What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-10 compared with 2021-08-11 · 110 added, 93 removed, 115 unchanged (64% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis of the consolidated financial results and condition of Westwater for the three and six months ended June 30, 2021, has been prepared based on information available to us as of August 11, 2021.

The following management’s discussion and analysis of the consolidated financial results and condition of Westwater for the three and nine months ended September 30, 2021, has been prepared based on information available to us as of November 10, 2021.

This discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included herewith and the audited Consolidated Financial Statements of Westwater for the period ended December 31, 2020 and the related notes thereto filed with our Annual Report on Form 10-K, which have been prepared in accordance with U.S.

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

See “Cautionary Note Regarding Forward-Looking Statements.”

See “Cautionary Note Regarding Forward-Looking Statements” herein.

Westwater Resources, Inc.

is a 44-year-old public company trading on the NYSE American Stock Exchange (“NYSE American”) focused on battery graphite development under the symbol “WWR.” Originally incorporated in 1977 as Uranium Resources, Inc.

to mine uranium in Texas, our company has pivoted to an energy materials developer.

to mine uranium in Texas, our company pivoted to an energy materials developer.

Westwater is focused on battery-grade graphite materials after its acquisition of Alabama Graphite Corp.

(“Alabama Graphite”) and its Coosa Graphite Project (“Coosa Project”) in Alabama in April 2018.

Westwater recently discovered vanadium concentrations at the Coosa Project and is executing an exploration plan to further investigate the size and extent of those concentrations and increase our knowledge of the deposit as a whole.

Combined with the anticipated construction of a battery graphite processing facility near Kellyton, Alabama, the Company is executing an exploration plan to further investigate the size and extent of mineral concentrations at Coosa graphite deposit, located near Rockford, Alabama, to increase our knowledge of the deposit as a whole.

RECENT DEVELOPMENTS

Graphite Processing Pilot Programs

During the quarter ended June 30, 2021, the Company continued, and is nearing completion of, its pilot program at Dorfner Anzaplan’s facilities near Amberg, Germany, as well as at facilities in Frankfurt, Germany, Chicago, Illinois and Buffalo, New York.

During the quarter ended September 30, 2021, the Company continued, and in October 2021 substantially completed, its pilot program at Dorfner Anzaplan’s facilities near Amberg, Germany, as well as at facilities in Frankfurt, Germany, Chicago, Illinois and Buffalo, New York.

The combined effort at these facilities produced approximately 13 metric tonnes of Westwater’s three battery-grade graphite products:

ULTRA-PMG™, ULTRA-CSPG™ and ULTRA-DEXDG™, which were previously produced at a bench scale.

As of June 30, 2021, Westwater had produced:

As of September 30, Westwater had produced through the pilot program:

● 10.8 metric tonnes of ULTRA-PMG™ in six sizes (6, 8, 10, 15, 30 and 44 microns):

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Westwater undertook its pilot program operations to inform and enhance design work for its commercial production facility and to produce products for testing by potential customers.

The information from those operations is being incorporated into the DFS.

Graphite Processing Site Selection

On June 22, 2021, AGP entered into incentive agreements with the State of Alabama and local municipalities for the siting of the Company’s proposed graphite processing plant in Coosa County, Alabama.

The incentive agreements provide certain tax credits and incentives under the Alabama Jobs Act in connection with the construction of the processing facility.

The estimated tax credits and incentives pursuant to the incentive agreements are estimated by

the State of Alabama at approximately $36 million.

However, our ability to realize the tax credits and incentives is dependent upon actual capital invested, creating and maintaining jobs in Alabama, and the generation of future taxable income in Alabama.

On July 23, 2021, AGP entered into a land lease with the Lake Martin Area Industrial Development Authority, providing AGP rights to approximately 70 acres to construct and operate its commercial graphite processing facility in Coosa County, Alabama.

The lease has a term of 10-years, a nominal lease payment, and transfer of title to AGP at the end of the lease term.

Further, the lease provides AGP the option to purchase the land for a nominal amount during the term of the lease.

At lease inception, the Company estimated the fair value of the land to be approximately $1.4 million.

Additions to the Executive Team

After a comprehensive search process that yielded many highly qualified candidates, Westwater hired Chad M.

Potter as Westwater’s Chief Operating Officer on August 2, 2021.

Potter is a proven operations leader, whose unique skills and experience will be instrumental in leading Westwater and its subsidiaries through the construction, development, and future operation the Coosa Graphite Project.

The addition of Mr.

Potter will help position Westwater’s American-made battery graphite operations as best in class with a focus on safety, quality, integrity, and the protection of our environment.

In the second quarter, after completing a comprehensive search process, Westwater hired Steven M.

Cates as Westwater’s Chief Accounting Officer and Controller on May 10, 2021.

Cates is a proven financial manager whose skills and experience will be instrumental in this stage of anticipated growth and value creation at Westwater.

The information from the pilot program was incorporated into the Definitive Feasibility Study (“DFS”).

Definitive Feasibility Study on the Coosa Graphite Project

On February 4, 2021, Westwater entered into a Master Services Agreement (the “Master Services Agreement”) with Samuel Engineering, Inc.

(“Samuel”) for various engineering support and consulting services in connection with the Company’s Coosa Project DFS.

Under the terms of the Master Services Agreement and as a part of the DFS, Samuel is, among other things, conducting studies that address the Coosa Project’s location, raw materials, product quality, infrastructure and other preliminary assessments, which will provide cost estimates for the Coosa Project, identifying long-lead items and providing detailed specifications for these items to be ordered, as well as preparing designs and drawings for the detailed engineering phase prior to construction.

The DFS is expected to be completed by the end of the third quarter of 2021.

Westwater plans to utilize the DFS as a basis for Board approval of the project, engaging one or more engineering, procurement, construction and management (“EPCM”) companies to complete the design and start the construction of the commercial plant.

Construction is anticipated to begin around the end of 2021.

Completion of construction of Phase I of the plant is planned for the end of 2022, with operations anticipated in 2023.

On October 11, 2021, the Company announced the results of the DFS pertaining to Phase I of its Coosa Graphite Processing Facility (the “Project”).

The Company intends to develop the Project to purify natural graphite concentrates and to produce battery ready graphite products in two phases.

The capital costs of Phase I of the Project are

estimated at $202 million.

Beginning in early 2023, the Project is expected to begin producing from purchased feedstock from outside sources until at least 2028, after which the Company expects to produce graphite feedstock from its Coosa Project.

After processing and purification, the Company expects approximately 7,500 mt per year of two products to be commercially available in the following quantities:

3,700 mt per year

● Fine Products from SPG milling:

3,800 mt per year

● Project Duration:

● Pre-Tax NPV-8 percent:

● Annual Pre-Tax Cash Flow (After the year 2024):

$24 million per year

● Project Pre-Tax Cash Flow:

$656 million.

Also on October 11, 2021, the Company announced a plan and design for Phase II of the project at a pre-feasibility level (“PFS”).

The PFS for Phase II of the Project estimates capital costs of $464 million, and after processing and purification, the Company expects approximately 32,400 mt per year of two products will be available in the following quantities:

15,800 mt per year

● Fine Products from SPG milling:

16,600 mt per year

● Project Duration:

● Pre-Tax NPV-8 percent:

● Average Annual Pre-Tax Cash Flow (After the year 2024):

● Project Pre-Tax Cash Flow:

The Company intends to initiate a DFS for Phase II upon completion and commissioning of Phase I of the Project.

Approval of Construction of Phase I and Purchase of Industrial Space

On October 11, 2021, the Company’s Board of Directors approved estimated expenditures of $202 million to execute the construction and commissioning plan for Phase I of the Project.

Construction related activities are expected to begin before the end of 2021.

In addition, on October 13, 2021 the Company completed the purchase of two buildings by its subsidiary, Alabama Graphite Products, LLC, that total 90,000 sq.

in size, to support the development of the Project.

These buildings will be used for administrative offices, a laboratory, and warehousing space, and each are adjacent to the planned processing plant.

The purchase of these two buildings avoids the need for certain construction activities.

Vanadium Target Identification

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Westwater subsequently commenced the first of a four-phase exploration program designed to determine the extent, character and quality of the vanadium mineralization at the Coosa Project.

As announced by the Company on February 19, 2019, the first phase demonstrated widespread positive values for vanadium that extended beyond the graphite deposit, as defined in the 2015 Preliminary Economic Assessment for the site.

The first phase demonstrated widespread positive values for vanadium that extended beyond the graphite deposit, as defined in the 2015 Preliminary Economic Assessment for the site.

The second phase of the vanadium exploration project began in April 2021 and is expected to continue throughout the remainder of the year.

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On February 24, 2021, the President signed an Executive Order that seeks to provide for more resilient supply chains to revitalize and rebuild domestic manufacturing capacity and maintain America’s competitive edge in research and development.

Graphite and vanadium are specifically named as critical minerals in which the U.S.

is heavily dependent on China for its supply.

The President’s declaration asked the Secretary of Energy, as part of larger study involving several branches of the U.S.

government, to submit a report identifying risks to the supply chain for high-capacity batteries including those that power electric vehicles.

Graphite and vanadium are specifically named as critical minerals in which the United States is heavily dependent on China for its supply.

The President’s declaration asked the Secretary of Energy, as part of larger study involving several branches of the United States government, to submit a report identifying risks to the supply chain for high-capacity batteries including those that power electric vehicles.

On June 8, 2021, the White House released a response to the findings of this study in support of securing an end-to-end domestic supply chain for advanced batteries, including investment in domestic production and processing of critical minerals.

Key recommendations in the June 8 th release include, among other things, providing funding and financial incentives to encourage consumer adoption of electric vehicles, providing financing to support advanced batter production, and investing in the development of next generation batteries.

The new order, and the key recommendations in the June 8 th White House release, build upon the prior Administration’s Executive Order issued on September 30, 2020, related to critical minerals, and could be important to Westwater’s plans to develop its battery graphite business in the United States.

is 100% dependent on imports for battery-grade graphite, which is currently the primary anode material in the Lithium-Ion batteries that power smartphones, laptops, electric vehicles, and store power generated from intermittent renewable energy sources.

Key recommendations in the June 8, 2021 release include, among other things, providing funding and financial incentives to encourage consumer adoption of electric vehicles, providing financing to support advanced battery production, and investing in the development of next generation batteries.

The February 2021 Executive Order and the key recommendations in the June 8, 2021 White House release, builds upon the prior Administration’s Executive Order issued on September 30, 2020, related to critical minerals, and could be important to Westwater’s plans to develop its battery graphite business in the United States.

Presently, the United States is almost 100% dependent on imports for battery-grade graphite, which is currently the primary anode material in the Lithium-Ion batteries that power smartphones, laptops, electric vehicles, and store power generated from intermittent renewable energy sources.

Westwater intends to develop the Coosa Project to supply natural flake graphite for beneficiation into battery-grade graphite for all types of batteries.

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Further details on the June 8, 2021 White House press release can be found at https://www.whitehouse.gov/briefing-room/statements-releases/2021/06/08/fact-sheet-biden-harris-administration-announces-supply-chain-disruptions-task-force-to-address-short-term-supply-chain-discontinuities/

Westwater will work to support the efforts by the relevant agencies in the U.S.

government and will ensure that they remain aware of the importance of battery-grade graphite, its importance to the nation’s security, and how the Coosa Project fits into the critical minerals-equation.

Westwater intends to support the efforts by the relevant United States governmental agencies to ensure that they remain aware of the importance of battery-grade graphite, its importance to the nation’s security, and how the Coosa Graphite Project fits into the critical minerals-equation.

The COVID-19 Pandemic and our Actions to Ensure Safety

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

These measures range from limitations on crowd size to mandatory orders for non-essential citizens to “shelter in place” or “stay at home” until further direction.

These measures range from limitations on crowd size to masking to mandatory orders for non-essential citizens to test and quarantine.

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

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Governments may also impose other laws, regulations or taxes which could adversely impact Westwater’s business, financial condition or results of operations.

The potential effects of COVID 19 could also impact Westwater in a number

of other ways including, but not limited to, laws and regulations affecting business, the availability of future borrowings, the cost of borrowings, and potential impairment of the carrying value of long-lived tangible assets.

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

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

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

Westwater has the following priorities while managing business activities during this period of volatility and uncertainty:

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● Third , to ensure the Company has access to adequate financial liquidity to support key operations and business activities.

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

Westwater’s corporate business activities are largely unaffected at this time by the COVID-19 pandemic.

Prior to March 1, 2021, Westwater reduced utilization of its offices and remote working arrangements were instituted to ensure that some employees were able to work remotely using systems that already were in place.

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Equity Financings

Capital Raises during the three and six months ended June 30, 2021

During the month of June 2021, the Company sold 1.2 million shares of common stock for net proceeds of $5.7 million pursuant to the December 2020 PA entered into with Lincoln Park.

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.

During the first six months of 2021, the Company has received net proceeds of $77.9 million from its equity facilities, resulting in a cash balance of approximately $119 million at June 30, 2021.

The significant treasury balance has mitigated the Company’s capital risk through 2021 and 2022 as the Company’s budgeted pilot program for processing battery-grade graphite, the DFS and the remaining budgeted product development costs are now fully funded, and the Company will be able to make substantial initial investment in the commercial graphite processing facility in Coosa County, Alabama in the latter half of 2021.

Capital Raises during three and nine months ended September 30, 2021

During the three months ended September 30, 2021, the Company sold 1.1 million shares of common stock for net proceeds of $4.0 million pursuant to the December 2020 PA entered into with Lincoln Park.

During the nine months ended September 30, 2021, the Company received net proceeds of $81.9 million from its equity facilities, resulting in a cash balance of approximately $119.0 million at September 30, 2021.

The Company anticipates making a substantial initial investment in the Project in the fourth quarter of 2021.

Transfer of Common Stock Listing to the NYSE American Stock Exchange

On March 8, 2021, Westwater Resources, Inc., acting pursuant to authorization from its Board of Directors, determined to voluntarily withdraw the listing of the Company's common stock, par value $0.001 per share, from The Nasdaq Capital Market (“Nasdaq”) and transfer the listing to the NYSE American.

On March 8, 2021, the Company, acting pursuant to authorization from its Board of Directors, determined to voluntarily withdraw the listing of the Company's common stock, par value $0.001 per share, from The Nasdaq Capital Market (“Nasdaq”) and transfer the listing to the NYSE American.

The Company informed Nasdaq on March 8, 2021, of its intent to transfer the listing of its common stock to the NYSE American.

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RESULTS OF OPERATIONS

Our consolidated net loss for the three months ended June 30, 2021, was $3.5 million, or $0.11 per share, as compared with a consolidated net loss of $2.5 million, or $0.43 per share for the same period in 2020.

The $1.0 million increase in our consolidated net loss from the respective prior period in 2020 was due to an increase in product development, exploration, and general and administrative costs;

offset partially by the elimination of costs from discontinued operations, and an unrealized gain related to the enCore common stock.

For the six months ended June 30, 2021, our consolidated net loss was $8.9 million, or $0.29 per share, as compared with a consolidated net loss of $5.8 million, or $1.18 per share for the same period in 2020.

The $ 3.1 million increase in our consolidated net loss from the respective prior period in 2020 was primarily due to an increase in product development, arbitration, general and administrative, and exploration expenses;

offset partially by the elimination of costs from discontinued operations, and an unrealized gain related to the enCore common stock.

Our net loss from continuing operations for the three months ended September 30, 2021, was $4.6 million, or $0.13 per share, as compared with a net loss from continuing operations of $3.4 million, or $0.42 per share for the same period in 2020.

The $1.2 million increase in our net loss from continuing operations was due primarily to increases in general and administrative, arbitration, exploration, and product development expenses;

offset partially by an unrealized gain related to the enCore common stock of $0.5 million.

For the nine months ended September 30, 2021, our net loss from continuing operations was $13.4 million, or $0.42 per share, as compared with a net loss from continuing operations of $6.9 million, or $1.18 per share for the same period in 2020.

The $6.5 million increase in our net loss from continuing operations was due primarily to increases in product development, arbitration, general and administrative, and exploration expenses;

offset partially by an unrealized gain related to the enCore common stock of $1.9 million.

Product development expenses

For the three and six month period ended June 30, 2021, $2.1 million and $3.9 million was spent on product development, respectively.

Of that, approximately $0.7 million and $1.9 million was related to our graphite processing pilot program for the three and six months ended June 30, 2021, respectively.

The remaining product development costs for both the three and six month periods related to product testing, other lab work, shipping, required travel, and other auxiliary costs associated with the Coosa Project.

Product development expenses for the three and nine months ended September 30, 2021, were $1.8 million and $5.8 million, respectfully, an increase of $0.2 million and $3.8 million compared to the same periods in 2020.

Product development costs were primarily comprised of expenses for our DFS, which began in February 2021 and was completed in October 2021, and our product development program continued through the first nine months of 2021.

The product development program includes costs incurred to collaborate with outside experts for lab work, product testing and other auxiliary costs associated with the Coosa Project.

Arbitration Costs

During the first two quarters of 2021, Westwater incurred arbitration related legal and expert consulting costs of $1.5 million.

This represents an increase of 114% or $0.8 million in costs associated with the Request for Arbitration against the Republic of Turkey compared to the six months ended June 30, 2020.

For further reference, see discussion above in the Recent Developments section of this Part I, Item 2 and in Part II, Item 1 below.

During the first nine months of 2021, Westwater incurred legal and expert consulting costs of $2.2 million associated with the Request for Arbitration against the Republic of Turkey.

This represents an increase of 152%, or $1.3 million in costs compared to the nine months ended September 30, 2020.

For further reference, see discussion below in Part II, Item 1.

Mineral property expenses

Mineral property expenses were $0.1 million for both the three and nine months ended September 30, 2021, an increase of $0.1 million compared to the same periods in 2020.

The increase in mineral property expenses was due to higher payments to land and surface owners for increased activities related to our exploration program.

General and Administrative Expenses

Significant expenditures for general and administrative expenses for the three and six months ended June 30, 2021, and 2020 were:

Significant expenditures for general and administrative expenses for the three and nine months ended September 30, 2021 and 2020 were:

For the Three months ended

For the Six months ended

For the Nine months ended

September 30,

(thousands of dollars)

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General and administrative expenses from continuing operations

General and administrative expenses for the three and six month periods ended June 30, 2021, increased by $0.5 million and $0.8 million from their respective periods in 2020, due primarily to higher costs related to the annual shareholder meeting, an increase in stock compensation in 2021, and higher costs related to the Company’s sales and marketing efforts.

These increases were offset partially by lower personnel costs due to the sale of our uranium business at December 31, 2020.

General and administrative expenses for the three and nine months ended September 30, 2021, increased by $0.3 million and $1.1 million from the same periods in 2020.

The increase quarter over quarter is due primarily to higher costs

related to an increase in stock compensation, and higher costs related to the Company’s sales and marketing efforts that began in the third quarter of 2020.

The increase for the first nine months of 2021 compared to the same period in 2020 is due primarily to higher costs related to an increase in stock compensation, higher public company expenses related to the annual shareholder meeting and moving to the NYSE American from the NASDAQ, and higher costs related to the Company’s sales and marketing efforts that began in the third quarter of 2020.

These increases for the three and nine month periods were offset partially by lower personnel costs due to the sale of our uranium business at December 31, 2020.

Net Loss from Discontinued Operations

Westwater sold its uranium business on December 31, 2020.

As a result, the net loss from discontinued operations was $6.4 million and $8.6 million for the three and nine months ended September 30, 2020, respectively.

See Note 3 to the financial statements for additional information.

FINANCIAL POSITION

Operating Activities

Net cash used in operating activities was $9.1 million for the six months ended June 30, 2021, as compared with $6.1 million for the same period in 2020.

The $3.0 million increase in cash used in operating activities was primarily due to increased graphite product development, exploration, general and administrative and arbitration costs in 2021 compared to 2020.

Net cash used in operating activities was $13.0 million for the nine months ended September 30, 2021, as compared with cash used in operating activities of $10.1 million for the same period in 2020.

The $2.9 million increase in cash used in operating activities was due primarily to increased graphite product development, exploration, general and administrative, and arbitration costs.

Investing Activities

Net cash provided by investing activities was $0.2 million for the six months ended June 30, 2021, as compared to net cash used of $0.1 million in investing activities for the same period in 2020.

The change was a result of the receipt of $0.3 million held in escrow for the balance of the outstanding Paycheck Protection Program loan and accrued interest at December 31, 2020, when the loan was transferred to enCore with the sale of uranium subsidiaries (see Note 3).

The loan was officially forgiven in full by the Small Business Administration on March 31, 2021, and the entire balance of the escrow fund was transferred to the Company’s operating account.

Net cash used in investing activities decreased by $0.1 million for the nine months ended September 30, 2021, as compared to the same period in 2020.

The decrease was a result of cash deposits related to the two buildings that were purchased on October 13, 2021, offset by the receipt of $0.3 million held in escrow for the balance of the outstanding Paycheck Protection Program.

The loan was officially forgiven in full by the Small Business Administration on March 31, 2021, and the entire balance of the escrow fund was transferred to the Company.

Financing Activities

Net cash provided by financing activities was $77.7 million for the six months ended June 30, 2021, due to sales of common stock through the Company’s ATM Offering Agreement with Cantor and the Company’s December 2020 PA with Lincoln Park.

Net cash provided by financing activities was $81.7 million for the nine months ended September 30, 2021, due to sales of common stock through the Company’s ATM Offering Agreement with Cantor and the Company’s December 2020 PA with Lincoln Park.

Net cash provided by financing activities for the same period in 2020 was $13.9 million.

The $71.1 million increase was due to greater shelf registration capacity with which to offer registered shares under the Company’s financing agreement with Cantor and increased sales activity under the Company’s financing agreements with Lincoln Park during the first six months of 2021 compared to the same period in 2020.

The $67.8 million increase was due to greater shelf registration capacity with which to offer registered shares under the Company’s financing agreement with Cantor and increased sales activity under the Company’s financing agreement with Lincoln Park during the first nine months of 2021 compared to the same period in 2020.

LIQUIDITY AND CAPITAL RESOURCES

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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.

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In the third quarter of 2020, the Company executed the strategic decision to focus its resources on the graphite business in Alabama, discontinuing its investment in its lithium mineral properties and selling its uranium business, located in Texas and New Mexico, to 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 proceedings, in which the Company is seeking damages.

During the first six months of 2021, the Company focused on graphite process development activities including operation of a pilot program for processing flake graphite into battery-grade graphite products and the initiation of a

Definitive Feasibility Study (“DFS”) on the Coosa Graphite Project.

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

On June 30, 2021, the Company’s cash balance was approximately $119 million.

During the six months ended June 30, 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 and 5.0 million shares of common stock for net proceeds of $30.6 million pursuant to the December 2020 PA with Lincoln Park (see Note 7).

As of June 30, 2021, the Company has no shares of common stock registered for sale under the ATM Offering Agreement and has 10,800,000 of common stock available for future sales pursuant to the Lincoln Park December 2020 PA.

During the first nine months of 2021, the Company focused on graphite process development activities including operation of a pilot program for processing flake graphite into battery-grade graphite products and a DFS on Phase I of the Coosa Graphite Project.

The data generated and experience gained from the pilot program was used to inform the Phase I DFS that was completed in October 2021 and will also inform the requirements and specifications for building a commercial graphite processing facility.

On September 30, 2021, the Company’s cash balance was approximately $119.0 million.

During the nine months ended September 30, 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 and 6.1 million shares of common stock for net proceeds of $34.6 million pursuant to the Lincoln Park December 2020 PA.

As of September 30, 2021, the Company has $50.0 million remaining available for future sales under the ATM Offering and has 9,700,252 of common stock available for future sales pursuant to the Lincoln Park December 2020 PA.

Subsequent to September 30, 2021, and through the date of this release, the Company has sold 637,200 common shares for net proceeds of $2.3 million pursuant to its financing facility with Cantor Fitzgerald & Co., and liquidated its holdings of enCore common stock for net cash proceeds of $3.6 million.

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

The Company is evaluating the continued use of the Cantor and Lincoln Park financing facilities to support construction of the commercial graphite processing facility.

The Company anticipates the continued use of the Cantor and Lincoln Park financing facilities 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 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, including the recent emergence of variant strains of the virus, could significantly impact the Company’s ability to raise funds through equity financing.

Market conditions, including but not limited to, inflation and supply change disruptions could adversely impact the planned cost of the Company’s commercial graphite processing facility.

Along with evaluating the continued use of the Cantor and Lincoln Park financing facilities, the Company may consider project financing to fund the construction of the commercial graphite processing facility.

Market conditions, including but not limited to, inflation and supply chain disruptions could adversely impact the planned cost of the Company’s commercial graphite processing facility.

Along with evaluating the continued use of the Cantor and Lincoln Park financing facilities, the Company may consider project financing to fund the construction of the Project.

The alternative sources of project financing could include, but are not limited to, convertible debt or pursuing a partnership or joint venture.

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

In the event funds are not available for project financing to complete construction of the Project in 2023, the Company expects to be able to fund its non-discretionary expenditures, however, the Company may be required to change its planned business development strategies.

OFF-BALANCE SHEET ARRANGEMENTS

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We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements include, without limitation, statements regarding the adequacy of funding, liquidity, the timing or occurrence of any future drilling or production from the Company’s properties, the ability of the Company to acquire additional properties or partner with other companies, the construction of pilot plant facilities and construction of commercial production facilities, the realization of expected benefits from recent business combinations and the Company’s anticipated cash burn rate and capital requirements.

Such forward-looking statements include, without limitation, statements regarding the adequacy of funding, liquidity, access to capital, financing activities, the timing or occurrence of any future drilling or production from the Company’s properties, potential effects of the COVID-19 pandemic, the strategic goals of the business, arbitration matters, costs of Phase I of the Project and estimated completion date, expected production quantities for Phase I of the Project , the realization of expected benefits from recent business combinations and the Company’s anticipated cash burn rate and capital requirements.

Words such as “may,” “could,” “should,” “would,” “believe,” “estimate,” “expect,” “anticipate,” “plan,” “forecast,” “potential,” “intend,” “continue,” “project” and variations of these words, comparable words and similar expressions generally indicate forward-looking statements.

You are cautioned not to place undue reliance on forward-looking statements.

Actual results may differ materially from those expressed or implied by these forward-looking statements.

Actual results may differ

materially from those expressed or implied by these forward-looking statements.

Factors that could cause actual results to differ materially from these forward-looking statements include, among others:

● the spot price and long-term contract price of graphite (both flake graphite feedstock and purified graphite products) and vanadium, and the world-wide supply and demand of graphite and vanadium;

● the effects, extent and timing of the entry of additional competition in the markets in which we operate;

● the ability to obtain contracts with customers;

● available sources and transportation of graphite feedstock;

● government regulation of the mining and processing industries in the United States;

● our ability to maintain and timely receive mining and other permits from regulatory agencies;

● the ability to control costs and avoid cost and schedule overruns during the development, construction and operation of the Project;

● risks associated with our operations and the operations of our partners, including the impact of COVID-19 and supply chain disruptions;

● operating conditions at our mining and processing facilities in the United States;

● unanticipated geological, processing, regulatory and legal or other problems we may encounter;

3 unchanged sentences

● currently pending or new litigation or arbitration.

● our ability to maintain and timely receive mining and other permits from regulatory agencies.

In addition, other factors are described in our Annual Report on Form 10-K for the year ended December 31, 2020, and the other reports we file with the SEC.

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis