) |
|
| 123 |
|
Total other income (expense) |
|
|
|
| 742 |
|
| (219) |
|
| 345 |
|
| 152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
|
| $ | (1,834) |
| $ | (3,137) |
| $ | (7,783) |
| $ | (27,012) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized fair value (decrease) increase on available-for-sale securities |
|
|
| $ | — |
| $ | 279 |
| $ | — |
| $ | (777) |
|
Transfer to realized loss upon sale of available-for-sale securities |
|
|
|
| — |
|
| 391 |
|
| 90 |
|
| 484 |
|
Comprehensive Loss |
|
|
| $ | (1,834) |
| $ | (2,467) |
| $ | (7,693) |
| $ | (27,305) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED LOSS PER SHARE |
|
|
| $ | (0.95) |
| $ | (3.07) |
| $ | (4.72) |
| $ | (33.98) |
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |
|
|
|
| 1,931,419 |
|
| 1,022,370 |
|
| 1,649,145 |
|
| 795,005 |
|
WESTWATER RESOURCES, INC. (formerly Uranium Resources, Inc.) | ||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND SUPPLEMENTAL CASH FLOW INFORMATION | ||||||
(expressed in thousands of dollars) | ||||||
(unaudited) | ||||||
|
|
|
| Nine Months Ended Sep 30, | ||
|
| Notes |
| 2017 |
| 2016 |
|
|
|
|
|
|
|
Operating Activities: |
|
|
|
|
|
|
Net loss |
|
|
| $ (3,778) |
| $ (12,624) |
Reconciliation of net loss to cash used in operations: |
|
|
|
|
|
|
Accretion of asset retirement obligations |
| 8 |
| 395 |
| 360 |
Amortization of debt discount |
|
|
| 30 |
| 1,355 |
Amortization of convertible loan establishment fee |
|
|
| - |
| 75 |
Amortization of notes receivable discount |
|
|
| (553) |
| - |
Loss on extinguishment of convertible debt |
| 7 |
| 39 |
| - |
Unrealized holding loss on securities |
|
|
| - |
| 116 |
Common stock issued as payment for commitment fees |
|
|
| - |
| 333 |
Costs incurred for restoration and reclamation activities |
| 8 |
| (37) |
| (54) |
Depreciation and amortization |
|
|
| 104 |
| 188 |
Stock compensation expense |
| 10 |
| 62 |
| 545 |
Gain on disposal of uranium properties |
| 3 |
| (4,927) |
| - |
Impairment of uranium properties |
|
|
| - |
| 534 |
Amortization of non-cash investor relations fees |
|
|
| 175 |
| - |
Effect of changes in operating working capital items: |
|
|
|
|
|
|
(Increase)/decrease in receivables |
|
|
| (5) |
| 47 |
(Increase)/decrease in prepaid and other current assets |
|
|
| (101) |
| 101 |
Decrease in payables, accrued liabilities and deferred credits |
|
|
| (280) |
| (830) |
Net Cash Used In Operating Activities |
|
|
| (8,876) |
| (9,854) |
|
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
Purchase of equipment |
|
|
| (100) |
| - |
Proceeds from the sale of investments |
|
|
| - |
| 247 |
Net decrease in restricted cash and short-term investments |
|
|
| 23 |
| 57 |
Proceeds from disposal of property, plant and equipment |
| 3 |
| 1,950 |
| - |
Net Cash Provided By Investing Activities |
|
|
| 1,873 |
| 304 |
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
Payments on borrowings |
| 7 |
| (5,500) |
| - |
Issuance of common stock, net |
| 9 |
| 16,395 |
| 12,511 |
Payment of minimum withholding taxes on net share settlements of equity awards |
|
|
| (1) |
| - |
Net Cash Provided By Financing Activities |
|
|
| 10,894 |
| 12,511 |
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
| 3,891 |
| 2,961 |
Cash and cash equivalents, beginning of period |
|
|
| 3,309 |
| 865 |
Cash and Cash Equivalents, End of Period |
|
|
| $ 7,200 |
| $ 3,826 |
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
Interest |
|
|
| $ 227 |
| $ 486 |
Supplemental Non-Cash Information With Respect to Investing and Financing Activities: |
|
|
|
|
|
|
Common stock issued for settlement of accounts payable |
|
|
| $ 300 |
| $ 834 |
Common stock issued for payment of convertible loan interest and fees |
|
|
| $ - |
| $ 242 |
Common stock issued for payment of commitment fees |
|
|
| $ 1,214 |
| $ 523 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
WESTWATER RESOURCES, INC. (formerly Uranium Resources, Inc.) | ||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | ||||||||||||
(expressed in thousands of dollars, except share amounts) | ||||||||||||
(unaudited) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||
| Common Stock |
|
|
|
|
|
|
|
|
| ||
| Shares |
| Amount |
| Paid-In Capital | Accumulated Other Comprehensive Loss |
| Accumulated Deficit |
| Treasury Stock |
| Total |
Balances, January 1, 2017 | 16,667,394 |
| $ 17 |
| $ 280,191 | $ - |
| $ (236,902) |
| $ (258) |
| $ 43,048 |
Net loss | - |
| - |
| - | - |
| (3,778) |
| - |
| (3,778) |
Common stock issued, net of issuance costs | 9,776,396 |
| 10 |
| 15,172 |
- |
| - |
| - |
| 15,182 |
Common stock issued for commitment fees | 880,000 |
| 1 |
| 1,213 | - |
| - |
| - |
| 1,214 |
Common stock issued for investor relations fees | 150,000 |
| - |
| 300 | - |
| - |
| - |
| 300 |
Stock compensation expense and related share issuances, net of shares withheld for the payment of taxes | 3,120 |
| - |
| 62 | - |
| - |
| - |
| 62 |
Minimum withholding taxes on net share settlements of equity awards | - |
| - |
| (1) | - |
| - |
| - |
| (1) |
Unrealized holding loss on marketable securities | - |
| - |
| - | (287) |
| - |
| - |
| (287) |
Balances, September 30, 2017 | 27,476,910 |
| $ 28 |
| $ 296,937 | $ (287) |
| $ (240,680) |
| $ (258) |
| $ 55,740 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
WESTWATER RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND SUPPLEMENTAL CASH FLOW INFORMATION
(formerly Uranium Resources, Inc.)expressed in thousands of dollars)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
| For the Nine Months Ended September 30, | ||||
|
| Notes |
| 2019 |
| 2018 | ||
Operating Activities: |
|
|
|
|
|
|
|
|
Net loss |
|
|
| $ | (7,783) |
| $ | (27,012) |
Reconciliation of net loss to cash used in operations: |
|
|
|
|
|
|
|
|
Non-cash lease expense |
|
|
|
| 8 |
|
| — |
Accretion of asset retirement obligations |
| 9 |
|
| 353 |
|
| 401 |
Decrease in restoration and reclamation accrual |
| 9 |
|
| (334) |
|
| (485) |
Amortization of note receivable discount |
| 4 |
|
| (299) |
|
| (507) |
Amortization of non-cash investor relations fee |
|
|
|
| — |
|
| 21 |
Depreciation and amortization |
|
|
|
| 71 |
|
| 94 |
Stock compensation expense |
| 11 |
|
| 255 |
|
| 308 |
Common stock issued for consulting services |
|
|
|
| — |
|
| 95 |
Common stock issued for purchase of lithium mineral interests |
|
|
|
| — |
|
| 114 |
Impairment of uranium properties |
| 7 |
|
| — |
|
| 17,968 |
Gain on disposal of uranium assets |
| 5 |
|
| (729) |
|
| (11) |
Loss on sale of marketable securities |
| 4 |
|
| 720 |
|
| 484 |
Effect of changes in operating working capital items: |
|
|
|
|
|
|
|
|
Decrease in prepaids and other |
|
|
|
| 105 |
|
| 195 |
Increase (decrease) in payables and accrued liabilities |
|
|
|
| 441 |
|
| (697) |
Net Cash Used In Operating Activities |
|
|
|
| (7,192) |
|
| (9,032) |
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities |
|
|
|
|
|
|
|
|
Proceeds from the sale of securities, net |
| 4 |
|
| 536 |
|
| 834 |
Proceeds from sale of uranium assets, net |
| 5 |
|
| 2,470 |
|
| 11 |
Proceeds from note receivable |
| 4 |
|
| 750 |
|
| 1,134 |
Acquisition of Alabama Graphite, net of cash acquired |
| 3 |
|
| — |
|
| (1,547) |
Net Cash Provided By Investing Activities |
|
|
|
| 3,756 |
|
| 432 |
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
Issuance of common stock, net |
| 10 |
|
| 2,628 |
|
| 5,917 |
Payment of minimum withholding taxes on net share settlements of equity awards |
|
|
|
| (1) |
|
| (5) |
Net Cash Provided By Financing Activities |
|
|
|
| 2,627 |
|
| 5,912 |
|
|
|
|
|
|
|
|
|
Net decrease in cash, cash equivalents and restricted cash |
|
|
|
| (809) |
|
| (2,688) |
Cash, Cash Equivalents and Restricted Cash, Beginning of Period |
|
|
|
| 5,309 |
|
| 7,722 |
Cash, Cash Equivalents and Restricted Cash, End of Period |
|
|
| $ | 4,500 |
| $ | 5,034 |
Cash Paid During the Period for: |
|
|
|
|
|
|
|
|
Interest |
|
|
| $ | 4 |
| $ | 7 |
Supplemental Non-Cash Information with Respect to Investing and Financing Activities: |
|
|
|
|
|
|
|
|
Securities received for payment of notes receivable – Laramide |
|
|
|
| 750 |
|
| 750 |
Common stock issued for acquisition of Alabama Graphite |
|
|
|
| — |
|
| 6,394 |
Stock options and warrants issued for acquisition of Alabama Graphite |
|
|
|
| — |
|
| 89 |
Common stock issued for consulting services |
|
|
|
| — |
|
| 95 |
Common stock issued for purchase of lithium mineral interests |
|
|
|
| — |
|
| 114 |
Total Non-Cash Investing and Financing Activities for the Period |
|
|
| $ | 750 |
| $ | 7,442 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
WESTWATER RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(expressed in thousands of dollars, except share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| |
|
| Common Stock |
| Paid-In |
| Comprehensive |
| Accumulated |
| Treasury |
|
|
| |||||||
Nine months ended September 30, 2019 |
| Shares |
| Amount |
| Capital |
| Income (Loss) |
| Deficit |
| Stock |
| Total | ||||||
Balances, January 1, 2019 |
| 1,436,555 |
| $ | 1 |
| $ | 313,012 |
| $ | (90) |
| $ | (291,874) |
| $ | (258) |
| $ | 20,791 |
Net loss |
| — |
|
| — |
|
| — |
|
| — |
|
| (7,783) |
|
| — |
|
| (7,783) |
Common stock and common stock purchase warrants issued, net of issuance costs |
| 688,208 |
|
| 1 |
|
| 2,628 |
|
| — |
|
| — |
|
| — |
|
| 2,629 |
Stock compensation expense and related share issuances, net of shares withheld for payment of taxes |
| 393 |
|
| — |
|
| 254 |
|
| — |
|
| — |
|
| — |
|
| 254 |
Minimum withholding taxes on net share settlements of equity awards |
| — |
|
| — |
|
| (1) |
|
| — |
|
| — |
|
| — |
|
| (1) |
Transfer to realized loss upon sale of available for sale securities |
| — |
|
| — |
|
| — |
|
| 90 |
|
| — |
|
| — |
|
| 90 |
Balances, September 30, 2019 |
| 2,125,156 |
| $ | 2 |
| $ | 315,893 |
| $ | 0 |
| $ | (299,657) |
| $ | (258) |
| $ | 15,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2019 |
| 1,658,371 |
| $ | 2 |
| $ | 314,179 |
| $ | — |
| $ | (297,823) |
| $ | (258) |
| $ | 16,100 |
Net loss |
| — |
|
| — |
|
| — |
|
| — |
|
| (1,834) |
|
| — |
|
| (1,834) |
Common stock and common stock purchase warrants issued, net of issuance costs |
| 466,785 |
|
| — |
|
| 1,475 |
|
| — |
|
| — |
|
| — |
|
| 1,475 |
Stock compensation expense and related share issuances, net of shares withheld for payment of taxes |
| — |
|
| — |
|
| 239 |
|
| — |
|
| — |
|
| — |
|
| 239 |
Balances, September 30, 2019 |
| 2,125,156 |
| $ | 2 |
| $ | 315,893 |
| $ | — |
| $ | (299,657) |
| $ | (258) |
| $ | 15,980 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
WESTWATER RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(expressed in thousands of dollars, except share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| |
|
| Common Stock |
|
|
| Comprehensive |
| Accumulated |
|
|
|
|
| |||||||
Nine months ended September 30, 2018 |
| Shares |
| Amount |
| Paid-In Capital |
| Income (Loss) |
| Deficit |
| Treasury Stock |
| Total | ||||||
Balances, January 1, 2018 |
| 555,806 |
| $ | 1 |
| $ | 297,277 |
| $ | 287 |
| $ | (256,190) |
| $ | (258) |
| $ | 41,117 |
Net loss |
| — |
|
| — |
|
| — |
|
| — |
|
| (27,012) |
|
| — |
|
| (27,012) |
Common stock issued, net of issuance costs |
| 353,909 |
|
| — |
|
| 5,917 |
|
| — |
|
| — |
|
| — |
|
| 5,917 |
Common stock, warrants and options issued for acquisition of Alabama Graphite |
| 232,504 |
|
| — |
|
| 6,483 |
|
| — |
|
| — |
|
| — |
|
| 6,483 |
Common stock issued for consulting services |
| 3,455 |
|
| — |
|
| 95 |
|
| — |
|
| — |
|
| — |
|
| 95 |
Common stock issued for purchase of lithium mineral interests |
| 4,000 |
|
| — |
|
| 114 |
|
| — |
|
| — |
|
| — |
|
| 114 |
Stock compensation expense and related share issuances, net of shares withheld for the payment of taxes |
| 419 |
|
| — |
|
| 308 |
|
| — |
|
| — |
|
| — |
|
| 308 |
Minimum withholding taxes on net share settlements of equity awards |
| — |
|
| — |
|
| (5) |
|
| — |
|
| — |
|
| — |
|
| (5) |
Unrealized holding loss on available-for-sale securities |
| — |
|
| — |
|
| — |
|
| (777) |
|
| — |
|
| — |
|
| (777) |
Transfer to realized loss upon sale of available for sale securities |
| — |
|
| — |
|
| — |
|
| 484 |
|
| — |
|
| — |
|
| 484 |
Balances, September 30, 2018 |
| 1,150,093 |
| $ | 1 |
| $ | 310,189 |
| $ | (6) |
| $ | (283,202) |
| $ | (258) |
| $ | 26,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2018 |
| 943,419 |
| $ | 1 |
| $ | 308,857 |
| $ | (676) |
| $ | (280,065) |
| $ | (258) |
| $ | 27,859 |
Net loss |
|
|
|
|
|
|
|
|
|
| — |
|
| (3,137) |
|
| — |
|
| (3,137) |
Common stock issued, net of issuance costs |
| 206,674 |
|
| — |
|
| 1,186 |
|
| — |
|
| — |
|
| — |
|
| 1,186 |
Stock compensation expense and related share issuances, net of shares withheld for the payment of taxes |
| — |
|
| — |
|
| 146 |
|
| — |
|
| — |
|
| — |
|
| 146 |
Unrealized holding loss on marketable securities |
| — |
|
| — |
|
| — |
|
| 279 |
|
| — |
|
| — |
|
| 279 |
Transfer to realized loss upon sale of available-for-sale securities |
| — |
|
| — |
|
| — |
|
| 391 |
|
| — |
|
| — |
|
| 391 |
Balances, September 30, 2018 |
| 1,150,093 |
| $ | 1 |
| $ | 310,189 |
| $ | (6) |
| $ | (283,202) |
| $ | (258) |
| $ | 26,724 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements for Westwater Resources, Inc. (the “Company,” “we,” “us,” “WWR” or “WWR”“Westwater”), formerly known as Uranium Resources, Inc., have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q10‑Q and Rule 8-038‑03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying statements should be read in conjunction with the audited financial statements included in Westwater Resources, Inc.’s 20162018 Annual Report on Form 10-K.10‑K. In the opinion of management, all adjustments (which are of a normal, recurring nature) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 20172019 are not necessarily indicative of the results that may be expected for any other period including the full year ending December 31, 2017.2019.
Significant Accounting Policies
Our significant accounting policies are detailed in Note 1, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements within our Annual Report on Form 10‑K for the year ended December 31, 2018. Refer to Note 14 for revisions made to our lease accounting policies resulting from our adoption of the new lease accounting standard effective January 1, 2019.
Reverse Stock Split
Immediately following the close of trading on April 22, 2019, the Company effected a one-for-fifty reverse stock split of its common stock. With the reverse stock split, every fifty shares of the Company’s issued and outstanding common stock were combined into one issued and outstanding share of common stock. The reverse stock split reduced the number of shares outstanding from approximately 74.7 million shares to approximately 1.5 million shares. The reverse stock split did not have any effect on the par value of the Company’s common stock. No fractional shares were issued as a result of the reverse stock split. Any fractional shares that would have resulted were settled in cash. All share data herein has been retroactively adjusted for the reverse stock split.
Recently IssuedAdopted Accounting Pronouncements
In January 2017,February 2016, the FASBFinancial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-01 (ASU 2017-01)2016-02, “Leases (Topic 842), Business Combinations: Clarifying” which supersedes existing guidance for lease accounting. This new standard requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The new standard requires a dual approach for lessee accounting under which a lessee accounts for leases as finance leases or operating leases with the Definitionrecognition of a Business, which clarifiesright-of-use asset and a corresponding lease liability. For finance leases, the definitionlessee recognizes interest expense and amortization of a business when determining whether a company has acquired or sold a business.the right-of-use asset, and for operating leases, the lessee recognizes straight-line lease expense. The ASU applies to all entities and isnew lease accounting standard along with the clarifying amendments subsequently issued by the FASB, collectively became effective for annual periods ending after December 15, 2017,the Company on January 1, 2019. The Company adopted the new lease accounting standard by applying the new lease guidance at the adoption date on January 1, 2019, and interim periods thereafter, with early adoptionas allowed under the standard, used the modified retrospective method and elected not to restate comparative periods. In addition, we elected the package of practical expedients permitted under certain circumstances.the transition guidance within the new standard. The Company doesdid not believe thatelect the hindsight practical expedient to determine the lease term for existing leases. As of January 1, 2019, in connection with the adoption of this guidance will havethe new lease accounting standard, the Company recorded a material impactright-of-use lease asset totaling $0.6 million with a corresponding lease liability totaling $0.6 million. Refer to Note 14 for further details on our financial statements. adoption of the new lease accounting standard.
8
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Recently Issued Accounting Pronouncements
In NovemberJune 2016, the FASB issued ASU 2016‑13, “Measurement of Credit Losses on Financial Instruments”. ASU 2016‑13 will change how companies account for credit losses for most financial assets and certain other instruments. For trade receivables, loans and held-to-maturity debt securities, companies will be required to estimate lifetime expected credit losses and recognize an allowance against the related instruments. For available for sale debt securities, companies will be required to recognize an allowance for credit losses rather than reducing the carrying value of the asset. The adoption of this update, if applicable, will result in earlier recognition of losses and impairments.
In November 2018, the FASB issued ASU 2018‑19, “Codification Improvements to ASC 326, Financial Instruments – Credit Losses.” ASU 2016‑13 introduced an expected credit loss methodology for the impairment of financial assets measured at amortized cost basis. That methodology replaces the probable, incurred loss model for those assets. ASU 2018‑19 is the final version of Proposed Accounting Standards Update No. 2016-18, Statement2018‑270, which has been deleted. Additionally, the amendments clarify that receivables arising from operating leases are not within the scope of Cash Flows: Restricted Cash, which will require that a statementSubtopic 326‑20. Instead, impairment of cash flows explain the change during period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalentsreceivables arising from operating leases should be includedaccounted for in accordance with cashASC 842, Leases.
These updates are effective beginning January 1, 2023, and cash equivalents when reconciling the beginning-of-periodCompany is currently evaluating ASU 2016‑13 and end-of-period total amounts shownASU 2018‑19 and the potential impact of adopting this guidance on its financial reporting.
In August 2018, the statement of cash flows. TheFASB issued ASU applies2018‑13, “Fair Value Measurement (ASC 820): Disclosure Framework – Changes to all entities andthe Disclosure Requirements for Fair Value Measurement”. This update modifies the disclosure requirements for fair value measurements by removing, modifying or adding disclosures. ASU 2018‑13 is effective for fiscal years beginning after December 15, 20182019 and interim periods within those fiscal years beginning after December 15, 2019, with early adoption is permitted. AsCertain disclosures in the update are applied retrospectively, while others are applied prospectively. The Company is currently evaluating the potential impact of adopting this guidance on its financial statements.
Cash, Cash Equivalents and Restricted Cash
The following table provides a result, upon adoption, the Company will include thereconciliation of cash, cash equivalents and restricted cash amountas reported within the consolidated balance sheet that sum to the total of the same such amounts shown in its beginning-of-period and end-of-period reconciliations of cash on its statement of cash flows. For the nine months ended September 30, 2017, this would have resulted in the Company including an additional $4.0 million in its beginning-of-period cash balance and an additional $3.7 million in its end-of-period cash balance. The Company also would not have recorded a release of restricted cash of $0.3 million in the investing section of its statement of cash flows.
|
|
|
|
|
|
|
|
| As of September 30, | ||||
(thousands of dollars) |
| 2019 |
| 2018 | ||
Cash and cash equivalents |
| $ | 716 |
| $ | 1,366 |
Restricted cash - pledged deposits for performance bonds |
|
| 3,784 |
|
| 3,668 |
Cash, cash equivalents and restricted cash shown in the statement of cash flows |
| $ | 4,500 |
| $ | 5,034 |
Funds deposited by the Company for collateralization of performance obligations are not available for the payment of general corporate obligations and are not included in cash equivalents. Restricted cash consists of money market accounts. The bonds are collateralized performance bonds required for future restoration and reclamation obligations related to the Company’s South Texas production properties.
Notes Receivable
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are carried at amortized cost using the effective interest method less any provision for impairment. Management monitors these assets for credit quality and recoverability on a quarterly basis, including the value of any
9
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
collateral. If the value of the collateral, less selling or recovery costs, exceeds the recorded investment in the asset, no impairment costs would be recorded.
2. LIQUIDITY AND GOING CONCERN
The interim Condensed Consolidated Financial Statements of the Company have been prepared on a “going concern” basis, which means that the continuation of the Company is presumed even though events and conditions exist that, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern because it is possible that the Company will be required to adversely change its current business plan or may be unable to meet its obligations as they become due within one year after the date that these financial statements were issued.
The Company last recorded revenues from operations in 2009 and expects to continue to incur losses as a result of costs and expenses related to maintaining its properties and general and administrative expenses. Since 2009, the Company has relied on equity financings, debt financings and asset sales to fund its operations and the Company expects to rely on these forms of financing to fund its operations into the near future. The Company will also continue to identify ways to reduce its cash expenditures.
The Company’s current business plan requires working capital to fund non-discretionary expenditures for uranium reclamation activities, mineral property holding costs, business development costs and administrative costs. The Company intends to pursue project financing to support execution of the graphite business plan, including discretionary capital expenditures associated with graphite battery-material product development, construction of pilot plant facilities and construction of commercial production facilities. The Company’s current lithium business plan will be funded by working capital; however, the Company is pursuing project financing including possible joint venture partners to fund discretionary greenfield exploration activities.
At September 30, 2017,2019 the Company had working capital of $8.2Company’s cash balances were $0.7 million which along with the anticipated funding from the financing agreements described below, is expected to provide it with the necessary liquidity through September 30, 2018. At December 31, 2016,and the Company had a working capital deficit balance of $4.2$2.6 million. The increase in working capital of $12.4 million for the nine months ended September 30, 2017 was primarily dueCompany’s cash balance at October 31, 2019 is $2.3 million. Subsequent to the following:
•
the completion of three equity offerings in January 2017, February 2017 and September 2017 for net proceeds of $8.9 million, $4.5 million and $2.0 million respectively, as further described in Note 9, below;
•
the completion of the sale of the Company’s wholly-owned subsidiary Hydro Resources Inc. (“HRI”) to Laramide Resources Ltd. (“Laramide”) on January 5, 2017. Upon completion,October 31, 2019, the Company received $2.2 million in cash, a $5.0 million promissory note, of which $1.5 million is due in January 2018, 2,218,333 shares of Laramide Resources Ltd.’s common stock which had a fair value of $0.5 million at September 30, 2017 and 2,218,333 common stock purchase warrants which had a fair value of $0.3 million at September 30, 2017. Details regarding this transaction are discussed in Note 3, below; and
•
the repayment of the $5.5 million outstanding balance under the RCF Loan (defined in Note 7, below.)
Also during the nine months ending September 30, 2017, the Company entered into the following financing agreements and anticipates funding from these sources to sustain operations through 2018:
WESTWATER RESOURCES, INC.
(formerly Uranium Resources, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
•
Controlled Equity Offering Sales Agreement
On April 14, 2017, the Company entered into a Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co. (“Cantor”) acting as sales agent, pursuant to which the Company has registered the offer and sale from time to time of shares of its common stock having an aggregate offering price of up to $30.0 million (the “ATM Offering”), of which approximately $28.9 million is available for future sales as of November 9, 2017. The Company is unable to sell shares of its common stock through the Controlled Equity Offering Sales Agreement on dates that it places shares with Aspire Capital through its CSPA, as discussed below.
•
Common Stock Purchase Agreement
On September 25, 2017, the Company entered into a Common Stock Purchase Agreement (“CSPA”) with Aspire Capital Fund, LLC (“Aspire Capital”) to place up to $22.0 million in the aggregate of its common stock over a term of 30 months. Upon execution of the CSPA, the Company issued 880,000 shares of common stock to Aspire Capital as a commitment fee. The Company cannot sell in excess of 5,033,677 shares of common stock, including the 880,000 commitment shares (“Exchange Cap”), unless (i) stockholder approval is obtained, or (ii) the average price paid for all shares issued under the Purchase Agreement (including the 880,000 commitment shares) is equal to or greater than $1.38. As of November 9, 2017, the Company has dollar capacity of $20.0 million of common stock available for future sales, limited to the current Exchange Cap of 2.7 million shares of common stock unless conditions (i) or (ii) above are met. See Note 9 below for further details.
The Company believes that the ATM Offering and the CSPA, along with its existing working capital balance, will provide it with the necessary liquidityexpects to fund operations through 2018. The Company will also continue to explore additional opportunities to raise capital, further monetize its non-core assets and identify ways to reduce its cash expenditures.as follows:
· | The Stock Purchase Agreement with Lincoln Park Capital, LLC. whereby the Company may place up to $10.0 million in the aggregate of the Company's common stock on an ongoing basis when required by the Company over a term of 24-months ending in June 2021. The Company currently has $5.2 million remaining sales capacity, subject to the registration of shares on Form S-1. As of November 5, 2019, the Company has registered the resale by Lincoln Park of an additional 959,000 shares on Form S-1. |
· | The Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co. which currently has $23.8 million remaining sales capacity, subject to the registration of shares on Form S-3. The Company is currently eligible to, and intends to, register the sale of additional shares under the agreement on Form S-3 pursuant to the SEC's shelf registration rules. |
· | Other debt and equity financings and asset sales. |
While the Company has been successful in the past in raising funds through equity and debt financings as well as through the sale of non-core assets, no assurance can be given that additional financing will be available to it in amounts sufficient to meet the Company’sits needs, or on terms acceptable to the Company. In the event that we are unable to raise sufficient additional funds, are not available, the Companywe may be required to materially changedelay, reduce or severely curtail our operations or otherwise impede our on-going business efforts, which could have a material adverse effect on our business, operating results, financial condition, long-term prospects and ability to continue as a viable business. Considering all of the factors above, the Company believes there is substantial doubt regarding its business plans.ability to continue as a going concern.
3. DISPOSAL OF HYDRO
10
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
3. ACQUISITIONS
Acquisition of Alabama Graphite
On January 5, 2017, Laramide andApril 23, 2018, the Company closedcompleted its acquisition of the outstanding securities of Alabama Graphite Corp. (“Alabama Graphite”) for total consideration of $8.9 million. Alabama Graphite is a Canadian entity that indirectly holds a 100% interest in the Coosa graphite project and Coosa mineral properties located in Alabama. The consideration was comprised of $2.4 million in cash used to fund Alabama Graphite’s operating activities prior to completion of the Alabama Graphite transaction and certain related transaction costs, $6.4 million in common stock of the Company and $89,000 for warrants and options in the Company. Each Alabama Graphite ordinary share was exchanged for 0.0016 common share of WWR. Each warrant and option of Alabama Graphite was also exchanged for warrants and options exercisable for common shares of WWR on the same terms and conditions as were applicable prior to the Alabama Graphite transaction, except that the exercise price was converted for the 0.0016 share exchange ratio and for the USD exchange rate on the agreement date which was $0.77809 (CAD to USD) on December 13, 2017. As a result, the Company issued 232,504 new shares, 7,280 options and 42,888 warrants. The value of the Company’s common stock issued as consideration was based upon the opening share price on April 23, 2018 of $27.50. The operating results of Alabama Graphite are included in the Consolidated Statement of Operations commencing April 23, 2018.
The Alabama Graphite loan from WWR was $1.8 million on April 23, 2018 and was eliminated when incorporated into the final acquisition accounting. Acquisition related costs were $1.9 million, of which $0.6 million was capitalized as additional cash consideration at the acquisition date for certain transaction costs that were directly related to the asset acquisition.
The acquisition of Alabama Graphite was accounted for as an asset acquisition in accordance with ASC 360 as “substantially all” of the purchase consideration was concentrated in a single identifiable asset for graphite mineral interests. WWR controls the Board of Directors and senior management positions of Alabama Graphite and has overall control over the day-to-day activities of the acquired entity.
11
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following summarizes the preliminary allocation of purchase price to the fair value of assets acquired and liabilities assumed as of the acquisition date (in thousands):
|
|
|
|
Consideration: |
|
|
|
Cash |
| $ | 2,397 |
Issuance of 232,504 common shares for replacement of Alabama Graphite shares |
|
| 6,394 |
Issuance of 7,280 options for replacement of Alabama Graphite options |
|
| 36 |
Issuance of 42,888 warrants for replacement of Alabama Graphite warrants |
|
| 54 |
|
| $ | 8,881 |
|
|
|
|
The fair value of the consideration given was allocated as follows: |
|
|
|
Assets: |
|
|
|
Cash and cash equivalents |
| $ | 17 |
Short-term receivables |
|
| 113 |
Prepaid expenses |
|
| 42 |
Property, plant, equipment and graphite mineral interests |
|
| 8,973 |
Total assets |
|
| 9,145 |
Liabilities: |
|
|
|
Accounts payable and accrued liabilities |
|
| 264 |
Total liabilities |
|
| 264 |
Net assets |
| $ | 8,881 |
The carrying value of the current assets acquired and liabilities assumed approximated the fair value due to the short-term nature of these items. The fair value of the graphite mineral interests was estimated using a discounted cash flow approach and market comparables. Key assumptions used in the discounted cash flow analysis include discount rates, mineral resources, future timing of production, recovery rates and future capital and operating costs.
4. NOTES RECEIVABLE
Laramide Note Receivable
As part of the consideration for the sale of the Company’s wholly-owned subsidiary HRI, which holds the Churchrock and Crownpoint projects, pursuant to a Share Purchase Agreement (the “Laramide SPA”). Under the terms of the Laramide SPA, executed on April 7, 2016 and amended on December 5, 2016,Hydro Resources, Inc. (HRI) in January 2017, the Company received a promissory note in the following consideration:
•
$2.5 million in cash,amount of which $0.25 million was paid on October 21, 2016;
•
2,218,333 shares of Laramide common stock and 2,218,333 Laramide common stock purchase warrants. Each common stock purchase warrant entitles the Company to purchase one share of common stock of Laramide at a price of CDN$0.45 for a period of 60 months from the date of closing;
•
a $5.0 million, promissory note, secured by a mortgage over the projects.Churchrock and Crownpoint properties owned by Laramide Resources Ltd. (“Laramide”). The note has a three-year term and carries an initial interest rate of 5% which then increases to 10% upon Laramide’s decision regarding commercial production at. The Company received the Churchrock project. Principalfirst two installment payments of approximately $1.5 million are due and payable oneach in January 5 in each of 2018 and 2019, with the balanceJanuary 2019. The final principal payment of $2.0 million is due and payable on January 5, 2020. Interest is payable on a quarterly basis provided however that no interest will be payable until March 31, 2018.during the final year. Laramide will havehad the right to satisfy up to half of each of thesethe principal payments by delivering shares of its common stock to the Company, which shares will bewere valued by reference to the volume weighted average price (“VWAP”) for Laramide’s common stock for the 20 trading days before thetheir respective anniversary of January 5, on which each payment is due;
•
a retained 4.0% Net Smelter Return Royalty (“NSR Royalty”) on the Churchrock project, which royalty may be repurchased by Laramide by January 5, 2018 for $4.95 million; and
WESTWATER RESOURCES, INC.
(formerly Uranium Resources, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
•
an option to purchase Laramide’s La Sal project for $3.0 million and an option to purchase its La Jara Mesa project for $5.0 million, both of which expire on January 5, 2018. Any such exercise by the Company will first result in a reductionanniversaries of the principal amount due under the promissory note with any remaining portions of the purchase price to be paidinitial issuance date in cash by the Company.
The divestiture of HRI was accounted for as an asset disposal and the non-cash consideration received from Laramide was recorded at fair value.January. The fair value of the shares of Laramide common stock received was determined using the closing share price of Laramide’s stock on January 5, 2017. The fair value of the common stock purchase warrants was determined using the Black-Scholes method on April 27, 2017, which was the date that Laramide’s stockholders approved the issuance of the warrants. The fair value of the notesthis note receivable was determined using the present value of the future cash receipts discounted at a market rate of 9.5%. The
On August 30, 2019, the Company did not record a separate fair valuesold the promissory note (Note 5). Prior to August 30, 2019, the Company had received three tranches of Laramide common shares as partial consideration for the options assale, which has resulted in the exercisereceipt of 2,218,133, 1,982,483 and 2,483,034 Laramide common shares in January 2017, January 2018 and January 2019, respectively. These share payments represented the options would reduceinitial consideration from the January 2017 sale of HRI and two note installments in January 2018 and January 2019. The first note installment in the amount outstanding underof $1.5 million in January 2018, consisted of $750,000 in cash and the issuance of 1,982,483 of Laramide’s common shares. The second note installment
12
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
in the amount of $1.5 million in January 2019, consisted of $750,000 in cash and the issuance of 2,483,034 of Laramide’s common shares. Additionally, Laramide made interest payments in the amount of $96,022 in cash during the nine months ending September 30, 2019.
During the nine months ended September 30, 2019, the Company sold the third tranche of 2,483,034 Laramide common shares and 2,218,133 Laramide warrants resulting in net proceeds of $0.5 million and a net loss on sale of marketable securities of $0.7 million.
The following tables show the notes receivable. Due toreceivable, accrued interest and unamortized discount on the high degreeCompany’s notes receivable as of uncertainties surrounding future mine developmentSeptember 30, 2019 and minerals prices, as well as limited marketability, the Company determined the fair value of the NSR Royalty to be nil. The following fair value amounts were recorded as the purchase consideration:December 31, 2018.
|
| | ||||||||||
| September 30, 2019 | |||||||||||
Less | ||||||||||||
Unamortized | Note Balance | |||||||||||
Note | Plus Accrued | Note | per Balance | |||||||||
(thousands of dollars) | Amount | Interest | Discount | Sheet | ||||||||
Current Assets | ||||||||||||
Notes receivable Laramide – current |
| $
| ||||||||||
|
|
| ||||||||||
|
| |||||||||||
|
| |||||||||||
|
| $ |
| $ | — | $ | — | |||||
Subtotal Notes Receivable – current | $ | — | $ | — | $ | — | $ | — | ||||
Non-current Assets | ||||||||||||
Notes receivable – Laramide – non-current | $ | — | $ | — | $ | — | $ | — | ||||
Total Notes Receivable – current and non-current | $ | — | $ | — | $ | — | $ | — |
The fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2018 | ||||||||||
|
|
|
|
|
|
|
| Less |
|
|
| |
|
|
|
|
|
|
|
| Unamortized |
| Note Balance | ||
|
| Note |
| Plus Accrued |
| Note |
| per Balance | ||||
(thousands of dollars) |
| Amount |
| Interest |
| Discount |
| Sheet | ||||
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Notes receivable Laramide – current |
| $ | 1,500 |
| $ | 45 |
| $ | — |
| $ | 1,545 |
Subtotal Notes Receivable – current |
| $ | 1,500 |
| $ | 45 |
| $ | — |
| $ | 1,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Notes receivable – Laramide – non-current |
| $ | 2,000 |
| $ | — |
| $ | (507) |
| $ | 1,493 |
Total Notes Receivable – current and non-current |
| $ | 3,500 |
| $ | 45 |
| $ | (507) |
| $ | 3,038 |
5. SALE OF URANIUM ASSETS
On March 5, 2019, the Company entered into an Asset Purchase Agreement with Uranium Royalty (USA) Corp. and Uranium Royalty Corp. (together “URC”) for the sale of four of its royalty interests on future uranium production from mineral properties located in South Dakota, Wyoming and New Mexico, as well as the remaining amount of the sharesLaramide promissory note in the amount of Laramide’s common stock$2.0 million as discussed above, for $2.75 million, including $0.5 million paid at signing. On June 28, 2019, Westwater and common stock purchase warrants received were valued using Level 1 inputsURC entered into an Amendment to the Agreement (collectively referred to as the "Agreement"). The Amendment extended the date for closing from July 31, 2019 to August 30, 2019. URC delivered an additional $1.0 million as deposit to the Company upon signing the Amendment. The transaction closed on August 30,
13
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
2019 at which time the Company transferred ownership of the fair value hierarchyroyalties and promissory note in exchange for the fair valuefinal payment of the notes receivable$1.25 million.
The sale of these uranium assets was valued using Level 2 inputs,accounted for as defined in Note 4 below.
an asset disposal. The Company recorded the following gain on disposal of uranium properties withinassets on its Condensed Consolidated StatementStatements of Operations:
| ||
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
URC Transaction |
|
|
|
(thousands of dollars) |
|
|
|
Total cash consideration received, net of transaction costs |
| $ | 2,470 |
Carrying value of promissory note |
|
| (1,741) |
Carrying value of royalty interests |
|
| — |
Gain on disposal of uranium assets |
| $ | 729 |
4.
6. FINANCIAL INSTRUMENTS
Applicable accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and establishes a fair-value hierarchy that prioritizes the inputs used to measure fair value using the following definitions (from highest to lowest priority):
•
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that are observable at the measurement date.
•
Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
•
Level 3 includes unobservable inputs that reflect management’s assumptions about what factors market participants would use in pricing the asset or liability. These inputs are developed based on the best information available, including internal data.
· | Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that are observable at the measurement date. |
| · | Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). |
· | Level 3 includes unobservable inputs that reflect management’s assumptions about what factors market participants would use in pricing the asset or liability. These inputs are developed based on the best information available, including internal data. |
The Company believes that the fair valuesvalue of ourits assets and liabilities approximate their reported carrying amounts. The following table presents information about assets that were recorded at fair value on a recurring and non-recurring basis as of September 30, 20172019 and December 31, 20162018 and indicate the fair value hierarchy:
|
| September 30, 2017 | |||
(thousands of dollars) |
| Level 1 | Level 2 | Level 3 | Total |
Current Assets |
|
|
|
|
|
Marketable securities and short term investments |
| $ 1,060 | $ - | $ - | $ 1,060 |
Total current assets recorded at fair value |
| $ 1,060 | $ - | $ - | $ 1,060 |
Non-Current Assets |
|
|
|
|
|
Restricted cash |
| 3,668 | - | - | 3,668 |
Total non-current assets recorded at fair value |
| $ 3,668 | $ - | $ - | $ 3,668 |
|
|
|
|
|
|
|
| December 31, 2016 | |||
|
| Level 1 | Level 2 | Level 3 | Total |
Non-Current Assets |
|
|
|
|
|
Restricted cash |
| $ 3,964 | $ - | $ - | $ 3,964 |
Total non-current assets recorded at fair value |
| $ 3,964 | $ - | $ - | $ 3,964 |
hierarchy.
5. PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2019 | ||||||||||
(thousands of dollars) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term available-for-sale investments |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
Total current assets recorded at fair value |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
Non-current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash |
| $ | 3,784 |
| $ | — |
|
| — |
| $ | 3,784 |
Total non-current assets recorded at fair value |
| $ | 3,784 |
| $ | — |
| $ | — |
| $ | 3,784 |
14
WESTWATER RESOURCES, INC.
(formerly Uranium Resources, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2018 |
|
| ||||||||
(thousands of dollars) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term available-for-sale investments |
| $ | 415 |
| $ | — |
| $ | — |
| $ | 415 |
Total current assets recorded at fair value |
| $ | 415 |
| $ | — |
| $ | — |
| $ | 415 |
Non-current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash |
| $ | 3,732 |
| $ | — |
|
| — |
| $ | 3,732 |
Total non-current assets recorded at fair value |
| $ | 3,732 |
| $ | — |
| $ | — |
| $ | 3,732 |
Assets that are measured on a recurring basis include the Company’s marketable securities and restricted cash.
6.7. PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Book Value of Property, Plant and Equipment at September 30, 2019 | ||||||||||||||||
(thousands of dollars) |
| Turkey |
| Texas |
| Alabama |
| New Mexico |
| Corporate |
| Total | ||||||
Uranium plant |
| $ | — |
| $ | 3,142 |
| $ | — |
| $ | — |
| $ | — |
| $ | 3,142 |
Mineral rights and properties |
|
| — |
|
| — |
|
| 8,972 |
|
| 7,806 |
|
| — |
|
| 16,778 |
Other property, plant and equipment |
|
| 6 |
|
| 429 |
|
| — |
|
| — |
|
| 126 |
|
| 561 |
Total |
| $ | 6 |
| $ | 3,571 |
| $ | 8,972 |
| $ | 7,806 |
| $ | 126 |
| $ | 20,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Book Value of Property, Plant and Equipment at December 31, 2018 | ||||||||||||||||
(thousands of dollars) |
| Turkey |
| Texas |
| Alabama |
| New Mexico |
| Corporate |
| Total | ||||||
Uranium plant |
| $ | — |
| $ | 3,256 |
| $ | — |
| $ | — |
| $ | — |
| $ | 3,256 |
Mineral rights and properties |
|
| — |
|
| — |
|
| 8,973 |
|
| 7,806 |
|
| — |
|
| 16,779 |
Other property, plant and equipment |
|
| 8 |
|
| 348 |
|
| — |
|
| — |
|
| 162 |
|
| 518 |
Total |
| $ | 8 |
| $ | 3,604 |
| $ | 8,973 |
| $ | 7,806 |
| $ | 162 |
| $ | 20,553 |
Impairment of Temrezli and Sefaatli Projects
On June 20, 2018, the General Directorate of Mining Affairs, a department of the Turkish Ministry of Energy and Natural Resources, notified the Company that the mining and exploration licenses for its Temrezli and Sefaatli projects located in Turkey had been revoked and potential compensation will be proffered. On December 13, 2018, the Company filed a Request for Arbitration against the Republic of Turkey before the International Centre for the Settlement of Investment Disputes, pursuant to the Treaty between the United States of America and the Republic of Turkey concerning the Reciprocal Encouragement and Protection of Investments. Although the Company is seeking compensation for its investment in the Temrezli and Sefaatli projects through the international arbitration process, it is more likely than not that the Company will be unable to explore, develop, mine or otherwise benefit from the mineral properties. Therefore, the Company has determined that all of the uranium mineral holding property assets located in Turkey were fully impaired. The Company will recognize compensation for the mining and exploration licenses when the amount of the full and fair compensation is fixed and determinable and the ability to collect is probable. See further discussion of the international arbitration process at Item 2 - Management Discussion and Analysis and Part II. Item 1- Legal Proceedings sections of this form 10-Q.
The Company reviews and evaluates its long-lived assets for impairment on an annual basis or more frequently when events or changes in circumstances indicate that the related carrying amounts may not be recoverable.
15
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
8. MINERAL PROPERTY EXPENDITURES
Mineral property expenditures by geographical location for the three and nine months ended September 30, 20172019 and 2016are2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| For the Three Months Ended Sep 30, |
| For the Nine Months Ended Sep 30, |
| For the Three Months Ended September 30, |
| For the Nine Months Ended September 30, | ||||||||||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
|
| (thousands of dollars) |
| (thousands of dollars) | ||||||||||||||||
Temrezli project, Turkey |
| $ 63 |
| $ 31 |
| $ 186 |
| $ 453 |
| $ | — |
| $ | 11 |
| $ | — |
| $ | 107 |
Total Turkey projects |
| 63 |
| 31 |
| 186 |
| 453 |
|
| — |
|
| 11 |
|
| — |
|
| 107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kingsville Dome project, Texas |
| 197 |
| 214 |
| 616 |
| 624 |
|
| 203 |
|
| 223 |
|
| 592 |
|
| 646 |
Rosita project, Texas |
| 188 |
| 130 |
| 472 |
| 290 |
|
| 237 |
|
| 259 |
|
| 454 |
|
| 614 |
Vasquez project, Texas |
| 117 |
| 105 |
| 399 |
| 365 |
|
| 85 |
|
| 42 |
|
| 397 |
|
| 373 |
Other projects, Texas |
| 26 |
| 11 |
| 30 |
| 80 |
|
| 5 |
|
| 14 |
|
| (3) |
|
| 14 |
Total Texas projects |
| 528 |
| 460 |
| 1,517 |
| 1,359 |
|
| 530 |
|
| 538 |
|
| 1,440 |
|
| 1,647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cebolleta project, New Mexico |
| - |
| - |
| 538 |
| 537 |
|
| — |
|
| — |
|
| 440 |
|
| 389 |
Juan Tafoya project, New Mexico |
| 38 |
| 37 |
| 354 |
| 48 |
|
| 40 |
|
| 39 |
|
| 49 |
|
| 48 |
Other projects, New Mexico |
| - |
| 32 |
| 2 |
| 32 |
|
| 13 |
|
| 12 |
|
| 13 |
|
| 12 |
Total New Mexico projects |
| 38 |
| 69 |
| 894 |
| 617 |
|
| 53 |
|
| 51 |
|
| 502 |
|
| 449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Columbus Basin project, Nevada |
| 481 |
| 113 |
| 667 |
| 113 |
|
| 126 |
|
| 126 |
|
| 127 |
|
| 249 |
Railroad Valley project, Nevada |
| 80 |
| - |
| 238 |
| - | ||||||||||||
Other projects, Nevada |
| 8 |
| 14 |
| 11 |
| 14 | ||||||||||||
Railroad Valley, Nevada |
|
| — |
|
| 79 |
|
| — |
|
| 95 | ||||||||
Total Nevada projects |
| 569 |
| 127 |
| 916 |
| 127 |
|
| 126 |
|
| 205 |
|
| 127 |
|
| 344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sal Rica project, Utah |
| 118 |
| 352 |
| 124 |
| 352 |
|
| 111 |
|
| 112 |
|
| 112 |
|
| 112 |
Total Utah projects |
| 118 |
| 352 |
| 124 |
| 352 |
|
| 111 |
|
| 112 |
|
| 112 |
|
| 112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coosa project, Alabama |
|
| 31 |
|
| 38 |
|
| 128 |
|
| 47 | ||||||||
Total Alabama projects |
|
| 31 |
|
| 38 |
|
| 128 |
|
| 47 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total expense for the period |
| $ 1,316 |
| 1,039 |
| $ 3,637 |
| $ 2,908 |
| $ | 851 |
| $ | 955 |
| $ | 2,309 |
| $ | 2,706 |
On June 20, 2017, the Company acquired its third lithium exploration project through the staking of 9,270 acres of federal placer mining claims within the Railroad Valley of central Nevada.
On March 24, 2017, the Company’s wholly owned subsidiary Lithium Holdings Nevada LLC entered into an option agreement to purchase a block of unpatented placer mining claims covering an area of approximately 3,000 acres within the Columbus Salt Marsh area of Esmeralda County, Nevada. The claims adjoin a portion of the Company’s current property holdings at its Columbus Basin project, expanding the project area within the basin to approximately 14,200 acres. The Company has the right to conduct exploration activities on the claims during the one-year option period. Under the option agreement, the Company may acquire the mineral property claims on or before March 24, 2018 in exchange for 200,000 shares of its common stock and a 1% NSR Royalty on the claims. The Company paid $75,000 for this option, which has been included as exploration expense for the Columbus Basin project.
WESTWATER RESOURCES, INC.
(formerly Uranium Resources, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
7. CONVERTIBLE LOAN
On November 13, 2013, the Company entered into a loan agreement (the “RCF Loan”) with Resource Capital Fund V L.P. (“RCF”), whereby RCF agreed, subject to the terms and conditions set forth in the RCF Loan, to provide a secured convertible loan facility of up to $15.0 million to the Company, which was subsequently amended on April 29, 2014 to reduce the amount available thereunder from $15.0 million to $8.0 million. The Company exchanged $2.5 million in principal for shares of its common stock in December 2016 and repaid the $5.5 million outstanding balance under the RCF Loan on February 9, 2017. No further obligations remain under the RCF Loan following the repayment. In addition, on July 31, 2017, the Company and RCF terminated the Stockholders’ Agreement dated March 1, 2012, pursuant to which RCF had certain stock participation rights and Board rights.
As a result of the repayment, the Company recorded a loss of $39,000 on the extinguishment of debt which represented the difference between the principal amount of $5.5 million and the carrying value of the RCF Loan on the date of repayment.
8.9. ASSET RETIREMENT OBLIGATIONS
The following table summarizes the changes in the reserve for future restoration and reclamation costs on the balance sheet:
|
|
|
|
|
|
|
|
| September 30, |
| December 31, | ||
(thousands of dollars) |
| 2019 |
| 2018 | ||
Balance, beginning of period |
| $ | 6,203 |
| $ | 5,731 |
Liabilities settled |
|
| (334) |
|
| (521) |
Accretion expense |
|
| 353 |
|
| 993 |
Balance, end of period |
|
| 6,222 |
|
| 6,203 |
Less: Current portion |
|
| (895) |
|
| (708) |
Non-current portion |
| $ | 5,327 |
| $ | 5,495 |
16
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The Company is currently performing plugging and surface reclamation activities at its Rosita projectand Vasquez projects located in Duval County, Texas. The Company’s current liability of $0.1$0.9 million consists of the estimated costs associated with current surface reclamation activities through September 20182020 at the Company’s Rosita project. and Vasquez projects.
9.
10. COMMON STOCK
Reverse Stock Split
Immediately following the close of trading on April 22, 2019, the Company effected a one-for-fifty reverse stock split of its common stock. With the reverse stock split, every fifty shares of the Company’s issued and outstanding common stock were combined into one issued and outstanding share of common stock. The reverse stock split reduced the number of shares outstanding from approximately 74.7 million shares to approximately 1.5 million shares. The reverse stock split did not have any effect on the par value of the Company’s common stock. No fractional shares were issued as a result of the reverse stock split. Any fractional shares that would have resulted were settled in cash. All share data herein has been retroactively adjusted for the reverse stock split.
Common Stock Issued, Net of Issuance Costs
Confidentially Marketed Public OfferingStock Purchase Agreement with Lincoln Park Capital Fund, LLC. ("Lincoln Park")
On January 19, 2017,May 24, 2019, Westwater entered into a securities purchase agreement, as amended by Amendment No. 1 thereto dated as of May 30, 2019 (as so amended, the "Purchase Agreement"), with Lincoln Park, pursuant to which the Company completed a registered public offering for net proceedsagreed to issue and sell to Lincoln Park, and Lincoln Park agreed to purchase from the Company (i) 104,294 shares of $8.9 million. The Company sold 1,399,140the Company's common stock and (ii) warrants to initially purchase an aggregate of up to 182,515 shares of common stock, at a price of $2.01 per share and 3,426,731 pre-funded warrants at a price of $2.00 per warrant. The warrants have an exercise price of $0.01. All$5.062 per share, for an aggregate of $550,751. On May 30, 2019, the Company issued and sold the common shares and the warrants to Lincoln Park and received aggregate gross proceeds before expenses of $550,751. The warrants will become exercisable upon the six-month anniversary of the pre-funded warrants have been exercised.Closing Date and thereafter at any time during the five-year period following such date.
Registered Direct OfferingPurchase Agreement ("PA") with Lincoln Park
On February 16, 2017,June 6, 2019, the Company completedentered into the PA with Lincoln Park to place up to $10.0 million in the aggregate of the Company's common stock on an ongoing basis when required by the Company over a registered direct offering for net proceedsterm of $4.5 million24 months. Westwater will control the timing and amount of any sales to Lincoln Park, and Lincoln Park is obligated to make purchases in accordance with Aspirethe PA. Any common stock that is sold to Lincoln Park will occur at a purchase price that is based on an agreed upon fixed discount to the Company's prevailing market prices at the time of each sale and with no upper limits to the price Lincoln Park may pay to purchase common stock. The agreement may be terminated by Westwater at any time, in its sole discretion, without any additional cost or penalty.
The PA specifically provides that the Company may not issue or sell any shares of its common stock under the PA if such issuance or sale would breach any applicable rules of The Nasdaq Capital Market. In particular, Nasdaq Listing Rule 5635(d) provides that the Company may not issue or sell more than 19.99% of the shares of the Company’s common stock outstanding immediately prior to the execution of the PA without shareholder approval. On August 6, 2019 the Company conducted a Special Meeting of Shareholders whereby Aspire Capital purchased 2,100,000the Company received such approval to sell up to 3,200,000 shares of common stock at a priceunder the PA..
Lincoln Park has no right to require the Company to sell any shares of $1.58 and 748,101 pre-funded common stock purchase warrants at a priceto Lincoln Park, but Lincoln Park is obligated to make purchases as the Company directs, subject to certain conditions. In all instances, the Company may not sell shares of $1.57. The warrants have an exercise priceits common stock to Lincoln Park under the PA if it would result in Lincoln Park beneficially owning more than 9.99% of $0.01 per share and a termits common stock.
17
Table of three years. All of the pre-funded warrants have been exercised.Contents
WESTWATER RESOURCES, INC.
(formerly Uranium Resources, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Following effectiveness of an S-1 registration statement relating to the resale of the shares subject to the PA on June 18, 2019, the Company began selling shares of its common stock to Lincoln Park under the terms of the PA. During the quarter ended September 30, 2019, the Company sold 466,784 shares of common stock for gross proceeds of $1.5 million. Inception-to-date through October 31, 2019, the Company has sold 1,234,534 shares of common stock for gross proceeds of $4.8 million. As of November 6, 2019, the Company has registered the resale by Lincoln Park of an additional 959,000 shares under a registration statement on Form S-1 which will be declared effective on November 7, 2019.
Controlled Equity Offering Sales Agreement with Cantor Fitzgerald (“Cantor”)
On April 14, 2017, the Company entered into the ATM Offeringat-the-market offering (the "ATM Offering") with Cantor acting as sales agent. Under the ATM Offering, the Company may from time to time sell shares of its common stock having an aggregate offering amount up to $30.0 million in “at-the-market” offerings, $8.0 million of which shares arewere registered for sale under a registration statement on Form S-3,S‑3, which was declared effective on March 9, 2017. The Company pays Cantor a commission equalof up to 2.5% of the gross proceeds from the sale of any shares pursuant to the ATM Offering. As of November 9, 2017,September 30, 2019, the Company had sold 673,853488,685 shares of common stock for net proceeds of $1.1$6.1 million under the ATM Offering.Offering, of which 57,205 shares of common stock and net proceeds of $0.4 million was sold in the nine months ended September 30, 2019. As a result, the Company had approximately $28.9$23.8 million remaining available for future sales under the ATM Offering. Offering, but has nil registered for sale as of September 30, 2019.
Common Stock Purchase Agreement with Aspire CapitalIssued for Acquisition of Alabama Graphite
On September 25, 2017, the Company entered into the CSPA with Aspire Capital to place up to $22.0 millionAs discussed in the aggregate of the Company’s common stockNote 3 above, on an ongoing basis when required by the Company over a term of 30 months. The Company will control the timing and amount of sales to Aspire Capital, and at a price based on market prices at that time. As consideration for Aspire Capital entering into the purchase agreement,April 23, 2018, the Company issued 880,000 shares of its common stock to Aspire Capital. The232,504 shares of common stock subject toin exchange for 100% of the CSPA were registered pursuant to the Company’s effective shelf registration statement on Form S-3.
On September 27, 2017, pursuant to the CSPA and after satisfaction of certain commencement conditions, Aspire Capital made an initial purchase of 1,428,571outstanding shares of common stock for which the Company received proceeds of $2.0 million. There were no other sales of common stock pursuant to the CSPA andAlabama Graphite as of November 9, 2017, $20.0 millionpart of the aggregate $22.0 million remained available for future sales under the CSPA.purchase consideration paid to acquire Alabama Graphite.
Common Stock Issued for Investor Relations Fees
On February 28, 2017, the Company issued 150,000 shares with a fair market value of $0.3 million or $2.00 per share as partial consideration for investor relations services that will be provided to the Company over the ensuing 12 months.
10.11. STOCK-BASED COMPENSATION
Stock-based compensation awards consist of stock options, restricted stock units (“RSUs”) and restricted stock awards (“RSAs”)bonus shares issued under the Company’s equity incentive plans which include: the 2013 Omnibus Incentive Plan (the “2013 Plan”Plan"); the 2007 Restricted Stock Plan (the “2007 Plan”); and the Amended and Restated 2004 Directors’ Stock Option and Restricted Stock Plan (the “2004 Directors’ Plan”); and the 2004 Stock Incentive Plan (the “2004 Plan”Plan"). Upon approval of the 2013 Plan by the Company’s stockholders on June 4, 2013, the Company’s authority to grant new awards under all plans other than the 2013 Plan was terminated. On July 18, 2017 and April 18, 2019, the Company’s stockholders approved an amendmentamendments to the 2013 Plan to increase the authorized number of shares of common stock available and reserved for issuance under the 2013 Plan by 1.0 million20,000 shares and to66,000 shares respectively and in 2017 re-approve the material terms of the performance goals under the plan. Under the 2013 Plan, the Company may grant awards of stock options, stock appreciation rights, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), unrestricted stock, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards and cash bonus awards to eligible persons. The maximum number of the Company’s common stock that may be reserved for issuance under the 2013 Plan is currently 66,278 shares of common stock, plus unissued shares under the prior plans. Equity awards under the 2013 Plan are granted from time to time at the discretion of the Compensation Committee of the Board (the “Committee”), with vesting periods and other terms as determined by the Committee with a maximum term of 10 years. The 2013 Plan is administered by the Committee, which can delegate the administration to the Board, other Committees or to such plan. other officers and employees of the Company as designated by the Committee and permitted by the 2013 Plan.
As of November 9, 2017, the Company had 561,232September 30, 2019, 45,886 shares were available for future issuances under the 2013 Plan.
For the threenine months ending September 30, 20172019 and 2016,2018, the Company recorded stock-based compensation expense of $24,279$0.2 million and $75,495,$0.3 million, respectively. For the nine months ending September 30, 2017 and 2016, the Company recorded stock-basedStock compensation expense of $62,356 and $545,166, respectively. Stock-based compensation expense has been includedis recorded in general and administrative expense.expenses.
In addition to the plans above, upon closing of the Company’s acquisition of Anatolia Energy Limited in November 2015, the Company issued 374,7497,495 replacement options and performance shares to the option holders and
18
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
performance shareholders of Anatolia Energy Limited. The number of replacement options and performance shares was based upon the Black-Scholes value with the exercise prices of the replacement options and performance shares determined using the exchange rate of 0.00548.0.0001096. The options and performance shares were issued with the same terms and conditions as were applicable prior to the acquisition of Anatolia Energy Limited. As of September 30, 2017, 98,6462019, there were 113 replacement options remainoutstanding and no performance shares outstanding.
WESTWATER RESOURCES, INC.In addition to the plans above, upon closing of the Company’s acquisition of Alabama Graphite in April 2018, the Company issued 50,168 replacement options and warrants to the option and warrant holders of Alabama Graphite. The number of replacement options and warrants shares was determined using the arrangement exchange rate of 0.0016. The exercise prices for the option and warrant shares were first converted for the exchange rate of 0.0016 and then converted to USD using the exchange rate on December 13, 2017 of 0.77809 (CAD to USD). The options and warrant shares were issued with the same terms and conditions as were applicable prior to the acquisition of Alabama Graphite. As of September 30, 2019, there were 4,528 replacement options and 11,440 replacement warrants outstanding.
(formerly Uranium Resources, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Stock Options
The following table summarizes stock options outstanding and changes for the nine-monththree-month periods ending September 30, 20172019 and 2016:2018:
|
| Sep 30, |
| Sep 30, | ||||
|
| 2017 |
| 2016 | ||||
|
| Number of Stock Options |
| Weighted Average Exercise Price |
| Number of Stock Options |
| Weighted Average Exercise Price |
Stock options outstanding at beginning of period |
| 110,828 |
| $ 18.24 |
| 326,424 |
| $ 24.90 |
Granted |
| 189,164 |
| 1.40 |
| - |
| - |
Expired |
| (6,001) |
| 104.67 |
| (215,346) |
| 27.64 |
Stock options outstanding at end of period |
| 293,991 |
| $ 5.64 |
| 111,078 |
| $ 19.60 |
Stock options exercisable at end of period |
| 104,722 |
| $ 13.26 |
| 110,869 |
| $ 19.57 |
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2019 |
| September 30, 2018 | ||||||
|
|
|
| Weighted |
|
|
| Weighted | ||
|
| Number of |
| Average |
| Number of |
| Average | ||
|
| Stock |
| Exercise |
| Stock |
| Exercise | ||
|
| Options |
| Price |
| Options |
| Price | ||
Stock options outstanding at beginning of period |
| 18,546 |
| $ | 64.49 |
| 5,723 |
| $ | 276.50 |
Granted |
| 20,942 |
|
| 19.25 |
| 16,254 |
|
| 49.00 |
Expired |
| (1,040) |
|
| 78.00 |
| (1,608) |
|
| 262.00 |
Canceled or forfeited |
| (550) |
|
| 19.25 |
| — |
|
| — |
Stock options outstanding at end of period |
| 37,898 |
| $ | 39.78 |
| 20,369 |
| $ | 95.50 |
Stock options exercisable at end of period |
| 37,898 |
| $ | 39.78 |
| 20,369 |
| $ | 95.50 |
The following table summarizes stock options outstanding and exercisable by stock option plan at September 30, 2017:2019:
|
| Outstanding Stock Options |
| Exercisable Stock Options | ||||
Stock Option Plan |
| Number of Outstanding Stock Options |
| Weighted Average Exercise Price |
| Number of Exercisable Stock Options |
| Weighted Average Exercise Price |
2004 Plan |
| 4,792 |
| $ 35.14 |
| 4,792 |
| $ 35.14 |
2004 Directors’ Plan |
| 973 |
| 317.14 |
| 973 |
| 317.14 |
2013 Plan |
| 189,581 |
| 1.48 |
| 312 |
| 35.88 |
Replacement Stock Options |
| 98,645 |
| 9.13 |
| 98,645 |
| 9.13 |
|
| 293,991 |
| $ 5.64 |
| 104,722 |
| $ 13.26 |
|
|
|
|
|
|
|
|
|
|
|
|
| Outstanding Stock Options |
| Exercisable Stock Options | ||||||
|
| Number of |
| Weighted |
| Number of |
| Weighted | ||
|
| Outstanding |
| Average |
| Stock Options |
| Average | ||
Stock Option Plan |
| Stock Options |
| Exercise Price |
| Exercisable |
| Exercise Price | ||
2004 Plan |
| 96 |
| $ | 1,752.25 |
| 96 |
| $ | 1,752.25 |
2004 Directors’ Plan |
| 3 |
|
| 10,380.00 |
| 3 |
|
| 10,380.00 |
2013 Plan |
| 33,158 |
|
| 25.47 |
| 33,158 |
|
| 25.47 |
Replacement Options-AGC |
| 4,528 |
|
| 81.65 |
| 4,528 |
|
| 81.65 |
Replacement Options-AEK |
| 113 |
|
| 831.50 |
| 113 |
|
| 831.50 |
|
| 37,898 |
| $ | 39.78 |
| 37,898 |
| $ | 39.78 |
Restricted Stock Units
Time-based and performance-based RSUs are valued using the closing share price of the Company’s common stock on the date of grant. The final number of shares issued under performance-based RSUs is generally based on the Company’s prior year performance as determined by the Compensation Committee of the Board of Directors at each vesting date, and the valuation of such awards assumes full satisfaction of all performance criteria.
19
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following table summarizes RSU activity for the nine-monththree-month periods ended September 30, 20172019 and 2016:
|
| Sep 30, |
| Sep 30, | ||||
|
| 2017 |
| 2016 | ||||
|
| Number of RSUs |
| Weighted-Average Grant Date Fair Value |
| Number of RSUs |
| Weighted-Average Grant Date Fair Value |
Unvested RSUs at beginning of period |
| 8,649 |
| $ 43.71 |
| 32,699 |
| $ 34.25 |
Granted |
| 304,064 |
| 1.40 |
| - |
| - |
Forfeited |
| - |
| - |
| (3,334) |
| 32.21 |
Vested |
| (39,340) |
| 4.16 |
| (7,698) |
| 29.45 |
Unvested RSUs at end of period |
| 273,373 |
| $ 1.95 |
| 21,667 |
| $ 36.27 |
WESTWATER RESOURCES, INC.
(formerly Uranium Resources, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS2018:
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| September 30, | ||||||
|
| 2019 |
| 2018 | ||||||
|
|
|
| Weighted- |
|
|
| Weighted- | ||
|
|
|
| Average |
|
|
| Average | ||
|
| Number of |
| Grant Date |
| Number of |
| Grant Date | ||
|
| RSUs |
| Fair Value |
| RSUs |
| Fair Value | ||
Unvested RSUs at beginning of period |
| 1,695 |
| $ | 70.00 |
| 3,578 |
| $ | 70.00 |
Granted |
| — |
|
| — |
| — |
|
| — |
Forfeited |
| — |
|
| — |
| (189) |
|
| 70.00 |
Vested |
| — |
|
| — |
| — |
|
| — |
Unvested RSUs at end of period |
| 1,695 |
| $ | 70.00 |
| 3,389 |
| $ | 70.00 |
11.12. EARNINGS PER SHARE
Basic and diluted loss per share of common stockshare have been calculated based on the weighted-average shares outstanding during the period. PotentiallyAdditionally, potentially dilutive shares of 750,698237,214 and 38,865 were excluded from the calculation of earnings per share because the effect on the basic income per share would be anti-dilutive for the three and nine months ended September 30, 2017.2019 and 2018, respectively.
12.
13. COMMITMENTS AND CONTINGENCIES
The Company’s uranium recovery operations are subject to federal and state regulations for the protection of the environment, including water quality. Future closure and reclamation costs are provided for as each pound of uranium is produced on a unit-of-productionunit‑of‑production basis. The Company reviews its uranium 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 materially compliant with current environmental regulations.
13.At any given time, the Company may enter into negotiations to settle outstanding legal proceedings and any resulting accruals will be estimated based on the relevant facts and circumstances applicable at that time. We do not expect that such settlements will, individually or in the aggregate, have a material effect on our financial position, results of operations or cash flows.
14. LEASES
Lease Adoption January 1, 2019
In February 2016, the FASB issued ASU No. 2016‑02, “Leases (Topic 842)”. This new standard requires lessees to recognize leases on their balance sheets. It also requires a dual approach for lessee accounting under which a lessee accounts for leases as finance leases or operating leases with the recognition of a right-of-use asset and a corresponding lease liability. For operating leases, the lessee recognizes straight-line lease expense. The new lease accounting standard along with the clarifying amendments subsequently issued by the FASB, collectively became effective for the Company on January 1, 2019. The Company adopted the new lease accounting standard by applying the new lease guidance at the adoption date on January 1, 2019, and as allowed under the transition relief provided in ASU 2018‑11, elected not to restate comparative periods. As of January 1, 2019, in connection with the adoption of the new lease accounting standard, the Company recorded a right-of-use lease asset totaling $595,870 with a corresponding lease liability totaling $599,596.
The right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are
20
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
recognized at the commencement date of the lease based on the present value of lease payments over the lease term using a discount rate of 9.5%. This rate is the Company’s current estimated incremental borrowing rate.
The Company has operating leases for corporate offices, storage space and equipment. The leases have remaining lease terms of 1 to 5 years, one of which includes an option to extend the corporate office lease for 3 years. Under our corporate office lease, we are required to reimburse the lessor each month for common use expenses such as maintenance and security services. Because these amounts are variable from year to year and not specifically set in the lease terms, they are not included in the measurement of the right-of-use asset and related lease liability, but rather expensed in the period incurred.
The Company is party to several leases that are for under one year in length. These include such leases as those for land used in exploration and mining activities, office equipment, machinery, office space, storage and other. The Company has elected the short-term lease exemptions allowed under the new leasing standards, whereby leases with initial terms of one year or less are not capitalized and instead expensed on a straight-line basis over the lease term.
The components of lease expense were as follows:
|
|
|
|
|
| September 30, | |
(thousands of dollars) |
| 2019 | |
Operating lease cost |
| $ | 121 |
Supplemental cash flow information related to leases was as follows:
|
|
|
|
|
| Nine months | |
|
| ended | |
|
| September 30, 2019 | |
Cash paid for amounts included in lease liabilities: |
|
|
|
(thousands of dollars) |
|
|
|
Operating cash flows from operating leases |
| $ | 117 |
|
|
|
|
Right-of-use assets obtained in exchange for lease obligations: |
|
|
|
Operating leases |
| $ | 513 |
Supplemental balance sheet information related to leases was as follows:
|
|
|
|
|
| September 30, | |
(thousands of dollars, except lease term and discount rate) |
| 2019 | |
Operating Leases |
|
|
|
Operating lease right-of-use assets |
| $ | 513 |
|
|
|
|
Current portion of lease liabilities |
| $ | 152 |
Operating lease liabilities – long term portion |
|
| 369 |
Total operating lease liabilities |
| $ | 521 |
September 30, | ||||
2019 | ||||
Weighted Average Remaining Lease Term | Operating leases | 4.0 | Years | |
Discount Rate | Operating leases | 9.5 | % |
21
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Maturities of lease liabilities are as follows:
|
|
|
|
|
|
|
| Operating | |
| Lease payments by year (In thousands) |
| Leases | |
| 2019 |
| $ | 39 |
| 2020 |
|
| 159 |
| 2021 |
|
| 161 |
| 2022 |
|
| 162 |
| 2023 |
|
| 92 |
| Total lease payments |
|
| 613 |
| Less imputed interest |
|
| (92) |
| Total |
| $ | 521 |
As of September 30, 2019, the company has $0.5 million in right-of-useassets and $0.5 million in related lease liabilities ($0.2 million of which is current). The most significant operating lease is for its corporate office in Centennial, Colorado, with $0.6 million remaining in undiscounted cash payments through the end of the lease term in 2023. The total undiscounted cash payments remaining on operating leases through the end of their respective terms is $0.6 million.
15. GEOGRAPHIC AND SEGMENT INFORMATION
The Company has onecurrently operates in three reportable operating segment, consistingsegments, which are uranium, lithium and graphite mining activities, including exploration, standby operations and restoration and reclamation activities. As a part of these activities, the Company also explores, evaluates and, if warranted, permits uranium, lithium and graphite properties. The Company’s long-term assets were $24.8 million and $25.8 million as of September 30, 2019 and December 31, 2018, respectively. 100% of the exploration and development of lithium and uranium projects. These activitieslong-term assets are focused principallylocated in the United States and the Republic of Turkey. WeStates. The Company reported no revenues during the three- and nine-month periodsnine months ended September 30, 20172019 and 2016. Geographic locationSeptember 30, 2018.
The reportable segments are those operations whose operating results are reviewed by the Chief Executive Officer to make decisions about resources to be allocated to the segment and assess its performance provided those operations pass certain quantitative thresholds. Operations whose revenues, earnings or losses or assets exceed or are expected to exceed 10% of property, plantthe total consolidated revenue, earnings or losses or assets are reportable segments. Information about current assets and equipment, including mineral rights,liabilities of the segments has not been provided because the information is not used to assess performance.
The table below provides a breakdown of the long-term assets by reportable segments as of September 30, 2019 and mineral property expenses, is providedDecember 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2019 | |||||||||||||
(thousands of dollars) |
| Corporate |
| Uranium |
| Lithium |
| Graphite |
| Total | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment |
| $ | 126 |
| $ | 11,383 |
| $ | — |
| $ | 8,972 |
| $ | 20,481 |
Restricted cash |
|
| — |
|
| 3,774 |
|
| — |
|
| 10 |
|
| 3,784 |
Operating lease right of use assets |
|
| 490 |
|
| 23 |
|
| — |
|
| — |
|
| 513 |
Total long-term assets |
| $ | 616 |
| $ | 15,180 |
| $ | — |
| $ | 8,982 |
| $ | 24,778 |
22
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2018 | |||||||||||||
(thousands of dollars) |
| Corporate |
| Uranium |
| Lithium |
| Graphite |
| Total | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment |
| $ | 162 |
| $ | 11,418 |
| $ | — |
| $ | 8,973 |
| $ | 20,553 |
Restricted cash |
|
| — |
|
| 3,722 |
|
| — |
|
| 10 |
|
| 3,732 |
Notes receivable, non-current |
|
| — |
|
| 1,493 |
|
| — |
|
| — |
|
| 1,493 |
Total long-term assets |
| $ | 162 |
| $ | 16,633 |
| $ | — |
| $ | 8,983 |
| $ | 25,778 |
The table below provides a breakdown of the reportable segments for the three months ended September 30, 2019 and September 30, 2018. Non-mining activities and other administrative operations are reported in Notes 5the Corporate column.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months Ended | |||||||||||||
|
| September 30, 2019 | |||||||||||||
(thousands of dollars) |
| Corporate |
| Uranium |
| Lithium |
| Graphite |
| Total | |||||
Statement of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral property expenses |
| $ | — |
| $ | 583 |
| $ | 237 |
| $ | 31 |
| $ | 851 |
General and administrative expenses |
|
| 844 |
|
| 447 |
|
| 1 |
|
| 67 |
|
| 1,359 |
Arbitration expenses |
|
| 146 |
|
| — |
|
| — |
|
| — |
|
| 146 |
Accretion of asset retirement costs |
|
| — |
|
| 197 |
|
| — |
|
| — |
|
| 197 |
Depreciation and amortization |
|
| 1 |
|
| 22 |
|
| — |
|
| — |
|
| 23 |
Loss from operations |
|
| (991) |
|
| (1,249) |
|
| (238) |
|
| (98) |
|
| (2,576) |
Other income |
|
| 13 |
|
| 729 |
|
| — |
|
| — |
|
| 742 |
Loss before taxes |
| $ | (978) |
| $ | (520) |
| $ | (238) |
| $ | (98) |
| $ | (1,834) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months Ended | |||||||||||||
|
| September 30, 2018 | |||||||||||||
(thousands of dollars) |
| Corporate |
| Uranium |
| Lithium |
| Graphite |
| Total | |||||
Statement of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral property expenses |
| $ | — |
| $ | 600 |
| $ | 317 |
| $ | 38 |
| $ | 955 |
General and administrative |
|
| 1,086 |
|
| 478 |
|
| — |
|
| 141 |
|
| 1,705 |
Arbitration expenses |
|
| 98 |
|
| — |
|
| — |
|
| — |
|
| 98 |
Accretion of asset retirement costs |
|
| — |
|
| 133 |
|
| — |
|
| — |
|
| 133 |
Depreciation and amortization |
|
| 1 |
|
| 26 |
|
| — |
|
| — |
|
| 27 |
Loss from operations |
|
| (1,185) |
|
| (1,237) |
|
| (317) |
|
| (179) |
|
| (2,918) |
Other income (expense) |
|
| (246) |
|
| 27 |
|
| — |
|
| — |
|
| (219) |
Loss before taxes |
| $ | (1,431) |
| $ | (1,210) |
| $ | (317) |
| $ | (179) |
| $ | (3,137) |
The table below provides a breakdown of the reportable segments for the nine months ended September 30, 2019 and 6, above.September 30, 2018. Non-mining activities and other administrative operations are reported in the Corporate column.
23
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months Ended | |||||||||||||
|
| September 30, 2019 | |||||||||||||
(thousands of dollars) |
| Corporate |
| Uranium |
| Lithium |
| Graphite |
| Total | |||||
Statement of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral property expenses |
| $ | — |
| $ | 1,942 |
| $ | 239 |
| $ | 128 |
| $ | 2,309 |
General and administrative |
|
| 3,208 |
|
| 1,272 |
|
| 1 |
|
| 283 |
|
| 4,764 |
Arbitration expenses |
|
| 631 |
|
| — |
|
| — |
|
| — |
|
| 631 |
Accretion of asset retirement costs |
|
| — |
|
| 353 |
|
| — |
|
| — |
|
| 353 |
Depreciation and amortization |
|
| 3 |
|
| 68 |
|
| — |
|
| — |
|
| 71 |
Loss from operations |
|
| (3,842) |
|
| (3,635) |
|
| (240) |
|
| (411) |
|
| (8,128) |
Other income (expense) |
|
| (384) |
|
| 729 |
|
| — |
|
| — |
|
| 345 |
Loss before taxes |
| $ | (4,226) |
| $ | (2,906) |
| $ | (240) |
| $ | (411) |
| $ | (7,783) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months Ended | |||||||||||||
|
| September 30, 2018 | |||||||||||||
(thousands of dollars) |
| Corporate |
| Uranium |
| Lithium |
| Graphite |
| Total | |||||
Statement of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral property expenses |
| $ | — |
| $ | 2,204 |
| $ | 455 |
| $ | 47 |
| $ | 2,706 |
General and administrative |
|
| 3,676 |
|
| 1,383 |
|
| — |
|
| 378 |
|
| 5,437 |
Arbitration expenses |
|
| 225 |
|
| — |
|
| — |
|
| — |
|
| 225 |
Acquisition related expenses |
|
| 333 |
|
| — |
|
| — |
|
| — |
|
| 333 |
Accretion of asset retirement costs |
|
| — |
|
| 401 |
|
| — |
|
| — |
|
| 401 |
Depreciation and amortization |
|
| 3 |
|
| 90 |
|
| — |
|
| 1 |
|
| 94 |
Impairment of Uranium properties |
|
| — |
|
| 17,968 |
|
| — |
|
| — |
|
| 17,968 |
Loss from operations |
|
| (4,237) |
|
| (22,046) |
|
| (455) |
|
| (426) |
|
| (27,164) |
Other income |
|
| 8 |
|
| 144 |
|
| — |
|
| — |
|
| 152 |
Loss before taxes |
| $ | (4,229) |
| $ | (21,902) |
| $ | (455) |
| $ | (426) |
| $ | (27,012) |
24
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management’s discussion and analysis of the consolidated financial results and condition of WWRWestwater for the three and nine months ended September 30, 20172019 has been prepared based on information available to us as of November 9, 2017.6, 2019. This discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included herewith and the audited Consolidated Financial Statements of WWR for the period ended December 31, 20162018 and the related notes thereto filed with our Annual Report on Form 10-K,10‑K, which have been prepared in accordance with U.S. GAAP. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth elsewhere in this report. See “Cautionary Note Regarding Forward-Looking Statements.”
IntroductionINTRODUCTION
WWRWestwater is an energy metalsminerals exploration and energy-related materials development company. The Company’s battery materials projects include graphite and lithium mineral properties. We are focused on expandingestablished our energy metals strategy, which includes developing our lithiumgraphite business while maintaining optionality onin 2018 with the future rising uranium priceacquisition of Alabama Graphite and its Coosa Graphite Project along with our significant uranium property holdingsthe associated Coosa Graphite Mine located across 41,900 acres (17,000 ha) in the Republic of Turkey, Texas and New Mexico. Incorporated in 1977, WWR also owns an extensive information database of historic drill-hole logs, assay certificates, maps and technical reports for uranium properties located in the western United States.
east-central Alabama. We established our lithium business in 2016 and currently control mineral rights encompassing approximately 36,73036,920 acres (14,941 ha) across threetwo prospective lithium brine basins in Nevada and Utah. We are conducting exploration and geological evaluation of these properties in 2017 and 2018 for potential development of any lithium resources that may be discovered there.
The focus of our uranium business continues to beCompany maintains optionality on advancing the Temrezli in-situ recovery (“ISR”) uranium project in central Turkey whenfuture rising uranium prices permit economic development of this project. We control extensive exploration propertieswith significant uranium property holdings located in Turkey under eight explorationTexas and operating licenses covering approximately 39,000 acres.New Mexico. In Texas, we havethe Company has two licensed and currently idled uranium processing facilities and approximately 11,000 acres (4,400 ha) of prospective ISRin-situ recovery uranium projects. In New Mexico, the Company controls mineral rights encompassing approximately 186,000188,700 acres (76,394 ha) in the prolific Grants Mineral Belt, which is one of the largest concentrations of sandstone-hosted uranium deposits in the world. Incorporated in 1977 as Uranium Resources, Inc., WWR also owns an extensive uranium information database of historic drill hole logs, assay certificates, maps and technical reports for the western United States.
Recent DevelopmentsGraphite, Lithium and Uranium Listed as Critical Materials
ChangeA Presidential Executive Order on a Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals was issued on December 20, 2017, which we believe will accelerate important energy related mineral development in Corporate Namethe United States. In conjunction with Professional Paper 1802, published by the US Geological Service (“USGS”), where 23 minerals are identified as critical to the Country’s security and economy, WWR believes these actions are important steps in support of domestic minerals development. One of the important steps outlined in the Executive Order required a list of critical minerals to be provided by the US Secretary of the Interior. This list was provided and included all three of WWR’s contemplated portfolio products consisting of graphite, lithium and uranium. Graphite and lithium, in particular, are critical to the development of batteries and other energy storage systems essential to the electric vehicle, solar and wind power industries.
EffectiveSection 232 Investigation
The US Department of Commerce initiated a Section 232 investigation in July 2018 to determine whether the present quantity of uranium ore and product imports threaten to impair US national security. This trade investigation was initiated under Section 232 of the Trade Expansion Act after two US uranium producers petitioned the Department of Commerce in January 2018, seeking an order that US nuclear utilities be required to purchase 25% of their uranium from US domestic production. US uranium production has declined significantly since 1987, with domestic uranium producers experiencing a major slowdown in operations and employment.
On July 12, 2019, President Trump announced the completion of the Section 232 trade investigation. President Trump decided to take no trade action, which has allayed market uncertainty about whether a quota, tariff or other trade action would be imposed under the broad power delegated to the President under Section 232. Instead, President Trump
25
ordered a review of the domestic nuclear supply chain (uranium production, conversion, enrichment and fabrication) in the context of the 2017 White House initiative to revive, revitalize and expand the nuclear energy sector.
Although President Trump did not agree that uranium imports threaten to impair the national security of the United States, he acknowledged that the United States uranium industry faces significant challenges in producing uranium domestically and that this is an issue of national security. Accordingly, to address concerns regarding the production of domestic uranium and ensure a comprehensive review of the domestic nuclear supply chain, the President directed that a Nuclear Fuel Working Group be established. The Working Group will include the Secretary of State, Secretary of Energy and Secretary of Defense, among other key officials, and will develop recommendations for reviving and expanding domestic nuclear fuel production (that is, uranium, conversion, enrichment and fuel fabrication). The Working Group was given 90 days to submit a report to the President making recommendations to further enable domestic nuclear fuel production, which was extended by an additional 30 days on October 10, 2019 to November 10, 2019.
RECENT DEVELOPMENTS
Royalty and Promissory Note Sale
On March 5, 2019, Westwater entered into an agreement to sell four royalties on uranium properties located in South Dakota, Wyoming and New Mexico and a promissory note due in 2020 to Uranium Royalty Corp. for $2.75 million, including $0.5 million paid at signing. On June 28, 2019, Westwater and URC entered into an amendment to the agreement. The amendment extended the date for closing under the agreement to August 21, 2017,30, 2019. In addition, URC delivered an additional $1,000,000 as deposit to the Company changed its name from “Uranium Resources, Inc.”upon signing the amendment, increasing the total deposit to “Westwater Resources, Inc.”$1,500,000. The name change was made pursuant to Section 242transaction closed on August 30, 2019, on which date the Company transferred ownership of the Delaware General Corporation Lawroyalty interests and did not affectpromissory note to URC in exchange for the rightsfinal payment of the Company’s security holders.$1.25 million.
Lithium Business ExpansionEquity Financings
Purchase Agreement (“PA”) with Lincoln Park
On June 20, 2017, the Company acquired its third lithium exploration project, through the staking of 9,270 acres of federal placer mining claims within the Railroad Valley of central Nevada. The Railroad Valley project is located approximately 75 miles west of Ely, Nevada.
Columbus Basin Data Review and Exploration Drilling
On April 5, 2017, the Company announced that its independent geophysical consultant has completed the review, integration and reinterpretation of historical geophysical survey data acquired by the Company and covering its Columbus Basin lithium brine exploration project in Nevada. Among other things, the results of the work indicated that the depth of the Columbus Salt Marsh basin is greater than previously anticipated and identified certain targets for lithium brine exploration. In July 2017, the Company began a Phase-1 exploration drilling program at the Columbus Basin Project.
On October 31, 2017, The Company announced that it has completed the Phase 1 exploration project at this project and reported the following results:
•
Three core holes were completed for a total of 3,870 ft. of drilling.
o
The maximum drilled depth was 1,680 ft.
o
Fluids with high total dissolved solids (TDS) were identified in all three holes.
•
In-house laboratory work performed at its Kingsville, Texas facility returned lithium concentrations of up to 43 parts per million (ppm) and boron concentrations of up to 173 ppm.
Planning is underway for a Phase 2 exploration program at the Project. As part of the Phase 2 program, Westwater has filed a Notice of Intent to drill in the Nina claim block and is evaluating the Phase 1 results and the results of drilling by Caeneus Minerals Ltd.
Sal Rica Exploration Planning
A brine sampling program at the Sal Rica Project was designed and implemented to infill previous shallow aquifer sampling completed by Mesa Exploration Corp. in 2016. The resultant combination of the new Westwater data and the existing Mesa Exploration Corp. data now provide shallow aquifer lithium concentration data on variable 1 to 2 mile centers, depending on site accessibility, across the entirety of the 13,260 acre project area.
In addition to the recent groundwater sampling event, Westwater has also completed new geophysical interpretations of the Sal Rica Project area. This data is being integrated into a conceptual model of the exploration target, and will guide the ongoing planning of a drilling and hydrogeologic characterization program to further expand and define the shallow, lithium bearing, brine aquifer. So far this work has outlined a strong lithium brine anomaly that covers an area of over twenty (20) square miles, with lithium values up to 100 ppm, all at shallow depths.
Westwater has commenced the permitting process with the Bureau of Land Management (“BLM”), and the State of Utah, to field an exploration program that optimizes project access and limits environmental disturbance, minimizes cost, and maximizes overall data quality.
Option Agreement for Lithium Brine Claims
On March 24, 2017, the Company’s wholly owned subsidiary Lithium Holdings Nevada LLC entered into an option agreement to purchase a block of unpatented placer mining claims covering an area of approximately 3,000 acres within the Columbus Salt Marsh area of Esmeralda County, Nevada. The claims adjoin a portion of the Company’s current property holdings at its Columbus Basin Project, expanding the project area within the basin to approximately 14,200 acres. The Company has the right to conduct exploration activities on the claims during the one-year option period. Under the option agreement, the Company may acquire the mineral property claims on or before March 24, 2018 in exchange for 200,000 shares of WWR common stock and a 1% net smelter return royalty on the claims.
Retirement of the RCF Loan
On February 9, 2017, the Company paid $5.5 million in cash, plus accrued and unpaid interest, to RCF to retire all of the obligations remaining under the RCF Loan, and thereafter, the loan agreement itself terminated pursuant to its terms. In addition, on July 31, 2017, the Company and RCF terminated the Stockholders’ Agreement dated March 1, 2012, pursuant to which RCF had certain stock participation rights and Board rights.
Common Stock Purchase Agreement with Aspire Capital
On September 25, 2017,6, 2019, the Company entered into the CSPAPA with Aspire CapitalLincoln Park to place up to $22.0$10.0 million in the aggregate of the Company’s common stock on an ongoing basis when required by the Company over a term of 3024 months. The CompanyWestwater will control the timing and amount of any sales to Aspire Capital,Lincoln Park, and Lincoln Park is obligated to make purchases in accordance with the PA. Any common stock that is sold to Lincoln Park will occur at a purchase price that is based on an agreed upon fixed discount to the Company’s prevailing market prices at that time. As consideration for Aspire Capital entering into the time of each sale and with no upper limits to the price Lincoln Park may pay to purchase agreement,common stock. The PA may be terminated by Westwater at any time, in its sole discretion, without any additional cost or penalty.
The PA specifically provides that the Company issued 880,000may not issue or sell any shares of its common stock under the PA if such issuance or sale would breach any applicable rules of The Nasdaq Capital Market. In particular, Nasdaq Listing Rule 5635(d) provides that the Company may not issue or sell more than 19.99% of the shares of the Company’s common stock outstanding immediately prior to the execution of the PA without shareholder approval. On August 6, 2019 the Company conducted a Special Meeting of Shareholders whereby the Company received such approval to sell up to 3,200,000 shares of common stock under the PA.
Lincoln Park has no right to require the Company to sell any shares of common stock to Lincoln Park, but Lincoln Park is obligated to make purchases as the Company directs, subject to certain conditions. In all instances, the Company may not sell shares of its common stock to Aspire Capital. TheLincoln Park under the PA if it would result in Lincoln Park beneficially owning more than 9.99% of its common stock.
Following effectiveness of an S-1 registration statement relating to the resale of the shares of common stock subject to the CSPA were registered pursuantPA on June 18, 2019, the Company began selling shares of its common stock to Lincoln Park under the Company’s effective shelf registration statement on Form S-3.
On September 27, 2017, as a provisionterms of the CSPA and after satisfaction of certain commencement conditions, Aspire Capital made an initial purchase of 1,428,571PA. During the quarter ended September 30, 2019, the Company sold 466,784 shares of common stock for whichgross proceeds of $1.5 million. Inception-to-date through October 31, 2019, the Company received proceeds of $2.0 million. There were no other saleshas sold 1,234,534 shares of common stock pursuant to the CSPA and asfor gross
26
proceeds of $4.8 million. As of November 9, 2017, $20.0 million of the aggregate $22.0 million remained available for future sales under the CSPA.
Controlled Equity Offering Sales Agreement
On April 14, 2017,6, 2019, the Company entered into the ATM Offering with Cantor acting as sales agent. Under the ATM Offering, the Company may from time to time sellhas registered for resale by Lincoln Park of an additional 959,000 shares of its common stock having an aggregate offering amount up to $30.0 million in “at-the-market” offerings, which shares are registered under a registration statement on Form S-3,S-1 which waswill be declared effective on March 9, 2017. TheNovember 7, 2019.
Stock Purchase Agreement with Lincoln Park Capital Fund, LLC. (“Lincoln Park”)
On May 24, 2019, Westwater entered into a securities purchase agreement, as amended by Amendment No. 1 thereto dated as of May 30, 2019 (as so amended, the “Purchase Agreement”), with Lincoln Park, pursuant to which the Company pays Cantor a commission equalagreed to 2.5%issue and sell to Lincoln Park, and Lincoln Park agreed to purchase from the Company (i) 104,294 shares of the gross proceeds from the sale of any shares pursuant to the ATM Offering. As of November 9, 2017, the Company had sold 673,853 shares ofCompany’s common stock, for net proceeds of $1.1 million under the ATM Offering. As a result, the Company had approximately $28.9 million remaining available for future sales under the ATM Offering.
Other Offerings
On January 19, 2017, the Company raised $8.9 million in net proceeds through the registered sale of approximately 1.4 million shares of common stockpar value $0.001 per share and pre-funded(ii) warrants to initially purchase approximately 3.4 millionan aggregate of up to 182,515 shares of common stock, at $0.01an exercise price of $5.062 per share. Also,share, for an aggregate of $550,751. On May 30, 2019, the Company issued and sold the common shares and the warrants to Lincoln Park and received aggregate gross proceeds before expenses of $550,751. The warrants will become exercisable upon the six-month anniversary of the closing date and thereafter at any time during the five-year period following such date.
Vanadium Target Identification
In late November 2018, Westwater announced the discovery of significant levels of vanadium concentrations at several locales within the graphitic schists at the Company’s Coosa Project. Westwater subsequently commenced the first of a four-phase exploration program designed to determine the extent, character and quality of the vanadiummineralization at Coosa. As announced by the Company on February 16, 2017,19, 2019, the Company raised approximately $4.5 millionfirst phase demonstrated widespread positive values for vanadium that extended beyond the graphite resource defined in additional net proceeds through the registered sale2015 Preliminary Economic Assessment for the Coosa Project.
Reclamation Success in Texas
Westwater has completed wellfield plugging at the Vasquez Project and the Texas Commission on Environmental Quality has approved this phase of 2.1 million sharesreclamation. This paves the way for bond releases in 2019, including the release of common stock and pre-funded warrants to purchase approximately 0.7 million shares of common stock at $0.01 per share. All of the pre-funded warrants were subsequently exercised.
Closing of Sale of HRI
On January 5, 2017,a surety bond posted by the Company completed the sale of its wholly owned subsidiary HRI, which held the Company’s Crownpoint and Churchrock properties, to Laramide for $2.5 million in cash, common stock and warrants from Laramide valued at $0.5 million, and a three-year installment promissory note in the amount of $5.0 million.$208,657 as announced by the Company on March 4, 2019. Reclamation of the waste disposal well and its associated pond, as well as the remainder of the surface, is planned for completion in early 2020.
At the Rosita Project, also located in Texas, the wellfield Production Areas 1 & 2 are plugged, and surface reclamation in those areas is planned for completion in 2020.
Turkish Government Taking of Temrezli and Sefaatli Licenses and Westwater’s Arbitration Filing
In December 2018, Westwater filed a Request for Arbitration against the Republic of Turkey for its unlawful actions against the Company’s investments, most notably, the June 2018 illegal taking of its licenses for the Temrezli and Şefaatli uranium projects located in the Republic of Turkey, rendering both projects worthless. These two uranium projects were owned by Westwater’s wholly-owned, indirect Turkish subsidiary Adur Madencilik Limited Sirketi (“Adur”).
Since 2007, Adur has held the exclusive rights for the exploration and development of uranium at Temrezli and Şefaatli, two sites located around 200 kilometers from Ankara, which include the largest and highest-grade deposits of uranium known to be in Turkey. Through June 2018, Adur and its shareholders had invested substantially in these two projects, using their technical expertise and carrying out extensive drilling, testing and studies to move the projects towards production. Having successfully completed the exploration stage of the uranium mining process in 2013‑2014, Adur was granted a number of exploration and operating licenses by the Turkish government to develop the Temrezli mine. As a direct result of Adur’s efforts, Temrezli became the most advanced uranium project in Turkey and it was projected to be one of the lowest cost uranium mines in the world. Experts have estimated that the Temrezli mine will generate revenues of up to $644 million over its life, netting Westwater an estimated future return on its investment of $267 million as described in the Prefeasibility Study completed for the Temrezli project in 2015.Westwater acquired Adur in late 2015 for approximately $18 million in an all-stock acquisition of Adur’s parent company, Anatolia Energy Corp.
27
For many years, Adur and Westwater worked closely with the Turkish authorities and shared their technical expertise in uranium mining. However, Turkey’s most recent actions have undermined this longstanding relationship. In particular, in June 2018, the Turkish government cancelled all of Adur’s exploration and operating licenses with retroactive effect, rendering Westwater’s investment in Adur effectively worthless. While the Turkish authorities had variously issued, renewed and overseen these licenses for more than a decade, in June 2018 they asserted that those licensed were issued by mistake and that the Turkish government has a governmental monopoly over all uranium mining activities in Turkey, in violation of Westwater’s rights under both Turkish and international law. Westwater reached out on numerous occasions to the Turkish government to resolve this dispute amicably, to reinstate the licenses and to remedy Turkey’s unlawful actions, but to no avail.
As a result, on December 13, 2018 Westwater filed a Request for Arbitration against the Republic of Turkey before the International Center for the Settlement of Investment Disputes (“ICSID”) pursuant to the Treaty between the United States of America and the Republic of Turkey concerning the Reciprocal Encouragement and Protection of Investments. Additional information regarding the ICSID arbitration proceeding is presented in Part II, Item 1 below.
Reverse Stock Split
On April 22, 2019, following the close of trading, Westwater effected a one-for-fifty reverse split of its common shares. The consolidated common shares began trading on a split-adjusted basis on April 23, 2019. On April 18, 2019, at the Annual Meeting of Stockholders, the Company also retainedreceived approval for a 4% NSR Royaltycharter amendment permitting Westwater to effect a reverse split. The primary purpose of the reverse split was to bring Westwater into compliance with Nasdaq’s $1.00 minimum bid price requirement to maintain Westwater’s stock listing on the Churchrock project, which Laramide may purchase for $4.95 million duringNasdaq Capital Market.
The reverse split reduced the first year following the closingnumber of Westwater’s outstanding common stock from 74,707,659 shares to 1,494,153 shares of common stock. No fractional shares were issued as a result of the transaction. In addition,reverse stock split. Any fractional shares that would have resulted were settled in cash. All share data herein has been retroactively adjusted for the Company has an option to purchase Laramide’s La Sal project for $3.0 million and an option to purchase Laramide’s La Jara Mesa project in Cibola County, New Mexico for $5.0 million, both of which options expire in January 2018.reverse stock split.
Results of OperationsRESULTS OF OPERATIONS
Summary
Our consolidated net loss for the three months ended September 30, 20172019 was $3.0$1.8 million, or $0.12$0.95 per share, as compared with $3.7a consolidated net loss of $3.1 million, or $0.38$3.07 per share for the same period in 2016. For the three months ended September 30, 2017, the2018. The $1.3 million decrease in our consolidated net loss of $0.7 million from the respective prior period was mostlyprimarily the result of a decreasethe gain on disposal of uranium assets to URC in interest expenseAugust 2019 and the reversal of $0.7 million.$0.4 million in accrued executive bonuses.
Our consolidated net loss for the nine months ended September 30, 20172019 was $3.8$7.8 million, or $0.16$4.72 per share, as compared with $12.6a consolidated net loss of $27.0 million, or $1.81$33.98 per share for the same period in 2016. For the nine months ended September 30, 2017, the2018. The $19.2 million decrease in our consolidated net loss of $8.8 million from the respective prior period was primarily the result of athe impairment charge for the Temrezli and Sefaatli uranium mineral interests in 2018 of $18.0 million and the gain on the disposal of our Churchrock and Crownpoint projects of $4.9 million, a decreaseuranium assets to URC in interest expense of $2.2 million, a decrease in the impairment of uranium properties of $0.5 million, a decrease general administrative expenses of $1.1 million, a decrease in commitment fees of $0.3 million and a decrease of $0.1 million due to a loss on the sale of marketable securities in 2016. Offsetting these amounts was an increase in mineral property expenses2019 of $0.7 million.
28
Mineral Property Expenses
The following table details our mineral property expenses for the three and nine months ended September 30, 20172019 and 2016:
| For the Three Months Ended Sep 30, |
| For the Nine Months Ended Sep 30, | ||||
| 2017 |
| 2016 |
| 2017 |
| 2016 |
| (thousands of dollars) | ||||||
Restoration/Recovery expenses |
|
|
|
|
|
|
|
Rosita Project | $ 71 |
| $ 18 |
| $ 160 |
| $ 6 |
Total restoration/recovery expenses | 71 |
| 18 |
| 160 |
| 6 |
|
|
|
|
|
|
|
|
Standby care and maintenance expenses |
|
|
|
|
|
|
|
Kingsville Dome Project | 153 |
| 166 |
| 477 |
| 467 |
2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Three months Ended |
| For the Nine months Ended | ||||||||
|
| September 30, |
| September 30, | ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Restoration/Recovery expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Kingsville Dome project |
|
|
|
|
|
|
|
|
|
|
|
|
Rosita project |
| $ | 7 |
| $ | 131 |
| $ | — |
| $ | 297 |
Vasquez project |
|
| (8) |
|
| (51) |
|
| 69 |
|
| 50 |
Total restoration/recovery expenses |
|
| (1) |
|
| 80 |
|
| 69 |
|
| 347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Standby care and maintenance expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Kingsville Dome project |
|
| 158 |
|
| 181 |
|
| 444 |
|
| 495 |
Rosita project |
|
| 97 |
|
| 97 |
|
| 298 |
|
| 276 |
Vasquez project |
|
| 93 |
|
| 92 |
|
| 235 |
|
| 231 |
Temrezli project |
|
| — |
|
| 11 |
|
| — |
|
| 107 |
Total standby care and maintenance expenses |
|
| 348 |
|
| 381 |
|
| 977 |
|
| 1,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration and evaluation costs |
|
| 21 |
|
| 18 |
|
| 113 |
|
| 39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Land maintenance and holding costs |
|
| 483 |
|
| 476 |
|
| 1,150 |
|
| 1,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mineral property expenses |
| $ | 851 |
| $ | 955 |
| $ | 2,309 |
| $ | 2,706 |
For the three and nine months ended September 30, 2017,2019, mineral property expenses increaseddecreased by $0.3$0.1 million and $0.7$0.4 million respectively, from the corresponding periods during 2016.2018. For both of the three month period, exploration costs increasedcomparative periods, the decreases were primarily due to a reduction in reclamation activities at the Vasquez and Rosita Projects due to adverse weather conditions in the first half of 2019 and a reduction in operating activities at the Temrezli Project due to the revocation of the mining licenses by $0.3 million, which was partially offset by a decreasethe government of Turkey in land and maintenance costs of $0.1 million. For the nine month period, exploration costs increased by $0.5 million, Rosita restoration costs increased by $0.2 million and land and maintenance costs increased by $0.3 million, and Temrezli standby costs decreased by $0.3 million.September 2018.
General and Administrative Expenses
Significant expenditures for general and administrative expenses for the three and nine months ended September 30, 20172019 and 20162018 were:
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| For the Three Months Ended Sep 30, |
| For the Nine Months Ended Sep 30, |
| For the Three months ended |
| For the Nine months ended |
| ||||||||||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
| September 30, |
| September 30, |
| ||||||||
|
| (thousands of dollars) |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||||
|
|
|
|
|
|
|
|
|
| (thousands of dollars) |
| ||||||||||
Stock compensation expense |
| $ 24 |
| $ 75 |
| $ 62 |
| $ 545 |
| $ | 239 |
| $ | 146 |
| $ | 255 |
| $ | 308 |
|
Salaries and payroll burden |
| 614 |
| 846 |
| 1,796 |
| 2,144 |
|
| 197 |
|
| 689 |
|
| 1,619 |
|
| 2,065 |
|
Legal, accounting, public company expenses | Legal, accounting, public company expenses | 718 |
| 648 |
| 2,251 |
| 2,266 |
|
| 635 |
|
| 545 |
|
| 2,105 |
|
| 1,816 |
|
Insurance and bank fees |
| 149 |
| 127 |
| 370 |
| 405 |
|
| 171 |
|
| 121 |
|
| 355 |
|
| 398 |
|
Consulting and professional services |
| 21 |
| 28 |
| 44 |
| 190 |
|
| 1 |
|
| 28 |
|
| 52 |
|
| 218 |
|
Office expenses |
| 148 |
| 126 |
| 364 |
| 392 |
|
| 107 |
|
| 102 |
|
| 235 |
|
| 338 |
|
Sales and Marketing |
|
| 6 |
|
| 53 |
|
| 17 |
|
| 178 |
| ||||||||
Other expenses |
| 26 |
| 33 |
| 89 |
| 93 |
|
| 3 |
|
| 21 |
|
| 126 |
|
| 116 |
|
Total |
| $ 1,700 |
| $ 1,883 |
| $ 4,976 |
| $ 6,035 |
| $ | 1,359 |
| $ | 1,705 |
| $ | 4,764 |
| $ | 5,437 |
|
For the three months ended September 30, 2017,2019, general and administrative charges decreased by $0.2$0.3 million as compared with the corresponding period in 2016. This2018. The decrease was primarily due to the reversal of executive bonus
29
accruals of $0.4 million, offset by an increase in legal, accounting and public company expenses due to financing activities and costs related to the special shareholder meeting held in August 2019.
For the nine months ended September 30, 2019, general and administrative charges decreased by $0.7 million compared with the corresponding period in 2018. The decrease was primarily due to the reversal of executive bonus accruals of $0.4 million, a decrease in consulting expenses of $0.2 million and sales and marketing expenses of $0.2 million, primarily related to the Alabama Graphite activities in 2018, and a decrease of $0.1 million in office expenses. These decreases in salaries expense and stock compensation expense of $0.3 million, which was partiallywere offset by an increase in legal, accounting and public company expenses of $0.1 million.$0.3 million due to financing activities, Nasdaq compliance activities, shareholder meeting costs for meetings held in April 2019 and August 2019.
Other Income and Expenses
For the three months ended September 30, 2019 the $1.0 million increase in other income compared to the three months ended September 30, 2018 was primarily due to the $0.7 million gain on sale of uranium assets to URC in August 2019, combined with the $0.4 million loss recorded in 2018 from sale of marketable securities.
For the nine months ended September 30, 2017, general and administrative charges decreased by $1.12019, the $0.2 million asincrease in other income compared withto the corresponding period in 2016. This decreasenine months ended September 30, 2018 was once again primarily due to decreasesthe $0.7 million gain on sale of uranium assets to URC in stock compensation expense and salaries and payroll burden of $0.8 million and consulting and professional services of $0.1 million.
Other Income and Expenses
Loss on Sale of Marketable Securities
On February 22, 2016, we received proceedsAugust 2019, offset by an increase of $0.2 million in loss recorded from the sale of our 76,455 shares of Energy Fuels Inc. common stock that we received as partial consideration for the sale of our Roca Honda assets during 2015. We recordedmarketable securities and a loss of $0.1 million as the difference between the fair value on the date we received the shares of $0.3 million and the proceeds received of $0.2 million.
Gain on Disposal of Uranium Properties
On January 5, 2017, we completed the sale of our wholly-owned subsidiary HRI, which holds the Churchrock and Crownpoint projects, to Laramide pursuant to the Laramide SPA. Under the terms of the Laramide SPA, executed on April 7, 2016 and amended on December 5, 2016, we received the following consideration:
•
$2.5 milliondecrease in cash, of which $0.25 million was paid on October 21, 2016;
•
2,218,333 shares of Laramide common stock and 2,218,333 Laramide common stock purchase warrants. Each common stock purchase warrant entitles the Company to purchase one share of common stock of Laramide at a price of CDN$0.45 for a period of 60 months from the date of closing;
•
a $5.0 million promissory note, secured by a mortgage over the projects. The note has a three-year term and carries an initial interest rate of 5% which then increases to 10% upon Laramide’s decision regarding commercial production at the Churchrock project. Principal payments of $1.5 million are due and payable on January 5 in each of 2018 and 2019, with the balance of $2.0 million due and payable on January 5, 2020. Interest is payable on a quarterly basis, provided however that no interest will be payable until March 31, 2018. Laramide will have the right to satisfy up to half of each of these payments by delivering shares of its common stock to the Company, which shares will be valued by reference to the VWAP for Laramide’s common stock for the 20 trading days before the respective anniversary of January 5, on which each payment is due;
•
a retained 4.0% NSR Royalty on the Churchrock project, which royalty may be repurchased by Laramide by January 5, 2018 for $4.95 million; and
•
an option to purchase Laramide’s La Sal project for $3.0 million and an option to purchase its La Jara Mesa project for $5.0 million, both of which expire on January 5, 2018. Any such exercise by the Company will first result in a reduction of the principal amount due under the promissory note with any remaining portions of the purchase to be paid in cash by the Company.
The divestiture of HRI was accounted for as an asset disposal and the non-cash consideration received from Laramide was recorded at fair value. The fair value of the shares of Laramide common stock received was determined using the closing share price of Laramide’s stock on January 5, 2017. The fair value of the common stock purchase warrants was determined using the Black-Scholes method on April 27, 2017, which was the date that Laramide’s stockholders approved the issuance of the warrants. The fair value of the notes receivable was determined using the present value of the future cash receipts discounted at a market rate of 9.5%. We did not record a separate fair value for the options as the exercise of the options would reduce the amount outstanding under the notes receivable. Due to the high degree of uncertainties surrounding future mine development and minerals prices, as well as limited marketability, the Company determined the fair value of the NSR Royalty to be nil. We recorded the following gain on disposal of uranium properties within our Condensed Consolidated Statement of Operations:
| ||
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Loss on Extinguishment of Convertible Debt
On February 9, 2017, we repaid $5.5 million outstanding under the RCF Loan. Upon repayment, we recognized a loss of $39,000, which represented the difference between the $5.5 million principal amount and the carrying value of the RCF Loan on the date of repayment.
Interest Income/(Expense)
Interest income of $0.2 million for the three months ended September 30, 2017 consisted of accrued interest receivable of $0.1 milliondue to a lower principal balance outstanding on the Laramide Notes and amortization of $0.1 million on the discount on the Laramide Notes.promissory note in 2019.
Interest income of $0.4FINANCIAL POSITION
Operating Activities
Net cash used in operating activities was $7.2 million for the nine months ended September 30, 2017 consisted of accrued interest receivable of $0.2 million on the Laramide Notes and amortization of $0.4 million on the discount on the Laramide Notes. These amounts were partially offset by interest expense of $0.2 million associated2019, as compared with the RCF Loan prior to repayment.
Interest expense of $0.7$9.0 million for the three months ended September 30, 2016 consistedsame period in 2018. The $1.8 million decrease in cash used was primarily due to a decrease of interest$1.0 million of $0.2mineral property expenses, general and administrative expenses and acquisition related costs in 2019 and an increase in cash from working capital items of $1.0 million, payable to RCF, and amortizationcomprised of the debt discountan increase in cash from working capital items of $0.5 million.million in 2019 in contrast to a decrease in working capital items of $0.5 million in 2018.
Investing Activities
Interest expense of $2.2Net cash provided by investing activities was $3.8 million for the nine months ended September 30, 2016 consisted2019, as compared with $0.4 million of interest of $0.7 million payable to RCF, amortization of the debt discount of $1.4 million and amortization of the establishment fee of $0.1 million.
Commitment Fees
Commitment fees expense of $0.3 millioncash provided by investing activities for the nine-monthsnine months ended September 30, 2016 was2018. For the result2019 period, the Company received note payments on the Laramide note in the amount of $0.8 million in cash. Additionally, the issuanceCompany received net proceeds of 75,000 shares$0.5 million from the sale of our common stockLaramide securities and $2.5 million in net proceeds from the sale of uranium assets to Aspire CapitalURC in August 2019. For the 2018 period, the Company received a note payment on February 4, 2016 as considerationthe Laramide note in the amount of $1.1 million in cash. Additionally, the Company received net proceeds of $0.8 million from the sale of Laramide securities. These increases were partially offset by cash used for Aspire Capital entering into an option agreement with us. The shares had a fair valuenote advances to Alabama Graphite of $4.44 per share.$1.5 million.
Financial Position
OperatingFinancing Activities
Net cash used in operatingprovided by financing activities was $8.9$2.6 million for the nine months ended September 30, 2017, as compared with $9.8 million for the same period in 2016. The decrease of $0.9 million in cash used is mostly due to a decrease in interest expense of $0.3 million, an increase in interest income of $0.4 million and an aggregated decrease in operating expenses of $0.3 million.
Investing Activities
Net cash provided by investing activities was $1.9 million for the nine months ended September 30, 2017, as compared with $0.3 million for the same period in 2016. For the 2017 period, we received $2.0 million, net of expenses,2019 from the saleproceeds of our wholly-owned subsidiary, HRIsales of common stock through the Company’s Cantor ATM Offering agreement, to Laramide which closed on January 5, 2017. ForLincoln Park pursuant to the 2016 period, we received $0.2 million fromStock Purchase Agreement and to Lincoln Park under the sale of short-term investments.Purchase Agreement.
Financing Activities
Net cash provided by financing activities was $10.9 million for the nine months ended September 30, 2017. For the nine months ended September 30, 2017,2018, net cash provided by financing activities was $5.9 million. During 2018, the Company received net cash proceeds of $15.4$1.3 million, were received upon equity financings completed in January, February$2.9 million and September 2017, respectively. Additionally, $1.0$1.7 million was received from the sale of common stock sold through the Company’s ATM Offering. This increase was offset by the repayment of $5.5 million outstanding under the RCF Loan.
Net cash provided by financing activities was $12.5 million for the nine months ended September 30, 2016. For the nine months ended September 30, 2016, net cash proceeds of $0.8 million and $1.2 million were received upon equity financings completed on February 4, 2016 and April 4, 2016, respectively. $4.7 million in net proceeds were received from the sale of common stock to Aspire Capital under the terms of the 2016 Common Stock Purchase Agreement with Aspire Capital, LLC (“Aspire”), a registered direct offering to Aspire and $5.8 millionthe Cantor ATM Offering agreement, respectively.
30
LIQUIDITY AND CAPITAL RESOURCES
The interim Condensed Consolidated Financial Statements of the Company have been prepared on a “going concern” basis, which means that the continuation of the Company is presumed even though events and conditions exist that, when considered in net proceeds were received from the sale of common stock sold throughaggregate, raise substantial doubt about the Company’s prior ATM programability to continue as a going concern because it is possible that the Company will be required to adversely change its current business plan or may be unable to meet its obligations as they become due within one year after the date that these financial statements were issued.
The Company last recorded revenues from operations in 2009 and expects to continue to incur losses as a result of costs and expenses related to maintaining its properties and general and administrative expenses. Since 2009, the Company has relied on equity financings, debt financings and asset sales to fund its operations and the Company expects to rely on these forms of financing to fund its operations into the near future. The Company will also continue to identify ways to reduce its cash expenditures.
The Company’s current business plan requires working capital to fund non-discretionary expenditures for uranium reclamation activities, mineral property holding costs, business development costs and administrative costs. The Company intends to pursue project financing to support execution of the graphite business plan, including discretionary capital expenditures associated with BTIG.
Liquiditygraphite battery-material product development, construction of pilot plant facilities and Capital Resourcesconstruction of commercial production facilities. The Company’s current lithium business plan will be funded by working capital; however, the Company is pursuing project financing including possible joint venture partners to fund discretionary greenfield exploration activities.
At September 30, 2017,2019 the Company had working capital of $8.2Company’s cash balances were $0.7 million which along with the anticipated funding from the financing agreements described below is expected to provide it with the necessary liquidity through September 30, 2018. At December 31, 2016,and the Company had a working capital deficit balance of $4.2$2.6 million. The increase in working capital of $12.4 million for the nine months ended September 30, 2017 was primarily dueCompany’s cash balance at October 31, 2019 is $2.3 million. Subsequent to the following:
•
the completion of three equity offerings in January 2017, February 2017 and September 2017 for net proceeds of $8.9 million, $4.5 million and $2.0 million respectively, as further described under “Recent Developments”;
•
the completion of the sale of the Company’s wholly-owned subsidiary HRI to Laramide on January 5, 2017. Upon completion,October 31, 2019, the Company received $2.2 million in cash, a $5.0 million promissory note, of which $1.5 million is due in January 2018, 2,218,333 shares of Laramide’s common stock which had a fair value of $0.5 million at September 30, 2017 and 2,218,333 common stock purchase warrants which had a fair value of $0.3 million at September 30, 2017. Details regarding this transaction are discussed in Note 3 to the accompanying condensed consolidated financial statements; and
•
the repayment of the $5.5 million outstanding balance under the RCF Loan (defined in Note 7 to the accompanying condensed consolidated financial statements.)
Also during the nine months ending September 30, 2017, the Company entered into the following financing agreements and anticipates funding from these sources to sustain operations through 2018:
•
Controlled Equity Offering Sales Agreement
On April 14, 2017, the Company entered into the ATM Offering with Cantor acting as sales agent, pursuant to which the Company has registered the offer and sale from time to time of shares of its common stock having an aggregate offering price of up to $30.0 million of which approximately $28.9 million is available for future sales as of November 9, 2017. The Company is unable to sell shares of its common stock through the ATM Offering on dates that it places shares with Aspire Capital through its CSPA, as discussed below.
•
Common Stock Purchase Agreement
On September 25, 2017, the Company entered into a CSPA with Aspire Capital to place up to $22.0 million in the aggregate of its common stock over a term of 30 months. Upon execution of the CSPA, the Company issued 880,000 shares of common stock to Aspire Capital as a commitment fee. The Company cannot sell in excess of 5,033,677 shares of common stock, the Exchange Cap, including the 880,000 commitment shares, unless (i) stockholder approval is obtained, or (ii) the average price paid for all shares issued under the CSPA (including the 880,000 commitment shares) is equal to or greater than $1.38. As of November 9, 2017, the Company has dollar capacity of $20.0 million of common stock available for future sales, limited to the current Exchange Cap of 2.7 million shares of common stock unless conditions (i) or (ii) above are met. See Note 9 to the accompanying condensed consolidated financial statements for further details.
The Company believes that the ATM Offering and the CSPA, along with its existing working capital balance, will provide it with the necessary liquidityexpects to fund operations through 2018. The Company will also continue to explore additional opportunities to raise capital, further monetize its non-core assets and identify ways to reduce its cash expenditures.as follows:
· | The Stock Purchase Agreement with Lincoln Park Capital, LLC. whereby the Company may place up to $10.0 million in the aggregate of the Company's common stock on an ongoing basis when required by the Company over a term of 24-months ending in June 2021. The Company currently has $5.2 million remaining sales capacity, subject to the registration of shares on Form S-1. As of November 5, 2019, the Company has registered for resale by Lincoln Park an additional 959,000 shares on Form S-1. |
· | The Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co. which currently has $23.8 million remaining sales capacity, subject to the registration of shares on Form S-3. The Company is currently eligible to, and intends to, register the sale of additional shares under the agreement on Form S-3 pursuant to the SEC's shelf registration rules. |
· | Other debt and equity financings and asset sales. |
While the Company has been successful in the past in raising funds through equity and debt financings as well as through the sale of non-core assets, no assurance can be given that additional financing will be available to it in amounts sufficient to meet the Company’sits needs, or on terms acceptable to the Company. In the event that we are unable to raise sufficient additional funds, are not available, the Companywe may be required to materially changedelay, reduce or severely curtail our operations or otherwise impede our on-going business efforts, which could have a material adverse effect on our business, operating results, financial condition, long-term prospects and ability to continue as a viable business. Considering all of the factors above, the Company believes there is substantial doubt regarding its business plans.ability to continue as a going concern.
Off- Balance Sheet ArrangementsOFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
With the exception of historical matters, the matters discussed in this report are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from projections or estimates contained herein. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, without limitation, statements regarding the adequacy of funding, liquidity, the timing or occurrence of any future drilling or production from the Company’s properties, the timing or establishment of lithium resources, the ability of the Company to acquire additional properties or partner with other companies, the realization of expected benefits from recent business combinations and the Company’s anticipated cash burn rate and capital requirements. Words such as “may,” “could,” “should,” “would,” “believe,” “estimate,” “expect,” “anticipate,” “plan,” “forecast,” “potential,” “intend,” “continue,” “project” and variations of these words, comparable words and similar expressions generally indicate forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or implied by these forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements include, among others:
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the availability of capital to WWR;
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the spot price and long-term contract price of uranium and lithium;
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risks associated with our foreign operations;
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the ability of WWR to enter into and successfully close acquisitions, dispositions or other material transactions;
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government regulation of the mining industry and the nuclear power industry in the United States and the Republic of Turkey;
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operating conditions at our mining projects;
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the world-wide supply and demand of uranium and lithium;
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weather conditions;
· | the availability of capital to WWR; |
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unanticipated geological, processing, regulatory and legal or other problems we may encounter;
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currently pending or new litigation; and
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our ability to maintain and timely receive mining and other permits from regulatory agencies.
· | the spot price and long-term contract price of graphite, vanadium, lithium and uranium; |
· | the ability of WWR to enter into and successfully close acquisitions, dispositions or other material transactions; |
· | government regulation of the mining industry and the nuclear power industry in the United States; |
· | operating conditions at our mining projects; |
· | the world-wide supply and demand of graphite, vanadium, lithium and uranium; |
· | weather conditions; |
· | unanticipated geological, processing, regulatory and legal or other problems we may encounter; |
· | the results of our exploration activities, and the possibility that future exploration results may be materially less promising than initial exploration result; |
· | any graphite, vanadium, lithium or uranium discoveries not being in high enough concentration to make it economic to extract the metals; |
· | currently pending or new litigation or arbitration; and |
· | our ability to maintain and timely receive mining and other permits from regulatory agencies. |
as well as other factors described elsewhere in this Quarterly Report on Form 10-Q,10‑Q, our 20162018 Annual Report on Form 10-K10‑K and the other reports we file with the SEC. Most of these factors are beyond our ability to predict or control. Future events and actual results could differ materially from those set forth herein, contemplated by or underlying the forward-looking statements. Forward-looking statements speak only as of the date on which they are made. We disclaim any obligation to update any forward-looking statements made herein, except as required by law.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide this information in our Quarterly Reports.
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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its filings with the Securities and Exchange Commission (“SEC”) is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management has recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply judgment in evaluating the Company’s controls and procedures.
During the fiscal period covered by this report, the Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e)13a‑15(e) and 15d-15(e)15d‑15(e) of the Securities Exchange Act of 1934, as amended). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2017.2019.
Changes in Internal Controls
During the three months ended September 30, 2017,There were no changes have been made in our internal control over financial reporting during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
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Information regarding reportable legal proceedings is contained in Part I, Item 3.,3, “Legal Proceedings,” in our Annual Report on Form 10-K10‑K for the year ended December 31, 2016. The following disclosure updates2018. There have been no material changes to the legal proceedingproceedings previously disclosed in the Annual Report on Form 10‑K, other than as set forth underbelow.
Arbitration Against Turkey
On December 13, 2018, Westwater filed a Request for Arbitration against the headings “Dispute Over Kleberg Settlement Agreement” and “TCEQ Adjudicatory ProceedingRepublic of Turkey before the International Centre for the Kingsville Facility”Settlement of Investment Disputes (“ICSID”), pursuant to the Treaty between the United States of America and the Republic of Turkey concerning the Reciprocal Encouragement and Protection of Investments. The Request for Arbitration was filed as a result of the Republic of Turkey’s unlawful actions against the Company’s licenses for the Temrezli and Sefaatli uranium projects owned by Westwater’s Turkish subsidiary Adur Madencilik Limited Sirketi (“Adur”). Specifically, in June 2018, the Turkish government cancelled all of Adur’s exploration and operating licenses with retroactive effect, rendering Westwater’s investment in Adur effectively worthless. While the Turkish authorities had variously issued, renewed and overseen these licenses for more than a decade, in June 2018 they asserted that those licenses were issued by mistake and that the Turkish government has a governmental monopoly over all uranium mining activities in Turkey, in violation of Westwater’s rights under both Turkish and international law. Westwater reached out on numerous occasions to the Turkish government to resolve this dispute amicably, to reinstate the licenses and to remedy Turkey’s unlawful actions, but to no avail.
As a result, on December 13, 2018, Westwater filed before ICSID its arbitration request against the Republic of Turkey. On December 21, 2018, ICSID registered Westwater’s Request for Arbitration. On May 1, 2019, the three-member ICSID Panel for the arbitration was established – one of the panel members was selected by Westwater, another was selected by Turkey, and the third panel member (serving as the Chair) was selected by the two party-appointed arbitrators. On September 9, 2019, the ICSID Panel issued Procedural Order #1, which places the locale for the proceeding in Washington, DC, and sets January 27, 2020 as the date for Westwater to file its Memorial, which is a document that sets out Westwater’s case. The ICSID Panel sets March 9, 2020 as the date for Turkey to move to bifurcate the proceeding (into legal and factual issues), or alternatively sets June 15, 2020 as the date for Turkey to file its counter-Memorial. Additional dates were established in the 2016 Form 10-KOrder that depend upon whether or not Turkey moves to reflect developments duringbifurcate the nine months ended September 30, 2017proceeding and should be read together withwhether or not the corresponding disclosure in the 2016 Form 10-K.
Dispute Over Kleberg Settlement Agreement
Following the submittal of all the briefs by both parties, on June 23, 2017, the Texas Supreme Court granted the Petition for Review. On October 12, 2017 the Texas Supreme Court held an oral argument. The Company has no indication as to when or how the Texas Supreme Court will ruleICSID Panel grants that request. A hearing on the matter.
TCEQ Adjudicatory Proceedingmerits is scheduled for May 17-21, 2021 if Turkey does not request bifurcation. If Turkey requests bifurcation and that request is denied by the Kingsville Facility
On April 12, 2017,Panel, then the TCEQ heldhearing on the merits is scheduled for September 13-17, 2021. If Turkey requests bifurcation and that request is granted by the Panel, then a hearing and grantedon the request of URI, Inc., a wholly-owned subsidiary of the Company, to withdraw the permit application without prejudice, and ordered URI, Inc. to pay Kleberg County $15,716 and to pay another named individual $967. URI, Inc. has made those payments and the matterbifurcation issues is fully resolved.scheduled for March 15-17, 2021.
Other than as set forth below, thereThere have been no material changes from those risk factors set forth in our Annualyearly Report on Form 10-K10‑K for the year ended December 31, 2016.
Our foreign operations subject us to a number of significant regulatory, legal and political risks that may have a material adverse impact on our prospects, projects, financial condition and results of operations.
Our acquisition of Anatolia Energy significantly increased the importance of foreign operations to our future prospects and growth, and our foreign operations expose us to a number of risks. These risks include such things as:
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enforcement of unfamiliar or uncertain foreign real estate, mineral tenure, contract, water use, mine safety and environmental laws and policies;
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challenges to mining, processing and related permits and licenses, or to applications for permits and licenses,2018, which are incorporated herein by or on behalf of regulatory authorities, indigenous populations, non-governmental organizations or other third parties;reference.
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war, crime, terrorism, sabotage, civil unrest and uncertain political and economic environments;
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deterioration in relations between the United States and the foreign jurisdictions in which we operate;
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renegotiation, nullification or forced modification of existing contracts, licenses, permits, approvals, concessions or the like;
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corruption;
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challenges in overseeing employees and contractors, including the risk that our employees and independent contractors may engage in unauthorized or illegal activity;
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exchange and currency controls and fluctuations;
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limitations on foreign exchange and repatriation of earnings;
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restrictions on mineral production and price controls;
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seizure of mineral production and expropriation or nationalization of property;
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changes in legislation, including changes related to taxation, new or increased mining royalty interests, import and export regulations, foreign ownership, foreign trade and foreign investment;
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high rates of inflation; and
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labor practices and disputes.
For example, during October 2017, the United States and the Republic of Turkey each suspended all non-immigrant visa services for travel between the two countries following the arrest of U.S. consular staff in Turkey. The uncertainty surrounding the political and economic relationship between the United States and Turkey and the suspension of non-immigrant visas between the two countries could adversely affect our ability to operate in Turkey.
In addition, we face the numerous risks as a new acquirer that our expectations may not be realized and that we may encounter unexpected problems. We continue to review Anatolia Energy’s operations in Turkey, including compliance with local laws and applicable permitting requirements. In the event we determine material noncompliance, we could face fines or restrictions on our ability to develop our projects in Turkey, which could have a material adverse effect on our prospects, projects, financial condition and results of operations.
Further, regulatory, permitting and business arrangements in foreign jurisdictions are subject to extensive laws and regulations intended to prevent improper payments, fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of business arrangements that are commonplace in such foreign jurisdictions, and violations of such laws and regulations could result in regulatory sanctions and serious harm to our reputation. We have adopted a code of business conduct and ethics, but it is not always possible to identify and deter misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSPROCEEDS.
None.
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Exhibit Index
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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