What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-12 compared with 2020-08-05 · 338 added, 154 removed, 397 unchanged (55% of the section changed)

3 unchanged sentences

(expressed in thousands of dollars, except share amounts)

September 30,

Current Assets:

1 unchanged sentence

Prepaid and other current assets

Current assets held for sale

Total Current Assets

5 unchanged sentences

Restricted cash

Assets held for sale, non-current

LIABILITIES AND STOCKHOLDERS’ EQUITY

2 unchanged sentences

Accrued liabilities

Asset retirement obligations - current

Operating lease liability - current

Notes payable - current

Current liabilities held for sale

Total Current Liabilities

Asset retirement obligations, net of current

Other long-term liabilities

Operating lease liability, net of current

Notes payable, net of current

Liabilities held for sale, non current

Total Liabilities

14 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Operating Expenses:

3 unchanged sentences

Arbitration costs

Accretion of asset retirement obligations

Depreciation and amortization

3 unchanged sentences

Interest income

Gain on sale of fixed assets

Other income (expense)

Total other income (expense)

Net Loss from Continuing Operations

Net Loss from Discontinued Operations

Other Comprehensive Income

7 unchanged sentences

(expressed in thousands of dollars)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Operating Activities:

6 unchanged sentences

Stock compensation expense

Gain on disposal of fixed assets

Impairment of uranium properties

Gain on disposal of uranium properties

Loss on sale of marketable securities

Effect of changes in operating working capital items:

Decrease/(Increase) in prepaids and other assets

(Decrease)/Increase in payables and accrued liabilities

(Increase)/Decrease in prepaids and other assets

Increase in payables and accrued liabilities

Net Cash Used In Operating Activities

22 unchanged sentences

Comprehensive

Six months ended June 30, 2020

Nine months ended September 30, 2020

Income (Loss)

Balances, January 1, 2020

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

Common stock issued, net of issuance costs

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

Balances, September 30, 2020

Three months ended September 30, 2020

Balances, June 30, 2020

Three months ended June 30, 2020

Balances, March 31, 2020

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

Balances, September 30, 2020

Comprehensive

Six months ended June 30, 2019

Nine months ended September 30, 2019

Paid-In Capital

6 unchanged sentences

Transfer to realized loss upon sale of available for sale securities

Balances, September 30, 2019

Three months ended September 30, 2019

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

Balances, September 30, 2019

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

9 unchanged sentences

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 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.

Operating results for the nine months ended September 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

15 unchanged sentences

The adoption of this update, if applicable, will result in earlier recognition of losses and impairments.

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

ASU 2016-13 will be effective for interim 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.” ASU 2016-13 introduced an expected credit loss methodology for the impairment of financial assets measured at amortized cost basis.

3 unchanged sentences

Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842, Leases.

ASU 2018-19 will be effective for interim and annual periods beginning after January 1, 2023.

ASU 2018-19 will be effective for interim and annual periods beginning after December 15, 2022.

WESTWATER RESOURCES, INC.

3 unchanged sentences

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 June 30,

As of September 30,

(thousands of dollars)

Cash and cash equivalents

Restricted cash - pledged deposits for performance bonds

Restricted cash included in assets held for sale (Note 8)

Restricted cash not included in assets held for sale

Cash, cash equivalents and restricted cash shown in the statement of cash flows

Funds deposited by the Company for collateralization of performance obligations are not available for the payment of general corporate obligations and are not included in cash equivalents.

Restricted cash consists of money market accounts.

The bonds are collateralized performance bonds required for future restoration and reclamation obligations 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 Company last recorded revenues from operations in 2009 and expects to continue to incur losses as a result of costs and expenses related to maintaining its properties and general and administrative expenses.

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

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

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

The Company’s restricted cash consists of funds held in money market accounts and used as collateral for performance obligation bonds.

The funds are not available for the payment of general corporate expenses and are excluded from cash and cash equivalents.

The performance obligation bonds are required for future restoration and reclamation obligations for the Company’s South Texas uranium properties.

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 into the near future.

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

In 2016, the Company began to incorporate energy-related materials into its business plan.

Between 2016 and 2020 the Company obtained mineral leases in Nevada and Utah and evaluated a green-fields exploration program for lithium.

In 2018, the Company acquired Alabama Graphite Corp.

and its Coosa Graphite Project for the purpose of developing the only commercial sized graphite mineral deposit in the contiguous United States and production of advanced graphite products for use in batteries.

In the third quarter of 2020, as further discussed below and as further discussed in Note 8, the Company made the strategic decision to focus most of its resources on its graphite business, agreeing to the sale of its uranium business and discontinuing its investment in its lithium mineral properties.

As of September 30, 2020, execution of the business plan for development of the Coosa Graphite Project was underway, with the commissioning of pilot plants for processing flake graphite into battery grade graphite products.

The start-up of operations for those plants is expected to commence before the end of 2020 or shortly thereafter.

The Company expects the pilot plant phase to last into mid-2021.

The Company will use the data generated from the pilot plant operations to inform the requirements and specifications for building a commercial sized graphite processing facility.

Pursuant to the Company’s Preliminary Economic Assessment of the Coosa Graphite Project as modified, financing required for the estimated capital expenditures to construct the commercial plant is approximately $120 million.

Subject to financing, the Company expects the construction phase for the commercial plant to begin in the second half of 2021 and be completed in mid-2022.

The Company expects to begin generating revenues from sales of advanced graphite products from the Coosa Graphite Project in 2023.

While executing on its graphite business plan, the Company has continued to fulfill its obligation to restore and reclaim its legacy uranium properties in South Texas.

These activities have resulted in expenditures of approximately $3.5 million per year, and these reclamation activities are expected to continue for an additional 4-5 years before completion.

The Company has provided $9.3 million in performance obligation bonds to the Texas Commission for Environment Quality as financial assurance related to its permits and licenses in South Texas, and has a recorded liability of

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

approximately $6.0 million for asset retirement obligations on its balance sheet (see Note 9).

In addition to its South Texas uranium operations, the Company has spent about $0.5 million to $1.0 million annually to maintain its uranium mineral property holdings in New Mexico.

In furtherance of the Company’s strategic shift to graphite battery materials, on September 1, 2020 the Company entered into a Letter of Intent (“LOI”) to sell its U.S.

uranium business, including its U.S.

uranium exploration assets in New Mexico and idled production assets in Texas to enCore Energy Corp.

(“enCore”) (see Note 8).

The pending sale includes the elimination of the $9.3 million bonding liability, the elimination of the $6.0 million in asset retirement obligations, and the elimination of more than $4.0 million in annual expenditures related to reclamation and compliance costs at the Company’s Kingsville, Vasquez, and Rosita sites in South Texas and its New Mexico land holding costs.

The Company anticipates that it will receive approximately US$2.0 million of enCore common stock and retain royalty interests on the New Mexico uranium properties as consideration for the sale.

This transaction is expected to close on or before December 31, 2020.

The Company will retain its uranium interests in Turkey, which are subject to ongoing international arbitration proceeding.

The Company’s strategic shift to focus solely on its graphite business also resulted in its decision not to renew its lithium mineral leases in Nevada and Utah when the annual rentals of approximately $0.2 million came due in late August 2020.

At September 30, 2020 the Company’s cash balances were $5.5 million.

During the month of October 2020, the Company sold 8.5 million shares of common stock for net proceeds of $50.2 million pursuant to its Controlled Equity Offering SM Sales Agreement with Cantor Fitzgerald & Co.

(“Cantor”) and its Purchase Agreement with Lincoln Park Capital LLC (“Lincoln Park”) (see Note 17).

The funding provided by these financing facilities has resulted in a cash balance of approximately $53.3 million at October 31, 2020.

Management believes the significant treasury balance has mitigated the Company’s capital risk through 2021 as the Company’s 2021 non-discretionary budget, budgeted graphite pilot plant program and the remaining budgeted product development initiatives are now fully funded.

The Company is pursuing project financing to support primary funding of the capital expenditures for construction of the commercial plant set to occur in the second half of 2021.

Management believes the Company’s current cash balance is sufficient to fund its planned non-discretionary expenditures through 2022.

In addition to pursuing other project financing, the Company is evaluating the renewal of the Cantor and Lincoln Park financing facilities for use in funding any required contributions by the Company to support project financing for construction of the commercial graphite facility.

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.

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.

Considering all of the factors above, the Company believes there is substantial doubt regarding its ability to continue as a going concern.

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

In the event funds are not available for project financing to complete construction of the commercial facility in 2022, the Company will be able to fund its non-discretionary expenditures, however, the Company may be required to change our planned business strategies.

NOTES RECEIVABLE

7 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.

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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%.

6 unchanged sentences

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

7 unchanged sentences

The sale of these uranium assets was accounted for as an asset disposal.

The Company recorded the following gain on disposal of uranium assets on its Consolidated Statements of Operations for the year ended December 31, 2019:

The Company recorded a net gain of $0.7 million on disposal of uranium assets on its Consolidated Statements of Operations for the nine months ended September 30, 2019.

At September 30, 2020, the gain has been reclassified to discontinued operations, which are reported as a separate component of Net Income/Loss for the prior periods on the Statement of Operations (see Note 8).

URC Transaction

4 unchanged sentences

Gain on disposal of uranium assets

A discussion on the Company’s current efforts to sell its remaining U.S.

uranium business, including its uranium exploration assets in New Mexico and idled production assets in Texas to enCore Energy (see Note 8).

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):

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

2 unchanged sentences

These inputs are developed based on the best information available, including internal data.

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 June 30, 2020 and December 31, 2019 and indicate the fair value hierarchy.

June 30, 2020

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

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

September 30, 2020

(thousands of dollars)

Current Assets

Restricted cash included in assets held for sale

Total current assets recorded at fair value

Non-current Assets

Restricted cash

Restricted cash not included in assets held for sale

Total non-current assets recorded at fair value

2 unchanged sentences

Non-current Assets

Restricted cash

Restricted cash included in assets held for sale

Restricted cash not included in assets held for sale

Total non-current assets recorded at fair value

1 unchanged sentence

PROPERTY, PLANT AND EQUIPMENT

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

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

(thousands of dollars)

2 unchanged sentences

Other property, plant and equipment

Total Property, Plant and Equipment

Property, Plant and Equipment included in assets held for sale

Property, Plant and Equipment from Continuing Operations

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Net Book Value of Property, Plant and Equipment at December 31, 2019

3 unchanged sentences

Other property, plant and equipment

Total Property, Plant and Equipment

Property, Plant and Equipment included in assets held for sale

Property, Plant and Equipment from Continuing Operations

Included in the Property, Plant and Equipment tables above are the long-lived assets related to the Company’s uranium business, which are reported in discontinued operations (see Note 8).

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 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.

As discussed in Note 8, the Company has entered into a binding LOI to sell its uranium business.

The proposed terms of the transaction are an indicator of impairment of the Company’s long-lived uranium property, plant and equipment.

For purposes of determining the amount of impairment, the Company has estimated that a loss in the amount of $5.2 million will be recorded upon closing of the proposed transaction using the September 30, 2020 carrying values of the uranium assets and liabilities included in the transaction plus estimated costs to close the transaction.

As discussed in Note 8, at September 30, 2020, property, plant and equipment related to the Company’s U.S.

uranium business in Texas and New Mexico, net of the $5.2 million impairment charge, have been reclassified to Held for Sale on the Condensed Consolidated Balance Sheet.

Balances for prior year periods have also been reclassified.

The $5.2 million impairment charge is included in discontinued operations on the Condensed Consolidated Statement of Operations for the period ended September 30, 2020.

WESTWATER RESOURCES, INC.

1 unchanged sentence

MINERAL PROPERTY EXPENDITURES

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,

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(thousands of dollars)

8 unchanged sentences

Columbus Basin project, Nevada

Other projects, Nevada

Total Nevada projects

2 unchanged sentences

Coosa project, Alabama

Bama project, Alabama

Total Alabama projects

Total expense for the period

ASSET RETIREMENT OBLIGATIONS

(Less) Mineral Property expenses attributable to Discontinued Operations

Mineral Property expenses for Continued Operations

Included in the table above are mineral property expenses related to the Company’s discontinued U.S.

uranium and lithium operations (see Note 8).

For the nine months ended September 30, 2020 and 2019, $1.9 million was spent on mineral property expenses for the Company’s uranium properties in Texas and New Mexico.

Expenditures included land-holding and maintenance, reclamation activities and standby costs.

The Company also spent $0.2 million during the third quarter of 2019 for claim maintenance, permits and fees on its lithium holdings in Utah and Nevada acquired in 2016.

These costs are included in the net loss from discontinued operations on the Condensed Consolidated Statements of Operations.

DISCONTINUED OPERATIONS

In the third quarter of 2020, the Company made the strategic decision to focus most of its resources on its graphite business, agreeing to the sale of its uranium business as further discussed below, and discontinuing its investment in its lithium business.

The Company’s lithium business included mineral leases and water rights in Nevada and Utah.

The Company elected not to renew the annual lease rentals on the mineral properties, which also voids the water rights.

On September 1, 2020, the Company signed a binding LOI to sell its U.S.

uranium assets located in New Mexico and Texas to enCore Energy Corp., a corporation incorporated under the laws of British Columbia, Canada.

The proposed transaction with enCore will be structured as a direct share purchase in which enCore acquires all issued and outstanding

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

equity securities of Westwater’s wholly-owned uranium subsidiaries, URI Inc., Neutron Energy Inc., and Uranco, Inc., as well as related subsidiaries, HRI-Churchrock, Inc., Hydro Restoration Corp., Belt Line Resources, Inc., and Uranium Resources, Inc.

(f/k/a URI Minerals, Inc.).

Westwater expects to receive enCore shares valued at approximately $2.0 million and retain royalties from future production from the New Mexico uranium properties.

As part of the proposed transaction, enCore will receive $3.0 million of cash collateral currently pledged against reclamation performance obligation bonds totaling approximately $9.3 million upon the successful replacement of those performance obligation bonds.

EnCore will also assume other liabilities related to the uranium properties including asset retirement obligations and outstanding royalties payable.

The sale is expected to close on or before December 31, 2020.

The Company considers assets to be held for sale when management approves and commits to a formal plan to actively market the assets for sale at a price reasonable in relation to fair value, the asset is available for immediate sale in its present condition, an active program to locate a buyer and other actions required to complete the sale have been initiated, the sale of the asset is expected to be completed within one year and it is unlikely that significant changes will be made to the plan.

Management has concluded that the sale of its U.S.

uranium assets to enCore meets these criteria.

As a result, the assets and liabilities in the disposal group are classified as held for sale for all periods presented on the Condensed Consolidated Balance Sheet as of September 30, 2020.

This divestiture will allow the Company to devote most of its available resources to the development of high-performance battery graphite.

This transaction represents a major strategic shift for Westwater and is expected to significantly affect current and future operations and financial results.

Due to this shift, the Company’s uranium segment has been classified as a discontinued operation and is reported separately from continuing operations on the Condensed Consolidated Statement of Operations for all periods presented.

The carrying amounts of the major classes of assets and liabilities related to the Company’s discontinued uranium and lithium operations and classified as held for sale as of September 30, 2020 and December 31, 2019 were as follows:

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30,

(thousands of dollars)

Restricted Cash

Prepaid and other current assets

Net property, plant and equipment

Operating lease right-of-use assets

Current Assets Held for Sale

Net property, plant and equipment

Operating lease right-of-use assets

Restricted cash

Assets Held for Sale, non-current

Total Assets Held for Sale

Accounts payable

Accrued liabilities

Asset retirement obligations - current

Operating lease liability - current

Notes payable - current

Other current liabilities

Current Liabilities Held for Sale

Asset retirement obligations, net of current

Operating lease liability, net of current

Other long-term liabilities

Liabilities Held for Sale, non-current

Total Liabilities Held for Sale

The results of the Company’s uranium and lithium business segments included in discontinued operations for the three and nine months ended September 30, 2020 and 2019 were as follows:

For the Three Months Ended

For the Nine Months Ended

September 30,

(thousands of dollars)

Mineral property expenses

General and administrative expenses

Accretion of asset retirement obligations

Depreciation and amortization

Impairment of uranium properties

Gain on disposal of uranium assets

Other income (expense)

Net Loss from Discontinued Operations

Our cash flow information for 2020 and 2019 included the following activities related to discontinued operations:

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended

For the Nine Months Ended

September 30,

(thousands of dollars)

Depreciation and amortization

Capital Expenditures

Accretion of asset retirement obligations

Impairment of uranium properties

ASSET RETIREMENT OBLIGATIONS (“ARO”)

The following table summarizes the changes in the reserve for future restoration and reclamation costs on the balance sheet:

September 30,

(thousands of dollars)

3 unchanged sentences

Balance, end of period

Current portion

Non-current portion

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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ARO included in current liabilities held for sale

ARO included in liabilities held for sale, non-current

Asset retirement obligations primarily consist of estimated reclamation costs for the Company’s ISR projects in South Texas.

These obligations are fully secured by performance obligation bonds totaling approximately $9.3 million and partially collateralized by $3.8 million in restricted cash.

In early September 2020, Westwater entered into an agreement with enCore Energy Corp to sell its U.S.

uranium assets, including those properties in Texas that are subject to the restoration obligations above (see Note 8).

These assets and related liabilities were classified as held for sale during the current period and are reported on the Company’s Condensed Consolidated Balance Sheet.

The sale is expected to close by year-end 2020, at which time all bonding obligations and nearly $6.0 million in reclamation liabilities will be transferred to enCore.

Until the transaction closes, the Company will continue to perform plugging and surface reclamation activities at its Rosita and Vasquez projects located in Duval County, Texas.

Common Stock Issued, Net of Issuance Costs

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.

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 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.

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 2020 Purchase Agreement without shareholder approval.

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 2020 Purchase Agreement if it would result in Lincoln Park beneficially owning more than 9.99% of its common stock.

On May 21, 2020, the Company entered into a Purchase Agreement with Lincoln Park, as amended on May 29, 2020 (the “2020 Purchase Agreement”), 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.

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

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.

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 1.97 million shares subject to the 2020 Purchase Agreement.

As of September 30, 2020, the Company had sold 1.8 shares of common stock for gross proceeds of

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

$3.8 million, of which 1.6 million shares of common stock and gross proceeds of $3.5 million was sold in the three months ended September 30, 2020.

The Company filed a second registration statement on Form S-1 relating to the resale of 3.2 million shares which was declared effective on October 2, 2020, and sold 1.1 million shares for gross proceeds of $8.2 million in October 2020.

With the October 2020 sales, the $12.0 million sales capacity of the 2020 Purchase Agreement has been reached.

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

4 unchanged sentences

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.

The 2019 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

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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.

The warrants became exercisable on November 30, 2019 and were exercised on October 6, 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.

On April 14, 2017, the Company entered into a Controlled Equity Offering Sales Agreement (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.

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 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

As of September 30, 2020, the Company had sold 4.1 million shares of common stock for net proceeds of $13.9 million under the ATM Offering Agreement, of which 2.1 million shares of common stock for net proceeds of $3.7 million were sold in the three months ended September 30, 2020.

During the month of October 2020, the Company registered and sold 7.3 million shares of common stock for net proceeds of $42.0 million under the ATM Offering Agreement.

As of November 12, 2020, the Company has no shares of common stock registered for sale under the ATM Offering Agreement.

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

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

September 30, 2019

Warrants outstanding at beginning of period

Warrants outstanding at end of period

On October 6, 2020, Lincoln Park provided notice of its exercise of 182,515 warrants.

Lincoln Park elected the cashless exercise method to convert the warrants to shares of common stock.

Based on the cashless exercise formula, the Company issued Lincoln Park 118,799 shares of common stock.

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’ Plan").

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.

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,

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.

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-approved 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.

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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 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.

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

For the nine months ending September 30, 2020 and 2019, the Company recorded stock-based compensation expense of $169,700 and $255,000, respectively.

Stock compensation expense is recorded in general and administrative expenses.

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

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

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

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

The following tables summarize stock options outstanding and changes for the three and nine-month periods ending September 30, 2020 and 2019:

Three months ended

September 30, 2020

September 30, 2019

Stock options outstanding at beginning of period

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Stock options exercisable at end of period

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

Nine months ended

September 30, 2020

September 30, 2019

Stock options outstanding at beginning of period

Canceled or forfeited

Stock options outstanding at end of period

Stock options exercisable at end of period

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

Outstanding Stock Options

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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 June 30, 2020 and 2019:

The following tables summarizes RSU activity for the three and nine-month periods ended September 30, 2020 and 2019:

Three months ended

September 30,

Unvested RSUs at beginning of period

Unvested RSUs at end of period

Nine months ended

September 30,

Unvested RSUs at beginning of period

Unvested RSUs at end of period

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 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

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The Company believes its operations are materially compliant with current environmental regulations.

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At any given time, the Company may enter into negotiations to settle outstanding legal proceedings and any resulting accruals will be estimated based on the relevant facts and circumstances applicable at that time.

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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.

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

Under our corporate office lease, we are required to reimburse the lessor each month for common use expenses such as maintenance and security services.

Because these amounts are variable from year to year and not specifically set in the lease terms, they are not included in the measurement of the right-of-use asset and related lease liability, but rather expensed in the period incurred.

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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The components of lease expense are as follows:

September 30,

(thousands of dollars)

Operating Lease Cost

Continuing Operations

Discontinued Operations

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

September 30, 2020

September 30, 2019

(thousands of dollars)

June 30, 2020

June 30, 2019

Continuing Operations

Discontinued Operations

Continuing Operations

Discontinued Operations

Cash paid for amounts included in lease liabilities:

Operating cash flows from operating leases

Cash flows from operating leases

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

September 30,

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

Continuing Operations

Discontinued Operations

Continuing Operations

Discontinued Operations

Operating Leases

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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

September 30,

Weighted Average Remaining Lease Term (in years)

1 unchanged sentence

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

September 30,

Lease payments by year (In thousands)

Continuing Operations

Discontinued Operations

2020 (remainder of year )

1 unchanged sentence

Less imputed interest

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).

Total Operating Lease Liability

As of September 30, 2020, the Company has $0.4 million in right-of-use assets and $0.4 million in related lease liabilities ($0.1 million of which is current).

The most significant operating lease is for its corporate office in Centennial, Colorado, with $0.4 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 $0.4 million.

All but one operating lease are part of the company’s Continuing Operations.

In May 2017 the Company’s wholly-owned subsidiary, URI, Inc.

entered into an irrevocable 63 month equipment and servicing lease for a Toshiba copier used in its office in Kingsville, Texas.

This lease is included in the disposal group that will be transferred to enCore in the sale of the Company’s U.S.

uranium properties expected to close by year-end 2020.

At September 30, 2020, there was 22 months left on the lease with a right-of-use asset balance of approximately $10,000 and a related lease liability for the same amount.

These balances are included in assets held for sale and liabilities related to assets held for sale on the balance sheet.

Monthly lease payments are included in the Income/Loss from Discontinued Operations.

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

GEOGRAPHIC AND SEGMENT INFORMATION

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 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 six months ended June 30, 2020 and June 30, 2019.

In addition to its corporate operations, the Company currently operates a graphite battery-materials reportable segment.

During the quarter ended September 30, 2020, the Company made the strategic decision to sell its uranium business and discontinue its lithium business, both of which conducted exploration, standby operations and restoration and reclamation activities (see Note 8).

As a result of entering into the LOI to sell the uranium business and the Company’s decision to discontinue investment into its lithium business, the Company has reclassed all uranium and lithium business activities as discontinued operations.

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.

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

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

The tables below provide a breakdown of the long-term assets by reportable segments as of September 30, 2020 and December 31, 2019:

September 30, 2020

(thousands of dollars)

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Total long-term assets

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

The tables below provide a breakdown of the reportable segments for the three months ended September 30, 2020 and September 30, 2019.

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

Three months Ended

June 30, 2020

September 30, 2020

(thousands of dollars)

4 unchanged sentences

Arbitration expenses

Accretion of asset retirement costs

Depreciation and amortization

2 unchanged sentences

Loss before taxes

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three months Ended

June 30, 2019

September 30, 2019

(thousands of dollars)

4 unchanged sentences

Arbitration expenses

Accretion of asset retirement costs

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.

The tables below provide a breakdown of the reportable segments for the nine months ended September 30, 2020 and September 30, 2019.

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

Six months Ended

June 30, 2020

Nine months Ended

September 30, 2020

(thousands of dollars)

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Depreciation and amortization

Loss from operations

Loss from continuing operations

Loss before taxes

Six months Ended

June 30, 2019

Nine months Ended

September 30, 2019

(thousands of dollars)

6 unchanged sentences

Depreciation and amortization

Loss from operations

Loss from continuing operations

Other (expense)

6 unchanged sentences

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.

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.

Any unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%.

The deadline to apply for loan forgiveness is the maturity date of the loan, which is April 30, 2022.

As part of the Flexibility Act, the deferral period for loan payments increased from 6 months to 10 months after the end of the borrower’s loan forgiveness covered period.

Our 24-week covered period began when loan proceeds were received May 4, 2020 and ended October 19, 2020.

Based on the changes to the deferral period, the Company has until August 19, 2021 to apply for loan forgiveness before payments on the principal, interest and fees are due.

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

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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)

Notes payable

current maturities

Notes payable, net of current

At September 30, 2020, the loan proceeds are included in Current Liabilities Held for Sale on the Condensed Consolidated Balance Sheets.

What changed 10-Q

Item 1. Financial Statements