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
March 31, 2020
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)
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, |
| December 31, | ||
|
| Notes |
| 2020 |
| 2019 | ||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| 1 |
| $ | 877 |
| $ | 1,870 |
Prepaid and other current assets |
|
|
|
| 843 |
|
| 491 |
Total Current Assets |
|
|
|
| 1,720 |
|
| 2,361 |
|
|
|
|
|
|
|
|
|
Property, plant and equipment, at cost: |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
| 91,701 |
|
| 91,746 |
Less accumulated depreciation and depletion |
|
|
|
| (71,377) |
|
| (71,409) |
Net property, plant and equipment |
| 6 |
|
| 20,324 |
|
| 20,337 |
Operating lease right-of-use assets |
| 13 |
|
| 454 |
|
| 484 |
Restricted cash |
| 1,5 |
|
| 3,806 |
|
| 3,797 |
Total Assets |
|
|
| $ | 26,304 |
| $ | 26,979 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
| $ | 1,486 |
| $ | 852 |
Accrued liabilities |
|
|
|
| 1,227 |
|
| 1,770 |
Asset retirement obligations - current |
| 8 |
|
| 1,090 |
|
| 894 |
Operating lease liability - current |
| 13 |
|
| 153 |
|
| 153 |
Total Current Liabilities |
|
|
|
| 3,956 |
|
| 3,669 |
|
|
|
|
|
|
|
|
|
Asset retirement obligations, net of current |
| 8 |
|
| 5,290 |
|
| 5,406 |
Other long-term liabilities |
|
|
|
| 500 |
|
| 500 |
Operating lease liability, net of current |
| 13 |
|
| 310 |
|
| 340 |
Total Liabilities |
|
|
|
| 10,056 |
|
| 9,915 |
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
| 12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity: |
|
|
|
|
|
|
|
|
Common stock, 100,000,000 shares authorized, $.001 par value; |
|
|
|
|
|
|
|
|
Issued shares – 4,762,794 and 3,339,541 respectively |
|
|
|
|
|
|
|
|
Outstanding shares - 4,762,633 and 3,339,380 respectively |
| 9 |
|
| 5 |
|
| 3 |
Paid-in capital |
| 9,10 |
|
| 322,227 |
|
| 319,758 |
Accumulated deficit |
|
|
|
| (305,726) |
|
| (302,439) |
Less: Treasury stock (161 and 161 shares, respectively), at cost |
|
|
|
| (258) |
|
| (258) |
Total Stockholders’ Equity |
|
|
|
| 16,248 |
|
| 17,064 |
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity |
|
|
| $ | 26,304 |
| $ | 26,979 |
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 |
|
| ||||
|
|
|
| March 31, |
|
| ||||
|
| Notes |
| 2020 |
| 2019 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
Mineral property expenses |
| 7 |
| $ | (728) |
| $ | (634) |
|
|
General and administrative expenses |
|
|
|
| (1,779) |
|
| (1,705) |
|
|
Arbitration costs |
|
|
|
| (669) |
|
| (131) |
|
|
Accretion of asset retirement obligations |
| 8 |
|
| (106) |
|
| (126) |
|
|
Depreciation and amortization |
|
|
|
| (13) |
|
| (23) |
|
|
Total operating expenses |
|
|
|
| (3,295) |
|
| (2,619) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Operating Income/(Expenses): |
|
|
|
|
|
|
|
|
|
|
Loss on sale of marketable securities |
| 3,5 |
|
| — |
|
| (720) |
|
|
Interest income |
| 3 |
|
| — |
|
| 166 |
|
|
Other income (expense) |
|
|
|
| 8 |
|
| (1) |
|
|
Total other income (expense) |
|
|
|
| 8 |
|
| (555) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
|
| $ | (3,287) |
| $ | (3,174) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|
Transfer to realized loss upon sale of available-for-sale securities |
|
|
|
| — |
|
| 90 |
|
|
Comprehensive Loss |
|
|
| $ | (3,287) |
| $ | (3,084) |
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED LOSS PER SHARE |
|
|
| $ | (0.82) |
| $ | (2.15) |
|
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |
|
|
|
| 4,004,948 |
|
| 1,478,233 |
|
|
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 Three Months Ended March 31, | ||||
|
| Notes |
| 2020 |
| 2019 | ||
Operating Activities: |
|
|
|
|
|
|
|
|
Net loss |
|
|
| $ | (3,287) |
| $ | (3,174) |
Reconciliation of net loss to cash used in operations: |
|
|
|
|
|
|
|
|
Non-cash lease expense |
|
|
|
| — |
|
| 5 |
Accretion of asset retirement obligations |
| 8 |
|
| 106 |
|
| 126 |
Costs incurred for restoration and reclamation activities |
| 8 |
|
| (26) |
|
| (335) |
Amortization of note receivable discount |
| 3 |
|
| — |
|
| (123) |
Depreciation and amortization |
|
|
|
| 13 |
|
| 23 |
Stock compensation expense |
| 10 |
|
| — |
|
| 8 |
Loss on sale of marketable securities |
| 3 |
|
| — |
|
| 720 |
Increase in prepaids and other assets |
|
|
|
| (352) |
|
| (32) |
Increase in payables and accrued liabilities |
|
|
|
| 91 |
|
| 42 |
Net Cash Used In Operating Activities |
|
|
|
| (3,455) |
|
| (2,740) |
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities |
|
|
|
|
|
|
|
|
Proceeds from disposal of uranium assets, net |
| 4 |
|
| — |
|
| 500 |
Proceeds from the sale of securities, net |
| 3 |
|
| — |
|
| 536 |
Proceeds from note receivable |
| 3 |
|
| — |
|
| 750 |
Net Cash Provided By Investing Activities |
|
|
|
| — |
|
| 1,786 |
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
Issuance of common stock, net |
| 9 |
|
| 2,471 |
|
| 415 |
Payment of minimum withholding taxes on net share settlements of equity awards |
|
|
|
| — |
|
| (1) |
Net Cash Provided By Financing Activities |
|
|
|
| 2,471 |
|
| 414 |
|
|
|
|
|
|
|
|
|
Net decrease in cash, cash equivalents and restricted cash |
|
|
|
| (984) |
|
| (540) |
Cash, Cash Equivalents and Restricted Cash, Beginning of Period |
|
|
|
| 5,667 |
|
| 5,309 |
Cash, Cash Equivalents and Restricted Cash, End of Period |
|
|
| $ | 4,683 |
| $ | 4,769 |
Cash Paid During the Period for: |
|
|
|
|
|
|
|
|
Interest |
|
|
| $ | 1 |
| $ | 1 |
Supplemental Non-Cash Information with Respect to Investing and Financing Activities: |
|
|
|
|
|
|
|
|
Securities received for payment of notes receivable – Laramide |
|
|
|
| — |
|
| 750 |
Total Non-Cash Investing and Financing Activities for the Period |
|
|
| $ | — |
| $ | 750 |
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 |
|
|
| |||||||
|
| Shares |
| Amount |
| Capital |
| Income (Loss) |
| Deficit |
| Stock |
| Total | ||||||
Balances, December 31, 2019 |
| 3,339,541 |
| $ | 3 |
| $ | 319,758 |
| $ | - |
| $ | (302,439) |
| $ | (258) |
| $ | 17,064 |
Net loss |
| — |
|
| — |
|
| — |
|
| — |
|
| (3,287) |
|
| — |
|
| (3,287) |
Common stock and common stock purchase warrants issued, net of issuance costs |
| 1,422,742 |
|
| 2 |
|
| 2,469 |
|
| — |
|
| — |
|
| — |
|
| 2,471 |
Stock compensation expense and related share issuances, net of shares withheld for payment of taxes |
| 511 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Balances, March 31, 2020 |
| 4,762,794 |
| $ | 5 |
| $ | 322,227 |
| $ | - |
| $ | (305,726) |
| $ | (258) |
| $ | 16,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2018 |
| 1,436,555 |
| $ | 1 |
| $ | 313,012 |
| $ | (90) |
| $ | (291,874) |
| $ | (258) |
| $ | 20,791 |
Net loss |
| — |
|
| — |
|
| — |
|
| — |
|
| (3,174) |
|
| — |
|
| (3,174) |
Common stock issued, net of issuance costs |
| 57,205 |
|
| — |
|
| 416 |
|
| — |
|
| — |
|
| — |
|
| 416 |
Stock compensation expense and related share issuances, net of shares withheld for payment of taxes |
| 393 |
|
| — |
|
| 8 |
|
| — |
|
| — |
|
| — |
|
| 8 |
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, March 31, 2019 |
| 1,494,153 |
| $ | 1 |
| $ | 313,435 |
| $ | - |
| $ | (295,048) |
| $ | (258) |
| $ | 18,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
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 20162019 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, 2017March 31, 2020 are not necessarily indicative of the results that may be expected for any other period including the full year ending December 31, 2017.2020.
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, 2019.
Recently IssuedAdopted Accounting Pronouncements
In January 2017,August 2018, the FASB issued Accounting Standards Update No. 2017-01 (ASU 2017-01), Business Combinations: ClarifyingASU 2018‑13, “Fair Value Measurement (ASC 820): Disclosure Framework – Changes to the Definition of a Business, which clarifiesDisclosure Requirements for Fair Value Measurement”. This update modifies the definition of a business when determining whether a company has acquireddisclosure requirements for fair value measurements by removing, modifying or sold a business. The ASU applies to all entities and is effective for annual periods ending after December 15, 2017, and interim periods thereafter, with early adoption permitted under certain circumstances.adding disclosures. The Company does not believe that theadopted this pronouncement effective January 1, 2020. The adoption of this guidance will haveASU 2018-13 has not had a material impact on ourthe Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements
In NovemberDecember 2019, the FASB issued ASU 2019-12, “Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740)” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 will be effective for interim and annual periods beginning after December 15, 2020.
In June 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. ASU 2016-13 will be effective for interim and annual periods beginning after January 1, 2023.
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 Subtopic 326‑20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842, Leases. ASU 2018-19 will be effective for interim and annual periods beginning after January 1, 2023.
7
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The Company is currently evaluating ASU 2016‑13, ASU 2018‑19 and ASU 2019-12 for the potential impact of adopting this guidance on its financial reporting.
Cash, Flows:Cash Equivalents and Restricted Cash which will require that
The following table provides a statement of cash flows explain the change during period in the totalreconciliation 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 equivalents should be included with cash and cash equivalents when reconcilingreported within the beginning-of-period and end-of-periodconsolidated balance sheet that sum to the total of the same such amounts shown onin the statement of cash flows.
|
|
|
|
|
|
|
|
| As of March 31, | ||||
(thousands of dollars) |
| 2020 |
| 2019 | ||
Cash and cash equivalents |
| $ | 877 |
| $ | 1,019 |
Restricted cash - pledged deposits for performance bonds |
|
| 3,806 |
|
| 3,750 |
Cash, cash equivalents and restricted cash shown in the statement of cash flows |
| $ | 4,683 |
| $ | 4,769 |
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 ASU appliesbonds are collateralized performance bonds required for future restoration and reclamation obligations related to all entitiesthe Company’s South Texas production properties.
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 effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years beginning after December 15, 2019, with early adoption permitted. As a result, upon adoption,possible that the Company will includebe 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 restricted cash amountdate 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 beginning-of-periodproperties 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 ingeneral and administrative expenses. Since 2009, the Company including an additional $4.0 million inhas relied on equity financings, debt financings and asset sales to fund its beginning-of-period cash balanceoperations and an additional $3.7 million inthe Company expects to rely on these forms of financing to fund its end-of-period cash balance.operations into the near future. The Company will also would not have recorded a releasecontinue 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 restricted cashthe graphite business plan, including discretionary capital expenditures associated with graphite battery-material product development, construction of $0.3 million in the investing sectionpilot plant facilities and construction of its statement of cash flows.
2. LIQUIDITY
At September 30, 2017,commercial production facilities. The Company’s current lithium business plan will be funded by working capital; however, the Company had working capital of $8.2is pursuing project financing including possible joint venture partners to fund discretionary greenfield exploration activities.
At March 31, 2020 the Company’s cash balances were $0.9 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$2.2 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 May 8, 2020 is $0.5 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,May 8, 2020, the Company received $2.2 million in cash, a $5.0 million promissory note,expects to fund operations as follows:
· | The new Stock Purchase Agreement with Lincoln Park Capital, LLC., approved by the Company’s shareholders at the annual shareholders meeting on April 28, 2020, whereby the Company may place up to $12.0 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 after execution of the agreement. |
8
•
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)
· | The Controlled Equity Offering Sales Agreement (the “ATM Offering Agreement”) with Cantor Fitzgerald & Co. The Company currently has registered the offer and sale from time to time of shares of its common stock having an aggregate offering price of up to $3.1 million. As of May 8, 2020, $2.8 million registered shares are available for future sales under the ATM Offering Agreement. |
· | The loan proceeds in the amount of $0.3 million received from the Paycheck Protection Program (“PPP”) by URI, Inc., a wholly owned subsidiary of WWR, on May 4, 2020. See Note 15. The Company plans to use the proceeds from this loan for payroll and benefits costs for its South Texas operations, which are eligible expenses in accordance with the PPP. Under the terms of the promissory note executed by URI, principal and accrued interest are forgivable after eight weeks as long as the proceeds are used for eligible purposes. Any unforgiven portion of the loan is payable over two years at an interest rate of 1% with a deferral of payments for the first six months. |
· | Other debt and equity financings and asset sales. |
•
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 liquidity 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.
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. Stock price volatility and uncertain economic conditions caused by the recent Covid-19 pandemic could significantly impact the Company’s ability to raise funds through equity financing. 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 RESOURCES, INC.NOTES RECEIVABLE
On January 5, 2017, Laramide andNote Receivable
As part of the Company closedconsideration 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 hashad a three-year term and carriescarried 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 was due and payable on January 5, 2020. Interest iswas 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 4). Prior to August 30, 2019, the Company had received three tranches of Laramide common shares as partial consideration for the options assale, which had 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 notes receivable. Due toissuance of 1,982,483 of Laramide’s common shares. The second note installment in the high degreeamount of uncertainties surrounding$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 year ending December 31, 2019.
9
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
On March 25, 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.
4. 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 mine developmenturanium production from mineral properties located in South Dakota, Wyoming and minerals prices,New Mexico, as well as limited marketability,the remaining amount of the Laramide promissory note in the amount of $2.0 million as discussed in Note 3 above, for $2.75 million, including $0.5 million paid at signing. On June 28, 2019, Westwater and URC entered into an Amendment to the Asset Purchase 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 determinedupon signing the fair valueAmendment. The transaction closed on August 30, 2019 at which time the Company transferred ownership of the NSR Royalty to be nil. The following fair value amounts were recorded asroyalties and promissory note in exchange for the purchase consideration:final payment of $1.25 million.
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
The fair valuesale of the shares of Laramide’s common stock and common stock purchase warrants received were valued using Level 1 inputs of the fair value hierarchy and the fair value of the notes receivablethese 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:Operations for the year ended December 31, 2019:
| ||
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
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.
5. 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.
10
WESTWATER RESOURCES, INC.
(formerly Uranium Resources, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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, 2017March 31, 2020 and December 31, 20162019 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, 2020 | ||||||||||
(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 |
| $ | 3,806 |
| $ | — |
|
| — |
| $ | 3,806 |
Total non-current assets recorded at fair value |
| $ | 3,806 |
| $ | — |
| $ | — |
| $ | 3,806 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 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 |
| $ | 3,797 |
| $ | — |
|
| — |
| $ | 3,797 |
Total non-current assets recorded at fair value |
| $ | 3,797 |
| $ | — |
| $ | — |
| $ | 3,797 |
Assets that are measured on a recurring basis include the Company’s marketable securities and restricted cash.
6. PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Book Value of Property, Plant and Equipment at March 31, 2020 | ||||||||||||||||
(thousands of dollars) |
| Turkey |
| Texas |
| Alabama |
| New Mexico |
| Corporate |
| Total | ||||||
Uranium plant |
| $ | — |
| $ | 3,112 |
| $ | — |
| $ | — |
| $ | — |
| $ | 3,112 |
Mineral rights and properties |
|
| — |
|
| — |
|
| 8,972 |
|
| 7,806 |
|
| — |
|
| 16,778 |
Other property, plant and equipment |
|
| 5 |
|
| 326 |
|
| — |
|
| — |
|
| 103 |
|
| 434 |
Total |
| $ | 5 |
| $ | 3,438 |
| $ | 8,972 |
| $ | 7,806 |
| $ | 103 |
| $ | 20,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Book Value of Property, Plant and Equipment at December 31, 2019 | ||||||||||||||||
(thousands of dollars) |
| Turkey |
| Texas |
| Alabama |
| New Mexico |
| Corporate |
| Total | ||||||
Uranium plant |
| $ | — |
| $ | 3,112 |
| $ | — |
| $ | — |
| $ | — |
| $ | 3,112 |
Mineral rights and properties |
|
| — |
|
| — |
|
| 8,972 |
|
| 7,806 |
|
| — |
|
| 16,778 |
Other property, plant and equipment |
|
| 6 |
|
| 327 |
|
| — |
|
| — |
|
| 114 |
|
| 447 |
Total |
| $ | 6 |
| $ | 3,439 |
| $ | 8,972 |
| $ | 7,806 |
| $ | 114 |
| $ | 20,337 |
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. For the three months ended March 31, 2020 no events or changes in circumstance, including any affects from the COVID-19 pandemic, are believed to have impacted recoverability of the Company’s long-lived assets. Accordingly, it was determined that no interim impairment was necessary.
11
WESTWATER RESOURCES, INC.
(formerly Uranium Resources, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
6.7. MINERAL PROPERTY EXPENDITURES
Mineral property expenditures by geographical location for the three and nine months ended September 30, 2017March 31, 2020 and 2016are2019 are as follows:
|
|
|
|
|
|
| ||||||||||
|
| For the Three Months Ended Sep 30, |
| For the Nine Months Ended Sep 30, |
| For the Three Months Ended March 31, |
| |||||||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
| 2020 |
| 2019 |
| |||
|
| (thousands of dollars) |
| (thousands of dollars) |
| |||||||||||
Temrezli project, Turkey |
| $ 63 |
| $ 31 |
| $ 186 |
| $ 453 | ||||||||
Total Turkey projects |
| 63 |
| 31 |
| 186 |
| 453 | ||||||||
|
|
|
|
|
|
|
|
| ||||||||
Kingsville Dome project, Texas |
| 197 |
| 214 |
| 616 |
| 624 |
| $ | 265 |
| $ | 244 |
| |
Rosita project, Texas |
| 188 |
| 130 |
| 472 |
| 290 |
|
| 91 |
|
| 117 |
| |
Vasquez project, Texas |
| 117 |
| 105 |
| 399 |
| 365 |
|
| 240 |
|
| 186 |
| |
Other projects, Texas |
| 26 |
| 11 |
| 30 |
| 80 | ||||||||
Total Texas projects |
| 528 |
| 460 |
| 1,517 |
| 1,359 |
|
| 596 |
|
| 547 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cebolleta project, New Mexico |
| - |
| - |
| 538 |
| 537 | ||||||||
Juan Tafoya project, New Mexico |
| 38 |
| 37 |
| 354 |
| 48 |
|
| 6 |
|
| 6 |
| |
Other projects, New Mexico |
| - |
| 32 |
| 2 |
| 32 | ||||||||
Total New Mexico projects |
| 38 |
| 69 |
| 894 |
| 617 |
|
| 6 |
|
| 6 |
| |
|
|
|
|
|
|
|
|
| ||||||||
Columbus Basin project, Nevada |
| 481 |
| 113 |
| 667 |
| 113 | ||||||||
Railroad Valley project, Nevada |
| 80 |
| - |
| 238 |
| - | ||||||||
Other projects, Nevada |
| 8 |
| 14 |
| 11 |
| 14 | ||||||||
Total Nevada projects |
| 569 |
| 127 |
| 916 |
| 127 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Sal Rica project, Utah |
| 118 |
| 352 |
| 124 |
| 352 |
|
| — |
|
| 1 |
| |
Total Utah projects |
| 118 |
| 352 |
| 124 |
| 352 |
|
| — |
|
| 1 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Coosa project, Alabama |
|
| 126 |
|
| 80 |
| |||||||||
Total Alabama projects |
|
| 126 |
|
| 80 |
| |||||||||
|
|
|
|
|
|
|
| |||||||||
Total expense for the period |
| $ 1,316 |
| 1,039 |
| $ 3,637 |
| $ 2,908 |
| $ | 728 |
| $ | 634 |
|
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. ASSET RETIREMENT OBLIGATIONS
The following table summarizes the changes in the reserve for future restoration and reclamation costs on the balance sheet:
|
|
|
|
|
|
|
|
| March 31, |
| December 31, | ||
(thousands of dollars) |
| 2020 |
| 2019 | ||
Balance, beginning of period |
| $ | 6,300 |
| $ | 6,203 |
Liabilities settled |
|
| (26) |
|
| (293) |
Accretion expense |
|
| 106 |
|
| 390 |
Balance, end of period |
|
| 6,380 |
|
| 6,300 |
Less: Current portion |
|
| (1,090) |
|
| (894) |
Non-current portion |
| $ | 5,290 |
| $ | 5,406 |
The Company is currently performing plugging and surface reclamation activities at its Kingsville Dome, Rosita projectand Vasquez projects located in Kleberg and Duval County,Counties in Texas. The Company’s current liability of $0.1$1.1 million consists of the estimated costs associated with current surface reclamation activities through September 2018March 2021 at the Company’s Kingsville Dome, Rosita project. and Vasquez projects.
9. COMMON STOCK
Common Stock Issued, Net
12
Table of Issuance CostsContents
Confidentially Marketed Public Offering
On January 19, 2017, the Company completed a registered public offering for net proceeds of $8.9 million. The Company sold 1,399,140 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 of the pre-funded warrants have been exercised.
Registered Direct Offering
On February 16, 2017, the Company completed a registered direct offering for net proceeds of $4.5 million with Aspire Capital whereby Aspire Capital purchased 2,100,000 shares of common stock at a price of $1.58 and 748,101 pre-funded common stock purchase warrants at a price of $1.57. The warrants have an exercise price of $0.01 per share and a term of three years. All of the pre-funded warrants have been exercised.
WESTWATER RESOURCES, INC.
(formerly Uranium Resources, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
9. COMMON STOCK
Common Stock Issued, Net of Issuance Costs
Controlled Equity Offering SalesPurchase Agreement (“PA”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”)
On April 14, 2017,June 6, 2019, the Company entered into the ATM OfferingPA 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, which shares are registered under a registration statement on Form S-3, which was declared effective on March 9, 2017. The Company pays Cantor a commission equal to 2.5% 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 of 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.
Common Stock Purchase Agreement with Aspire Capital
On September 25, 2017, the Company entered into the CSPA 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. The sharesLincoln Park under the PA if it would result in Lincoln Park beneficially owning more than 9.99% of its common stock subject to the CSPA were registered pursuant to the Company’s effective shelfstock.
Following effectiveness of a registration statement on Form S-3.
S-1 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. On September 27, 2017, pursuant to11, 2019, October 28, 2019 and February 28, 2020 we filed subsequent registration statements on Form S-1, which were declared effective on September 20, 2019, November 7, 2019 and March 6, 2020, respectively, registering for resale additional shares under the CSPA and after satisfaction of certain commencement conditions, Aspire Capital made an initial purchase of 1,428,571PA. Inception-to-date through March 31, 2020, the Company has sold 2,576,764 shares of common stock for gross proceeds of $7.1 million. In April 2020, the Company sold the remaining 623,236 registered shares of common stock for gross proceeds of $0.6 million.
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 "Securities Purchase Agreement"), with Lincoln Park, pursuant to which the Company received proceedsagreed to issue and sell to Lincoln Park, and Lincoln Park agreed to purchase from the Company (i) 104,294 shares of $2.0 million. There were no other salesthe Company's common stock and (ii) warrants to initially purchase an aggregate of up to 182,515 shares of common stock, at an exercise price of $5.062 per share. 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 became exercisable on November 30, 2019 and may be exercised at any time thereafter until November 30, 2024.
Controlled Equity Offering Sales Agreement with Cantor Fitzgerald (“Cantor”)
On April 14, 2017, the Company entered into the "ATM Offering Agreement” with Cantor acting as sales agent. Under the ATM Offering Agreement, the Company may from time to time sell shares of its common stock in “at-the-market” offerings and $3.1 million of which shares were registered for sale under a registration statement on Form S‑3, which was declared effective on April 13, 2020. The Company pays Cantor a commission of up to 2.5% of the gross proceeds from the sale of any shares pursuant to the CSPA and asATM Offering Agreement. As of November 9, 2017, $20.0March 31, 2020, the Company had
13
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
sold 1,029,197 shares of common stock for net proceeds of $7.2 million of the aggregate $22.0 million remained available for future sales under the CSPA.ATM Offering Agreement, of which 540,512 shares of common stock and net proceeds of $1.1 million was sold in the three months ended March 31, 2020.
Common Stock IssuedWarrants
The following table summarizes warrants outstanding and changes for Investor Relations Feesthe three-month periods ending March 31, 2020 and 2019:
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.
|
|
|
|
|
|
| March 31, 2020 |
| March 31, 2019 |
|
|
|
|
|
|
| Number of |
| Number of |
|
| Warrants |
| Warrants |
Warrants outstanding at beginning of period |
| 197,622 |
| 15,107 |
Issued |
| — |
| — |
Expired |
| — |
| — |
Warrants outstanding at end of period |
| 197,622 |
| 15,107 |
10. 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, April 18, 2019 and April 28, 2020, 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, 66,000 and to350,000 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, 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 416,278 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 561,232March 31, 2020, 45,886 shares were available for future issuances under the 2013 Plan.
For the three months ending September 30, 2017 and 2016,March 31, 2019 the Company recorded stock-based compensation expense of $24,279 and $75,495, respectively. For the nine months ending September 30, 2017 and 2016, the Company recorded$7,719. No stock-based compensation expense of $62,356 and $545,166, respectively. Stock-basedwas recorded for the three months ending March 31, 2020. Stock 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 LimitedAlabama Graphite in November 2015,April 2018, the Company issued 374,74950,168 replacement options and performance shareswarrants to the option and warrant holders and performance shareholders of Anatolia Energy Limited.Alabama Graphite. The number of replacement options and performancewarrants shares was based upondetermined using the Black-Scholes value with thearrangement exchange rate of 0.0016. The exercise prices for the option and warrant shares were first converted for the exchange rate of the replacement options0.0016 and performance shares determinedthen converted to USD using the exchange rate on December 13, 2017 of 0.00548.0.77809 (CAD to USD). The options and performancewarrant shares were issued with the same terms and conditions as were applicable prior to the acquisition of Anatolia Energy Limited.Alabama Graphite. As of September 30, 2017, 98,646March 31, 2020, there were 3,312 replacement options remainand 11,440 replacement warrants outstanding.
14
WESTWATER RESOURCES, INC.
(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, 2017March 31, 2020 and 2016:2019:
|
| 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 |
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, 2020 |
| March 31, 2019 | ||||||
|
|
|
| Weighted |
|
|
| Weighted | ||
|
| Number of |
| Average |
| Number of |
| Average | ||
|
| Stock |
| Exercise |
| Stock |
| Exercise | ||
|
| Options |
| Price |
| Options |
| Price | ||
Stock options outstanding at beginning of period |
| 37,786 |
| $ | 37.42 |
| 19,170 |
| $ | 79.78 |
Granted |
| — |
|
| — |
| — |
|
| — |
Expired |
| (1,217) |
|
| 75.95 |
| (280) |
|
| 179.68 |
Canceled or forfeited |
| — |
|
| — |
| — |
|
| — |
Stock options outstanding at end of period |
| 36,569 |
| $ | 36.14 |
| 18,890 |
| $ | 78.21 |
Stock options exercisable at end of period |
| 36,569 |
| $ | 36.14 |
| 18,890 |
| $ | 78.21 |
The following table summarizes stock options outstanding and exercisable by stock option plan at September 30, 2017:March 31, 2020:
|
| 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-Alabama Graphite |
| 3,312 |
|
| 83.88 |
| 3,312 |
|
| 83.88 |
|
| 36,569 |
| $ | 36.14 |
| 36,569 |
| $ | 36.14 |
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.
The following table summarizes RSU activity for the nine-monththree-month periods ended September 30, 2017March 31, 2020 and 2016:2019:
|
| 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 |
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, |
| March 31, | ||||||
|
| 2020 |
| 2019 | ||||||
|
|
|
| Weighted- |
|
|
| Weighted- | ||
|
|
|
| Average |
|
|
| Average | ||
|
| Number of |
| Grant Date |
| Number of |
| Grant Date | ||
|
| RSUs |
| Fair Value |
| RSUs |
| Fair Value | ||
Unvested RSUs at beginning of period |
| — |
| $ | — |
| 2,260 |
| $ | 70.00 |
Granted |
| — |
|
| — |
| — |
|
| — |
Forfeited |
| — |
|
| — |
| (565) |
|
| 70.00 |
Vested |
| — |
|
| — |
| — |
|
| — |
Unvested RSUs at end of period |
| — |
| $ | — |
| 1,695 |
| $ | 70.00 |
15
WESTWATER RESOURCES, INC.
(formerly Uranium Resources, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
11. 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 750,698234,191 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.March 31, 2020.
12. 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.
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.
13. LEASES
The Company’s lease portfolio consists of operating leases for corporate offices, storage space and equipment. The leases have remaining lease terms of 1 to 3.5 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. In addition, the Company holds numerous leases related to mineral exploration and production to which it has not applied the new leasing standard. Leases to explore or use minerals and similar nonregenerative resources are specifically excluded by ASC 842-10.
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 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.
16
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The components of lease expense are as follows:
|
|
|
|
|
|
|
|
| Three months |
| Three months | ||
|
| ended |
| ended | ||
|
|
| March 31, |
|
| March 31, |
(thousands of dollars) |
| 2020 |
| 2019 | ||
Operating lease cost |
| $ | 40 |
| $ | 40 |
Supplemental cash flow information related to the Company’s operating leases is as follows:
|
|
|
|
|
|
|
|
| Three months |
| Three months | ||
|
| ended |
| ended | ||
(thousands of dollars) |
| March 31, 2020 |
| March 31, 2019 | ||
Cash paid for amounts included in lease liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
| $ | 39 |
| $ | 39 |
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for lease obligations: |
|
|
|
|
|
|
Operating leases |
| $ | 454 |
| $ | 569 |
Supplemental balance sheet information related to the Company’s operating leases is as follows:
|
|
|
|
|
|
|
|
| March 31, |
| December 31, | ||
(thousands of dollars, except lease term and discount rate) |
| 2020 |
| 2019 | ||
Operating Leases |
|
|
|
|
|
|
Operating lease right-of-use assets |
| $ | 454 |
| $ | 484 |
|
|
|
|
|
|
|
Current portion of lease liabilities |
| $ | 153 |
| $ | 153 |
Operating lease liabilities – long term portion |
|
| 310 |
|
| 340 |
Total operating lease liabilities |
| $ | 463 |
| $ | 493 |
Weighted-average remaining lease term and discount rate for the Company’s operating leases are as follows:
|
|
|
|
|
|
|
|
|
|
| March 31, |
| March 31, | ||
|
|
| 2020 |
| 2019 | ||
Weighted Average Remaining Lease Term (in years) |
|
| 3.5 |
|
| 4.4 |
|
|
|
|
|
|
|
|
|
Discount Rate |
|
| 9.5 | % |
| 9.5 | % |
17
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Maturities of lease liabilities for the Company’s operating leases are as follows:
|
|
|
|
|
| March 31, | |
Lease payments by year (In thousands) |
| 2020 | |
2020 (remainder of year ) |
| $ | 120 |
2021 |
|
| 161 |
2022 |
|
| 162 |
2023 |
|
| 93 |
Total lease payments |
|
| 536 |
Less imputed interest |
|
| (73) |
Total |
| $ | 463 |
As of March 31, 2020, 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 $0.5 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 $0.5 million.
14. 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 explores, evaluates and, if warranted, develops uranium, lithium and graphite properties. The Company’s long-term assets were $24.6 million as of both March 31, 2020 and December 31, 2019. 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-three months ended March 31, 2020 and nine-month periodsMarch 31, 2019.
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 the total consolidated revenue, earnings or losses or assets are reportable segments. Information about current assets and 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 March 31, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, 2020 | |||||||||||||
(thousands of dollars) |
| Corporate |
| Uranium |
| Lithium |
| Graphite |
| Total | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment |
| $ | 103 |
| $ | 11,249 |
| $ | — |
| $ | 8,972 |
| $ | 20,324 |
Restricted cash |
|
| — |
|
| 3,796 |
|
| — |
|
| 10 |
|
| 3,806 |
Operating lease right of use assets |
|
| 435 |
|
| 19 |
|
| — |
|
| — |
|
| 454 |
Total long-term assets |
| $ | 538 |
| $ | 15,064 |
| $ | — |
| $ | 8,982 |
| $ | 24,584 |
18
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2019 | |||||||||||||
(thousands of dollars) |
| Corporate |
| Uranium |
| Lithium |
| Graphite |
| Total | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment |
| $ | 114 |
| $ | 11,251 |
| $ | — |
| $ | 8,972 |
| $ | 20,337 |
Restricted cash |
|
| — |
|
| 3,787 |
|
| — |
|
| 10 |
|
| 3,797 |
Operating lease right of use assets |
|
| 463 |
|
| 21 |
|
| — |
|
| — |
|
| 484 |
Total long-term assets |
| $ | 577 |
| $ | 15,059 |
| $ | — |
| $ | 8,982 |
| $ | 24,618 |
The table below provides a breakdown of the reportable segments for the three months ended September 30, 2017March 31, 2020 and 2016. Geographic locationMarch 31, 2019. Non-mining activities and other administrative operations are reported in the Corporate column.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months Ended | |||||||||||||
|
| March 31, 2020 | |||||||||||||
(thousands of dollars) |
| Corporate |
| Uranium |
| Lithium |
| Graphite |
| Total | |||||
Statement of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral property expenses |
| $ | — |
| $ | 602 |
| $ | — |
| $ | 126 |
| $ | 728 |
General and administrative expenses |
|
| 1,189 |
|
| 426 |
|
| — |
|
| 164 |
|
| 1,779 |
Arbitration expenses |
|
| 669 |
|
| — |
|
| — |
|
| — |
|
| 669 |
Accretion of asset retirement costs |
|
| — |
|
| 106 |
|
| — |
|
| — |
|
| 106 |
Depreciation and amortization |
|
| 12 |
|
| 1 |
|
| — |
|
| — |
|
| 13 |
|
|
| 1,870 |
|
| 1,135 |
|
| — |
|
| 290 |
|
| 3,295 |
Loss from operations |
|
| (1,870) |
|
| (1,135) |
|
| — |
|
| (290) |
|
| (3,295) |
Other income |
|
| — |
|
| 8 |
|
| — |
|
| — |
|
| 8 |
Loss before taxes |
| $ | (1,870) |
| $ | (1,127) |
| $ | — |
| $ | (290) |
| $ | (3,287) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months Ended | |||||||||||||
|
| March 31, 2019 | |||||||||||||
(thousands of dollars) |
| Corporate |
| Uranium |
| Lithium |
| Graphite |
| Total | |||||
Statement of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral property expenses |
| $ | — |
| $ | 553 |
| $ | 1 |
| $ | 80 |
| $ | 634 |
General and administrative |
|
| 1,148 |
|
| 392 |
|
| — |
|
| 165 |
|
| 1,705 |
Arbitration expenses |
|
| 131 |
|
| — |
|
| — |
|
| — |
|
| 131 |
Accretion of asset retirement costs |
|
| — |
|
| 126 |
|
| — |
|
| — |
|
| 126 |
Depreciation and amortization |
|
| 1 |
|
| 22 |
|
| — |
|
| — |
|
| 23 |
|
|
| 1,280 |
|
| 1,093 |
|
| 1 |
|
| 245 |
|
| 2,619 |
Loss from operations |
|
| (1,280) |
|
| (1,093) |
|
| (1) |
|
| (245) |
|
| (2,619) |
Other expense |
|
| (555) |
|
| — |
|
| — |
|
| — |
|
| (555) |
Loss before taxes |
| $ | (1,835) |
| $ | (1,093) |
| $ | (1) |
| $ | (245) |
| $ | (3,174) |
19
15. SUBSEQUENT EVENTS
Loan under the Paycheck Protection Program
On May 4, 2020, URI, Inc, a wholly owned subsidiary of Westwater, received loan proceeds in the amount of $0.3 million under the Paycheck Protection Program (“PPP”) in accordance with the terms of a promissory note executed in favor of Celtic Bank Corporation, a Salt Lake City based Small Business Administration Preferred Lender. The PPP, established as part of the Coronavirus Aid, Relief and equipment,Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loan and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including mineral rights,payroll costs, rent and mineral property expenses,utilities. No more than 25% of the amount forgiven can be attributable to non-payroll costs. Any unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months, making the first payment of principal and interest due on November 11, 2020.
The Company intends to use the proceeds for funding its payroll and benefits costs for the restart of South Texas operations, purposes consistent with the PPP. The Company’s South Texas operations were shut down and employees furloughed in March 2020 due to the uncertain economic conditions that had significantly impacted the capital markets. While the Company currently believes that its use of the loan proceeds will meet the conditions for forgiveness of the loan, no assurance can be provided that the Company will obtain forgiveness of the Loan, in Notes 5 and 6, above.whole or in part.
20
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, 2017March 31, 2020 has been prepared based on information available to us as of November 9, 2017.May 13, 2020. 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, 20162019 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 Resources, Inc. is ana 40-year-old public company trading on the Nasdaq Capital Market (“Nasdaq”) under the symbol “WWR.” Originally incorporated in 1977 as Uranium Resources, Inc. to mine uranium in Texas, our company has been reborn as a diversified energy metalsmaterials developer. Westwater now has a presence in uranium, lithium exploration, and battery-ready graphite materials after its acquisition of Alabama Graphite Corp. (“Alabama Graphite”) in April 2018. In addition, Westwater recently discovered significant vanadium concentrations at the Coosa Graphite Project (the “Coosa Project”) in Alabama and has an exploration plan available to further investigate the size and extent of those concentrations.
Westwater holds battery-ready graphite development company. We are focused on expanding our energy metals strategy, which includes developing ourproperties in Alabama, exploration properties with lithium business while maintaining optionality on the future risingexploration potential in Nevada and Utah, two idled uranium price with our significantproduction properties in Texas and several uranium property holdingsproperties in the Republic of Turkey, Texas and New Mexico. IncorporatedWestwater ceased uranium production in 1977, WWR also owns an extensive information database2009 due to reductions in the price of historic drill-hole logs, assay certificates, maps and technical reports foruranium, although Westwater’s uranium properties locatedand facilities in Texas can be restarted once the price of uranium recovers to acceptable levels.
Graphite, Lithium and Uranium Listed as Critical Materials
A 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 result in important energy related mineral development in the western United States.
We established our 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 businessand uranium. Graphite and lithium, in 2016 and currently control mineral rights encompassing approximately 36,730 acres across three prospective lithium brine basins in Nevada and Utah. Weparticular, are conducting exploration and geological evaluation of these properties in 2017 and 2018 for potentialcritical to the development of any lithium resourcesbatteries and other energy storage systems essential to the electric vehicle, solar and wind power industries.
Section 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
21
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.
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 (“NFWG”) be established. The NFWG includes the Secretary of State, Secretary of Energy and Secretary of Defense, among other key officials.
On April 23, 2020, the U.S. Department of Energy (“DOE”) announced the NFWG’s strategy to revive the U.S. uranium industry in a report entitled “Strategy to Restore American Nuclear Energy Leadership.” The most important recommendations in the report for the uranium mining sector are:
· | U.S. purchases of 17-19 million pounds of U3O8 for a strategic uranium reserve, beginning in 2020 from domestic producers using a competitive bidding process. |
· | DOE will end the uranium bartering program and reevaluate DOE’s Excess Uranium Inventory Management Policy. |
· | Streamline regulatory reform and land access for uranium extraction. |
· | Support Department of Commerce efforts to extend the Russian Suspension Agreement to protect against future uranium dumping in the U.S. market. |
· | Enable the Nuclear Regulatory Commission to deny imports of nuclear fuel fabricated in Russia or China for national security purposes. |
· | Fund advanced water treatment technology for uranium mining and in-situ recovery. |
· | Increase efficiencies in the export processes and the adoption of 123 Agreements to open new markets for exports of U.S. civil nuclear technology, materials and fuel. |
RECENT DEVELOPMENTS
On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic. The pandemic spread outside of China during the first quarter of 2020 and has impacted businesses throughout the world. In the U.S., many state and local governments have, based on local conditions, either recommended or mandated actions to slow the transmission of COVID-19. These measures range from limitations on crowd size, together with closures of bars and dine-in restaurants, to mandatory orders for non-essential citizens to “shelter in place” or “stay at home” until further direction. Borders between many countries have been closed to contain the spread of COVID-19. Uncertainty with respect to the economic effects of the pandemic has introduced significant volatility in the financial markets.
This pandemic, and the resultant uncertain economic conditions it has created, could adversely affect our operations, major facilities, or employees’ and consumers’ health. We have the following priorities while managing our business during this period of volatility and uncertainty:
· | First, to ensure the health and safety of our employees and the communities where we work. |
· | Second, to work with our business partners to maintain our advanced graphite product development schedule. |
· | Third, to ensure adequate financial liquidity to support our key operations and business activities. |
WWR’s corporate business activities are largely unaffected at this time. Even though we have closed our offices, we have instituted remote working arrangements to ensure that our team is able to work remotely using systems that we already had in place. Our continued focus on the health and safety of our employees, the safety of our operations,
22
and the safety of the communities in which we live and work remains paramount. To that end, we have eliminated unnecessary travel, instituted health protocols for working together, and ensured that our employees are permitted to take time off due to illness or the illness of those around them without penalty. As a result, our corporate business activities will continue on as before, without interruption.
In South Texas, due to tumultuous capital markets and uncertain economic conditions created by the pandemic, we shut down restoration and reclamation operations and furloughed employees in March 2020. We have complied with stay at home orders issued by county and state jurisdictions. After consultation with the Texas Commission on Environmental Quality, we are maintaining certain critical permit compliance activities with a limited workforce. Upon receipt of the PPP loan proceeds, we reinstated employees and restarted restoration and reclamation activities on May 4, 2020.
Our graphite business plan continues without pause. We visited our technical consulting partner, Dorfner Anzaplan, as well as equipment manufacturers in January. They continue to produce results that inform our pilot plant operations, which are presently scheduled for the fourth quarter of this year. The Company expects to issue press releases outlining the project’s progress. We remain excited about the battery materials markets, the end markets for those products, and the part we plan to play in supplying critical materials to serve them.
To the extent that the COVID-19 pandemic continues or worsens, local governments or governmental agencies may impose additional restrictions. The result of COVID-19 and those restrictions could result in a number of adverse impacts to our business, including but not limited to additional disruption to the economy, additional work restrictions, and supply chains being interrupted, slowed, or rendered inoperable. As a result, it may be discovered there.
challenging to obtain and process raw materials to support our business needs, and individuals could become ill, quarantined, or otherwise unable to work and/or travel due to health reasons or governmental restrictions. Also, governments may impose other laws, regulations or taxes which could adversely impact our business, financial condition or results of operations. The focuspotential effects of COVID-19 could also impact us in a number of other ways including, but not limited to, laws and regulations affecting our business, the availability of future borrowings, the cost of borrowings, and potential impairment of the carrying value of our uranium business continueslong-lived tangible assets.
Payroll Protection Loan
The Paycheck Protection Program (or “PPP”) was established under the congressionally-approved Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration (SBA). The Paycheck Protection Program is a loan designed to beprovide a direct incentive for small businesses to keep their workers on advancing the Temrezli in-situ recoverypayroll. On May 4, 2020, URI, Inc, a wholly owned subsidiary of Westwater, received loan proceeds in the amount of $0.3 million under the Paycheck Protection Program (“ISR”PPP”) uranium project in central Turkeyaccordance with the terms of a promissory note executed in favor of Celtic Bank Corporation, a Salt Lake City based SBA Preferred Lender. The loan and accrued interest are forgivable after eight weeks as long as the loan proceeds are used for eligible purposes, including payroll and benefits costs, rent and utilities. Any unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months, making the first payment of principal and interest due on November 11, 2020.
Between February 14, 2020 and March 16, 2020, the Company’s share price decreased 63% due to turmoil in the equity capital markets due to the COVID-19 pandemic discussed above. This significantly impacted the Company’s financing facilities because registered share capacity was exhausted faster than anticipated due to the significant decrease in share price. For instance, the number of registered shares approved by shareholders available under the Company’s Lincoln Park PA was exhausted in April 2020 with $2.3 million of remaining usable capacity lost. As a result of the severe downturn in the capital markets and uncertainty about when uranium prices permit economic development of this project. We control extensive exploration properties in Turkey under eight exploration and operating licenses covering approximately 39,000 acres. In Texas, we have two licensed and currently idled uranium processing facilities and approximately 11,000 acres of prospective ISR uranium projects. In New Mexico,conditions would return to normal, the Company controls mineral rights encompassing approximately 186,000 acres inshut down its South Texas operations and implemented other cost reduction initiatives. When the prolific Grants Mineral Belt, which is oneCARES Act was passed and PPP loan eligibility rules were promulgated, the Company’s interpretation of the largest concentrationsrules were that the loan proceeds could be used for payroll and benefits of sandstone-hosted uranium depositsURI’s furloughed employees which would allow restart of operations in the world.
Recent Developments
Change in Corporate Name
Effective August 21, 2017,South Texas. Accordingly, the Company changedintends to use the proceeds for funding its name from “Uranium Resources, Inc.” to “Westwater Resources, Inc.” The name change was made pursuant to Section 242payroll and benefits costs for its South Texas operations, purposes consistent with the PPP.
23
While the Company currently believes that its use of the Delaware General Corporation Law and did not affectloan proceeds will meet the rightsconditions for forgiveness of the Company’s security holders.loan, no assurance can be provided that the Company will obtain forgiveness of the Loan, in whole or in part.
Lithium Business Expansion
Equity Financings
Purchase Agreement (“PA”) with Lincoln Park Capital Fund, LLC. (“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.
Following effectiveness of a registration statement on Form S-1 relating to the resale of the shares subject to the PA on June 18, 2019, the Company issued 880,000began selling shares of its common stock to Aspire Capital. The sharesLincoln Park under the terms of common stock subject to the CSPA were registered pursuant to the Company’s effective shelfPA. On September 11, 2019, October 28, 2019 and February 28, 2020 we filed subsequent registration statementstatements on Form S-3.
OnS-1, which were declared effective on September 27, 2017, as a provision of20, 2019, November 7, 2019 and March 6, 2020, respectively, registering for resale additional shares under the CSPA and after satisfaction of certain commencement conditions, Aspire Capital made an initial purchase of 1,428,571PA. Inception-to-date through March 31, 2020, the Company has sold 2,576,764 shares of common stock for whichgross proceeds of $7.1 million. In April 2020, the Company received proceeds of $2.0 million. There were no other sales of common stock pursuant tosold the CSPA and 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, the Company entered into 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, which shares are registered under a registration statement on Form S-3, which was declared effective on March 9, 2017. The Company pays Cantor a commission equal to 2.5% of the gross proceeds from the sale of any shares pursuant to the ATM Offering. As of November 9, 2017, the Company had sold 673,853remaining 623,236 shares of common stock for netgross proceeds of $1.1 million$0.6 million.
Turkish Government Taking of Temrezli and Sefaatli Licenses and Westwater’s Arbitration Filing and Proceedings
On January 27, 2020, Westwater filed a Claimant’s Memorial (the “Memorial”) in its arbitration proceeding against the Republic of Turkey (“Turkey”). The Memorial relates to Westwater’s request for arbitration submitted to the International Centre for the Settlement of Investment Disputes (“ICSID”) in December 2018 as a result of Turkey’s unlawful actions against Westwater’s investments at the Temrezli and Sefaatli uranium projects owned by Westwater’s Turkish subsidiary Adur Madencilik Limited Sirketi.
The Memorial sets forth the basis for Westwater’s claims under the ATM Offering.treaty between the United States and Turkey concerning the reciprocal encouragement and protection of investments and international law generally, as well as the basis for the jurisdiction of the tribunal constituted on May 1, 2019 following ICSID’s registration of Westwater’s request for arbitration. The Memorial also establishes the reparations owed by Turkey for breach of its international obligations towards Westwater, consisting of no less than $36.5 million, plus costs and post-award interest, as compensation for Westwater’s resulting loss of its investment. Accompanying the Memorial is an expert report regarding the reparations owed to Westwater. In determining the amount of Westwater’s loss, the expert report considered (i) the projected future cash flows from the expropriated projects, discounted to present value by a risk-adjusted discount rate, (ii) valuations from transactions for similar projects, and (iii) in the case of the Sefaatli project, the amounts invested in the project.
On March 11, 2020, Turkey filed a request to bifurcate the arbitration proceeding, and on March 30, 2020, Westwater filed a response in opposition to Turkey’s request for bifurcation. On April 28, 2020, the arbitral tribunal denied Turkey’s bifurcation request. 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 stock and pre-funded warrants to purchase approximately 3.4 million shares of common stock at $0.01 per share. Also,this decision, Turkey must file a Counter-Memorial on February 16, 2017, the Company raised approximately $4.5 million in additional net proceeds through the registered sale of 2.1 million shares 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, 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,or before July 20, 2020, and a three-year installment promissory note in the amount of $5.0 million. The Company also retained a 4% NSR Royaltyhearing on the Churchrock project, which Laramide may purchasesubstantive issues and damages is now scheduled for $4.95 million duringSeptember 2021.
Additional information regarding the first year following the closingICSID arbitration proceeding is presented in Part II, Item 1 below.
24
Results of OperationsRESULTS OF OPERATIONS
Summary
Our consolidated net loss for the three months ended September 30, 2017March 31, 2020 was $3.0$3.3 million, or $0.12$0.82 per share, as compared with $3.7a consolidated net loss of $3.2 million, or $0.38$2.15 per share for the same period in 2016. For the three months ended September 30, 2017, the decrease2019. The $0.1 million increase in our consolidated net loss of $0.7 million from the respective prior period was mostlypartially the result of a decrease in interest expense of $0.7 million.
Our consolidated net loss for the nine months ended September 30, 2017 was $3.8 million, or $0.16 per share, as compared with $12.6 million, or $1.81 per share for the same period in 2016. For the nine months ended September 30, 2017, the decrease in our consolidated net loss of $8.8 million from the respective prior period was the result of a gain on the disposal of our Churchrock and Crownpoint projects of $4.9 million, a decrease 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 propertylegal expenses related to the arbitration against the Republic of $0.7 million.Turkey discussed above.
Mineral Property Expenses
The following table details our mineral property expenses for the three and nine months ended September 30, 2017March 31, 2020 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 |
2019:
|
|
|
|
|
|
|
|
|
|
| For the Three months Ended |
|
| ||||
|
| March 31, |
|
| ||||
|
| 2020 |
| 2019 |
|
| ||
|
|
|
|
|
|
|
|
|
Restoration/Recovery expenses |
|
|
|
|
|
|
|
|
Kingsville Dome project |
| $ | 1 |
| $ | — |
|
|
Rosita project |
|
| — |
|
| (19) |
|
|
Vasquez project |
|
| — |
|
| 37 |
|
|
Total restoration/recovery expenses |
|
| 1 |
|
| 18 |
|
|
|
|
|
|
|
|
|
|
|
Standby care and maintenance expenses |
|
|
|
|
|
|
|
|
Kingsville Dome project |
|
| 171 |
|
| 154 |
|
|
Rosita project |
|
| 87 |
|
| 118 |
|
|
Vasquez project |
|
| 84 |
|
| 73 |
|
|
Temrezli project |
|
| — |
|
| — |
|
|
Total standby care and maintenance expenses |
|
| 342 |
|
| 345 |
|
|
|
|
|
|
|
|
|
|
|
Exploration and evaluation costs |
|
|
|
|
|
|
|
|
Coosa project |
|
| 126 |
|
| 80 |
|
|
Other projects |
|
| — |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
Land maintenance and holding costs |
|
| 259 |
|
| 191 |
|
|
|
|
|
|
|
|
|
|
|
Total mineral property expenses |
| $ | 728 |
| $ | 634 |
|
|
For the three and nine months ended September 30, 2017,March 31, 2020, mineral property expenses increased by $0.3$0.1 million and $0.7 million, respectively, from the corresponding periodsperiod during 2016. For2019. The increase was primarily due to an increase in work related to the three month period, exploration costs increased by $0.3 million, which was partially offset by a decreaseCoosa project as well as an increase in land maintenance and maintenanceholding costs for our Vasquez project in South Texas as a result 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.a lease renewal that required a lease bonus payment.
25
General and Administrative Expenses
Significant expenditures for general and administrative expenses for the three and nine months ended September 30, 2017March 31, 2020 and 20162019 were:
|
|
|
|
|
|
|
|
| ||||||||
| For the Three months ended |
|
| |||||||||||||
|
| For the Three Months Ended Sep 30, |
| For the Nine Months Ended Sep 30, |
| March 31, |
|
| ||||||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
| 2020 |
| 2019 |
|
| ||
|
| (thousands of dollars) |
| (thousands of dollars) |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation expense |
| $ 24 |
| $ 75 |
| $ 62 |
| $ 545 |
| $ | — |
| $ | 8 |
|
|
Salaries and payroll burden |
| 614 |
| 846 |
| 1,796 |
| 2,144 |
|
| 767 |
|
| 684 |
|
|
Legal, accounting, public company expenses | Legal, accounting, public company expenses | 718 |
| 648 |
| 2,251 |
| 2,266 |
|
| 653 |
|
| 721 |
|
|
Insurance and bank fees |
| 149 |
| 127 |
| 370 |
| 405 |
|
| 167 |
|
| 142 |
|
|
Consulting and professional services |
| 21 |
| 28 |
| 44 |
| 190 |
|
| 30 |
|
| 21 |
|
|
Office expenses |
| 148 |
| 126 |
| 364 |
| 392 |
|
| 90 |
|
| 104 |
|
|
Sales and marketing |
|
| 14 |
|
| 7 |
|
| ||||||||
Other expenses |
| 26 |
| 33 |
| 89 |
| 93 |
|
| 58 |
|
| 18 |
|
|
Total |
| $ 1,700 |
| $ 1,883 |
| $ 4,976 |
| $ 6,035 |
| $ | 1,779 |
| $ | 1,705 |
|
|
For the three months ended September 30, 2017,March 31, 2020, general and administrative charges decreased by $0.2were approximately $0.1 million as compared withhigher than the corresponding period in 2016. This decrease2019. The increase was primarily due to decreasesexecutive search consulting costs for a sales and marketing executive for Westwater.
Arbitration Costs
During the three months ended March 31, 2020, the Company incurred arbitration related legal and expert consulting costs of $0.7 million associated with the Request for Arbitration against the Republic of Turkey filed with ICSID in salaries expenseDecember 2018. For further reference, see discussion in the Recent Developments section of this Part I and stock compensation expensebelow at Part II, Item 1. The increase of $0.3$0.6 million whichover the $0.1 million cost incurred during the same period in 2019 was partially offset by andue to the increased activity leading up to and following the filing of the Company’s Memorial with ICSID on January 27, 2020.
Other Income and Expenses
For the three months ended March 31, 2020 the $0.6 million increase in legal, accounting and public company expenses of $0.1 million.
Forother income compared to the ninethree months ended September 30, 2017, general and administrative charges decreased by $1.1 million as compared with the corresponding period in 2016. This decreaseMarch 31, 2019 was primarily due to decreasesthe $0.7 million loss recorded 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 proceeds of $0.2 million2019 from the sale of our 76,455 shares of Energy Fuels Inc. common stock that we received as partial considerationmarketable securities. No such loss occurred for the sale of our Roca Honda assets during 2015. We recorded 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. same period in 2020.
Gain on Disposal of Uranium PropertiesFINANCIAL POSITION
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 million 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 million on the Laramide Notes and amortization of $0.1 million on the discount on the Laramide Notes.
Interest income of $0.4 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 associated with the RCF Loan prior to repayment.
Interest expense of $0.7 million for the three months ended September 30, 2016 consisted of interest of $0.2 million payable to RCF, and amortization of the debt discount of $0.5 million.
Interest expense of $2.2 million for the nine months ended September 30, 2016 consisted 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 million for the nine-months ended September 30, 2016 was the result of the issuance of 75,000 shares of our common stock to Aspire Capital on February 4, 2016 as consideration for Aspire Capital entering into an option agreement with us. The shares had a fair value of $4.44 per share.
Financial Position
Operating Activities
Net cash used in operating activities was $8.9$3.5 million for the ninethree months ended September 30, 2017,March 31, 2020, as compared with $9.8$2.7 million for the same period in 2016.2019. The decrease of $0.9$0.8 million increase in cash used is mostlywas primarily due to a decrease in interest expense of $0.3 million, an increase in interest income of $0.4 millionarbitration costs as well as land maintenance and an aggregated decreaseholding costs for our Vasquez project in operating expenses of $0.3 million.South Texas.
Investing Activities
Net cash provided by investing activities was $1.9 million$0 for the ninethree months ended September 30, 2017,March 31, 2020, as compared with $0.3$1.8 million of cash provided by investing activities for the same period in 2016.three months ended March 31, 2019. For the 20172019 period, wethe Company received $2.0note payments on the Laramide note in the amount of $0.8 million in cash. Additionally, the Company received net proceeds of expenses, from the sale of our wholly-owned subsidiary, HRI to Laramide which closed on January 5, 2017. For the 2016 period, we received $0.2$0.5 million from the sale of short-term investments.Laramide securities and $0.5 million from URC as a deposit in accordance with the terms of the Asset Purchase Agreement signed on March 5, 2019. See Note 4 to our unaudited Condensed Consolidated Financial Statements included herewith for more information.
26
Financing Activities
Net cash provided by financing activities was $10.9$2.5 million for the ninethree months ended September 30, 2017. March 31, 2020 from the proceeds of sales of common stock through the Company’s ATM Offering Agreement and to Lincoln Park pursuant to the Stock Purchase Agreement.
For the ninethree months ended September 30, 2017,March 31, 2019, net cash proceeds of $15.4provided by financing activities was $0.4 million were received upon equity financings completed in January, February and September 2017, respectively. Additionally, $1.0 million was received from the sale of common stock sold through the Company’s ATM Offering. This increase was offset byOffering Agreement.
LIQUIDITY AND CAPITAL RESOURCES
The interim Condensed Consolidated Financial Statements of the repaymentCompany have been prepared on a “going concern” basis, which means that the continuation of $5.5 million outstanding under the RCF Loan.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.
Net cash provided by financing activities was $12.5 million forThe 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 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 uponCompany has relied on equity financings, completeddebt financings and asset sales to fund its operations and the Company expects to rely on February 4, 2016these 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 April 4, 2016, respectively. $4.7 million in net proceeds were received from the sale of common stockadministrative costs. The Company intends to Aspire Capital under the termspursue project financing to support execution of the 2016 Common Stock Purchase Agreementgraphite business plan, including discretionary capital expenditures associated with graphite battery-material product development, construction of pilot plant facilities and $5.8 million in net proceeds were received fromconstruction of commercial production facilities. The Company’s current lithium business plan will be funded by working capital; however, the sale of common stock sold throughCompany is pursuing project financing including possible joint venture partners to fund discretionary greenfield exploration activities.
At March 31, 2020 the Company’s prior ATM program with BTIG.
Liquiditycash balances were $0.9 million and Capital Resources
At September 30, 2017, the Company had working capital of $8.2 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, the Company had a working capital deficit balance of $4.2$2.2 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 May 8, 2020 is $0.5 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,May 8, 2020, 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 new Stock Purchase Agreement with Lincoln Park Capital, LLC., approved by the Company’s shareholders at the annual shareholders meeting on April 28, 2020, whereby the Company may place up to $12.0 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 after execution of the agreement. |
· | The Controlled Equity Offering Sales Agreement (the “ATM Offering Agreement”) with Cantor Fitzgerald & Co. The Company currently has registered the offer and sale from time to time of shares of its common stock having an aggregate offering price of up to $3.1 million. As of May 8, 2020, $2.8 million registered shares are available for future sales under the ATM Offering Agreement. |
· | The loan proceeds in the amount of $0.3 million received from the Paycheck Protection Program (“PPP”) by URI, Inc., a wholly owned subsidiary of WWR, on May 4, 2020. See Note 15. The Company plans to use the proceeds from this loan for payroll and benefits costs for its South Texas operations, which are eligible expenses in accordance with the PPP. Under the terms of the promissory note executed by URI, principal and accrued interest are forgivable after eight weeks as long as the proceeds are used for eligible purposes. Any unforgiven portion of the loan is payable over two years at an interest rate of 1% with a deferral of payments for the first six months. |
· | Other debt and equity financings and asset sales. |
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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. Stock price volatility and uncertain economic conditions caused by the recent Covid-19 pandemic could significantly impact the Company’s ability to raise funds through equity financing. 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.
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:
· | the spot price and long‑term contract price of graphite, vanadium, lithium and uranium; |
· | the ability of the Company to enter into and successfully close acquisitions, dispositions or other material transactions; |
· | the Company’s ability to raise capital in the future; |
· | government regulation of the mining industry and the nuclear power industry in the United States; |
· | risks associated with our operations and the operations of our partners, including the impact of COVID-19; |
· | our expectations regarding the use of funds from the Company’s PPP Loan and the potential for loan forgiveness under the terms of the PPP Loan; |
· | operating conditions at our 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 |
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the availabilityTable of capital to WWR;Contents
•
the spot price and long-term contract price of uranium and lithium;
•
risks associated with our foreign operations;
•
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 and the Republic of Turkey;
•
operating conditions at our mining projects;
•
the world-wide supply and demand of uranium and lithium;
•
weather conditions;
promising than initial exploration results; |
•
unanticipated geological, processing, regulatory and legal or other problems we may encounter;
•
currently pending or new litigation; and
•
our ability to maintain and timely receive mining and other permits from regulatory agencies.
· | 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; |
· | our ability to continue to satisfy the listing requirements of the Nasdaq Capital Market; |
· | 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 20162019 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.
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.March 31, 2020.
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 March 31, 2020 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 updates2019. 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.
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 numerous dates for both parties to make various filings.
On January 27, 2020, Westwater filed its Memorial, which is a document that sets out Westwater’s case. On March 11, 2020, Turkey filed a request to bifurcate the arbitration proceeding, and on March 30, 2020, Westwater filed a response in opposition to Turkey's request for bifurcation. In Procedural Order #2 issued on April 28, 2020, the arbitral tribunal denied Turkey’s bifurcation request. As a result of the tribunal’s decision, Turkey must file a Counter-Memorial setting forth its positions in the 2016 Form 10-K to reflect developments during the nine months ended September 30, 2017arbitration on or before July 20, 2020, and should be read together with 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 rule on the matter.
TCEQ Adjudicatory Proceeding for the Kingsville Facility
On April 12, 2017, the TCEQ held a hearing on substantive issues and granted 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 matterdamages is fully resolved.now scheduled for September 2021.
Other than asthe risk factor set forth below, there have been no material changes from those risk factors set forth in our Annual Report on Form 10-K10‑K for the year ended December 31, 2016.2019, which are incorporated herein by reference.
Our foreign operations subject us
We face various risks related to a numberhealth epidemics, pandemics and similar outbreaks, including the global outbreak of coronavirus disease 2019 (“COVID-19”). The continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which increases the cost of capital and adversely impacts access to capital. If significant regulatory, legal and political risks that may have a material adverse impact onportions of our prospects, projects, financial condition and resultsworkforce are unable to work effectively, including because 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:
•
enforcement of unfamiliar or uncertain foreign real estate, mineral tenure, contract, water use, mine safety and environmental laws and policies;
•
challenges to mining, processing and related permits and licenses, or to applications for permits and licenses, by or on behalf of regulatory authorities, indigenous populations, non-governmental organizationsillness, quarantines, government actions, facility closures or other third parties;restrictions in connection with the COVID-19 pandemic, our operations will likely be impacted. In addition, our costs may increase as a result of the COVID-19 outbreak. These cost increases may not be fully recoverable or adequately covered by insurance.
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war, crime, terrorism, sabotage, civil unrest and uncertain political and economic environments;
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deteriorationIt is possible that the continued spread of COVID-19 could also further cause disruption 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;
•
limitations on foreign exchange and repatriation of earnings;
•
restrictions on mineral production and price controls;
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seizure of mineral production and expropriation or nationalization of property;
•
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;
•
high rates of inflation; and
•
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 couldsupply chains, adversely affect our abilitybusiness partners, delay our plans to operate in Turkey.
advance our pilot plant or cause other unpredictable events. We continue to work with our stakeholders to address this global pandemic responsibly. 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 operationsmonitor the situation, to assess further possible implications to our business, and to take actions in Turkey, including compliance with local laws and applicable permitting requirements. Inan effort to mitigate adverse consequences.
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We cannot at this time predict the event we determine material noncompliance, we could face fines or restrictions on our ability to develop our projects in Turkey, whichimpact of the COVID-19 pandemic, but it 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 impacteffects on our business, including the impositionfinancial position, results of significant civil, criminal and administrative penalties.operations and/or cash flows.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSPROCEEDS.
None.None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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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