What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-05 compared with 2020-05-13 · 217 added, 408 removed, 334 unchanged (65% of the section changed)

13 unchanged sentences

Restricted cash

LIABILITIES AND STOCKHOLDERS’

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

3 unchanged sentences

Operating lease liability - current

Notes payable - current

Total Current Liabilities

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Operating lease liability, net of current

Notes payable, net of current

Total Liabilities

Commitments and Contingencies

Stockholders’

Stockholders’ Equity:

Common stock, 100,000,000 shares authorized, $.001 par value;

Issued shares –

4,762,794 and 3,339,541 respectively

Issued shares – 6,664,976 and 3,339,541 respectively

Outstanding shares - 6,664,815 and 3,339,380 respectively

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Treasury stock (161 and 161 shares, respectively), at cost

Total Stockholders’

Total Liabilities and Stockholders’

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

The accompanying notes are an integral part of these condensed consolidated financial statements.

3 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Operating Expenses:

Mineral property expenses

Product development expenses

General and administrative expenses

8 unchanged sentences

Total other income (expense)

Other Comprehensive Income (Loss)

Other Comprehensive Income

Transfer to realized loss upon sale of available-for-sale securities

6 unchanged sentences

(expressed in thousands of dollars)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Operating Activities:

6 unchanged sentences

Stock compensation expense

Gain on disposal of fixed assets

Loss on sale of marketable securities

Increase in prepaids and other assets

Increase in payables and accrued liabilities

Effect of changes in operating working capital items:

Decrease/(Increase) in prepaids and other assets

(Decrease)/Increase in payables and accrued liabilities

Net Cash Used In Operating Activities

3 unchanged sentences

Proceeds from note receivable

Net Cash Provided By Investing Activities

Capital expenditures

Net Cash (Used In)/Provided By Investing Activities

Cash Flows From Financing Activities:

Proceeds from note payable

Issuance of common stock, net

1 unchanged sentence

Net Cash Provided By Financing Activities

Net decrease in cash, cash equivalents and restricted cash

Net increase/(decrease) in cash, cash equivalents and restricted cash

Cash, Cash Equivalents and Restricted Cash, Beginning of Period

2 unchanged sentences

Supplemental Non-Cash Information with Respect to Investing and Financing Activities:

Securities received for payment of notes receivable –

Securities received for payment of notes receivable – Laramide

Total Non-Cash Investing and Financing Activities for the Period

1 unchanged sentence

WESTWATER RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(expressed in thousands of dollars, except share amounts)

Comprehensive

Six months ended June 30, 2020

Income (Loss)

Balances, December 31, 2019

Balances, January 1, 2020

Common stock and common stock purchase warrants issued, net of issuance costs

Stock compensation expense and related share issuances, net of shares withheld for payment of taxes

Balances, June 30, 2020

Three months ended June 30, 2020

Balances, March 31, 2020

Balances, December 31, 2018

Common stock issued, net of issuance costs

Stock compensation expense and related share issuances, net of shares withheld for payment of taxes

Balances, June 30, 2020

Comprehensive

Six months ended June 30, 2019

Paid-In Capital

Income (Loss)

Treasury Stock

Balances, January 1, 2019

Common stock issued, net of issuance costs

Stock compensation expense and related share issuances, net of shares withheld for the payment of taxes

Minimum withholding taxes on net share settlements of equity awards

Transfer to realized loss upon sale of available for sale securities

Balances, June 30, 2019

Three months ended June 30, 2019

Balances, March 31, 2019

Common stock issued, net of issuance costs

Stock compensation expense and related share issuances, net of shares withheld for the payment of taxes

Minimum withholding taxes on net share settlements of equity awards

Balances, June 30, 2019

The accompanying notes are an integral part of these condensed consolidated financial statements.

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The accompanying unaudited condensed consolidated financial statements for Westwater Resources, Inc.

(the “Company,”

“we,”

“us,”

“WWR”

or “Westwater”), 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.

(the “Company,” “we,” “us,” “WWR” or “Westwater”), 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 2019 Annual Report on Form 10‑K.

The accompanying statements should be read in conjunction with the audited financial statements included in Westwater Resources, Inc.’s 2019 Annual Report on Form 10-K.

In the opinion of management, all adjustments (which are of a normal, recurring nature) considered necessary for a fair presentation have been included.

Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for any other period including the full year ending December 31, 2020.

Operating results for the six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for any other period including the full year ending December 31, 2020.

Significant Accounting Policies

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Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU 2018‑13, “Fair Value Measurement (ASC 820):

Disclosure Framework –

Changes to the Disclosure Requirements for Fair Value Measurement”.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (ASC 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement”.

This update modifies the disclosure requirements for fair value measurements by removing, modifying or adding disclosures.

The Company adopted this pronouncement effective January 1, 2020.

The adoption of ASU 2018-13 has not had a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, “Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740)”

which is intended to simplify various aspects related to accounting for income taxes.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740)” which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

ASU 2019-12 will be effective for interim and annual periods beginning after December 15, 2020.

In June 2016, the FASB issued ASU 2016‑13, “Measurement of Credit Losses on Financial Instruments”.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments”.

ASU 2016-13 will change how companies account for credit losses for most financial assets and certain other instruments.

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ASU 2016-13 will be effective for interim and annual periods beginning after January 1, 2023.

In November 2018, the FASB issued ASU 2018‑19, “Codification Improvements to ASC 326, Financial Instruments –

Credit Losses.”

ASU 2016‑13 introduced an expected credit loss methodology for the impairment of financial assets measured at amortized cost basis.

In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to ASC 326, Financial Instruments – Credit Losses.” ASU 2016-13 introduced an expected credit loss methodology for the impairment of financial assets measured at amortized cost basis.

That methodology replaces the probable, incurred loss model for those assets.

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The following table provides a reconciliation of cash, cash equivalents and restricted cash as reported within the consolidated balance sheet that sum to the total of the same such amounts shown in the statement of cash flows.

As of March 31,

As of June 30,

(thousands of dollars)

4 unchanged sentences

Restricted cash consists of money market accounts.

The bonds are collateralized performance bonds required for future restoration and reclamation obligations related to the Company’s South Texas production properties.

The bonds are collateralized performance bonds required for future restoration and reclamation obligations primarily related to the Company’s South Texas production properties.

LIQUIDITY AND GOING CONCERN

The interim Condensed Consolidated Financial Statements of the Company have been prepared on a “going concern”

basis, which means that the continuation of the Company is presumed even though events and conditions exist that, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern because it is possible that the Company will be required to adversely change its current business plan or may be unable to meet its obligations as they become due within one year after the date that these financial statements were issued.

The interim Condensed Consolidated Financial Statements of the Company have been prepared on a “going concern” basis, which means that the continuation of the Company is presumed even though events and conditions exist that, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern because it is possible that the Company will be required to adversely change its current business plan or may be unable to meet its obligations as they become due within one year after the date that these financial statements were issued.

The Company last recorded revenues from operations in 2009 and expects to continue to incur losses as a result of costs and expenses related to maintaining its properties and general and administrative expenses.

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The Company will also continue to identify ways to reduce its cash expenditures.

The Company’s current business plan requires working capital to fund non-discretionary expenditures for uranium reclamation activities, mineral property holding costs, business development costs and administrative costs.

The Company intends to pursue project financing to support execution of the graphite business plan, including discretionary capital expenditures associated with graphite battery-material product development, construction of pilot plant facilities and construction of commercial production facilities.

The Company’s current lithium business plan will be funded by working capital;

The Company’s current business plan requires working capital to fund non-discretionary expenditures for uranium reclamation activities, mineral property holding costs, early stage graphite battery-material product development costs and administrative costs.

The Company is pursuing project financing to support execution of the graphite business plan, including discretionary capital expenditures associated with ongoing graphite battery-material product development costs, construction of pilot plant facilities and construction of commercial production facilities.

The Company’s current lithium business plan will be funded by working capital;

however, the Company is pursuing project financing including possible joint venture partners to fund discretionary greenfield exploration activities.

At March 31, 2020 the Company’s cash balances were $0.9 million and the Company had a working capital deficit balance of $2.2 million.

The Company’s cash balance at May 8, 2020 is $0.5 million.

Subsequent to May 8, 2020, the Company expects to fund operations as follows:

The new Stock Purchase Agreement with Lincoln Park Capital, LLC., approved by the Company’s shareholders at the annual shareholders meeting on April 28, 2020, whereby the Company may place up to $12.0 million in the aggregate of the Company's common stock on an ongoing basis when required by the Company over a term of 24-months after execution of the agreement.

At June 30, 2020 the Company’s cash balances were $2.3 million and the Company had a working capital deficit balance of $1.0 million.

The Company’s cash balance at July 31, 2020 is $2.9 million.

Subsequent to July 31, 2020, the Company expects to fund operations as follows:

● The Purchase Agreement with Lincoln Park Capital, LLC (“Lincoln Park”) dated as of May 21, 2020 and as amended on May 29, 2020 (the “2020 Purchase Agreement”), the issuance of shares pursuant to which was approved by the Company’s shareholders at the annual shareholders meeting on April 28, 2020.

Pursuant to the 2020 Purchase Agreement, the Company may place up to $12.0 million in the aggregate of the Company's

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Controlled Equity Offering Sales Agreement (the “ATM Offering Agreement”) with Cantor Fitzgerald & Co.

The Company currently has registered the offer and sale from time to time of shares of its common stock having an aggregate offering price of up to $3.1 million.

As of May 8, 2020, $2.8 million registered shares are available for future sales under the ATM Offering Agreement.

The loan proceeds in the amount of $0.3 million received from the Paycheck Protection Program (“PPP”) by URI, Inc., a wholly owned subsidiary of WWR, on May 4, 2020.

The Company plans to use the proceeds from this loan for payroll and benefits costs for its South Texas operations, which are eligible expenses in accordance with the PPP.

Under the terms of the promissory note executed by URI, principal and accrued interest are forgivable after eight weeks as long as the proceeds are used for eligible purposes.

Any unforgiven portion of the loan is payable over two years at an interest rate of 1% with a deferral of payments for the first six months.

Other debt and equity financings and asset sales.

common stock on an ongoing basis when required by the Company over a term of 24-months ending in May 2022.

As of July 31, 2020, the Company has 722,279 registered shares for resale by Lincoln Park on a current Form S-1 and $9.7 million remaining sales capacity under the 2020 Purchase Agreement, subject to periodic registration of shares on Form S-1.

● The Controlled Equity Offering Sales Agreement (the “ATM Offering Agreement”) with Cantor Fitzgerald & Co.

(“Cantor”) which currently has $19.5 million remaining sales capacity, subject to periodic registration of shares on Form S-3.

The Company is currently eligible to, and intends to, register the sale of additional shares under the agreement on Form S-3 pursuant to the SEC’s shelf registration rules.

● Other possible debt and equity financings and asset sales.

While the Company has been successful in the past in raising funds through equity and debt financings as well as through the sale of non-core assets, no assurance can be given that additional financing will be available to it in amounts sufficient to meet its needs, or on terms acceptable to the Company.

Stock price volatility and uncertain economic conditions caused by the recent Covid-19 pandemic could significantly impact the Company’s ability to raise funds through equity financing .

Stock price volatility and uncertain economic conditions caused by the recent Covid-19 pandemic could significantly impact the Company’s ability to raise funds through equity financing.

In the event that we are unable to raise sufficient additional funds, we may be required to delay, reduce or severely curtail our operations or otherwise impede our on-going business efforts, which could have a material adverse effect on our business, operating results, financial condition, long-term prospects and ability to continue as a viable business.

4 unchanged sentences

(HRI) in January 2017, the Company received a promissory note in the amount of $5.0 million, secured by a mortgage over the Churchrock and Crownpoint properties owned by Laramide Resources Ltd.

(“Laramide”).

The note had a three-year term and carried an initial interest rate of 5%.

2 unchanged sentences

Interest was payable on a quarterly basis during the final year.

Laramide had the right to satisfy up to half of the principal payments by delivering shares of its common stock to the Company, which shares were valued by reference to the volume weighted average price (“VWAP”) for Laramide’s common stock for the 20 trading days before their respective anniversaries of the initial issuance date in January.

The fair value of this note receivable was determined using the present value of the future cash receipts discounted at a market rate of 9.5%.

2 unchanged sentences

These share payments represented the initial consideration from the January 2017 sale of HRI and two note installments in January 2018 and January 2019.

The first note installment in the amount of $1.5 million in January 2018, consisted of $750,000 in cash and the issuance of 1,982,483 of Laramide’s common shares.

The second note installment in the amount of $1.5 million in January 2019, consisted of $750,000 in cash and the issuance of 2,483,034 of Laramide’s common shares.

The first note installment in the amount of $1.5 million in January 2018, consisted of $750,000 in cash and the issuance of 1,982,483 of Laramide’s common shares.

The second note installment in the amount of $1.5 million in January 2019, consisted of $750,000 in cash and the issuance of 2,483,034 of Laramide’s common shares.

Additionally, Laramide made interest payments in the amount of $96,022 in cash during the year ending December 31, 2019.

On March 25, 2019, the Company sold the third tranche of 2,483,034 Laramide common shares and 2,218,133 Laramide warrants resulting in net proceeds of $0.5 million and a net loss on sale of marketable securities of $0.7 million.

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SALE OF URANIUM ASSETS

1 unchanged sentence

and Uranium Royalty Corp.

(together “URC”) for the sale of four of its royalty interests on future uranium production from mineral properties located in South Dakota, Wyoming and New Mexico, as well as the remaining amount of the Laramide promissory note in the amount of $2.0 million as discussed in Note 3 above, for $2.75 million, including $0.5 million paid at signing.

On June 28, 2019, Westwater and URC entered into an Amendment to the Asset Purchase Agreement.

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● 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.

● 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.

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The Company believes that the fair value of its assets and liabilities approximate their reported carrying amounts.

The following table presents information about assets that were recorded at fair value on a recurring and non-recurring basis as of March 31, 2020 and December 31, 2019 and indicate the fair value hierarchy.

March 31, 2020

The following table presents information about assets that were recorded at fair value on a recurring and non-recurring basis as of June 30, 2020 and December 31, 2019 and indicate the fair value hierarchy.

June 30, 2020

(thousands of dollars)

Current Assets

Short-term available-for-sale investments

Total current assets recorded at fair value

Non-current Assets

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(thousands of dollars)

Current Assets

Short-term available-for-sale investments

Total current assets recorded at fair value

Non-current Assets

1 unchanged sentence

Total non-current assets recorded at fair value

Assets that are measured on a recurring basis include the Company’s marketable securities and restricted cash.

PROPERTY, PLANT AND EQUIPMENT

Net Book Value of Property, Plant and Equipment at March 31, 2020

Net Book Value of Property, Plant and Equipment at June 30, 2020

(thousands of dollars)

8 unchanged sentences

The Company reviews and evaluates its long-lived assets for impairment on an annual basis or more frequently when events or changes in circumstances indicate that the related carrying amounts may not be recoverable.

For the three months ended March 31, 2020 no events or changes in circumstance, including any affects from the COVID-19 pandemic, are believed to have impacted recoverability of the Company’s long-lived assets.

For the six months ended June 30, 2020 no events or changes in circumstance, including any affects from the COVID-19 pandemic, are believed to have impacted recoverability of the Company’s long-lived assets.

Accordingly, it was determined that no interim impairment was necessary.

2 unchanged sentences

MINERAL PROPERTY EXPENDITURES

Mineral property expenditures by geographical location for the three months ended March 31, 2020 and 2019 are as follows:

For the Three Months Ended March 31,

Mineral property expenditures by geographical location for the three and six months ended June 30, 2020 and 2019 are as follows:

For the Three Months Ended June 30,

For the Six Months Ended June 30,

(thousands of dollars)

2 unchanged sentences

Vasquez project, Texas

Other projects, Texas

Total Texas projects

Cebolleta project, New Mexico

Juan Tafoya project, New Mexico

Total New Mexico projects

Columbus Basin project, Nevada

Total Nevada projects

Sal Rica project, Utah

12 unchanged sentences

Non-current portion

The Company is currently performing plugging and surface reclamation activities at its Kingsville Dome, Rosita and Vasquez projects located in Kleberg and Duval Counties in Texas.

The Company’s current liability of $1.1 million consists of the estimated costs associated with current reclamation activities through March 2021 at the Company’s Kingsville Dome, Rosita and Vasquez projects.

The Company is currently performing plugging and surface reclamation activities at its Rosita and Vasquez projects located in Duval County, Texas.

The Company’s current liability of $0.9 million consists of the estimated costs associated with current reclamation activities through June 2021 at the Company’s Kingsville Dome, Rosita and Vasquez projects.

WESTWATER RESOURCES, INC.

1 unchanged sentence

Common Stock Issued, Net of Issuance Costs

Purchase Agreement (“PA”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”)

On June 6, 2019, the Company entered into the PA with Lincoln Park to place up to $10.0 million in the aggregate of the Company’s common stock on an ongoing basis when required by the Company over a term of 24 months.

Westwater will control the timing and amount of any sales to Lincoln Park, and Lincoln Park is obligated to make purchases in accordance with the PA.

Any common stock that is sold to Lincoln Park will occur at a purchase price that is based on an agreed upon fixed discount to the Company’s prevailing market prices at the time of each sale and with no upper limits to the price Lincoln Park may pay to purchase common stock.

The PA may be terminated by Westwater at any time, in its sole discretion, without any additional cost or penalty.

The PA specifically provides that the Company may not issue or sell any shares of its common stock under the PA if such issuance or sale would breach any applicable rules of The Nasdaq Capital Market.

In particular, Nasdaq Listing Rule 5635(d) provides that the Company may not issue or sell more than 19.99% of the shares of the Company’s common stock outstanding immediately prior to the execution of the PA without shareholder approval.

On August 6, 2019 the Company conducted a Special Meeting of Shareholders whereby the Company received such approval to sell up to 3,200,000 shares of common stock under the PA.

2020 Purchase Agreement with Lincoln Park

On May 21, 2020, the Company entered into the 2020 Purchase Agreement, as amended on May 29, 2020, with Lincoln Park to place up to $12.0 million in the aggregate of the Company’s common stock on an ongoing basis when required by the Company over a term of 24 months.

Westwater will control the timing and amount of any sales to Lincoln Park, and Lincoln Park is obligated to make purchases in accordance with the 2020 Purchase Agreement.

The 2020 Purchase Agreement may be terminated by Westwater at any time, in its sole discretion, without any additional cost or penalty.

The 2020 Purchase Agreement specifically provides that the Company may not issue or sell any shares of its common stock under the 2020 Purchase Agreement if such issuance or sale would breach any applicable rules of The Nasdaq Capital Market.

The Company received such shareholder approval to sell up to 8.0 million shares of common stock under the 2020 Purchase Agreement at its Annual Shareholders Meeting conducted on April 28, 2020.

Lincoln Park has no right to require the Company to sell any shares of common stock to Lincoln Park, but Lincoln Park is obligated to make purchases as the Company directs, subject to certain conditions.

In all instances, the Company may not sell shares of its common stock to Lincoln Park under the PA if it would result in Lincoln Park beneficially owning more than 9.99% of its common stock.

Following effectiveness of a registration statement on Form S-1 relating to the resale of the shares subject to the PA on June 18, 2019, the Company began selling shares of its common stock to Lincoln Park under the terms of the PA.

On September 11, 2019, October 28, 2019 and February 28, 2020 we filed subsequent registration statements on Form S-1, which were declared effective on September 20, 2019, November 7, 2019 and March 6, 2020, respectively, registering for resale additional shares under the PA.

Inception-to-date through March 31, 2020, the Company has sold 2,576,764 shares of common stock for gross proceeds of $7.1 million.

In April 2020, the Company sold the remaining 623,236 registered shares of common stock for gross proceeds of $0.6 million.

Stock Purchase Agreement with Lincoln Park Capital Fund, LLC.

("Lincoln Park")

In all instances, the Company may not sell shares of its common stock to Lincoln Park under the 2020 Purchase Agreement if it would result in Lincoln Park beneficially owning more than 9.99% of its common stock.

As an initial purchase on May 21, 2020, Lincoln Park bought $250,000 worth of Common Stock of the Company at a price of $1.2989 per share.

The Company issued 156,250 shares of Common Stock to Lincoln Park as consideration for its commitment to purchase shares of Common Stock under the 2020 Purchase Agreement.

Also on May 21, 2020, the Company entered into a registration rights agreement with Lincoln Park pursuant to which the Company filed a registration statement on Form S-1 with the Securities and Exchange Commission, which was declared effective on June 26, 2020 relating to the resale of an initial tranche of 1,971,000 shares subject to the 2020 Purchase Agreement.

As of June 30, 2020, the Company has sold 192,471 shares of common stock for gross proceeds of $250,000 under the 2020 Purchase Agreement and through July 31, 2020, the Company has sold 1.1 million shares of common stock for gross proceeds of $2.3 million.

2019 Purchase Agreement (“2019 Purchase Agreement”) with Lincoln Park

On June 6, 2019, the Company entered into the 2019 Purchase Agreement with Lincoln Park to place up to $10.0 million in the aggregate of the Company’s common stock on an ongoing basis when required by the Company over a term of 24 months.

On August 6, 2019 the Company conducted a Special Meeting of Shareholders whereby the Company received such approval to sell up to 3.2 million shares of common stock under the 2019 Purchase Agreement.

Following effectiveness of a registration statement on Form S-1 relating to the resale of the shares subject to the 2019 Purchase Agreement on June 18, 2019, the Company began selling shares of its common stock to Lincoln Park under the terms of the 2019 Purchase Agreement.

On September 11, 2019, October 28, 2019 and February 28, 2020 the Company filed subsequent registration statements on Form S-1, which were declared effective on September 20, 2019, November 7, 2019 and March 6, 2020, respectively, registering for resale additional shares under the 2019 Purchase Agreement.

During the quarter ended June 30, 2020 the Company sold 623,236 shares of common stock for gross proceeds of $593,356.

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Purchase Agreement was terminated in May 2020 with historical sales of 3.2 million shares of common stock for gross proceeds of $7.7 million.

Securities Purchase Agreement with Lincoln Park

On May 24, 2019, Westwater entered into a Securities Purchase Agreement, as amended by Amendment No.

1 thereto dated as of May 30, 2019 (as so amended, the "Securities Purchase Agreement"), with Lincoln Park, pursuant to which the Company agreed to issue and sell to Lincoln Park, and Lincoln Park agreed to purchase from the Company (i) 104,294 shares of the Company's common stock and (ii) warrants to initially purchase an aggregate of up to 182,515 shares of common stock, at an exercise price of $5.062 per share.

1 thereto dated as of May 30, 2019, with Lincoln Park, pursuant to which the Company agreed to issue and sell to Lincoln Park, and Lincoln Park agreed to purchase from the Company (i) 104,294 shares of the Company's common stock and (ii) warrants to initially purchase an aggregate of up to 182,515 shares of common stock, at an exercise price of $5.062 per share.

On May 30, 2019, the Company issued and sold the common shares and the warrants to Lincoln Park and received aggregate gross proceeds before expenses of $550,751.

The warrants became exercisable on November 30, 2019 and may be exercised at any time thereafter until November 30, 2024.

Controlled Equity Offering Sales Agreement with Cantor Fitzgerald (“Cantor”)

On April 14, 2017, the Company entered into the "ATM Offering Agreement”

with Cantor acting as sales agent.

Under the ATM Offering Agreement, the Company may from time to time sell shares of its common stock in “at-the-market”

offerings and $3.1 million of which shares were registered for sale under a registration statement on Form S‑3, which was declared effective on April 13, 2020.

ATM Offering Agreement with Cantor

On April 14, 2017, the Company entered into the ATM Offering Agreement with Cantor acting as sales agent.

Under the ATM Offering Agreement, the Company may from time to time sell shares of its common stock in “at-the-market” offerings and $3.1 million of which shares were registered for sale under a registration statement on Form S-3, which was declared effective on April 13, 2020.

The Company pays Cantor a commission of up to 2.5% of the gross proceeds from the sale of any shares pursuant to the ATM Offering Agreement.

As of March 31, 2020, the Company had

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

sold 1,029,197 shares of common stock for net proceeds of $7.2 million under the ATM Offering Agreement, of which 540,512 shares of common stock and net proceeds of $1.1 million was sold in the three months ended March 31, 2020.

The following table summarizes warrants outstanding and changes for the three-month periods ending March 31, 2020 and 2019:

March 31, 2020

March 31, 2019

As of June 30, 2020, the Company had sold 1,959,422 shares of common stock for net proceeds of $10.2 million under the ATM Offering Agreement, of which 930,225 shares of common stock and net proceeds of $3.0 million was sold in the three months ended June 30, 2020.

As a result, the Company has approximately $19.5 million remaining available for future sales under the ATM Offering, but had no shares of common stock registered for sale under the ATM Offering Agreement as of June 30, 2020.

The following table summarizes warrants outstanding and changes for the three-month periods ending June 30, 2020 and 2019:

June 30, 2020

June 30, 2019

Warrants outstanding at beginning of period

1 unchanged sentence

STOCK-BASED COMPENSATION

Stock-based compensation awards consist of stock options, restricted stock units and bonus shares issued under the Company’s equity incentive plans which include:

the 2013 Omnibus Incentive Plan (the “2013 Plan") and the Amended and Restated 2004 Directors’

Stock Option and Restricted Stock Plan (the “2004 Directors’

Upon approval of the 2013 Plan by the Company’s stockholders on June 4, 2013, the Company’s authority to grant new awards under all plans other than the 2013 Plan was terminated.

On July 18, 2017, April 18, 2019 and April 28, 2020, the Company’s stockholders approved amendments to the 2013 Plan to increase the authorized number of shares of common stock available and reserved for issuance under the 2013 Plan by 20,000 shares, 66,000 and 350,000 shares, respectively and in 2017 re-approve the material terms of the performance goals under the plan.

Under the 2013 Plan, the Company may grant awards of stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), unrestricted stock, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards and cash bonus awards to eligible persons.

The maximum number of the Company’s common stock that may be reserved for issuance under the 2013 Plan is currently 416,278 shares of common stock, plus unissued shares under the prior plans.

Equity awards under the 2013 Plan are granted from time to time at the discretion of the Compensation Committee of the Board (the “Committee”), with vesting periods and other terms as determined by the Committee with a maximum term of 10 years.

Stock-based compensation awards consist of stock options, restricted stock units and bonus shares issued under the Company’s equity incentive plans which include:

the 2013 Omnibus Incentive Plan (the “2013 Plan") and the Amended and Restated 2004 Directors’ Stock Option and Restricted Stock Plan (the “2004 Directors’ 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.

Under the 2013 Plan, the Company may grant awards of stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), unrestricted stock,

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards and cash bonus awards to eligible persons.

The maximum number of the Company’s common stock that may be reserved for issuance under the 2013 Plan is currently 416,278 shares of common stock, plus unissued shares under the prior plans.

The 2013 Plan is administered by the Committee, which can delegate the administration to the Board, other Committees or to such other officers and employees of the Company as designated by the Committee and permitted by the 2013 Plan.

As of March 31, 2020, 45,886 shares were available for future issuances under the 2013 Plan.

For the three months ending March 31, 2019 the Company recorded stock-based compensation expense of $7,719.

No stock-based compensation expense was recorded for the three months ending March 31, 2020.

As of June 30, 2020, 58,586 shares were available for future issuances under the 2013 Plan.

For the six months ending June 30, 2020 and 2019, the Company recorded stock-based compensation expense of $27,771 and $15,424, respectively.

Stock compensation expense is recorded in general and administrative expenses.

In addition to the plans above, upon closing of the Company’s acquisition of Alabama Graphite in April 2018, the Company issued 50,168 replacement options and warrants to the option and warrant holders of Alabama Graphite.

The number of replacement options and warrants shares was determined using the arrangement exchange rate of 0.0016.

1 unchanged sentence

The options and warrant shares were issued with the same terms and conditions as were applicable prior to the acquisition of Alabama Graphite.

As of March 31, 2020, there were 3,312 replacement options and 11,440 replacement warrants outstanding.

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2020, there were 2,840 replacement options outstanding but all replacement warrants have expired.

Stock Options

The following table summarizes stock options outstanding and changes for the three-month periods ending March 31, 2020 and 2019:

March 31, 2020

March 31, 2019

The following table summarizes stock options outstanding and changes for the six-month periods ending June 30, 2020 and 2019:

June 30, 2020

June 30, 2019

Stock options outstanding at beginning of period

2 unchanged sentences

Stock options exercisable at end of period

The following table summarizes stock options outstanding and exercisable by stock option plan at March 31, 2020:

The following table summarizes stock options outstanding and exercisable by stock option plan at June 30, 2020:

Outstanding Stock Options

5 unchanged sentences

Exercise Price

2004 Directors’

2004 Directors’ Plan

Replacement Options-Alabama Graphite

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 three-month periods ended March 31, 2020 and 2019:

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 following table summarizes RSU activity for the three-month periods ended June 30, 2020 and 2019:

Unvested RSUs at beginning of period

Unvested RSUs at end of period

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

EARNINGS PER SHARE

Basic and diluted loss per common share have been calculated based on the weighted-average shares outstanding during the period.

Additionally, potentially dilutive shares of 234,191 were excluded from the calculation of earnings per share because the effect on the basic income per share would be anti-dilutive for the three months ended March 31, 2020.

Additionally, potentially dilutive shares of 559,576 were excluded from the calculation of earnings per share because the effect on the basic income per share would be anti-dilutive for the six months ended June 30, 2020.

COMMITMENTS AND CONTINGENCIES

The Company’s uranium recovery operations are subject to federal and state regulations for the protection of the environment, including water quality.

Future closure and reclamation costs are provided for as each pound of uranium is produced on a unit-of-production basis.

4 unchanged sentences

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.

The Company’s lease portfolio consists of operating leases for corporate offices, storage space and equipment.

The leases have remaining lease terms of 1 to 3.5 years, one of which includes an option to extend the corporate office lease for 3 years.

1 unchanged sentence

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.

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company is party to several leases that are for under one year in length.

5 unchanged sentences

Right-of-use assets and lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term using a discount rate of 9.5%.

This rate is the Company’s current estimated incremental borrowing rate.

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

This rate is the Company’s current estimated incremental borrowing rate.

The components of lease expense are as follows:

1 unchanged sentence

Operating lease cost

Supplemental cash flow information related to the Company’s operating leases is as follows:

(thousands of dollars)

March 31, 2020

March 31, 2019

June 30, 2020

June 30, 2019

Cash paid for amounts included in lease liabilities:

2 unchanged sentences

Operating leases

Supplemental balance sheet information related to the Company’s operating leases is as follows:

(thousands of dollars, except lease term and discount rate)

2 unchanged sentences

Current portion of lease liabilities

Operating lease liabilities –

long term portion

Operating lease liabilities – long term portion

Total operating lease liabilities

Weighted-average remaining lease term and discount rate for the Company’s operating leases are as follows:

Weighted Average Remaining Lease Term (in years)

Discount Rate

Weighted-average remaining lease term and discount rate for the Company’s operating leases are as follows:

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Maturities of lease liabilities for the Company’s operating leases are as follows:

Weighted Average Remaining Lease Term (in years)

Discount Rate

Maturities of lease liabilities for the Company’s operating leases are as follows:

Lease payments by year (In thousands)

2 unchanged sentences

Less imputed interest

As of March 31, 2020, the Company has $0.5 million in right-of-use assets and $0.5 million in related lease liabilities ($0.2 million of which is current).

As of June 30, 2020, the Company has $0.4 million in right-of-use assets and $0.4 million in related lease liabilities ($0.2 million of which is current).

The most significant operating lease is for its corporate office in Centennial, Colorado, with $0.5 million remaining in undiscounted cash payments through the end of the lease term in 2023.

1 unchanged sentence

GEOGRAPHIC AND SEGMENT INFORMATION

The Company currently operates in three reportable segments, which are uranium, lithium and graphite mining activities, including exploration, standby operations and restoration and reclamation activities.

In addition to its corporate operations, the Company currently operates in three reportable segments, which are uranium, lithium and graphite mining activities, including exploration, standby operations and restoration and reclamation activities.

As a part of these activities, the Company explores, evaluates and, if warranted, develops uranium, lithium and graphite properties.

The Company’s long-term assets were $24.6 million as of both March 31, 2020 and December 31, 2019.

The Company’s long-term assets were $24.6 million as of both June 30, 2020 and December 31, 2019.

100% of the long-term assets are located in the United States.

The Company reported no revenues during the three months ended March 31, 2020 and March 31, 2019.

The Company reported no revenues during the six months ended June 30, 2020 and June 30, 2019.

The reportable segments are those operations whose operating results are reviewed by the Chief Executive Officer to make decisions about resources to be allocated to the segment and assess its performance provided those operations pass certain quantitative thresholds.

1 unchanged sentence

Information about current assets and liabilities of the segments has not been provided because the information is not used to assess performance.

The table below provides a breakdown of the long-term assets by reportable segments as of March 31, 2020 and December 31, 2019:

March 31, 2020

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The table below provides a breakdown of the long-term assets by reportable segments as of June 30, 2020 and December 31, 2019:

June 30, 2020

(thousands of dollars)

3 unchanged sentences

Total long-term assets

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

4 unchanged sentences

Total long-term assets

The table below provides a breakdown of the reportable segments for the three months ended March 31, 2020 and March 31, 2019.

The table below provides a breakdown of the reportable segments for the three months ended June 30, 2020 and June 30, 2019.

Non-mining activities and other administrative operations are reported in the Corporate column.

Three months Ended

March 31, 2020

June 30, 2020

(thousands of dollars)

1 unchanged sentence

Mineral property expenses

Product development expenses

General and administrative expenses

3 unchanged sentences

Loss from operations

Other income/(expense)

Loss before taxes

Three months Ended

March 31, 2019

June 30, 2019

(thousands of dollars)

1 unchanged sentence

Mineral property expenses

Product development expenses

General and administrative

2 unchanged sentences

Depreciation and amortization

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Loss from operations

Loss before taxes

The table below provides a breakdown of the reportable segments for the six months ended June 30, 2020 and June 30, 2019.

Non-mining activities and other administrative operations are reported in the Corporate column.

Six months Ended

June 30, 2020

(thousands of dollars)

Statement of Operations

Mineral property expenses

Product development expenses

General and administrative

Arbitration expenses

Accretion of asset retirement costs

Depreciation and amortization

Loss from operations

Loss before taxes

Six months Ended

June 30, 2019

(thousands of dollars)

Statement of Operations

Mineral property expenses

Product development expenses

General and administrative

Arbitration expenses

Accretion of asset retirement costs

Depreciation and amortization

Loss from operations

Other (expense)

Loss before taxes

SUBSEQUENT EVENTS

Loan under the Paycheck Protection Program

On May 4, 2020, URI, Inc, a wholly owned subsidiary of Westwater, received loan proceeds in the amount of $0.3 million under the Paycheck Protection Program (“PPP”) in accordance with the terms of a promissory note executed in favor of Celtic Bank Corporation, a Salt Lake City based Small Business Administration Preferred Lender.

The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business.

The loan and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll costs, rent and utilities.

NOTES PAYABLE

Loan under the Paycheck Protection Program (PPP)

The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for forgivable loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business.

The loan and accrued interest are forgivable as long as the borrower uses the loan proceeds for eligible purposes, including payroll costs, rent and utilities.

No more than 40% of the amount forgiven can be attributable to non-payroll costs.

Any unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months, making the first payment of principal and interest due on November 11, 2020.

The Company intends to use the proceeds for funding its payroll and benefits costs for the restart of South Texas operations, purposes consistent with the PPP.

The Company’s South Texas operations were shut down and employees furloughed in March 2020 due to the uncertain economic conditions that had significantly impacted the capital markets.

While the Company currently believes that its use of the loan proceeds will meet the conditions for forgiveness of the loan, no assurance can be provided that the Company will obtain forgiveness of the Loan, in whole or in part.

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 Westwater for the three months ended March 31, 2020 has been prepared based on information available to us as of May 13, 2020.

This discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included herewith and the audited Consolidated Financial Statements of WWR for the period ended December 31, 2019 and the related notes thereto filed with our Annual Report on Form 10‑K, which have been prepared in accordance with U.S.

This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth elsewhere in this report.

See “Cautionary Note Regarding Forward-Looking Statements.”

Westwater Resources, Inc.

is a 40-year-old public company trading on the Nasdaq Capital Market (“Nasdaq”) under the symbol “WWR.

Originally incorporated in 1977 as Uranium Resources, Inc.

to mine uranium in Texas, our company has been reborn as a diversified energy materials developer.

Westwater now has a presence in uranium, lithium exploration, and battery-ready graphite materials after its acquisition of Alabama Graphite Corp.

(“Alabama Graphite”) in April 2018 .

In addition, Westwater recently discovered significant vanadium concentrations at the Coosa Graphite Project (the “Coosa Project”) in Alabama and has an exploration plan available to further investigate the size and extent of those concentrations.

Westwater holds battery-ready graphite development properties in Alabama, exploration properties with lithium exploration potential in Nevada and Utah, two idled uranium production properties in Texas and several uranium properties in Texas and New Mexico.

Westwater ceased uranium production in 2009 due to reductions in the price of uranium, although Westwater’s uranium properties and facilities in Texas can be restarted once the price of uranium recovers to acceptable levels.

Graphite, Lithium and Uranium Listed as Critical Materials

A Presidential Executive Order on a Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals was issued on December 20, 2017, which we believe will result in important energy related mineral development in the United States.

In conjunction with Professional Paper 1802, published by the US Geological Service (“USGS”), where 23 minerals are identified as critical to the Country’s security and economy, WWR believes these actions are important steps in support of domestic minerals development.

One of the important steps outlined in the Executive Order required a list of critical minerals to be provided by the US Secretary of the Interior.

This list was provided and included all three of WWR’s contemplated portfolio products consisting of graphite, lithium and uranium.

Graphite and lithium, in particular, are critical to the development of batteries and other energy storage systems essential to the electric vehicle, solar and wind power industries.

Section 232 Investigation

The US Department of Commerce initiated a Section 232 investigation in July 2018 to determine whether the present quantity of uranium ore and product imports threaten to impair US national security.

This trade investigation was initiated under Section 232 of the Trade Expansion Act after two US uranium producers petitioned the Department of Commerce in January 2018, seeking an order that US nuclear utilities be required to purchase 25% of their uranium from US domestic production.

US uranium production has declined significantly since 1987, with domestic uranium producers experiencing a major slowdown in operations and employment.

On July 12, 2019, President Trump announced the completion of the Section 232 trade investigation.

President Trump decided to take no trade action, which has allayed market uncertainty about whether a quota, tariff or other trade action would be imposed under the broad power delegated to the President under Section 232.

Instead, President Trump

ordered a review of the domestic nuclear supply chain (uranium production, conversion, enrichment and fabrication) in the context of the 2017 White House initiative to revive, revitalize and expand the nuclear energy sector.

Accordingly, to address concerns regarding the production of domestic uranium and ensure a comprehensive review of the domestic nuclear supply chain, the President directed that a Nuclear Fuel Working Group (“NFWG”) be established.

The NFWG includes the Secretary of State, Secretary of Energy and Secretary of Defense, among other key officials.

On April 23, 2020, the U.S.

Department of Energy (“DOE”) announced the NFWG’s strategy to revive the U.S.

uranium industry in a report entitled “Strategy to Restore American Nuclear Energy Leadership.”

The most important recommendations in the report for the uranium mining sector are:

purchases of 17-19 million pounds of U3O8 for a strategic uranium reserve, beginning in 2020 from domestic producers using a competitive bidding process.

DOE will end the uranium bartering program and reevaluate DOE’s Excess Uranium Inventory Management Policy.

Streamline regulatory reform and land access for uranium extraction.

Support Department of Commerce efforts to extend the Russian Suspension Agreement to protect against future uranium dumping in the U.S.

Enable the Nuclear Regulatory Commission to deny imports of nuclear fuel fabricated in Russia or China for national security purposes.

Fund advanced water treatment technology for uranium mining and in-situ recovery.

Increase efficiencies in the export processes and the adoption of 123 Agreements to open new markets for exports of U.S.

civil nuclear technology, materials and fuel.

RECENT DEVELOPMENTS

On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic.

The pandemic spread outside of China during the first quarter of 2020 and has impacted businesses throughout the world.

In the U.S., many state and local governments have, based on local conditions, either recommended or mandated actions to slow the transmission of COVID-19.

These measures range from limitations on crowd size, together with closures of bars and dine-in restaurants, to mandatory orders for non-essential citizens to “shelter in place”

or “stay at home”

until further direction.

Borders between many countries have been closed to contain the spread of COVID-19.

Uncertainty with respect to the economic effects of the pandemic has introduced significant volatility in the financial markets.

This pandemic, and the resultant uncertain economic conditions it has created, could adversely affect our operations, major facilities, or employees’

and consumers’

We have the following priorities while managing our business during this period of volatility and uncertainty:

First, to ensure the health and safety of our employees and the communities where we work.

Second, to work with our business partners to maintain our advanced graphite product development schedule.

Third , to ensure adequate financial liquidity to support our key operations and business activities.

WWR’s corporate business activities are largely unaffected at this time.

Even though we have closed our offices, we have instituted remote working arrangements to ensure that our team is able to work remotely using systems that we already had in place.

Our continued focus on the health and safety of our employees, the safety of our operations,

and the safety of the communities in which we live and work remains paramount.

To that end, we have eliminated unnecessary travel, instituted health protocols for working together, and ensured that our employees are permitted to take time off due to illness or the illness of those around them without penalty.

As a result, our corporate business activities will continue on as before, without interruption.

In South Texas, due to tumultuous capital markets and uncertain economic conditions created by the pandemic, we shut down restoration and reclamation operations and furloughed employees in March 2020.

We have complied with stay at home orders issued by county and state jurisdictions.

After consultation with the Texas Commission on Environmental Quality, we are maintaining certain critical permit compliance activities with a limited workforce.

Upon receipt of the PPP loan proceeds, we reinstated employees and restarted restoration and reclamation activities on May 4, 2020.

Our graphite business plan continues without pause.

We visited our technical consulting partner, Dorfner Anzaplan, as well as equipment manufacturers in January.

They continue to produce results that inform our pilot plant operations, which are presently scheduled for the fourth quarter of this year.

The Company expects to issue press releases outlining the project’s progress.

We remain excited about the battery materials markets, the end markets for those products, and the part we plan to play in supplying critical materials to serve them.

To the extent that the COVID-19 pandemic continues or worsens, local governments or governmental agencies may impose additional restrictions.

The result of COVID-19 and those restrictions could result in a number of adverse impacts to our business, including but not limited to additional disruption to the economy, additional work restrictions, and supply chains being interrupted, slowed, or rendered inoperable.

As a result, it may be challenging to obtain and process raw materials to support our business needs, and individuals could become ill, quarantined, or otherwise unable to work and/or travel due to health reasons or governmental restrictions.

Also, governments may impose other laws, regulations or taxes which could adversely impact our business, financial condition or results of operations.

The potential effects of COVID-19 could also impact us in a number of other ways including, but not limited to, laws and regulations affecting our business, the availability of future borrowings, the cost of borrowings, and potential impairment of the carrying value of our long-lived tangible assets.

Payroll Protection Loan

The Paycheck Protection Program (or “PPP”) was established under the congressionally-approved Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S.

Small Business Administration (SBA).

The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.

The loan and accrued interest are forgivable after eight weeks as long as the loan proceeds are used for eligible purposes, including payroll and benefits costs, rent and utilities.

Between February 14, 2020 and March 16, 2020, the Company’s share price decreased 63% due to turmoil in the equity capital markets due to the COVID-19 pandemic discussed above.

This significantly impacted the Company’s financing facilities because registered share capacity was exhausted faster than anticipated due to the significant decrease in share price.

For instance, the number of registered shares approved by shareholders available under the Company’s Lincoln Park PA was exhausted in April 2020 with $2.3 million of remaining usable capacity lost.

As a result of the severe downturn in the capital markets and uncertainty about when economic conditions would return to normal, the Company shut down its South Texas operations and implemented other cost reduction initiatives.

When the CARES Act was passed and PPP loan eligibility rules were promulgated, the Company’s interpretation of the rules were that the loan proceeds could be used for payroll and benefits of URI’s furloughed employees which would allow restart of operations in South Texas.

Accordingly, the Company intends to use the proceeds for funding its payroll and benefits costs for its South Texas operations, purposes consistent with the PPP.

Equity Financings

Purchase Agreement (“PA”) with Lincoln Park Capital Fund, LLC.

(“Lincoln Park:”)

Westwater will control the timing and amount of any sales to Lincoln Park, and Lincoln Park is obligated to make purchases in accordance with the PA.

The PA may be terminated by Westwater at any time, in its sole discretion, without any additional cost or penalty.

Inception-to-date through March 31, 2020, the Company has sold 2,576,764 shares of common stock for gross proceeds of $7.1 million.

In April 2020, the Company sold the remaining 623,236 shares of common stock for gross proceeds of $0.6 million.

Turkish Government Taking of Temrezli and Sefaatli Licenses and Westwater’s Arbitration Filing and Proceedings

On January 27, 2020, Westwater filed a Claimant’s Memorial (the “Memorial”) in its arbitration proceeding against the Republic of Turkey (“Turkey”).

The Memorial relates to Westwater’s request for arbitration submitted to the International Centre for the Settlement of Investment Disputes (“ICSID”) in December 2018 as a result of Turkey’s unlawful actions against Westwater’s investments at the Temrezli and Sefaatli uranium projects owned by Westwater’s Turkish subsidiary Adur Madencilik Limited Sirketi.

The Memorial sets forth the basis for Westwater’s claims under the treaty between the United States and Turkey concerning the reciprocal encouragement and protection of investments and international law generally, as well as the basis for the jurisdiction of the tribunal constituted on May 1, 2019 following ICSID’s registration of Westwater’s request for arbitration.

The Memorial also establishes the reparations owed by Turkey for breach of its international obligations towards Westwater, consisting of no less than $36.5 million, plus costs and post-award interest, as compensation for Westwater’s resulting loss of its investment.

Accompanying the Memorial is an expert report regarding the reparations owed to Westwater.

In determining the amount of Westwater’s loss, the expert report considered (i) the projected future cash flows from the expropriated projects, discounted to present value by a risk-adjusted discount rate, (ii) valuations from transactions for similar projects, and (iii) in the case of the Sefaatli project, the amounts invested in the project.

On March 11, 2020, Turkey filed a request to bifurcate the arbitration proceeding, and on March 30, 2020, Westwater filed a response in opposition to Turkey’s request for bifurcation.

On April 28, 2020, the arbitral tribunal denied Turkey’s bifurcation request.

As a result of this decision, Turkey must file a Counter-Memorial on or before July 20, 2020, and a hearing on the substantive issues and damages is now scheduled for September 2021.

Additional information regarding the ICSID arbitration proceeding is presented in Part II, Item 1 below.

RESULTS OF OPERATIONS

Our consolidated net loss for the three months ended March 31, 2020 was $3.3 million, or $0.82 per share, as compared with a consolidated net loss of $3.2 million, or $2.15 per share for the same period in 2019.

The $0.1 million increase in our consolidated net loss from the respective prior period was partially the result of an increase in legal expenses related to the arbitration against the Republic of Turkey discussed above.

Mineral Property Expenses

The following table details our mineral property expenses for the three months ended March 31, 2020 and 2019:

For the Three months Ended

Restoration/Recovery expenses

Kingsville Dome project

Rosita project

Vasquez project

Total restoration/recovery expenses

Standby care and maintenance expenses

Kingsville Dome project

Rosita project

Vasquez project

Temrezli project

Total standby care and maintenance expenses

Exploration and evaluation costs

Coosa project

Other projects

Land maintenance and holding costs

Total mineral property expenses

For the three months ended March 31, 2020, mineral property expenses increased by $0.1 million from the corresponding period during 2019.

The increase was primarily due to an increase in work related to the Coosa project as well as an increase in land maintenance and holding costs for our Vasquez project in South Texas as a result of a lease renewal that required a lease bonus payment.

General and Administrative Expenses

Significant expenditures for general and administrative expenses for the three months ended March 31, 2020 and 2019 were:

For the Three months ended

Any unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months.

According to terms of the promissory note from Celtic Bank, the first payment of principal and interest is due November 30, 2020, with subsequent payments due at the end of each month through the loan maturity date of April 30, 2022.

The Company used the proceeds for funding its payroll and benefits costs for the restart of South Texas operations, purposes consistent with the PPP.

The Company’s South Texas operations were shut down and employees furloughed in March 2020 due to the severe downturn in the capital markets and uncertainty about when economic conditions would return to normal.

While the Company currently believes that its use of the loan proceeds will meet the conditions for forgiveness of the loan and is in the process of preparing the SBA’s forgiveness application, no assurance can be provided that the Company will obtain forgiveness of the loan, in whole or in part.

At June 30, 2020 the loan proceeds are presented on the balance sheet as current and long-term debt based on the schedule of repayments and excluding any possible forgiveness of the loans.

The following table summarizes notes payable related to the PPP loan on the balance sheet as of June 30, 2020:

(thousands of dollars)

Stock compensation expense

Salaries and payroll burden

Legal, accounting, public company expenses

Insurance and bank fees

Consulting and professional services

Office expenses

Sales and marketing

Other expenses

For the three months ended March 31, 2020, general and administrative charges were approximately $0.1 million higher than the corresponding period in 2019.

The increase was primarily due to executive search consulting costs for a sales and marketing executive for Westwater.

Arbitration Costs

During the three months ended March 31, 2020, the Company incurred arbitration related legal and expert consulting costs of $0.7 million associated with the Request for Arbitration against the Republic of Turkey filed with ICSID in December 2018.

For further reference, see discussion in the Recent Developments section of this Part I and below at Part II, Item 1.

The increase of $0.6 million over the $0.1 million cost incurred during the same period in 2019 was due to the increased activity leading up to and following the filing of the Company’s Memorial with ICSID on January 27, 2020.

Other Income and Expenses

For the three months ended March 31, 2020 the $0.6 million increase in other income compared to the three months ended March 31, 2019 was primarily due to the $0.7 million loss recorded in 2019 from the sale of marketable securities.

No such loss occurred for the same period in 2020.

FINANCIAL POSITION

Operating Activities

Net cash used in operating activities was $3.5 million for the three months ended March 31, 2020, as compared with $2.7 million for the same period in 2019.

The $0.8 million increase in cash used was primarily due to an increase in arbitration costs as well as land maintenance and holding costs for our Vasquez project in South Texas.

Investing Activities

Net cash provided by investing activities was $0 for the three months ended March 31, 2020, as compared with $1.8 million of cash provided by investing activities for the three months ended March 31, 2019.

For the 2019 period, the Company received note payments on the Laramide note in the amount of $0.8 million in cash.

Additionally, the Company received net proceeds of $0.5 million from the sale of Laramide securities and $0.5 million from URC as a deposit in accordance with the terms of the Asset Purchase Agreement signed on March 5, 2019.

See Note 4 to our unaudited Condensed Consolidated Financial Statements included herewith for more information.

Financing Activities

Net cash provided by financing activities was $2.5 million for the three months ended March 31, 2020 from the proceeds of sales of common stock through the Company’s ATM Offering Agreement and to Lincoln Park pursuant to the Stock Purchase Agreement.

For the three months ended March 31, 2019, net cash provided by financing activities was $0.4 million from the sale of common stock through the Company’s ATM Offering Agreement.

LIQUIDITY AND CAPITAL RESOURCES

The interim Condensed Consolidated Financial Statements of the Company have been prepared on a “going concern”

Since 2009, the Company has relied on equity financings, debt financings and asset sales to fund its operations and the Company expects to rely on these forms of financing to fund its operations into the near future.