What changed in this filing

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Item 1. Financial Statements

2021-05-12 compared with 2020-11-12 · 157 added, 492 removed, 243 unchanged (73% of the section changed)

3 unchanged sentences

(expressed in thousands of dollars, except share amounts)

September 30,

Current Assets:

Cash and cash equivalents

Equity securities

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

3 unchanged sentences

Operating lease liability - current

Current liabilities held for sale

Total Current Liabilities

Operating lease liability, net of current

Liabilities held for sale, non current

Total Liabilities

6 unchanged sentences

Accumulated deficit

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

Treasury stock (161 shares), at cost

Total Stockholders’ Equity

5 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

September 30,

Operating Expenses:

Mineral property expenses

Product development expenses

Exploration expenses

General and administrative expenses

3 unchanged sentences

Non-Operating Income/(Expenses):

Loss on sale of marketable securities

Interest income

Gain on sale of fixed assets

Unrealized gain on equity securities

Other income (expense)

2 unchanged sentences

Net Loss from discontinued operations

Other Comprehensive Income

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

Comprehensive Loss

BASIC AND DILUTED LOSS PER SHARE

4 unchanged sentences

(expressed in thousands of dollars)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Operating Activities:

Reconciliation of net loss to cash used in operations:

Non-cash lease expense

Accretion of asset retirement obligations

Costs incurred for restoration and reclamation activities

Amortization of note receivable discount

Depreciation and amortization

Stock compensation expense

Impairment of uranium properties

Gain on disposal of uranium properties

Loss on sale of marketable securities

Unrealized (gain) on equity securities

Effect of changes in operating working capital items:

(Increase)/Decrease in prepaids and other assets

Increase in prepaids and other assets

Increase in payables and accrued liabilities

1 unchanged sentence

Cash Flows From Investing Activities

Proceeds from disposal of uranium assets, net

Proceeds from the sale of securities, net

Proceeds from note receivable

Capital expenditures

Net Cash (Used In)/Provided By Investing Activities

Proceeds from PPP loan escrow

Net Cash Provided By Investing Activities

Cash Flows From Financing Activities:

Proceeds from note payable

Issuance of common stock, net

4 unchanged sentences

Cash, Cash Equivalents and Restricted Cash, End of Period

Cash Paid During the Period for:

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

Securities received for payment of notes receivable – Laramide

Total Non-Cash Investing and Financing Activities for the Period

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

2 unchanged sentences

(expressed in thousands of dollars, except share amounts)

Comprehensive

Nine months ended September 30, 2020

Income (Loss)

Balances, January 1, 2020

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

Balances, December 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, September 30, 2020

Comprehensive

Nine months ended September 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, September 30, 2019

Three months ended September 30, 2019

Balances, June 30, 2019

Balances, March 31, 2021

Balances, December 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

Balances, September 30, 2019

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

Balances, March 31, 2020

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

7 unchanged sentences

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 Annual Report on Form 10-K for the year ended December 31, 2020.

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 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.

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for any other period including the full year ending December 31, 2021.

Significant Accounting Policies

Our significant accounting policies are detailed in Note 1, Summary of Significant Accounting Policies , in the Notes to Consolidated Financial Statements within our Annual Report on Form 10-K for the year ended December 31, 2020.

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”.

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 Financial Accounting Standards Board (“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.

ASU 2019-12 became 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”.

10 unchanged sentences

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

The Company is currently evaluating ASU 2016-13 and ASU 2018-19 for the potential impact of adopting this guidance on its financial reporting.Cash, Cash Equivalents and Restricted Cash

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company is currently evaluating ASU 2016-13, ASU 2018-19 and ASU 2019-12 for the potential impact of adopting this guidance on its financial reporting.

Cash, Cash Equivalents and Restricted Cash

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 September 30,

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

As of March 31,

(thousands of dollars)

Cash and cash equivalents

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

Restricted cash not included in assets held for sale

Restricted cash - pledged deposits for performance bonds

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

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

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

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

With the divestiture of the Company’s uranium subsidiaries, all performance obligations and related restricted cash was transferred to enCore Energy as of December 31, 2020.

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 expects to rely on debt and equity financing to fund its operations for the foreseeable 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

In 2016, the Company began to expand its business plan into acquisition and development of energy-related materials.

Between 2016 and 2020 the Company obtained lithium mineral leases in Nevada and Utah and acquired Alabama Graphite Corp.

and its Coosa Graphite Project in Alabama in 2018 for the purpose of developing and mining a commercial sized graphite mineral deposit and processing the flake graphite into advanced graphite products for use in batteries.

In the third quarter of 2020, the Company executed the strategic decision to focus most of its resources on its graphite business, discontinuing its investment in its lithium mineral properties and announced a proposed transaction to sell its uranium business enCore Energy Corp.

As discussed in Note 3, the sale to enCore closed on December 31, 2020 and included the elimination of a $9.3 million bonding liability, the elimination of $5.2 million in asset retirement obligations, and the elimination of more than $4.0 million in annual expenditures related to reclamation and compliance costs.

The Company received approximately $1.8 million of enCore common stock and retained royalty interests on the New Mexico uranium properties as consideration for the sale.

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

During the first quarter of 2021, the Company primarily focused on graphite process development activities including operation of pilot programs for processing flake graphite into battery-grade graphite products and the kickoff of a Definitive Feasibility Study (“DFS”) on the Coosa Graphite Project.

The data generated and experience gained from operating the pilot programs is being used to inform the DFS and will also inform the requirements and specifications for building a commercial graphite processing facility.

On March 31, 2021, the Company’s cash balance was approximately $118 million.

During the quarter ended March 31, 2021, the Company sold 9.3 million shares of common stock for net proceeds of $47.3 million pursuant to its Controlled Equity Offering SM Sales Agreement with Cantor Fitzgerald & Co.

(“Cantor”) and 3.8 million shares of common stock for net proceeds of $24.9 million pursuant to the December 2020 PA (as defined below) with Lincoln Park Capital Fund, LLC (“Lincoln Park”) (see Note 7).

As of March 31, 2021, the Company has no shares of common stock registered for sale under the ATM Offering Agreement and has sold approximately 19.9% of the outstanding shares of common stock as of the date of the Lincoln Park December 2020 PA.

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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

Laramide Note Receivable

As part of the consideration for the sale of Hydro Resources, Inc.

(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%.

The Company received the first two installment payments of $1.5 million each in January 2018 and January 2019.

The final principal payment of $2.0 million was due and payable on January 5, 2020.

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

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

ACQUISITIONS AND DISPOSALS

Sale of Uranium Business to enCore Energy

On December 31, 2020, Westwater, its wholly owned subsidiary URI Neutron Holdings II, Inc.

(“Neutron Holdings”), and enCore entered into a securities purchase agreement (the “Purchase Agreement”) to sell their subsidiaries engaged in the uranium business in Texas and New Mexico (the “Uranium Subsidiaries”) to enCore.

The transaction closed December 31, 2020.

At the closing of the transaction, enCore delivered $742,642 in cash and issued $1,795,000 worth of its common shares to Westwater and Westwater and Neutron Holdings transferred all of the equity interests in the Uranium Subsidiaries to enCore along with a copy of a database relating to the Grants Mineral Belt located in New Mexico.

In addition, enCore delivered to Westwater a 2% net smelter return royalty (“NSR Royalty”) on production from the uranium properties held by Uranco, Inc.

in New Mexico, and a 2.5% net profits interest (“NPI”) in the profits from operations of Neutron Energy, Inc.’s Juan Tafoya and Cebolleta Projects.

Pursuant to the terms of the Purchase Agreement, enCore has also agreed to replace the indemnification obligations of Westwater for certain reclamation surety bonds held in the name of URI, Inc., and Westwater transferred to enCore all rights to $3,796,788 in cash collateral held to secure such indemnity obligations.

Also, at closing, in accordance with the terms of the Side Letter executed by the parties to the Purchase Agreement, Westwater delivered $333,120 in cash to enCore, which amount was to be delivered in escrow upon the request of the lender, Celtic Bank, under the loan made to URI, Inc.

in May 2020 pursuant to the Small Business Administration (“SBA”) Paycheck Protection Program (the “PPP Loan”).

The escrowed amount was to be released to Westwater upon, and subject to, forgiveness of the PPP Loan under the terms of the CARES Act.

The PPP Loan forgiveness application was filed on January 25, 2021 and Westwater received a notification from the SBA on March 31 that 100% of the loan had been forgiven.

As a result, on March 31, 2021, the escrowed funds were returned to Westwater

The divestiture of the uranium business was accounted for as an asset disposal and the non-cash consideration received from enCore was recorded at fair value.

In accordance with the terms of the purchase agreement, non-cash consideration included the receipt of shares of enCore common stock in the amount of $1,795,000.

The number of shares issued at closing was 2,571,598.

The number of shares was determined by a pricing formula based on the volume weighted average price (“VWAP”) of enCore’s common shares for the ten trading days ending on and including December 30, 2020.

The VWAP formula resulted in a price of $0.698.

For purposes of determining the fair value of the enCore shares at December 31, 2020, the Company used the closing price for enCore shares on December 31, 2020 which was $0.736, resulting in a value of approximately $1,895,000.

The Company then determined that a discount for lack of marketability should be considered because (1) the shares were not eligible for sale by Westwater until May 1, 2021, and (2) after May 1, 2021, the terms of the purchase agreement require WWR to offer enCore a first right to buy the shares if the amount to be sold in a single transaction is greater than 250,000 shares.

Utilizing a precedent comparable transaction and Black-Scholes valuation methodology for fair value

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%.

On August 30, 2019, the Company sold the promissory note (Note 4).

Prior to August 30, 2019, the Company had received three tranches of Laramide common shares as partial consideration for the sale, which had resulted in the receipt of 2,218,133, 1,982,483 and 2,483,034 Laramide common shares in January 2017, January 2018 and January 2019, respectively.

These share payments represented the 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.

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.

SALE OF URANIUM ASSETS

On March 5, 2019, the Company entered into an Asset Purchase Agreement with Uranium Royalty (USA) Corp.

and Uranium Royalty Corp.

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

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

The Amendment extended the date for closing from July 31, 2019 to August 30, 2019.

URC delivered an additional $1.0 million as deposit to the Company upon signing the Amendment.

The transaction closed on August 30, 2019 at which time the Company transferred ownership of the royalties and promissory note in exchange for the final payment of $1.25 million.

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

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

evaluation, the Company determined that a discount of 21%, or $375,000, should be applied to the shares.

Accordingly, the carrying value of the shares has been adjusted to reflect a fair value of $1,520,000, and the discount was charged to loss on sale of uranium assets on the Consolidated Statement of Operations for the year ended 12/31/2020.

Finally, due to the high degree of uncertainties surrounding future mine development and uranium prices, as well as limited marketability, the Company determined the fair value of the NSR Royalty and NPI to be of nil value.

At December 31, 2020, the following fair value amounts were recorded as purchase consideration:

(thousands of dollars)

Total cash consideration received, net of transaction costs

Carrying value of promissory note

Carrying value of royalty interests

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).

Transaction costs

Contingent consideration for PPP Loan escrow

enCore common stock

Total consideration received

At December 31, 2020, the Company recorded the following loss on disposal of uranium properties within its Consolidated Statement of Operations:

(thousands of dollars)

Total consideration received

Carrying value of uranium property, plant and equipment

Restricted Cash

Asset retirement obligation

Note Payable (PPP loan)

Other liabilities

Loss on disposal of uranium entities

The loss was primarily related to resolution of transaction issues and final negotiations in the fourth quarter leading up to the transaction closing on December 31, 2020.

FINANCIAL INSTRUMENTS

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):

Applicable accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and establishes a fair-value hierarchy that prioritizes the inputs used to measure fair value using the following definitions (from highest to lowest priority):

● Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that are observable at the measurement date.

● Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

● Level 3 includes unobservable inputs that reflect management’s assumptions about what factors market participants would use in pricing the asset or liability.

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

● Level 3 includes unobservable inputs that reflect management’s assessment about what factors market participants would use in pricing the asset or liability.

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

The Company believes that the fair 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

The following table presents information about assets that were recorded at fair value on a recurring and non-recurring basis as of March 31, 2021 and December 31, 2020 and indicates the fair value hierarchy.

March 31, 2021

(thousands of dollars)

Current Assets

Restricted cash included in assets held for sale

Equity securities

Total current assets recorded at fair value

Non-current Assets

Restricted cash not included in assets held for sale

Total non-current assets recorded at fair value

December 31, 2020

(thousands of dollars)

Current Assets

Equity securities

Total current assets recorded at fair value

Non-current Assets

Restricted cash included in assets held for sale

Restricted cash not included in assets held for sale

Restricted cash

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.

Equity securities on the balance sheet at December 31, 2020 and March 31, 2021 consist solely of shares of common stock received as partial consideration for the sale of uranium assets to enCore (see Note 3).

A $0.2 million increase in the fair value of the equity securities was recognized in net income for the three month period ended March 31, 2021.

PROPERTY, PLANT AND EQUIPMENT

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

Net Book Value of Property, Plant and Equipment at March 31, 2021

(thousands of dollars)

Uranium plant

Mineral rights and properties

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, 2020

(thousands of dollars)

Uranium plant

Mineral rights and properties

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.

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.

For the three

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MINERAL PROPERTY EXPENDITURES

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)

Kingsville Dome project, Texas

Rosita project, Texas

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

Other projects, Nevada

Total Nevada projects

Sal Rica project, Utah

Total Utah projects

Coosa project, Alabama

Bama project, Alabama

Total Alabama projects

Total expense for the period

(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.

months ended March 31, 2021 no events or changes in circumstance are believed to have impacted recoverability of the Company’s long-lived assets.

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

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.

In the third quarter of 2020, the Company executed the strategic decision to focus its resources on its graphite business, as further discussed below, and discontinue its investment in its lithium business.

On December 31, 2020 the Company entered into a securities purchase agreement pursuant to which it agreed to sell its subsidiaries engaged in the uranium business in Texas and New Mexico to enCore.

The transaction closed on December 31, 2020.

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:

In accordance with ASC 205-20 – “Discontinued Operations,” the enCore transaction represented a major strategic shift for Westwater and resulted in the reclassification of the Company’s uranium activities as discontinued operations and disclosure of the associated profit/loss of the Company’s uranium business as a separate line-item on the Company’s Condensed Consolidated Statement of Operations for three months ended March 31, 2020.

The results of the Company’s uranium and lithium business segments included in discontinued operations for the three months ended March 31, 2020 were as follows:

For the Three Months Ended

For the Nine Months Ended

September 30,

(thousands of dollars)

March 31, 2020

Mineral property expenses

2 unchanged sentences

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

Our cash flow information for the three months ended March 31, 2020 included the following activities related to discontinued operations:

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)

Balance, beginning of period

Liabilities settled

Accretion expense

Balance, end of period

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 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.

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

December 2020 Purchase Agreement with Lincoln Park Capital Fund, LLC

On December 4, 2020, the Company entered into a Purchase Agreement with Lincoln Park (“the “December 2020 PA”) to place up to $100.0 million in the aggregate of the Company's common stock on an ongoing basis when required by the Company over a term of 36 months.

The Company controls the timing and amount of any sales to Lincoln Park, and Lincoln Park is obligated to make purchases in accordance with the December 2020 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

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

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.

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

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

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 were exercised on October 6, 2020.

prevailing market prices at the time of each sale and with no upper limits to the price Lincoln Park may pay to purchase common stock.

The agreement may be terminated by the Company at any time, in its sole discretion, without any additional cost or penalty.

The December 2020 PA specifically provides that the Company may not issue or sell any shares of its common stock under the agreement if such issuance or sale would breach any applicable rules of the NYSE American Stock Exchange (“NYSE American”).

In particular, NYSE American General Rule 713(a) provides that the Company may not issue or sell more than 19.99% of the number of shares of the Company’s common stock that were outstanding immediately prior to the execution of the December 2020 PA unless (i) shareholder approval is obtained or (ii) the average price of all applicable sales of common stock to Lincoln Park under the December 2020 PA, equals of exceeds $6.15.

The Company has scheduled its Annual Shareholders Meeting for May 21, 2021 and has included a proposal in its Proxy Statement which seeks shareholder approval for the issuance of more than 19.99% of the shares of the Company’s common stock outstanding on December 4, 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 December 2020 PA if it would result in Lincoln Park beneficially owning more than 9.99% of its common stock.

During the three months ended March 31, 2021, the Company sold 3.8 million shares of common stock for net proceeds of $24.9 million pursuant to the December 2020 PA with Lincoln Park.

These shares were sold pursuant to a Form S-3 registration statement filed pursuant to Rule 424(b)(3) and declared effective by the Securities and Exchange Commission on December 4, 2020.

As of March 31, 2021, the Company has sold approximately 19.9% of the outstanding shares of common stock as of the date of the December 2020 PA.

ATM Offering Agreement with Cantor

On April 14, 2017, the Company entered into a Controlled Equity Offering Sales Agreement (the “ATM Offering Agreement”) with Cantor acting as sales agent.

On April 14, 2017, the Company entered into a Controlled Equity Offering SM 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 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

During the three months ended March 31, 2021, the Company sold 9.3 million shares of common stock for net proceeds of $47.3 million pursuant to the ATM Offering Agreement with Cantor.

These shares were sold pursuant to a prospectus supplement filed on December 4, 2020 pursuant to Rule 424(b)(5) as a takedown off the Company’s shelf registration statement which had been declared effective by the Securities and Exchange Commission on December 1, 2020.

As of March 31, 2021, 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 March 31, 2021 and 2020:

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March 31, 2021

March 31, 2020

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.

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On October 6, 2020, a warrant holder of 182,515 warrants provided notice of exercise.

The warrant holder elected the cashless exercise method to convert the warrants to shares of common stock.

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

STOCK-BASED COMPENSATION

7 unchanged sentences

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 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.

As of March 31, 2021, 58,586 shares were available for future issuances under the 2013 Plan.

For the three months ending March 31, 2021 and 2020, the Company recorded stock-based compensation expense of $91,000 and $0, respectively.

Stock compensation expense is recorded in general and administrative expenses.

3 unchanged sentences

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

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

As of March 31, 2021, there were 1,200 replacement options outstanding but all replacement warrants have expired.

WESTWATER RESOURCES, INC.

1 unchanged sentence

Stock Options

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

Canceled or forfeited

Stock options outstanding at end of period

Stock options exercisable at end of period

Nine months ended

September 30, 2020

September 30, 2019

The following tables summarize stock options outstanding and changes for the three month periods ending March 31, 2021 and 2020:

March 31, 2021

March 31, 2020

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 September 30, 2020:

The following table summarizes stock options outstanding and exercisable by stock option plan at March 31, 2021:

Outstanding Stock Options

7 unchanged sentences

Replacement Options-Alabama Graphite

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units

1 unchanged sentence

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 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,

The following tables summarizes RSU activity for the three month periods ended March 31, 2021 and 2020:

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 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 nine months ended September 30, 2020.

Additionally, potentially dilutive shares of 341,856 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, 2021.

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.

The Company reviews its reclamation obligations each year and determines the appropriate unit charge.

The Company also evaluates the status of current environmental laws and their potential impact on their accrual for costs.

Future operations on the Company’s properties are subject to federal and state regulations for the protection of the environment, including water quality.

The Company evaluates the status of current environmental laws and their potential impact on current operating costs and accrual for future costs.

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.

1 unchanged sentence

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

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.

The leases have remaining lease terms of 1.6 years to 2.3 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.

9 unchanged sentences

The components of lease expense are as follows:

September 30,

For the Three Months Ended

(thousands of dollars)

Operating lease cost

Continuing Operations

Discontinued Operations

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

September 30, 2020

September 30, 2019

For the Three Months Ended

(thousands of dollars)

Continuing Operations

Discontinued Operations

Continuing Operations

Discontinued Operations

Cash paid for amounts included in lease liabilities:

Cash flows from operating leases

Operating 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

4 unchanged sentences

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

September 30,

For the Three Months Ended

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

Lease payments by year

(In thousands)

2021 (remainder of year )

1 unchanged sentence

Less imputed interest

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.

As of March 31, 2021, the Company has $0.3 million in right-of-use assets and $0.3 million in related lease liabilities ($0.2 million of which is current).

The most significant operating lease is for the Company’s 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 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.

Operations whose revenues, earnings or losses or assets exceed or are expected to exceed 10% of the total consolidated revenue, earnings or losses or assets are reportable segments.

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

The 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)

Net property, plant and equipment

Restricted cash

Operating lease right of use assets

Total long-term assets

December 31, 2019

(thousands of dollars)

Net property, plant and equipment

Restricted cash

Operating lease right of use assets

Total long-term assets

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

September 30, 2020

(thousands of dollars)

Statement of Operations

Mineral property expenses

Product development expenses

General and administrative expenses

Arbitration expenses

Depreciation and amortization

Loss from operations

Other income/(expense)

Loss before taxes

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three months Ended

September 30, 2019

(thousands of dollars)

Statement of Operations

Mineral property expenses

Product development expenses

General and administrative

Arbitration expenses

Depreciation and amortization

Loss from operations

Loss before taxes

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.

Nine months Ended

September 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 continuing operations

Loss before taxes

Nine months Ended

September 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 continuing operations

Other (expense)

Loss before taxes

NOTES PAYABLE

Loan under the Paycheck Protection Program (PPP)

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 (“SBA”) Preferred Lender.

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%.

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.

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 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