UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
xFORM 10-Q
☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2017
Or
2022
oOr
☐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 001-33404
WESTWATER RESOURCES, INC.
(Exact Name of IssuerRegistrant as Specified in Its Charter)
| | 75-2212772 |
(State of Incorporation) | | (I.R.S. Employer Identification No.) |
6950 S. Potomac Street, Suite 300, Centennial, Colorado80112
(Address of Principal Executive Offices, Including Zip Code)
(303) 531-0518 (303) 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 | | NYSE American |
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-2 of the Exchange Act.
Large accelerated | | Accelerated |
| | |
Non-accelerated | | 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-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.
| |
3 | |
| |
5 | |
| |
5 | |
| |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 17 |
| |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 22 |
| |
22 | |
| |
23 | |
| |
23 | |
| |
23 | |
| |
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 24 |
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24 | |
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24 | |
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24 | |
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25 | |
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26 |
7
2
DEFINITIONS
When used in this Form 10-Q, the following terms have the meaning indicated.
Term | Meaning |
Alabama Graphite | Alabama Graphite Company, Inc., an Alabama corporation and wholly owned subsidiary of Westwater Resources. |
Annual Report | Westwater Resources, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021. |
AGP | Alabama Graphite Products, LLC, an Alabama limited liability company and wholly owned subsidiary of Westwater Resources. |
ASC | FASB Accounting Standards Codification. |
ASU | FASB Accounting Standards Update. |
ATM Offering Agreement | Controlled Equity Offering Sale Agreement between Westwater Resources and Cantor Fitzgerald & Co. dated April 14, 2017. |
Cantor | Cantor Fitzgerald & Co. |
Coosa Graphite Deposit | The Company’s graphite mineral deposit located near Rockford, Alabama. |
EU Critical Raw Minerals List | The list of raw materials that are crucial to the economy of the European Union published by the European Commission. |
Inducement Plan | The Employment Inducement Incentive Award Plan. The Inducement Plan provides for the grant of equity-based awards, including restricted stock units, restricted stock, performance shares and performance units, and its terms are substantially similar to the Company’s 2013 Omnibus Incentive Plan. |
Kellyton Graphite Plant | The Company’s planned battery-grade graphite processing facility near Kellyton, Alabama. |
FASB | The Financial Accounting Standards Board. |
graphite | A naturally occurring carbon material with electrical properties that enhance the performance of electrical storage batteries, listed on the U.S. Critical Minerals List and the EU Critical Raw Materials List. |
Gross acres | Total acreage of land under which we have mineral rights. May include unleased fractional ownership. |
Lincoln Park | Lincoln Park Capital Fund, LLC. |
U.S. Critical Minerals List | The list of critical minerals that are crucial to the economy of the United States of America published by the Department of Interior. |
vanadium | A rare-earth metal used as a strengthening alloy in steelmaking, and in certain types of batteries, listed on the U.S. Critical Minerals List. |
Westwater Resources | Westwater Resources, Inc. |
2020 Lincoln Park PA | Purchase Agreement dated as of December 4, 2020 between Westwater Resources and Lincoln Park Capital Fund, LLC. |
USE OF NAMES
In this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms “we,” “us,” “our,” “WWR,” “Westwater,” “Westwater Resources,” or the “Company” refer to Westwater Resources, Inc. and its subsidiaries.
3
CURRENCY
The accounts of the Company are maintained in U.S. dollars. All dollar amounts referenced in this Quarterly Report on Form 10-Q and the consolidated financial statements are stated in U.S. dollars.
4
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.
CONDENSED CONSOLIDATED BALANCE SHEETS
(expressed in thousands of dollars, except share amounts)
(unaudited)
| | | | | | |
|
| September 30, |
| December 31, | ||
| | 2022 | | 2021 | ||
ASSETS |
| |
|
| |
|
| | | | | | |
Current Assets: |
| |
|
| |
|
Cash and cash equivalents |
| $ | 100,308 |
| $ | 115,293 |
Prepaid and other current assets |
|
| 516 |
|
| 320 |
Total Current Assets |
|
| 100,824 |
|
| 115,613 |
| | | | | | |
Property, plant and equipment, at cost: |
|
|
|
|
|
|
Property, plant and equipment |
|
| 64,472 |
|
| 14,593 |
Less: Accumulated depreciation |
|
| (213) |
|
| (114) |
Net property, plant and equipment |
|
| 64,259 |
|
| 14,479 |
Operating lease right-of-use assets |
|
| 122 |
|
| 226 |
Other long-term assets |
|
| — |
|
| 2,665 |
Total Assets |
| $ | 165,205 |
| $ | 132,983 |
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
| | | | | | |
Current Liabilities: |
|
|
|
|
|
|
Accounts payable |
| $ | 18,521 |
| $ | 3,043 |
Accrued liabilities |
|
| 2,122 |
|
| 2,129 |
Operating lease liability, current |
|
| 128 |
|
| 152 |
Total Current Liabilities |
|
| 20,771 |
|
| 5,324 |
| | | | | | |
Operating lease liability, net of current |
|
| — |
|
| 83 |
Other long-term liabilities |
|
| 1,378 |
|
| 1,378 |
Total Liabilities |
|
| 22,149 |
|
| 6,785 |
| | | | | | |
Commitments and Contingencies (see note 8) |
|
| | | | |
| | | | | | |
Stockholders’ Equity: |
|
|
|
|
|
|
Common stock, 100,000,000 shares authorized, $.001 par value |
|
|
|
|
|
|
Issued shares - 48,066,843 and 35,279,724, respectively |
|
|
|
|
|
|
Outstanding shares - 48,066,682 and 35,279,563, respectively |
|
| 48 |
|
| 35 |
Paid-in capital |
|
| 494,840 |
|
| 468,578 |
Accumulated deficit |
|
| (351,574) |
|
| (342,157) |
Less: Treasury stock (161 shares), at cost |
|
| (258) |
|
| (258) |
Total Stockholders’ Equity |
|
| 143,056 |
|
| 126,198 |
| | | | | | |
Total Liabilities and Stockholders’ Equity |
| $ | 165,205 |
| $ | 132,983 |
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 part of these condensed consolidated financial statements.
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.
5
WESTWATER RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(expressed in thousands of dollars, except share and per share amounts)
(unaudited)
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 |
| | | | | | | | | | | | |
| | For the Three Months Ended | | For the Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Operating Expenses: |
| | | | | | | | | | | |
Product development expenses | | $ | (257) | | $ | (1,834) | | $ | (857) | | $ | (5,766) |
Exploration expenses | | | (235) | | | (348) | | | (644) | | | (877) |
General and administrative expenses | | | (2,611) | | | (2,189) | | | (7,466) | | | (6,470) |
Arbitration costs | | | — | | | (644) | | | (142) | | | (2,190) |
Mineral property expenses | | | (11) | | | (94) | | | (18) | | | (94) |
Depreciation and amortization | | | (43) | | | (1) | | | (99) | | | (3) |
Total operating expenses | | | (3,157) | | | (5,110) | | | (9,226) | | | (15,400) |
| | | | | | | | | | | | |
Non-Operating Income: | |
|
|
|
| | |
|
|
|
|
|
Unrealized gain on equity securities | |
| — |
|
| 507 | |
| — |
|
| 1,918 |
Other (expense) income, net | | | (296) | | | 35 | | | (191) | | | 44 |
Total other (expense) income | |
| (296) |
|
| 542 | |
| (191) |
|
| 1,962 |
| |
| |
|
|
| |
| |
|
|
|
Net Loss | | $ | (3,453) |
| $ | (4,568) | | $ | (9,417) |
| $ | (13,438) |
| |
|
|
|
|
| |
|
|
|
|
|
BASIC AND DILUTED LOSS PER SHARE | | $ | (0.07) | | $ | (0.13) | | $ | (0.21) | | $ | (0.42) |
| | | | | | | | | | | | |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | |
| 47,462,656 |
|
| 34,331,778 | |
| 43,807,123 |
|
| 31,808,215 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
WESTWATER RESOURCES, INC.
(formerly Uranium Resources, Inc.)CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in thousands of dollars)
(unaudited)
| | | | | | |
| | For the Nine Months Ended September 30, | ||||
|
| 2022 |
| 2021 | ||
Operating Activities: |
| |
|
| |
|
Net loss |
| $ | (9,417) | | $ | (13,438) |
Reconciliation of net loss to cash used in operations: |
|
| | |
| |
Non-cash lease expense |
|
| (3) | |
| (1) |
Depreciation and amortization |
|
| 99 | |
| 3 |
Stock compensation expense |
|
| 703 | |
| 594 |
Unrealized gain on equity securities | | | — | | | (1,918) |
Effect of changes in operating working capital items: | | | | | | |
(Increase) decrease in prepaids and other assets |
|
| (196) | |
| 55 |
Increase in payables and accrued liabilities |
|
| 225 | |
| 1,665 |
Net Cash Used In Operating Activities |
|
| (8,589) | |
| (13,040) |
| | | | | | |
Cash Flows From Investing Activities: |
|
|
| |
|
|
Proceeds from PPP loan escrow |
|
| — | |
| 333 |
Building deposit | | | — | | | (245) |
Capital expenditures |
|
| (31,968) | |
| (119) |
Net Cash Used In Investing Activities |
|
| (31,968) | |
| (31) |
| | | | | | |
Cash Flows From Financing Activities: |
|
|
| |
|
|
Issuance of common stock, net |
|
| 25,604 | |
| 81,865 |
Payment of minimum withholding taxes on net share settlements of equity awards |
|
| (32) | |
| (150) |
Net Cash Provided By Financing Activities |
|
| 25,572 | |
| 81,715 |
|
|
|
| |
|
|
Net (decrease) increase in Cash, Cash Equivalents and Restricted Cash |
|
| (14,985) | |
| 68,644 |
Cash, Cash Equivalents and Restricted Cash, Beginning of Period |
|
| 115,293 | |
| 50,325 |
Cash, Cash Equivalents and Restricted Cash, End of Period |
| $ | 100,308 | | $ | 118,969 |
| | | | | | |
Supplemental Non-Cash Information with Respect to Investing and Financing Activities: |
|
|
| |
|
|
Accrued capital expenditures (at end of period) | | | 16,028 | | | — |
Total Non-Cash Investing and Financing Activities for the Period |
| $ | 16,028 | | $ | — |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
WESTWATER RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(expressed in thousands of dollars, except share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | |
Nine months ended September 30, 2022 | | Common Stock | | Paid-In | | Accumulated | | Treasury | | | | ||||||
| | Shares | | Amount | | Capital | | Deficit | | Stock | | Total | |||||
Balances, December 31, 2021 |
| 35,279,724 | | $ | 35 | | $ | 468,578 | | $ | (342,157) | | $ | (258) | | $ | 126,198 |
Net loss |
| — | |
| — | | | — | |
| (9,417) | |
| — | |
| (9,417) |
Common stock issued, net of issuance costs |
| 12,619,147 | |
| 13 | | | 25,591 | |
| — | |
| — | |
| 25,604 |
Stock compensation expense and related share issuances, net of shares withheld for payment of taxes |
| 167,972 | |
| — | | | 703 | |
| — | |
| — | |
| 703 |
Minimum withholding taxes on net share settlements of equity awards | | — | | | — | | | (32) | | | — | | | — | | | (32) |
Balances, September 30, 2022 |
| 48,066,843 | | $ | 48 | | $ | 494,840 | | $ | (351,574) | | $ | (258) | | $ | 143,056 |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Three months ended September 30, 2022 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Balances, June 30, 2022 | | 47,218,863 | | $ | 47 | | $ | 493,445 | | $ | (348,121) | | $ | (258) | | $ | 145,113 |
Net loss |
| — | | | — | |
| — | |
| (3,453) | |
| — | |
| (3,453) |
Common stock issued, net of issuance costs |
| 796,781 | |
| 1 | |
| 1,062 | |
| — | |
| — | |
| 1,063 |
Stock compensation expense and related share issuances, net of shares withheld for payment of taxes |
| 51,199 | |
| — | |
| 333 | |
| — | |
| — | |
| 333 |
Balances, September 30, 2022 |
| 48,066,843 | | $ | 48 | | $ | 494,840 | | $ | (351,574) | | $ | (258) | | $ | 143,056 |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Nine months ended September 30, 2021 | | Common Stock | | Paid-In | | Accumulated | | Treasury | | | | ||||||
|
| Shares |
| Amount |
| Capital |
| Deficit |
| Stock |
| Total | |||||
Balances, December 31, 2020 |
| 19,172,020 | | $ | 19 | | $ | 383,723 | | $ | (326,013) | | $ | (258) | | $ | 57,471 |
Net loss |
| — | |
| — | |
| — | |
| (13,438) | |
| — | |
| (13,438) |
Common stock issued, net of issuance costs |
| 15,407,018 | |
| 15 | |
| 81,850 | |
| — | |
| — | |
| 81,865 |
Stock compensation expense and related share issuances, net of shares withheld for payment of taxes | | 57,186 | |
| — | |
| 594 | | | — | | | — | | | 594 |
Minimum withholding taxes on net share settlements of equity awards |
| — | |
| — | |
| (150) | |
| — | |
| — | |
| (150) |
Balances, September 30, 2021 |
| 34,636,224 | | $ | 34 | | $ | 466,017 | | $ | (339,451) | | $ | (258) | | $ | 126,342 |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Three months ended September 30, 2021 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Balances, June 30, 2021 | | 33,536,476 | | $ | 33 | | $ | 461,717 | | $ | (334,883) | | $ | (258) | | $ | 126,609 |
Net loss |
| — | |
| — | |
| — | |
| (4,568) | |
| — | |
| (4,568) |
Common stock issued, net of issuance costs |
| 1,099,748 | |
| 1 | | | 4,001 | |
| — | |
| — | |
| 4,002 |
Stock compensation expense and related share issuances, net of shares withheld for the payment of taxes |
| — | |
| — | |
| 299 | |
| — | |
| — | |
| 299 |
Balances, September 30, 2021 |
| 34,636,224 | | $ | 34 | | $ | 466,017 | | $ | (339,451) | | $ | (258) | | $ | 126,342 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
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,” or “WWR”), 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-Q and Rule 8-03 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 2016our Annual Report on Form 10-K.10-K for the year ended December 31, 2021. The interim condensed consolidated financial statements are unaudited. 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, 20172022 are not necessarily indicative of the results that may be expected for any other period including the full year ending December 31, 2017.2022.
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.
Recently Issued Accounting Pronouncements
In January 2017, the FASB issued Accounting Standards Update No. 2017-01 (ASU 2017-01), Business Combinations: Clarifying the Definition of a Business, which clarifies the definition of a business when determining whether a company has acquired 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. The Company does not believe that the adoption of this guidance will have a material impact on our financial statements.
In NovemberJune 2016, the FASB issued Accounting Standards Update No. 2016-18, StatementASU 2016-13, “Measurement of Cash Flows: Restricted Cash, whichCredit Losses on Financial Instruments.” ASU 2016-13 will require that a statementchange 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 cash flows explain the change during periodasset. The adoption of this update, if applicable, will result in the totalearlier recognition of cash, cash equivalentslosses and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents shouldimpairments. ASU 2016-13 will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The ASU applies to all entities and is effective for fiscal yearsinterim and annual periods beginning after December 15, 2022.
In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to ASC 326, Financial Instruments – Credit Losses”, which clarifies 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 interimannual periods within those fiscal years beginning after December 15, 2019, with early adoption permitted. As a result, upon adoption,2022.
The Company is currently evaluating ASU 2016-13 and ASU 2018-19 for the potential impact of adopting this guidance on its financial reporting.
2. LIQUIDITY
The Company last recorded revenues from operations in 2009. Since 2009, the Company will includehas relied on equity financings, debt financings and asset sales to fund its operations. The Company expects to rely on debt and equity financings to fund its operations for the restrictedforeseeable future.
During the first nine months of 2022, the Company continued construction activities related to the Kellyton Graphite Plant. The Company also continued its exploration project to investigate the size and extent of both graphite and vanadium mineral concentrations at the Coosa Graphite Deposit. Drilling was completed in April 2022 and the Company expects to complete a resource model by the end of the year 2022.
On September 30, 2022, the Company’s cash amount in its beginning-of-period and end-of-period reconciliations of cash on its statement of cash flows. Forbalance was approximately $100.3 million. During the nine months ended September 30, 2017, this would have resulted in2022, the Company including an additional $4.0 million in its beginning-of-period cash balance and an additional $3.7 million in its end-of-period cash balance. The Company also would not have recorded a release of restricted cash of $0.3 million in the investing section of its statement of cash flows.
2. LIQUIDITY
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 of $4.2 million. The increase in working capital of $12.4 million for the nine months ended September 30, 2017 was primarily due 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, the Company received $2.2 million in cash, a $5.0 million promissory note, of which $1.5 million is due in January 2018, 2,218,333 shares of Laramide Resources Ltd.’s common stock which had a fair value of $0.5 million at September 30, 2017 and 2,218,333 common stock purchase warrants which had a fair value of $0.3 million at September 30, 2017. Details regarding this transaction are discussed in Note 3, below; and
•
the repayment of the $5.5 million outstanding balance under the RCF Loan (defined in Note 7, below.)
Also during the nine months ending September 30, 2017, the Company entered into the following financing agreements and anticipates funding from these sources to sustain operations through 2018:
WESTWATER RESOURCES, INC.
(formerly Uranium Resources, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
•
Controlled Equity Offering Sales Agreement
On April 14, 2017, the Company entered into a Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co. (“Cantor”) acting as sales agent, pursuant to which the Company has registered the offer and sale from time to time of shares of its common stock having an aggregate offering price of up to $30.0 million (the “ATM Offering”), of which approximately $28.9 million is available for future sales as of November 9, 2017. The Company is unable to sell shares of its common stock through the Controlled Equity Offering Sales Agreement on dates that it places shares with Aspire Capital through its CSPA, as discussed below.
•
Common Stock Purchase Agreement
On September 25, 2017, the Company entered into a Common Stock Purchase Agreement (“CSPA”) with Aspire Capital Fund, LLC (“Aspire Capital”) to place up to $22.0 million in the aggregate of its common stock over a term of 30 months. Upon execution of the CSPA, the Company issued 880,000 shares of common stock to Aspire Capital as a commitment fee. The Company cannot sell in excess of 5,033,677 shares of common stock, including the 880,000 commitment shares (“Exchange Cap”), unless (i) stockholder approval is obtained, or (ii) the average price paid for all shares issued under the Purchase Agreement (including the 880,000 commitment shares) is equal to or greater than $1.38. As of November 9, 2017, the Company has dollar capacity of $20.0 million of common stock available for future sales, limited to the current Exchange Cap of 2.7sold 12.6 million shares of common stock unless conditions (i) or (ii) above are met. See Note 9 below for further details.
The Company believes thatnet proceeds of $25.6 million pursuant to the ATM Offering Agreement (see Note 4).
9
Management believes the Company’s current cash balance is sufficient to fund its planned non-discretionary expenditures through the fourth quarter of 2023. The Company has in place the ATM Offering Agreement and the CSPA, along with its existing working capital balance, will provide it with2020 Lincoln Park PA, both of which could be used to support construction of Phase I of 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 assetsKellyton Graphite Plant and identify ways to reduce its cashthe Company’s planned non-discretionary 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. InStock price volatility, rising interest rates, inflation and generally uncertain economic conditions could significantly impact the event thatCompany’s ability to raise funds through equity or debt financing. Further, market conditions, including but not limited to, inflation, labor shortages and supply chain disruptions could also adversely impact the planned cost and the construction and commissioning timeline of Phase I of the Kellyton Graphite Plant.
Along with evaluating the continued use of the ATM Offering Agreement and the 2020 Lincoln Park PA, the Company is considering other forms of project financing to fund the construction of the Kellyton Graphite Plant, including both Phase I and Phase II. The alternative sources of project financing could include, but are not limited to, project debt, convertible debt, or pursuing a partnership or joint venture. If funds are not available to fund the construction of Phase I of the Kellyton Graphite Plant under the Company’s financing facilities or through alternative financing sources, the Company expects to be able to fund the Company’s non-discretionary expenditures with the Company’s current cash balance, however in such instance, the Company may be required to materially change its business plans.planned development strategies related to the Coosa Deposit and Phase I of the Kellyton Graphite Plant, including the construction and commissioning timeline of Phase I of the Kellyton Graphite Plan, or putting the construction of Phase I on hold until additional funding is obtained.
3. DISPOSAL OF HYDRO RESOURCES, INC.PROPERTY, PLANT AND EQUIPMENT
On January 5, 2017, Laramide and
| | | | | | | | | |
| | Net Book Value of Property Plant and Equipment at September 30, 2022 | |||||||
(thousands of dollars) |
| Alabama |
| Corporate |
| Total | |||
Mineral rights and properties | | $ | 8,972 | | $ | — | | $ | 8,972 |
Other property, plant and equipment | |
| 5,755 | |
| 26 | |
| 5,781 |
Construction in progress | | | 49,506 | | | — | | | 49,506 |
Total | | $ | 64,233 | | $ | 26 | | $ | 64,259 |
| | | | | | | | | |
| | Net Book Value of Property Plant and Equipment at December 31, 2021 | |||||||
(thousands of dollars) |
| Alabama |
| Corporate |
| Total | |||
Mineral rights and properties | | $ | 8,972 | | $ | — | | $ | 8,972 |
Other property, plant and equipment | |
| 4,462 | |
| 28 | |
| 4,490 |
Construction in progress | | | 1,017 | | | — | | | 1,017 |
Total | | $ | 14,451 | | $ | 28 | | $ | 14,479 |
Construction in Progress
Construction in progress represents assets that are not ready for service or are in the construction stage. Assets are depreciated based on the estimated useful life of the asset once it is placed in service.
During the first quarter of 2022, the manufacturing of certain equipment commenced, for which the Company closedmade cash deposits of $2.7 million as of December 31, 2021. As such, the saledeposits as of December 31, 2021 are now reflected as construction in progress, and will continue to be included in construction in progress until such assets are placed into service.
10
Impairment of Property, Plant and Equipment
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 nine months ended September 30, 2022 no events or changes in circumstance are believed to have impacted recoverability of the Company’s wholly-owned subsidiary HRI, which holds the Churchrock and Crownpoint projects, pursuant to a Sharelong-lived assets. Accordingly, it was determined that no interim impairment was necessary.
4. COMMON STOCK
Common Stock Issued, Net of Issuance Costs
December 2020 Purchase Agreement (the “Laramide SPA”). Underwith Lincoln Park Capital Fund, LLC
On December 4, 2020, the termsCompany entered into the 2020 Lincoln Park PA with Lincoln Park to place up to either $100.0 million or 16.0 million shares in the aggregate of the Laramide SPA, executedCompany's common stock on April 7, 2016an ongoing basis over a term of 36 months. The Company controls the timing and amendedamount of any sales to Lincoln Park, and Lincoln Park is obligated to make purchases in accordance with the 2020 Lincoln Park PA. Any common stock that is sold to Lincoln Park will occur at a purchase price that is based on December 5, 2016,an agreed upon fixed discount to the Company's prevailing market prices at the time of each sale and with no upper limits on the price Lincoln Park may pay to purchase common stock. The Lincoln Park PA may be terminated by the Company receivedat any time, in its sole discretion, without any additional cost or penalty.
The 2020 Lincoln Park PA specifically provides that the following consideration:
•
$2.5 million in cash, of which $0.25 million was paid on October 21, 2016;
•
2,218,333Company may not issue or sell any shares of Laramideits common stock and 2,218,333 Laramideunder the agreement if such issuance or sale would breach any applicable rules of the NYSE American Stock Exchange (“NYSE American”). In particular, NYSE American General Rule 713(a) provides that the Company may not issue or sell more than 19.99% of the number of shares of the Company’s common stock purchase warrants. Eachthat were outstanding immediately prior to the execution of the 2020 Lincoln Park PA unless (i) shareholder approval is obtained or (ii) the average price of all applicable sales of common stock purchase warrant entitlesto Lincoln Park under the 2020 Lincoln Park PA, equals or exceeds $6.15. The Company held its 2021 Annual Shareholders Meeting on May 21, 2021 and obtained shareholder approval for the issuance of more than 19.99% of the shares of the Company’s common stock outstanding under the 2020 Lincoln Park PA.
Lincoln Park has no right to require the Company to purchase one sharesell any shares of common stock of Laramide at a price of CDN$0.45 for a period of 60 months fromto Lincoln Park, but Lincoln Park is obligated to make purchases as the date of closing;
•
a $5.0 million promissory note, secured by a mortgage overCompany directs, subject to certain conditions. In all instances, 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 approximately $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 principal payments by deliveringCompany may not sell shares of its common stock to Lincoln Park under the 2020 Lincoln Park PA if it would result in Lincoln Park beneficially owning more than 9.99% of the Company’s common stock at any one point in time.
Since inception, the Company whichhas sold 6.3 million shares will be valued by referenceof common stock to Lincoln Park pursuant to the volume weighted average price (“VWAP”) for Laramide’s common stock for2020 Lincoln Park PA.
During the 20 trading days beforethree and nine months ended September 30, 2022, the 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 reduction of the principal amount due under the promissory note with any remaining portions of the purchase price 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%. The Company did not record a separate fair value for the options as the exercisesell any shares of the options would reduce the amount outstanding under the notes receivable. Duecommon stock pursuant to the high degree of uncertainties surrounding future mine development2020 Lincoln Park PA compared to 1.1 million and minerals prices, as well as limited marketability, the Company determined the fair value of the NSR Royalty to be nil. The following fair value amounts were recorded as the purchase consideration:
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
The fair value of the6.1 million shares of Laramide’s common stock sold for net proceeds of $4.0 million and common stock purchase warrants received were valued using Level 1 inputs of the fair value hierarchy and the fair value of the notes receivable was valued using Level 2 inputs, as defined in Note 4 below.
The Company recorded the following gain on disposal of uranium properties within its Condensed Consolidated Statement of Operations:
| ||
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
4. 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.
WESTWATER RESOURCES, INC.
(formerly Uranium Resources, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The Company believes that the fair values of our assets and liabilities approximate their reported carrying amounts. The following table presents information about assets that were recorded at fair value on a recurring basis as of September 30, 2017 and December 31, 2016 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 |
5. PROPERTY, PLANT AND EQUIPMENT
WESTWATER RESOURCES, INC.
(formerly Uranium Resources, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
6. MINERAL PROPERTY EXPENDITURES
Mineral property expenditures by geographical location$34.6 million, respectively, for the three and nine months ended September 30, 2017 and 2016are as follows:2021.
|
| For the Three Months Ended Sep 30, |
| For the Nine Months Ended Sep 30, | ||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
|
| (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 |
Rosita project, Texas |
| 188 |
| 130 |
| 472 |
| 290 |
Vasquez project, Texas |
| 117 |
| 105 |
| 399 |
| 365 |
Other projects, Texas |
| 26 |
| 11 |
| 30 |
| 80 |
Total Texas projects |
| 528 |
| 460 |
| 1,517 |
| 1,359 |
|
|
|
|
|
|
|
|
|
Cebolleta project, New Mexico |
| - |
| - |
| 538 |
| 537 |
Juan Tafoya project, New Mexico |
| 38 |
| 37 |
| 354 |
| 48 |
Other projects, New Mexico |
| - |
| 32 |
| 2 |
| 32 |
Total New Mexico projects |
| 38 |
| 69 |
| 894 |
| 617 |
|
|
|
|
|
|
|
|
|
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 |
Total Utah projects |
| 118 |
| 352 |
| 124 |
| 352 |
|
|
|
|
|
|
|
|
|
Total expense for the period |
| $ 1,316 |
| 1,039 |
| $ 3,637 |
| $ 2,908 |
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:
The Company is currently performing surface reclamation activities at its Rosita project located in Duval County, Texas. The Company’s current liability of $0.1 million consists of the estimated costs associated with current surface reclamation activities through September 2018 at the Company’s Rosita project.
9. COMMON STOCK
Common Stock Issued, Net of Issuance Costs
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)
Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co.
On April 14, 2017, the Company entered into the ATM Offering Agreement with Cantor acting as the sales agent. Under the ATM Offering Agreement, 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.offerings. The Company pays Cantor a commission equalof up to 2.5% of the gross proceeds from the sale of any shares pursuant to the ATM Offering. As of November 9, 2017,Offering Agreement.
During the three and nine months ended September 30, 2022, the Company had sold 673,8530.8 million and 12.6 million shares of common stock for net proceeds of $1.1 million underand $25.6 million, respectively, pursuant to the ATM Offering. As a result,Offering Agreement. During the nine months ended September 30, 2021, the Company had approximately $28.9sold 9.3 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 Capital to place up to $22.0 million in the aggregate of the Company’s common stock on an ongoing basis when required by the Company over a term of 30 months. The Company will control the timing and amount of sales to Aspire Capital, and at a price based on market prices at that time. As consideration for Aspire Capital entering into the purchase agreement, the Company issued 880,000 shares of its common stock to Aspire Capital. The shares of common stock subject to the CSPA were registered
11
for net proceeds of $47.3 million, pursuant to the Company’s effective shelf registration statement on Form S-3.
On September 27, 2017, pursuant to the CSPA and after satisfaction of certain commencement conditions, Aspire Capital made an initial purchase of 1,428,571ATM Offering Agreement. The Company did not sell any shares of common stock for which the Company received proceeds of $2.0 million. There were no other sales of common stock pursuant to the CSPA and asATM Offering Agreement for the three months ended September 30, 2021.
Sales made under the ATM Offering Agreement are made pursuant to a prospectus supplement filed pursuant to Rule 424(b)(5), which registered for sale up to a total of November 9, 2017, $20.0$50.0 million of the aggregate $22.0Company’s common stock, which was filed on August 20, 2021 as a takedown off the Company’s shelf registration statement on Form S-3, which was declared effective by the Commission on July 8, 2021.
As of September 30, 2022, the Company has received total gross proceeds of $28.8 million remained available for future salessince inception under the CSPA.ATM Offering Agreement.
Common Stock Issued for Investor Relations Fees
On February 28, 2017, the Company issued 150,000 shares with a fair market value of $0.3 million or $2.00 per share as partial consideration for investor relations services that will be provided to the Company over the ensuing 12 months.
10.5. 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:include the 2013 Omnibus Incentive Plan (the “2013 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”). 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, April 28, 2020, and May 21, 2021, 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, 66,000, 350,000, and 1,500,000 shares, respectively, and to re-approvein 2017 re-approved the material terms of the performance goals under the 2013 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. Equity awards under the 2013 Plan are granted from time to time at the discretion of the Compensation Committee of the Board (the “Committee”), with vesting periods and other terms as determined by the Committee with a maximum term of 10 years. The 2013 Plan is administered by the Committee, which can delegate the administration to the Board, other committees or to such plan. other officers and employees of the Company as designated by the Committee and permitted by the 2013 Plan.
As of November 9, 2017, the Company had 561,232September 30, 2022, shares available for future issuances under the 2013 Plan.
Plan were 215,025. For the three and nine months endingended September 30, 2017 and 2016,2022 the Company recorded stock-based compensation expense of $24,279$0.3 million and $75,495, respectively. For$0.7 million, respectively, compared to $0.3 million and $0.6 million, respectively, in the nine months ending September 30, 2017 and 2016, the Company recorded stock-basedsame periods in 2021. Stock compensation expense of $62,356 and $545,166, respectively. Stock-based compensation expense has been includedis recorded in general and administrative expense.expenses.
In addition to the plans above, upon closingon May 9, 2022, the Board of Directors adopted the Inducement Plan and on May 13, 2022, the Company filed a registration statement on Form S-8 to register an aggregate of 250,000 shares of the Company’s acquisitioncommon stock. These shares may be issued pursuant to the Inducement Plan as equity awards to be granted for the sole purpose of Anatolia Energy Limited in November 2015,recruiting and hiring new employees. No shares have been issued under the Inducement Plan as of September 30, 2022. Subsequent to September 30, 2022, on October 4, 2022 the Company issued 374,749 replacement58,946 restricted stock units under the Inducement Plan that vest over two years.
12
Stock Options
Stock options and performance shares to the option holders and performance shareholders of Anatolia Energy Limited. The number of replacement options and performance shares was based uponare valued using the Black-Scholes value withoption pricing model on the exercise pricesdate of the replacement options and performance shares determined using the exchange rate of 0.00548.grant. The options and performance shares were issued with the same terms and conditions as were applicable prior to the acquisition of Anatolia Energy Limited. As of September 30, 2017, 98,646 replacement options remain outstanding.Company accounts for forfeitures upon occurrence.
WESTWATER RESOURCES, INC.
(formerly Uranium Resources, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Stock Options
The following table summarizestables summarize stock options outstanding and changes for the nine-month periods endingnine months ended September 30, 2017 and 2016:2022:
|
| Sep 30, |
| Sep 30, | ||||
|
| 2017 |
| 2016 | ||||
|
| Number of Stock Options |
| Weighted Average Exercise Price |
| Number of Stock Options |
| Weighted Average Exercise Price |
Stock options outstanding at beginning of period |
| 110,828 |
| $ 18.24 |
| 326,424 |
| $ 24.90 |
Granted |
| 189,164 |
| 1.40 |
| - |
| - |
Expired |
| (6,001) |
| 104.67 |
| (215,346) |
| 27.64 |
Stock options outstanding at end of period |
| 293,991 |
| $ 5.64 |
| 111,078 |
| $ 19.60 |
Stock options exercisable at end of period |
| 104,722 |
| $ 13.26 |
| 110,869 |
| $ 19.57 |
| | | | | | | | | | |
| | September 30, 2022 | | September 30, 2021 | ||||||
|
| |
| Weighted |
| |
| Weighted | ||
| | Number of | | Average | | Number of | | Average | ||
| | Stock | | Exercise | | Stock | | Exercise | ||
| | Options | | Price | | Options | | Price | ||
Stock options outstanding at beginning of period |
| 277,576 | | $ | 6.18 |
| 185,054 | | $ | 7.99 |
Granted |
| 78,720 | |
| 1.09 |
| 94,522 | |
| 3.91 |
Expired |
| — | |
| — |
| (2,000) | |
| 73.54 |
Stock options outstanding at end of period |
| 356,296 | | | 5.06 |
| 277,576 | | | 6.18 |
Stock options exercisable at end of period |
| 277,576 | | $ | 6.18 |
| 183,054 | | $ | 7.35 |
The weighted average remaining term for stock options outstanding as of September 30, 2022, is approximately 8.2 years.
The following table summarizes stock options outstanding and exercisable by stock option plan at September 30, 2017:2022:
|
| 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 |
| 92 | | $ | 1,638.00 |
| 92 | | $ | 1,638.00 |
2004 Directors’ Plan |
| 3 | |
| 10,380.00 |
| 3 | |
| 10,380.00 |
2013 Plan |
| 356,201 | |
| 4.55 |
| 277,481 | |
| 5.53 |
|
| 356,296 | | $ | 5.06 |
| 277,576 | | $ | 6.18 |
As of September 30, 2022, the Company had less than $0.1 million of unrecognized compensation costs related to non-vested stock options that will be recognized over a period of approximately nine months.
13
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-month periodsnine months ended September 30, 20172022 and 2016:
|
| Sep 30, |
| Sep 30, | ||||
|
| 2017 |
| 2016 | ||||
|
| Number of RSUs |
| Weighted-Average Grant Date Fair Value |
| Number of RSUs |
| Weighted-Average Grant Date Fair Value |
Unvested RSUs at beginning of period |
| 8,649 |
| $ 43.71 |
| 32,699 |
| $ 34.25 |
Granted |
| 304,064 |
| 1.40 |
| - |
| - |
Forfeited |
| - |
| - |
| (3,334) |
| 32.21 |
Vested |
| (39,340) |
| 4.16 |
| (7,698) |
| 29.45 |
Unvested RSUs at end of period |
| 273,373 |
| $ 1.95 |
| 21,667 |
| $ 36.27 |
WESTWATER RESOURCES, INC.2021:
(formerly Uranium Resources, Inc.)
| | | | | | | | | | |
| | September 30, | | September 30, | ||||||
| | 2022 | | 2021 | ||||||
|
| |
| Weighted- |
| |
| Weighted- | ||
| | | | Average | | | | Average | ||
| | Number of | | Grant Date | | Number of | | Grant Date | ||
| | RSUs | | Fair Value | | RSUs | | Fair Value | ||
Unvested RSUs at beginning of period |
| 385,004 | | $ | 3.18 |
| 236,403 | | $ | 2.10 |
Granted |
| 1,168,003 | | | 1.16 |
| 240,125 | |
| 3.93 |
Forfeited/Expired |
| (225,091) | |
| 2.39 |
| — | |
| — |
Vested |
| (181,991) | |
| 2.31 |
| (78,801) | |
| 2.10 |
Unvested RSUs at end of period |
| 1,145,925 | | $ | 1.42 |
| 397,727 | | $ | 3.20 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAs of September 30, 2022, the Company had $0.8 million of unrecognized compensation costs related to non-vested restricted stock units that will be recognized over a period of approximately 2.25 years.
(unaudited)
6. OTHER (EXPENSE) INCOME, NET
| | | | | | | | | | | | |
| | For the Three Months Ended | | For the Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
(thousands of dollars) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Other (expense) income: | |
|
|
|
| | |
|
|
|
|
|
Foreign exchange loss | |
| (649) |
|
| — | |
| (645) |
|
| — |
Interest income | | | 352 | | | 8 | | | 453 | | | 18 |
Other income | | | 1 | | | 27 | | | 1 | | | 26 |
Total other (expense) income, net | | $ | (296) |
| $ | 35 | | $ | (191) |
| $ | 44 |
As of the three and nine months ended September 30, 2022, the Company recognized $0.6 million of foreign currency exchange loss related to our Euro denominated bank account. As of September 30, 2022, the Company’s cash balance included approximately 9.5 million Euros. The foreign exchange loss was calculated using the exchange rate as of the balance sheet date. A change in the Euro to USD exchange rate of $0.01 results in a foreign exchange adjustment of less than $0.1 million.
As of the three and nine months ended September 30, 2022, the Company recognized interest income of $0.4 million and $0.5 million, respectively, in our investment account.
11.
7. 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 750,6981,502,221 from the unvested RSUs and the outstanding stock options at the end of the period were excluded from the calculation of earnings per share because the effect on the basic income per share would be anti-dilutive, as the Company had a net loss for the three and nine months ended September 30, 2017.2022.
12.
14
8. COMMITMENTS AND CONTINGENCIES
TheFuture operations on the Company’s uranium recovery operationsproperties are subject to federal and state regulations for the protection of the environment, including air and water quality. Future closure and reclamation costs are provided for as each pound of uranium is produced on a unit-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 theircurrent operating costs and accrual for future costs. The Company believes its operations are materially compliant with current, applicable environmental regulations.
13. GEOGRAPHIC AND SEGMENT INFORMATIONAt 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.
9. LEASES
The Company’s lease portfolio consists of an operating lease for the corporate office, storage space and equipment. The corporate office lease has a remaining lease term of 0.83 years and includes an option to extend the 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 have terms that are less than a year in length. These include leases for land used in exploration activities, office equipment, machinery, office space, storage and other. The Company has elected the short-term lease exemption allowed under the new leasing standards, whereby leases with initial terms of one reportable operating segment, consistingyear or less are not capitalized and instead expensed on a straight-line basis over the lease term. In addition, the Company holds several 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, “Leases.”
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 were recognized at the commencement date of the explorationlease 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 estimated incremental borrowing rate at the lease commencement date.
The components of lease expense are as follows:
| | | | | | |
|
| For the Nine Months Ended | ||||
| | September 30, | ||||
(thousands of dollars) | | 2022 | | 2021 | ||
Operating lease cost | | $ | 115 | | $ | 115 |
Supplemental cash flow information related to the Company’s operating leases is as follows:
| | | | | | |
| | For the Nine Months Ended | ||||
| | September 30, | ||||
(thousands of dollars) |
| 2022 | | 2021 | ||
Cash paid for amounts included in lease liabilities: |
| |
| | |
|
Operating cash flows from operating leases | | $ | 119 | | $ | 115 |
| | | | | | |
Right-of-use assets obtained in exchange for lease obligations: | |
|
| |
|
|
Operating leases | | $ | 122 | | $ | 258 |
15
Supplemental balance sheet information related to the Company’s operating leases is as follows:
| | | | | | |
|
| September 30, | | December 31, | ||
(thousands of dollars) | | 2022 | | 2021 | ||
Operating Leases |
| |
| | |
|
Operating lease right-of-use assets | | $ | 122 | | $ | 226 |
| | | | | | |
Operating lease liability, current | | | 128 | | | 152 |
Operating lease liabilities – long term portion | |
| — | |
| 83 |
Total operating lease liabilities | | $ | 128 | | $ | 235 |
Weighted-average remaining lease term and developmentdiscount rate for the Company’s operating lease are as follows:
| | | | | | | |
| | | For the Nine Months Ended | ||||
| | | September 30, | ||||
| | | 2022 | | 2021 | ||
Weighted Average Remaining Lease Term (in years) | |
| 0.8 | | | 1.8 | |
| | | | | | | |
Discount Rate | |
| 9.5 | % | | 9.5 | % |
Maturities of lithium and uranium projects. These activitieslease liabilities for the Company’s operating leases are focused principally in the United States and the Republicas follows:
| | | |
Lease payments by year |
| September 30, | |
(in thousands) | | 2022 | |
2022 (remainder of year) | | $ | 40 |
2023 | | | 92 |
Total lease payments | |
| 132 |
Less imputed interest | |
| (4) |
Total | | $ | 128 |
As of Turkey. We reported no revenues during the three- and nine-month periods ended September 30, 20172022, the Company has $0.1 million in right-of-use assets and 2016. Geographic location$0.1 million in related lease liabilities, all of property, plant and equipment, including mineral rights, and mineral property expenses,which is providedcurrent. The most significant operating lease is for the Company’s corporate office in Notes 5 and 6, above.Centennial, Colorado, with $0.1 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 $0.1 million.
16
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, 20172022, has been prepared based on information available to us as of November 9, 2017.2022. 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 WWRWestwater for the period ended December 31, 20162021 and the related notes thereto filed withincluded in our Annual Report, on Form 10-K, which have beenwere prepared in accordance with U.S. GAAP. This management’s discussion and analysis contains forward-looking statements that involveare subject to 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.”Statements” herein.
IntroductionINTRODUCTION
WWRWestwater Resources, Inc., originally incorporated in 1977, is ana 45-year-old energy metals exploration and development company. We aretechnology company focused on expanding our energy metals strategy,developing battery-grade natural graphite materials after its acquisition of Alabama Graphite in April 2018. Alabama Graphite holds mineral rights to explore and potentially mine the Coosa Graphite Deposit. During the first nine months of 2022, AGP continued construction activities related to Phase I of the Kellyton Graphite Plant and in April of 2022 Alabama Graphite completed the initial drilling stage of its exploration program to further investigate the size and extent of both graphite and vanadium mineral concentrations at the Coosa Graphite Deposit. The Coosa Graphite Deposit is located near Rockford, Alabama at 32 ° 54’ 30” North and 86 ° 24’ 00” West.
RECENT DEVELOPMENTS
Kellyton Graphite Plant – Construction Update
During the third quarter of 2022, the Company continued construction activities related to Phase I of its Kellyton Graphite Plant, including the completion of earthwork and site grading. Construction activity during the third quarter also included receipt of more long-lead equipment components, and further work on underground utilities, foundations, and the manufacturing of plant buildings.
As previously announced, in April 2022, the Company completed the buildout of its Kellyton administrative offices, hosted a groundbreaking ceremony at the site of the Kellyton Graphite Plant, and selected a general contractor for the construction of the Kellyton Graphite Plant. In June 2022, the Company received its air permit from the Alabama Department of Environmental Management and consequently has all necessary permits to complete the construction of Phase I of the Kellyton Graphite Plant. The Company also applied for its wastewater disposal permit, which includes developing our lithium business while maintaining optionality onwill be required before the future rising uranium price with our significant uranium property holdingsKellyton Graphite Plant commences operations. The Company has estimated the cost to construct and commission Phase I of the Kellyton Graphite Plant to be approximately $202 million, of which approximately $50.5 million has been incurred to date. Subject to global supply chain disruptions and challenges, and the Company’s ability to raise the remaining capital necessary to complete Phase I of the Kellyton Graphite Plant, the Company is targeting that it will begin testing and commissioning Phase I of the Kellyton Graphite Plant in mid-year 2023 and expects the testing and commissioning to continue in the Republicsecond half of Turkey, Texas and New Mexico. Incorporated in 1977, WWR also owns an extensive information database of historic drill-hole logs, assay certificates, maps and technical reports for uranium properties located in the western United States.2023.
We established our lithium business in 2016 and currently control mineral rights encompassing approximately 36,730 acres across three prospective lithium brine basins in Nevada and Utah. We are conducting exploration and geological evaluation of these properties in 2017 and 2018 for potential development of any lithium resources that may be discovered there.Coosa Graphite Deposit – Exploration Program
The focus of our uranium business continues to be on advancing the Temrezli in-situ recovery (“ISR”) uranium project in central Turkey 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, the Company controls mineral rights encompassing approximately 186,000 acres in the prolific Grants Mineral Belt, which is one of the largest concentrations of sandstone-hosted uranium deposits in the world.
Recent Developments
Change in Corporate Name
Effective August 21, 2017, the Company changed its name from “Uranium Resources, Inc.” to “Westwater Resources, Inc.” The name change was made pursuant to Section 242 of the Delaware General Corporation Law and did not affect the rights of the Company’s security holders.
Lithium Business Expansion
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 brinebegan an exploration project in Nevada. Among other things,April 2021 to investigate the resultssize and extent of both graphite and vanadium mineral concentrations at the Coosa Graphite Deposit. In April 2022, the Company completed the drilling activity related to this exploration program and expects to complete a resource model by the end of the work indicated that the depthyear 2022. The exploration program was conducted on approximately 4,000 acres out 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 underwaythe approximately 41,965 acres for a Phase 2 exploration program at the Project. Aswhich Westwater holds mineral rights. In addition, as part of the Phase 2 program, Westwater has filed a Noticeresource model, vanadium mineralization is expected to be evaluated using extractive metallurgy techniques to ascertain the economic potential, if any, of Intentthe vanadium at the Coosa Graphite Deposit. Subject to drillits own definitive feasibility study, the availability and costs of financing, and regulatory approval, the Company anticipates that the mining operations related to the Coosa Graphite Deposit will commence by the end of 2028.
17
Graphite and Vanadium as Critical Materials
Presently, the United States is almost 100% dependent on imports for battery-grade graphite, which is currently the primary anode material in the Nina claim blockLithium-ion batteries that power electric vehicles, smartphones, laptops, and store power generated from intermittent renewable energy sources. Westwater intends to process natural flake graphite into battery-grade graphite for all types of batteries including Lithium-ion batteries.
On March 31, 2022, President Biden invoked the Defense Production Act to encourage the domestic production of critical materials, including graphite, for advanced batteries for electric vehicles and clean energy storage.
On August 16, 2022, President Biden signed into law the Inflation Reduction Act (“IRA”). This legislation includes an investment of $369 billion in climate programs. The IRA provides a 10% tax credit for the costs of producing certain critical minerals, including graphite and vanadium. This credit is eligible for direct pay 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 implementedalso transferable to infill previous shallow aquifer sampling completed by Mesa Exploration Corp. in 2016. The resultant combinationunrelated taxpayers. In addition, a key provision of the new Westwater data andIRA that could indirectly benefit the existing Mesa Exploration Corp. data now provide shallow aquifer lithium concentration data on variable 1Company is the Clean Vehicle credit. Prior to 2 mile centers, depending on site accessibility, across the entiretypassage of the 13,260 acre project area.
In additionIRA, there was a limit placed on manufacturers once a manufacturer had sold at least 200,000 electric vehicles; however, the IRA eliminates the limitation on the number of electric vehicles a manufacturer can sell before the Clean Vehicle credit is phased out or eliminated. Further, the IRA sets a minimum domestic content threshold for the percentage of the value of applicable critical minerals contained in the battery of the electric vehicles. As Westwater intends to produce battery grade graphite for lithium-ion batteries to be used in electric vehicles in the United States, management believes the domestic content requirement could provide indirect future benefit 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.
Company.
Westwater has commencedand will continue to support the permitting process withefforts by the Bureaurelevant United States governmental agencies to ensure that they remain aware of Land Management (“BLM”),the importance of natural battery-grade graphite, its importance to the nation’s security, and how the Kellyton Graphite Plant and the State of Utah, to field an exploration program that optimizes project accessCoosa Graphite Deposit fit into the critical minerals-equation.
Equity Financings
Capital Raises during three and limits environmental disturbance, minimizes cost,nine months ended September 30, 2022
During the three 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,nine months ended September 30, 2022 the Company may acquire the mineral property claims on or before March 24, 2018 in exchange for 200,000 shares of WWR common stocksold 0.8 million and a 1% net smelter return royalty on the claims.
Retirement of the RCF Loan
On February 9, 2017, the Company paid $5.512.6 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, the Company entered into the CSPA with Aspire Capital to place up to $22.0 million in the aggregate of the Company’s common stock on an ongoing basis when required by the Company over a term of 30 months. The Company will control the timing and amount of sales to Aspire Capital, and at a price based on market prices at that time. As consideration for Aspire Capital entering into the purchase agreement, the Company issued 880,000 shares of its common stock to Aspire Capital. The shares of common stock subject to the CSPA were registered pursuant to the Company’s effective shelf registration statement on Form S-3.
On September 27, 2017, as a provision of the CSPA and after satisfaction of certain commencement conditions, Aspire Capital made an initial purchase of 1,428,571 shares of common stock for which the Company received proceeds of $2.0 million. There were no other sales of common stock pursuant to the CSPA 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 673,853 shares of common stock for net proceeds of $1.1 million underand $25.6 million, respectively, pursuant to the ATM Offering. AsOffering Agreement, resulting in 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 salecash balance of approximately 1.4$100.3 million shares of common stock and pre-funded warrantsat September 30, 2022.
See Note 4 to purchase approximately 3.4 million shares of common stock at $0.01 per share. Also, on February 16, 2017, the Company raised approximately $4.5 million infinancial statements for 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.information.
Closing of Sale of HRIRESULTS OF OPERATIONS
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, and a three-year installment promissory note in the amount of $5.0 million. The Company also retained a 4% NSR Royalty on the Churchrock project, which Laramide may purchase for $4.95 million during the first year following the closing of the transaction. In addition, the Company has an option to purchase Laramide’s La Sal project for $3.0 million and an option to purchase Laramide’s La Jara Mesa project in Cibola County, New Mexico for $5.0 million, both of which options expire in January 2018.
Results of Operations
Summary
Our consolidated net loss for the three months ended September 30, 20172022, was $3.0$3.5 million, or $0.12$0.07 per share, as compared with $3.7a net loss of $4.6 million, or $0.38$0.13 per share for the same period in 2016. For the three months ended September 30, 2017, the2021. The $1.1 million decrease in our consolidated net loss was due primarily to lower product development expenses, arbitration costs, and exploration expenses; offset partially by increases in general and administrative expenses, foreign exchange loss adjustment for our Euro denominated bank account and no unrealized gain on equity securities, which were sold in the fourth quarter of $0.7 million from the respective prior period was mostly the result of a decrease in interest expense of $0.7 million.2021.
Our consolidated net loss for the nine months ended September 30, 20172022 was $3.8$9.4 million, or $0.16$0.21 per share, as compared with $12.6a net loss of $13.4 million, or $1.81$0.42 per share for the same period in 2016. For2021. The $4.0 million decrease in our net loss was due primarily to decreases in product development expenses, arbitration costs, and exploration expenses; offset partially by increases in general and administrative expenses, foreign exchange loss adjustment for our Euro denominated bank account and no unrealized gain on equity securities, which were sold in the fourth quarter of 2021.
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Product Development Expenses
Product development expenses for three and 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 of2022, were $0.3 million and $0.9 million, respectively, a decrease of $0.1$1.6 million and $4.9 million, respectively, compared to the same periods in 2021. Product development costs for the three and nine months ended September 30, 2022, primarily relate to continued product development, product optimization costs, and continued sample production of battery-grade natural graphite products for evaluation by potential customers. Product development costs in the comparable periods of 2021 were primarily comprised of expenses for our definitive feasibility study related to Phase I of the Kellyton Graphite Plant, which began in February 2021 and was completed in October 2021, and our graphite processing pilot program that was completed in 2021.
Arbitration Costs
During the three months and nine months ended September 30, 2022, arbitration costs decreased by $0.6 million and $2.0 million, respectively, compared to the same periods in 2021. The decrease in arbitration costs during the first three quarters of 2022 was due to a losslower legal fees related the Company’s request for Arbitration against the Republic of Turkey. During the first three quarters of 2021, the Company incurred legal fees for the hearing on substantive issues, which was conducted during the saleweek of marketable securitiesSeptember 13-17, 2021. For further reference, see Part I, Item 3 of the Annual Report.
General and Administrative Expenses
General and administrative expenses for three and nine months ended September 30, 2022, increased by $0.4 million and $1.0 million, respectively, compared to the same periods in 2016. Offsetting these amounts was an increase in mineral property expenses of $0.7 million.2021. The increases are due primarily to increased personnel costs as the Company continues to build its team.
Mineral PropertyExploration Expenses
The following table details our mineral propertyExploration expenses for the three and nine months ended September 30, 20172022, decreased by $0.1 million 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 |
For$0.2 million compared to the same periods in 2021. The decrease for the three and nine months ended September 30, 2017, mineral property expenses increased by $0.3 million and $0.7 million, respectively, frommonth periods of 2022 compared to the correspondingsame periods during 2016. Forin 2021 is due primarily to the three month period,Company completing the drilling stage of its exploration costs increased by $0.3 million, which was partially offset by a decreaseprogram in land and maintenance costs of $0.1 million. For the nine month period, exploration costs increased by $0.5 million, Rosita restoration costs increased by $0.2 million and land and maintenance costs increased by $0.3 million, and Temrezli standby costs decreased by $0.3 million.April 2022.
General and Administrative
Other Expenses
Significant expenditures for general and administrativeOther expenses for the three and nine months ended September 30, 2017 and 2016 were:
|
| For the Three Months Ended Sep 30, |
| For the Nine Months Ended Sep 30, | ||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
|
| (thousands of dollars) | ||||||
|
|
|
|
|
|
|
|
|
Stock compensation expense |
| $ 24 |
| $ 75 |
| $ 62 |
| $ 545 |
Salaries and payroll burden |
| 614 |
| 846 |
| 1,796 |
| 2,144 |
Legal, accounting, public company expenses | 718 |
| 648 |
| 2,251 |
| 2,266 | |
Insurance and bank fees |
| 149 |
| 127 |
| 370 |
| 405 |
Consulting and professional services |
| 21 |
| 28 |
| 44 |
| 190 |
Office expenses |
| 148 |
| 126 |
| 364 |
| 392 |
Other expenses |
| 26 |
| 33 |
| 89 |
| 93 |
Total |
| $ 1,700 |
| $ 1,883 |
| $ 4,976 |
| $ 6,035 |
For the three months ended September 30, 2017, general and administrative charges decreased2022, increased by $0.2 million as compared with the corresponding period in 2016. This decrease was primarily due to decreases in salaries expense and stock compensation expense of $0.3 million, which was partially offset by an increase in legal, accounting and public company expenses of $0.1 million.
For the nine months ended September 30, 2017, general and administrative charges decreased by $1.1 million as compared with the corresponding period in 2016. This decrease was primarily due to decreases 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 million from the sale of our 76,455 shares of Energy Fuels Inc. common stock that we received as partial consideration for the sale of our Roca Honda assets during 2015. We 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.
Gain on Disposal of Uranium Properties
On January 5, 2017, we completed the sale of our wholly-owned subsidiary HRI, which holds the Churchrock and Crownpoint projects, to Laramide pursuantmillion, respectively, compared 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 millionsame periods 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.2021. 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:
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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 millionincrease for the three months ended September 30, 2017 consistedand nine month periods of accrued2022 compared to the same periods in 2021 is due primarily to foreign exchange loss adjustment of $0.6 million for our Euro denominated bank account; offset partially by interest receivableincome of $0.1$0.4 million on our investment account. A change in the Laramide Notes and amortizationEuro to USD exchange rate of $0.01 results in a foreign exchange adjustment of less than $0.1 million on the discount on the Laramide Notes.million.
Interest income
FINANCIAL POSITION
Operating Activities
Net cash used in operating activities of $0.4$8.6 million for the nine months ended September 30, 2017 consisted2022, represents a decrease of accrued interest receivable$4.5 million compared to the same period in 2021. The decrease in cash used in operating activities was due primarily to decreases in product development expenses and arbitration costs; offset partially, by a foreign exchange loss on our Euro denominated bank account and higher general and administrative expenses as discussed in Results of $0.2 million on the Laramide Notes and amortizationOperations.
19
Investing Activities
Net cash used in investing activities increased 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$31.9 million for the nine months ended September 30, 2016 consisted2022, as compared to the same period in 2021. The increase was a result of interestcapital expenditures related to the construction of $0.7 million payable to RCF, amortizationPhase I of the debt discountKellyton Graphite Plant, which began construction related activities in December 2021. The capital expenditures in the first nine months of $1.4 million2022 primarily related to earthwork and amortization of the establishment fee of $0.1 million.site grading, progress payments related to long-lead equipment items, work on underground utilities and foundations, and detailed design engineering and project management activities.
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
OperatingFinancing Activities
Net cash used in operatingprovided by financing activities was $8.9$25.6 million for the nine months ended September 30, 2017, as compared with $9.8 million for the same period in 2016. The decrease of $0.9 million in cash used is mostly2022, due to a decrease in interest expensesales of $0.3 million, an increase in interest income of $0.4 million and an aggregated decrease in operating expenses of $0.3 million.
Investing Activities
Net cash provided by investing activities was $1.9 million forcommon stock through the nine months ended September 30, 2017, as compared with $0.3 million for the same period in 2016. For the 2017 period, we received $2.0 million, net of expenses, 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 million from the sale of short-term investments.
Financing Activities
Company’s ATM Offering Agreement. Net cash provided by financing activities was $10.9 million for the same period in 2021 was $81.7 million. The $56.1 million decrease was due to lower sales activity under the 2020 Lincoln Park PA and the ATM Offering Agreement during the first nine months of 2022 compared to the same period in 2021.
LIQUIDITY AND CAPITAL RESOURCES
The Company last recorded revenues from operations in 2009. Since 2009, the Company has relied on equity financings, debt financings and asset sales to fund its operations. The Company expects to rely on debt and equity financing to fund its operations and business plan for the foreseeable future.
During the first nine months of 2022, the Company continued construction activities related to the Kellyton Graphite Plant. Subject to global supply chain disruptions and challenges, and the Company’s ability to raise the remaining capital necessary to complete Phase I of the Kellyton Graphite Plant, the Company is targeting that it will begin testing and commissioning of Phase I of the Kellyton Graphite Plant in mid-year 2023 and expects the testing and commissioning to continue in the second half of 2023. Also during the first nine months of 2022, the Company continued its exploration project to investigate the size and extent of both graphite and vanadium mineral concentrations at the Coosa Graphite Deposit. Drilling was completed in April 2022 and the Company expects to complete the resource model by the end of the year 2022.
On September 30, 2022, the Company’s cash balance was approximately $100.3 million inclusive of approximately 9.5 million Euros. The Company plans to use its Euro cash balance to pay for long lead equipment denominated in Euros. During the three and nine months ended September 30, 2017. For2022, the nine months ended September 30, 2017, net cash proceeds of $15.4Company sold 0.8 million were received upon equity financings completed in January, February and September 2017, respectively. Additionally, $1.012.6 million was received from the saleshares of common stock sold through the Company’s ATM Offering. This increase was offset by the repayment of $5.5 million outstanding under the RCF Loan.
Net cash provided by financing activities was $12.5 million for the nine months ended September 30, 2016. For the nine months ended September 30, 2016, net cash proceeds of $0.8 million and $1.2 million were received upon equity financings completed on February 4, 2016 and April 4, 2016, respectively. $4.7 million in net proceeds were received from the sale of common stock to Aspire Capital under the terms of the 2016 Common Stock Purchase Agreement and $5.8 million in net proceeds were received from the sale of common stock sold through the Company’s prior ATM program with BTIG.
Liquidity 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 of $4.2 million. The increase in working capital of $12.4 million for the nine months ended September 30, 2017 was primarily due 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$1.1 million and $2.0$25.6 million, respectively, as further described under “Recent Developments”;
•
the completion of the sale of the Company’s wholly-owned subsidiary HRIpursuant to Laramide on January 5, 2017. Upon completion, 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 whichAgreement. As of September 30, 2022, 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$21.2 million of which approximately $28.9 million isremaining available for future sales as of November 9, 2017. The Company is unable to sell shares of its common stock throughunder the ATM Offering on dates that it placesAgreement and has 9.7 million 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 limitedpursuant to the 2020 Lincoln Park PA.
Management believes the Company’s current Exchange Capcash balance is sufficient to fund its planned non-discretionary expenditures through the fourth quarter 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.
2023. The Company believes thathas in place the ATM Offering Agreement and the CSPA, along with its existing working capital balance, will provide it with2020 Lincoln Park PA, both of which could be used to support construction of Phase I of 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 assetsKellyton Graphite Plant and identify ways to reduce its cashthe Company’s planned non-discretionary 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. InStock price volatility, rising interest rates, inflation and generally uncertain economic conditions could significantly impact the event thatCompany’s ability to raise funds through equity or debt financing. Further, market conditions, including but not limited to, inflation, labor shortages and supply chain disruptions could adversely impact the planned cost and the construction and commissioning timeline of Phase I of the Kellyton Graphite Plant.
Along with evaluating the continued use of the ATM Offering Agreement and the 2020 Lincoln Park PA, the Company is considering other forms of project financing to fund the construction of the Kellyton Graphite Plant, including both Phase I and Phase II. The alternative sources of project financing could include, but are not limited to, project debt, convertible debt, or pursuing a partnership or joint venture. If funds are not available to fund the construction of Phase I
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of the Kellyton Graphite Plant under the Company’s financing facilities or through alternative financing sources, the Company expects to be able to fund its non-discretionary expenditures with the Company’s current cash balance, however in such instance, the Company may be required to materially change its planned business plans.development strategies related to the Coosa Deposit and Phase I of the Kellyton Graphite Plant, including the construction and commissioning timeline of Phase I of the Kellyton Graphite Plant, or putting the construction of Phase I on hold until additional funding is obtained.
Off- Balance Sheet Arrangements
OFF-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, access to capital, financing activities, the timing or occurrence of any future drilling or production from the Company’s properties, economic conditions, the timing or establishment of lithium resources, the abilitystrategic goals of the Company to acquire additional properties or partner with other companiesbusiness, arbitration matters, costs of Phase I of the Kellyton Graphite Plant and estimated construction and commissioning timeline and completion date, the outcome of the feasibility study and start date for the mining of the Coosa Graphite Deposit, 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”“project,” “target” 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 (both flake graphite feedstock and purified graphite products) and vanadium, and the world-wide supply and demand of graphite and vanadium; |
● | the effects, extent and timing of the entry of additional competition in the markets in which we operate; |
● | our ability to obtain contracts with customers; |
● | available sources and transportation of graphite feedstock; |
● | the ability to control costs and avoid cost and schedule overruns during the development, construction and operation of the Kellyton Graphite Plant; |
● | the ability to construct and operate the Kellyton Graphite Plant in accordance with the requirements of permits and licenses and the requirements of tax credits and other incentives; |
● | the effects of inflation, including labor shortages and supply chain disruptions; |
● | rising interest rates and the associated impact on the availability and cost of financing sources; |
● | the availability and supply of equipment and materials needed to construct the Kellyton Graphite Plant; |
● | stock price volatility; |
● | government regulation of the mining and processing industries in the United States; |
● | unanticipated geological, processing, regulatory and legal or other problems we may encounter; |
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Table 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;
● | the results of our exploration activities, and the possibility that future exploration results may be materially less promising than initial exploration results; |
● | any graphite or vanadium discoveries not being in high enough concentration to make it economic to extract the metals; |
● | our ability to finance growth plans; |
● | the potential effects of the continued COVID-19 pandemic; |
● | currently pending or new litigation or arbitration; and |
● | our ability to maintain and timely receive mining and other permits from regulatory agencies. |
•
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.
as well asIn addition, other factors are described elsewhere in this Quarterly Report on Form 10-Q, our 2016 Annual Report, on Form 10-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) and 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 at a reasonable assurance level as of September 30, 2017.2022.
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 nine months ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
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PART II - OTHER INFORMATION
Information regarding reportable legal proceedings is contained in Part I, Item 3.,3, “Legal Proceedings,” in our Annual Report on Form 10-K for the year ended December 31, 2016. The following disclosure updatesReport. There have been no material changes to the legal proceeding set forth under the headings “Dispute Over Kleberg Settlement Agreement” and “TCEQ Adjudicatory Proceeding for the Kingsville Facility”proceedings previously disclosed in the 2016 Form 10-K to reflect developments during the nine months ended September 30, 2017 and should be read together with the corresponding disclosure in the 2016 Form 10-K.Annual Report.
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 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 matter is fully resolved.
Other than as set forth below, there have beenAn investment in our common stock involves various risks. When considering an investment in us, careful consideration should be given to the risk factors discussed in “Risk Factors” in Item 1A in our Annual Report. There are no material changes from thoseto the risk factors set forthdescribed in our Annual Report, on Form 10-K forexcept as follows:
Our business could be negatively impacted by inflationary pressures, which may result in increased costs of operations and negatively impact the year ended December 31, 2016.
Our foreign operations subject us to a number of significant regulatory, legal and political risks that may have a material adverse impact on our prospects, projects, financial condition and results of operations.
Our acquisition of Anatolia Energy significantly increased the importance of foreign operations to our future prospects and growth, and our foreign operations expose us to a number of risks. These risks include such things as:
•
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 organizations or other third parties;
•
war, crime, terrorism, sabotage, civil unrest and uncertain political and economic environments;
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deterioration in relations between the United States and the foreign jurisdictions in which we operate;
•
renegotiation, nullification or forced modification of existing contracts, licenses, permits, approvals, concessions or the like;
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corruption;
•
challenges in overseeing employees and contractors, including the risk that our employees and independent contractors may engage in unauthorized or illegal activity;
•
exchange and currency controls and fluctuations;
•
limitations on foreign exchange and repatriation of earnings;
•
restrictions on mineral production and price controls;
•
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 could adversely affect our ability to operate in Turkey.
In addition, we face the numerous risks as a new acquirer that our expectations may not be realized and that we may encounter unexpected problems. We continue to review Anatolia Energy’s operations in Turkey, including compliance with local laws and applicable permitting requirements. In the event we determine material noncompliance, we could face fines or restrictions on our ability to develop our projects in Turkey,securities markets generally, which could have a material adverse effect on our prospects, projects,ability to access capital.
The U.S. has experienced rising inflation in 2022 and U.S. inflation is currently at a 40-year high. A sustained increase in inflation may continue to raise our costs for labor, services, and materials. Further, our suppliers face inflationary impacts such as the tight labor market and supply chain disruptions, that could increase the costs to construct and commission the Kellyton Graphite Plant, explore and develop the Coosa Graphite Deposit, and our day to day operations. The rate and scope of these various inflationary factors may increase our operating costs materially, which may not be readily recoverable, and have an adverse effect on our costs, operating margins, results of operations and financial condition.
Further, sustained inflation has caused and may continue to cause the Federal Reserve Board to raise the target for the federal funds rate, which correspondingly increases interest rates. Increased interest rates could have a negative effect on the securities markets generally which may, in turn, have a material adverse effect on the Company’s ability to access capital, particularly debt financing, and the market price of equity securities, including the Company’s common stock, which usually decrease as interest rates rise. To the extent that we access debt financing or issue variable interest rate instruments in the future, any increase in interest rates would increase our cost of borrowing and our interest expense.
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability, an ongoing military conflict between Russia and Ukraine, and record inflation. Our business, financial condition and results of operations.operations could be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine, geopolitical tensions, or record inflation.
Further, regulatory, permitting
In February of 2022, Russian military forces invaded Ukraine, and business arrangementssustained conflict and disruption in foreign jurisdictions are subjectthe region is likely. Although the length, impact and outcome of the ongoing military conflict in Ukraine is highly unpredictable, this conflict could lead to extensive laws and regulations intended to prevent improper payments, fraud, kickbacks, self-dealingsignificant market and other abusive practices. These lawsdisruptions, including significant volatility in commodity prices and regulations may restrictsupply of energy resources, instability in financial markets, higher inflation, supply chain interruptions, political and social instability, changes in consumer or prohibit a wide range of business arrangements thatpurchaser preferences as well as increase in cyberattacks and espionage. We are commonplace in such foreign jurisdictions,continuing to monitor the conflict 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 significantassessing its potential impact on our business.
The extent and duration of the military action or future escalation of such hostilities, the extent and impact of existing and future sanctions, market disruptions and volatility, and the result of any diplomatic negotiations cannot be predicted. While we expect any direct impacts to our business to be limited, the indirect impacts on the economy and on the mining industry and other industries in general could negatively affect our business and may make it more difficult for us to raise equity or debt financing. In addition, the impact of other current macro-economic factors on our business, which may be exacerbated by the war in Ukraine - including the impositioninflation, supply chain constraints and geopolitical events - is likely to have an adverse effect on our business
.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSPROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
None.
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Exhibit Index
| ||
Exhibit
| Description | |
3.1 | | |
| | |
3.2 | | |
|
| |
| | |
| |
|
| | |
10.2* | | |
| | |
31.1 | | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | |
31.2 | | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | |
32.1 | | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| | |
32.2 | | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| | |
101.INS: | | Inline XBRL Instance Document |
| | |
101.SCH: | | Inline XBRL Taxonomy Extension Schema Document |
| | |
101.CAL: | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| | |
101.DEF: | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| | |
101.LAB: | | Inline XBRL Taxonomy Extension Label Linkbase Document |
| | |
101.PRE: | | XBRL Taxonomy Extension Presentation Linkbase Document |
| | |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Indicates management contract or compensatory plan or arrangement.
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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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