WESTWATER RESOURCES, INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS WESTWATER RESOURCES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (expressed in thousands of dollars, except share amounts) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ ​ 2021 ​ 2020 ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ Current Assets: ​ ​ Cash and cash equivalents $ 117,861 $ 50,315 Equity securities 1,713 1,520 Prepaid and other current assets 750 754 Total Current Assets 120,324 52,589 ​ ​ ​ ​ ​ ​ ​ Property, plant and equipment, at cost: Property, plant and equipment 9,079 9,080 Less accumulated depreciation and depletion (96) (95) Net property, plant and equipment 8,983 8,985 Operating lease right-of-use assets 322 353 Restricted cash — 10 Total Assets $ 129,629 $ 61,937 ​ LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ Current Liabilities: Accounts payable $ 2,881 $ 1,734 Accrued liabilities 2,191 2,369 Operating lease liability - current 150 149 Total Current Liabilities 5,222 4,252 ​ ​ ​ ​ ​ ​ ​ Operating lease liability, net of current 182 214 Total Liabilities 5,404 4,466 ​ ​ ​ ​ ​ ​ ​ Commitments and Contingencies ​ ​ ​ ​ ​ ​ ​ Stockholders’ Equity: Common stock, 100,000,000 shares authorized, $.001 par value; Issued shares – 32,336,476 and 19,172,020 respectively Outstanding shares - 32,336,315 and 19,171,859 respectively 32 19 Paid-in capital 455,854 383,723 Accumulated deficit (331,403) (326,013) Less: Treasury stock (161 shares), at cost (258) (258) Total Stockholders’ Equity 124,225 57,471 ​ ​ ​ ​ ​ ​ ​ Total Liabilities and Stockholders’ Equity $ 129,629 $ 61,937 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ ​ 3 Table of Contents ​ WESTWATER RESOURCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (expressed in thousands of dollars, except share and per share amounts) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ ​ ​ ​ March 31, ​ ​ ​ 2021 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Expenses: ​ ​ Product development expenses ​ $ (1,823) $ (126) ​ ​ Exploration expenses ​ ​ (145) ​ ​ — ​ ​ General and administrative expenses ​ (2,084) (1,362) ​ ​ Arbitration costs ​ (1,532) (669) ​ ​ Depreciation and amortization ​ (1) (2) ​ ​ Total operating expenses ​ (5,585) (2,159) ​ ​ ​ ​ ​ ​ Non-Operating Income/(Expenses): ​ ​ ​ Unrealized gain on equity securities ​ ​ 193 ​ ​ — ​ ​ Other income (expense) ​ 2 (3) ​ ​ Total other income (expense) ​ 195 (3) ​ ​ ​ ​ ​ ​ ​ Net Loss from continuing operations ​ ​ (5,390) ​ (2,162) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss from discontinued operations ​ ​ — ​ (1,125) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss ​ $ (5,390) $ (3,287) ​ ​ ​ ​ ​ ​ BASIC AND DILUTED LOSS PER SHARE ​ $ (0.19) $ (0.82) ​ ​ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING ​ 28,597,938 4,004,948 ​ ​ ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ 4 Table of Contents WESTWATER RESOURCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND SUPPLEMENTAL CASH FLOW INFORMATION (expressed in thousands of dollars) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended March 31, ​ 2021 2020 Operating Activities: ​ ​ Net loss $ (5,390) ​ $ (3,287) Reconciliation of net loss to cash used in operations: ​ ​ Accretion of asset retirement obligations — ​ 106 Costs incurred for restoration and reclamation activities ​ ​ — ​ ​ (26) Depreciation and amortization 1 ​ 13 Stock compensation expense 91 ​ — Unrealized (gain) on equity securities ​ ​ (193) ​ ​ — Effect of changes in operating working capital items: ​ ​ ​ ​ ​ ​ Increase in prepaids and other assets (328) ​ (352) Increase in payables and accrued liabilities 969 ​ 91 Net Cash Used In Operating Activities (4,850) ​ (3,455) ​ ​ ​ ​ ​ ​ ​ Cash Flows From Investing Activities ​ Proceeds from PPP loan escrow 333 ​ — Net Cash Provided By Investing Activities 333 ​ — ​ ​ ​ ​ ​ ​ ​ Cash Flows From Financing Activities: ​ Issuance of common stock, net 72,203 ​ 2,471 Payment of minimum withholding taxes on net share settlements of equity awards (150) ​ — Net Cash Provided By Financing Activities 72,053 ​ 2,471 ​ ​ Net increase/(decrease) in cash, cash equivalents and restricted cash 67,536 ​ (984) Cash, Cash Equivalents and Restricted Cash, Beginning of Period 50,325 ​ 5,667 Cash, Cash Equivalents and Restricted Cash, End of Period $ 117,861 ​ $ 4,683 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ 5 Table of Contents WESTWATER RESOURCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY ​ (expressed in thousands of dollars, except share amounts) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Paid-In ​ Accumulated ​ Treasury ​ ​ ​ ​ ​ Shares ​ Amount ​ Capital ​ Deficit ​ Stock ​ Total Balances, December 31, 2020 19,172,020 ​ $ 19 ​ $ 383,723 ​ $ (326,013) ​ $ (258) ​ $ 57,471 Net loss — ​ — ​ ​ — ​ (5,390) ​ — ​ (5,390) Common stock issued, net of issuance costs 13,107,270 ​ 13 ​ ​ 72,190 ​ — ​ — ​ 72,203 Stock compensation expense and related share issuances, net of shares withheld for payment of taxes 57,186 ​ — ​ ​ 91 ​ — ​ — ​ 91 Minimum withholding taxes on net share settlements of equity awards ​ — ​ ​ — ​ ​ (150) ​ ​ — ​ ​ — ​ ​ (150) Balances, March 31, 2021 32,336,476 ​ $ 32 ​ $ 455,854 ​ $ (331,403) ​ $ (258) ​ $ 124,225 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balances, December 31, 2019 ​ 3,339,541 ​ $ 3 ​ $ 319,758 ​ $ (302,439) ​ $ (258) ​ $ 17,064 Net loss — ​ — ​ — ​ (3,287) ​ — ​ (3,287) Common stock issued, net of issuance costs 1,422,742 ​ 2 ​ 2,469 ​ — ​ — ​ 2,471 Stock compensation expense and related share issuances, net of shares withheld for payment of taxes 511 ​ — ​ — ​ — ​ — ​ — Balances, March 31, 2020 4,762,794 ​ $ 5 ​ $ 322,227 ​ $ (305,726) ​ $ (258) ​ $ 16,248 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ ​ ​ ​ ​ 6 Table of Contents WESTWATER RESOURCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ​ ​ 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements for Westwater Resources, Inc. (the “Company,” “we,” “us,” “WWR” or “Westwater”), have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying statements should be read in conjunction with the audited financial statements included in Westwater Resources, Inc.’s 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 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 Issued Accounting Pronouncements 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 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”. ASU 2016-13 will change how companies account for credit losses for most financial assets and certain other instruments. For trade receivables, loans and held-to-maturity debt securities, companies will be required to estimate lifetime expected credit losses and recognize an allowance against the related instruments. For available for sale debt securities, companies will be required to recognize an allowance for credit losses rather than reducing the carrying value of the asset. The adoption of this update, if applicable, will result in earlier recognition of losses and impairments. ASU 2016-13 will be effective for interim and annual periods beginning after 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. That methodology replaces the probable, incurred loss model for those assets. ASU 2018-19 is the final version of Proposed Accounting Standards Update 2018-270, which has been deleted. Additionally, the amendments clarify that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842, Leases. ASU 2018-19 will be effective for interim and annual periods beginning after 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 7 Table of Contents WESTWATER RESOURCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ​ 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) 2021 2020 Cash and cash equivalents ​ $ 117,861 ​ $ 877 Restricted cash - pledged deposits for performance bonds ​ — ​ 3,806 Cash, cash equivalents and restricted cash shown in the statement of cash flows ​ $ 117,861 ​ $ 4,683 ​ 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. ​ 2. LIQUIDITY 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 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 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. (“enCore”). 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. 8 Table of Contents WESTWATER RESOURCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ​ Management believes the Company’s current cash balance is sufficient to fund its planned non-discretionary expenditures through 2022. 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 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. ​ ​ ​ 3. 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 9 Table of Contents WESTWATER RESOURCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ​ 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) ​ Cash ​ $ 743 Transaction costs ​ (558) Contingent consideration for PPP Loan escrow ​ ​ 333 enCore common stock ​ 1,520 Total consideration received ​ $ 2,038 ​ 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 ​ $ 2,038 Carrying value of uranium property, plant and equipment ​ (6,204) Restricted Cash ​ (3,797) Other assets ​ ​ (579) Asset retirement obligation ​ ​ 5,239 Note Payable (PPP loan) ​ ​ 333 Other liabilities ​ ​ 305 Loss on disposal of uranium entities ​ $ (2,665) ​ 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. ​ 4. FINANCIAL INSTRUMENTS Applicable accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and establishes a fair-value hierarchy that prioritizes the inputs used to measure fair value using the following definitions (from highest to lowest priority): ● Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that are observable at the measurement date. ● Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). 10 Table of Contents WESTWATER RESOURCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ​ ● 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 March 31, 2021 and December 31, 2020 and indicates the fair value hierarchy. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2021 (thousands of dollars) Level 1 Level 2 Level 3 Total Current Assets ​ ​ ​ ​ Equity securities ​ $ — ​ $ — ​ $ 1,713 ​ $ 1,713 Total current assets recorded at fair value ​ $ — ​ $ — ​ $ 1,713 ​ $ 1,713 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 (thousands of dollars) Level 1 Level 2 Level 3 Total Current Assets ​ ​ ​ ​ Equity securities ​ $ — ​ $ — ​ $ 1,520 ​ $ 1,520 Total current assets recorded at fair value ​ $ — ​ $ — ​ $ 1,520 ​ $ 1,520 Non-current Assets ​ ​ ​ ​ Restricted cash ​ $ 10 ​ $ — ​ — ​ $ 10 Total non-current assets recorded at fair value ​ $ 10 ​ $ — ​ $ — ​ $ 10 ​ 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. ​ ​ 5. PROPERTY, PLANT AND EQUIPMENT ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Book Value of Property, Plant and Equipment at March 31, 2021 (thousands of dollars) Alabama Corporate Total Mineral rights and properties ​ 8,972 ​ — ​ 8,972 Other property, plant and equipment ​ — ​ 11 ​ 11 Total ​ $ 8,972 ​ $ 11 ​ $ 8,983 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Book Value of Property, Plant and Equipment at December 31, 2020 (thousands of dollars) Alabama Corporate Total Mineral rights and properties ​ 8,972 ​ — ​ 8,972 Other property, plant and equipment ​ — ​ 13 ​ 13 Total ​ $ 8,972 ​ $ 13 ​ $ 8,985 ​ 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 three 11 Table of Contents WESTWATER RESOURCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ​ 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6. DISCONTINUED OPERATIONS 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. ​ 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 (thousands of dollars) March 31, 2020 Mineral property expenses $ (602) General and administrative expenses (417) Accretion of asset retirement obligations (106) Depreciation and amortization (11) Other income (expense) 11 Net Loss from Discontinued Operations $ (1,125) ​ 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 ​ March 31, (thousands of dollars) ​ 2020 Depreciation and amortization $ 11 Accretion of asset retirement obligations ​ 106 ​ ​ 7. COMMON STOCK Common Stock Issued, Net of Issuance Costs 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 12 Table of Contents WESTWATER RESOURCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ​ 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 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. ​ 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. ​ Warrants The following table summarizes warrants outstanding and changes for the three-month periods ending March 31, 2021 and 2020: 4e3rd555555fffffffff3 ​ ​ ​ ​ ​ ​ March 31, 2021 ​ March 31, 2020 ​ ​ ​ ​ ​ Number of ​ Number of ​ ​ Warrants ​ Warrants Warrants outstanding at beginning of period — 197,622 Issued — — Expired — — Warrants outstanding at end of period — 197,622 ​ ​ ​ ​ ​ 13 Table of Contents WESTWATER RESOURCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ​ 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. ​ 8. 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”). 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-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. Equity awards under the 2013 Plan are granted from time to time at the discretion of the Compensation Committee of the Board (the “Committee”), with vesting periods and other terms as determined by the Committee with a maximum term of 10 years. The 2013 Plan is administered by the Committee, which can delegate the administration to the Board, other Committees or to such other officers and employees of the Company as designated by the Committee and permitted by the 2013 Plan. 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. In addition to the plans above, upon closing of the Company’s acquisition of Alabama Graphite in April 2018, the Company issued 50,168 replacement options and warrants to the option and warrant holders of Alabama Graphite. The number of replacement options and warrants shares was determined using the arrangement exchange rate of 0.0016. The exercise prices for the option and warrant shares were first converted for the exchange rate of 0.0016 and then converted to USD using the exchange rate on December 13, 2017 of 0.77809 (CAD to USD). The options and warrant shares were issued with the same terms and conditions as were applicable prior to the acquisition of Alabama Graphite. As of March 31, 2021, there were 1,200 replacement options outstanding but all replacement warrants have expired. 14 Table of Contents WESTWATER RESOURCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ​ Stock Options 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 ​ ​ Weighted ​ Weighted ​ ​ Number of ​ Average ​ Number of ​ Average ​ ​ Stock ​ Exercise ​ Stock ​ Exercise ​ ​ Options ​ Price ​ Options ​ Price Stock options outstanding at beginning of period 185,054 ​ $ 7.99 37,786 ​ $ 37.42 Granted — ​ — — ​ — Expired (800) ​ 71.63 (1,217) ​ 75.95 Canceled or forfeited ​ — ​ ​ — ​ — ​ ​ — Stock options outstanding at end of period 184,254 ​ $ 7.72 36,569 ​ $ 36.14 Stock options exercisable at end of period 34,453 ​ $ 32.40 36,569 ​ $ 36.14 ​ ​ The following table summarizes stock options outstanding and exercisable by stock option plan at March 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding Stock Options ​ Exercisable Stock Options ​ Number of Weighted Number of Weighted ​ ​ Outstanding ​ Average ​ Stock Options ​ Average Stock Option Plan ​ Stock Options ​ Exercise Price ​ Exercisable ​ Exercise Price 2004 Plan 92 ​ $ 1,638.00 92 ​ $ 1,638.00 2004 Directors’ Plan 3 ​ 10,380.00 3 ​ 10,380.00 2013 Plan 182,959 ​ 6.29 33,158 ​ 25.47 Replacement Options-Alabama Graphite 1,200 ​ 74.82 1,200 ​ 74.82 ​ 184,254 ​ $ 7.72 34,453 ​ $ 32.40 ​ Restricted Stock Units Time-based and performance-based RSUs are valued using the closing share price of the Company’s common stock on the date of grant. The final number of shares issued under performance-based RSUs is generally based on the Company’s prior year performance as determined by the Compensation Committee of the Board of Directors at each vesting date, and the valuation of such awards assumes full satisfaction of all performance criteria. The following tables summarizes RSU activity for the three month periods ended March 31, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ March 31, ​ ​ 2021 ​ 2020 ​ ​ Weighted- ​ Weighted- ​ ​ ​ ​ Average ​ ​ ​ Average ​ ​ Number of ​ Grant Date ​ Number of ​ Grant Date ​ ​ RSUs ​ Fair Value ​ RSUs ​ Fair Value Unvested RSUs at beginning of period 236,403 ​ $ 2.10 — ​ $ — Granted — ​ — — ​ — Forfeited — ​ — — ​ — Vested (78,801) ​ 2.10 — ​ — Unvested RSUs at end of period 157,602 ​ $ 2.10 — ​ $ — 15 Table of Contents WESTWATER RESOURCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ​ ​ ​ 9. 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 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. ​ 10. COMMITMENTS AND CONTINGENCIES 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. At any given time, the Company may enter into negotiations to settle outstanding legal proceedings and any resulting accruals will be estimated based on the relevant facts and circumstances applicable at that time. We do not expect that such settlements will, individually or in the aggregate, have a material effect on our financial position, results of operations or cash flows. ​ 11. LEASES The Company’s lease portfolio consists of operating leases for corporate offices, storage space and equipment. The leases have remaining lease terms of 1.6 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. Because these amounts are variable from year to year and not specifically set in the lease terms, they are not included in the measurement of the right-of-use asset and related lease liability, but rather expensed in the period incurred. The Company is party to several leases that are for under one year in length. These include such leases as those for land used in exploration and mining activities, office equipment, machinery, office space, storage and other. The Company has elected the short-term lease exemptions allowed under the new leasing standards, whereby leases with initial terms of one year or less are not capitalized and instead expensed on a straight-line basis over the lease term. In addition, the Company holds numerous leases related to mineral exploration and production to which it has not applied the new leasing standard. Leases to explore or use minerals and similar nonregenerative resources are specifically excluded by ASC 842-10. The right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term using a discount rate of 9.5%. This rate is the Company’s current estimated incremental borrowing rate. The components of lease expense are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ ​ March 31, (thousands of dollars) ​ 2021 ​ 2020 Operating lease cost ​ $ 38 ​ $ 40 ​ 16 Table of Contents WESTWATER RESOURCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ​ Supplemental cash flow information related to the Company’s operating leases is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ ​ March 31, (thousands of dollars) 2021 ​ 2020 Cash paid for amounts included in lease liabilities: ​ ​ ​ Operating cash flows from operating leases ​ $ 39 ​ $ 39 ​ ​ ​ ​ ​ ​ ​ Right-of-use assets obtained in exchange for lease obligations: ​ ​ Operating leases ​ $ 322 ​ $ 454 ​ Supplemental balance sheet information related to the Company’s operating leases is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, (thousands of dollars, except lease term and discount rate) ​ 2021 ​ 2020 Operating Leases ​ ​ ​ Operating lease right-of-use assets ​ $ 322 ​ $ 353 ​ ​ ​ ​ ​ ​ ​ Current portion of lease liabilities ​ $ 150 ​ $ 149 Operating lease liabilities – long term portion ​ 182 ​ 214 Total operating lease liabilities ​ $ 332 ​ $ 363 ​ ​ Weighted-average remaining lease term and discount rate for the Company’s operating leases are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ ​ ​ March 31, ​ ​ ​ 2021 ​ 2020 Weighted Average Remaining Lease Term (in years) ​ 2.6 ​ ​ 3.5 ​ ​ ​ ​ ​ ​ ​ ​ ​ Discount Rate ​ 9.5 % ​ 9.5 % ​ Maturities of lease liabilities for the Company’s operating leases are as follows: ​ ​ ​ ​ ​ Lease payments by year March 31, (In thousands) ​ 2021 2021 (remainder of year ) ​ $ 117 2022 ​ 158 2023 ​ 92 Total lease payments ​ $ 367 Less imputed interest ​ (35) Total ​ $ 332 ​ 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. ​ 17 Table of Contents