WESTWATER RESOURCES, INC. - FORM 10-Q

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EX-32 - CERTIFICATION - WESTWATER RESOURCES, INC.	ex32b.htm
EX-32 - CERTIFICATION - WESTWATER RESOURCES, INC.	ex32a.htm
EX-31 - CERTIFICATION - WESTWATER RESOURCES, INC.	ex31b.htm
EX-31 - CERTIFICATION - WESTWATER RESOURCES, INC.	ex31a.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2018

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 001-33404

WESTWATER RESOURCES, INC.

(Exact Name of Registrant as Specified in Its Charter)


DELAWARE		75-2212772
(State of Incorporation)		(I.R.S. Employer Identification No.)

6950 S. Potomac Street, Suite 300, Centennial, Colorado 80112

(Address of Principal Executive Offices, Including Zip Code)

(303) 531-0516

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer o		Accelerated filer o

Non-accelerated filer o		Smaller reporting company x

		Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Title of Each Class of Common Stock		Number of Shares Outstanding
Common Stock, $0.001 par value		66,332,617 as of November 7, 2018

WESTWATER RESOURCES, INC.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4. CONTROLS AND PROCEDURES

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

ITEM 4. MINE SAFETY DISCLOSURES.

ITEM 5. OTHER INFORMATION.

ITEM 6. EXHIBITS.

SIGNATURES

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


WESTWATER RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(expressed in thousands of dollars, except share amounts)
(unaudited)
		September 30,	December 31,
	Notes	2018	2017
ASSETS

Current Assets:
Cash and cash equivalents		$ 1,366	$ 4,054
Marketable securities	5	499	1,361
Notes receivable – current	4	1,500	1,750
Prepaid and other current assets		611	668
Total Current Assets		3,976	7,833

Property, plant and equipment, at cost:
Property, plant and equipment		91 970	101,187
Less accumulated depreciation, depletion and impairment		(65 652)	(65,778)
Net property, plant and equipment	6	26,318	35,409

Restricted cash	1,5	3,668	3,668
Notes receivable – non-current	4	1,368	3,328
Total Assets		$ 35,330	$ 50,238

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable		$ 867	$ 538
Accrued liabilities		1,592	2,352
Current portion of asset retirement obligations	8	597	1,078
Total Current Liabilities		3,056	3,968

Asset retirement obligations, net of current portion	8	5,050	4,653
Other long-term liabilities and deferred credits		500	500
Total Liabilities		8,606	9,121

Commitments and Contingencies	12

Stockholders' Equity:
Common stock, 100,000,000 shares authorized, $.001 par value;
Issued shares – 57,504,640 and 27,790,324, respectively
Outstanding shares – 57,496,615 and 27,782,299, respectively	9	58	28
Paid-in capital	9,10	310,132	297,250
Accumulated other comprehensive (loss) income		(6)	287
Accumulated deficit		(283,202)	(256,190)
Treasury stock (8,025 and 8,025 shares, respectively), at cost		(258)	(258)
Total Stockholders' Equity		26,724	41,117

Total Liabilities and Stockholders' Equity		$ 35,330	$ 50,238

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


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 September 30,			For the Nine Months Ended September 30,
	Notes	2018	2017		2018	2017

Operating Expenses:
Mineral property expenses	7	$ (955)	$ (1,316)		$ (2,706)	$ (3,637)
General and administrative expenses		(1,803)	(1,700)		(5,662)	(4,976)
Acquisition costs	3	-	-	-	(333)	-
Accretion of asset retirement obligations	8	(133)	(132)		(401)	(395)
Depreciation and amortization		(27)	(27)		(94)	(104)
Impairment of uranium properties	6	-	-		(17,968)	-
Total operating expenses		(2,918)	(3,175)		(27,164)	(9,112)

Non-Operating Income/(Expenses):
Loss on sale of marketable securities	4	(391)	-		(484)	-
Loss on extinguishment of convertible debt		-	-		-	(39)
Gain on disposal of uranium properties		-	-		-	4,927
Interest income	4	167	186		513	424
Other income		5	6		123	22
Total other (expense)/income		(219)	192		152	5,334

Net Loss		$ (3,137)	$ (2,983)		$ (27,012)	$ (3,778)

Other Comprehensive Income (Loss)
Unrealized fair value increase (decrease) on marketable securities		$ 279	$ (126)		$ (777)	$ (287)
Transfer to realized loss upon sale of available-for sale securities		391	-		484	-
Comprehensive Loss		$ (2,467)	$ (3,109)		$ (27,305)	$ (4,065)

BASIC AND DILUTED LOSS PER SHARE		$ (0.06)	$ (0.12)		$ (0.68)	$ (0.16)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING		51,118,498	25,037,203		39,750,245	23,763,842

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


WESTWATER RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND SUPPLEMENTAL CASH FLOW INFORMATION
(expressed in thousands of dollars)
(unaudited)
		Nine Months Ended September 30,
	Notes	2018	2017
Operating Activities:
Net loss		$ (27,012)	$ (3,778)
Reconciliation of net loss to cash used in operations:
Accretion of asset retirement obligations	8	401	395
Amortization of debt discount		-	30
Amortization of notes receivable discount	4	(507)	(553)
Amortization of non-cash investor relations fees		21	175
Loss on extinguishment of convertible debt		-	39
Loss on sale of marketable securities		484	-
Costs incurred for restoration and reclamation activities	8	(485)	(37)
Depreciation and amortization		94	104
Stock compensation expense	10	308	62
Common stock issued for purchase of lithium mineral interests		114	-
Common stock issued for consulting services		95	-
Gain on disposal of fixed assets		(11)	(4,927)
Impairment of uranium properties	6	17,968	-
Effect of changes in operating working capital items:
Decrease (increase) in receivables and other		105	(5)
Decrease (increase) in prepaids and other		90	(101)
Decrease in payables and deferred credits		(697)	(280)
Net Cash Used In Operating Activities		(9,032)	(8,876)

Cash Flows From Investing Activities:
Purchase of equipment		-	(100)
Proceeds from the sale of securities, net	4	834	-
Proceeds from disposal of property, plant and equipment		11	1,950
Proceeds from note receivable	4	1,134	-
Acquisition of Alabama Graphite, net of cash acquired	3	(1,547)	-
Net Cash Provided By Investing Activities		432	1,850
Cash Flows From Financing Activities:
Payments on borrowings		-	(5,500)
Issuance of common stock, net	9	5,917	16,395
Payment of minimum withholding taxes on net share settlements of equity awards		(5)	(1)
Net Cash Provided By Financing Activities		5,912	10,894

Net (decrease)/increase in cash, cash equivalents and restricted cash		(2,688)	3,868
Cash, cash equivalents and restricted cash, beginning of period		7,722	7,296
Cash, Cash Equivalents and Restricted Cash, End of Period		$ 5,034	$ 11,164
Cash paid during the period for:
Interest		$ 7	$ 227
Supplemental Non-Cash Information for Investing and Financing Activities:
Securities received for payment of notes receivable - Laramide		$ 750	$ -
Securities received for asset disposal - Laramide		-	568
Common stock issued for acquisition of Alabama Graphite		6,394	-
Stock options and warrants issued for acquisition of Alabama Graphite		89	-
Common stock issued for commitment fees		-	1,214
Common stock issued for consulting services		95	300
Common stock issued for purchase of lithium mineral interests		114	-
Total Non-Cash Investing and Financing Activities for the Period		$ 7,442	$ 2,082

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


WESTWATER RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(expressed in thousands of dollars, except share amounts)
(unaudited)

	Common Stock Shares	Amount	Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Treasury Stock	Total
Balances, January 1, 2018	27,790,324	$ 28	$ 297,250	$ 287	$ (256,190)	$ (258)	$ 41,117
Net loss	-	-	-	-	(27,012)	-	(27,012)
Common stock issued, net of issuance costs	17,695,448	18	5,899	-	-	-	5,917
Common stock, warrants and options issued for acquisition of Alabama Graphite	11,625,210	12	6,471	-	-	-	6,483
Common stock issued for consulting services	172,727	-	95	-	-	-	95
Common stock issued for purchase of lithium mineral interests	200,000	-	114	-	-	-	114
Stock compensation expense and related share issuances, net of shares withheld for payment of taxes	20,931	-	308	-	-	-	308
Minimum withholding taxes on net share settlements of equity awards	-	-	(5)	-			(5)
Unrealized holding loss on marketable securities	-	-	-	(777)	-	-	(777)
Transfer to realized loss upon sale of available for sale securities	-	-	-	484	-	-	484
Balances, September 30, 2018	57,504,640	$ 58	$ 310,132	$ (6)	$ (283,202)	$ (258)	$ 26,724

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

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements for Westwater Resources, Inc. (the “Company,” “we,” “us,” “WWR” or “Westwater”), formerly known as Uranium Resources, Inc., 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 2017 Annual Report on Form 10-K. In the opinion of management, all adjustments (which are of a normal, recurring nature) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for any other period including the full year ending December 31, 2018.

Recently Adopted Accounting Pronouncements

In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows: Restricted Cash, which will require that a statement of cash flows explain the change during a period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The ASU applies to all entities and is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years beginning after December 15, 2019, with early adoption permitted. Upon adopting ASU 2016-18, the Company has included the restricted cash amount in its beginning-of-period and end-of-period reconciliations of cash on its statement of cash flows and has removed restricted cash releases of $23,000 from the investing activities section of the cash flow statement for the nine months ended September 30, 2017.

In January 2017, the FASB issued Accounting Standards Update No. 2017-01 (ASU 2017-01), Business Combinations: Clarifying the Definition of a Business, which clarifies the definition of a business when determining whether a company has acquired or sold a business. The ASU applies to all entities and is effective for annual periods ending after December 15, 2017, and interim periods thereafter, with early adoption permitted under certain circumstances. The Company utilized the updated “Definition of a Business” in ASC 805 for the Alabama Graphite acquisition and determined that the transaction should be recorded as an asset acquisition under ASC 360.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize all leases, including operating leases, unless the lease is a short-term lease or a land lease for mineral properties. ASU 2016-02 also requires additional disclosures regarding leasing arrangements. ASU 2016-02 is effective for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. Currently, the only affected leases the Company holds are for equipment, office space and storage space. The Company has gathered the necessary information for proper disclosure of the leases once the ASU is effective. The Company will continue to monitor any new leases to ensure that it has all the information necessary to handle the transition to the new standard and properly report the transactions. The Company does not anticipate the new standard will affect its net income materially but will result in additional fixed assets and the related lease liabilities.

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,
(thousands of dollars)	2018	2017
Cash and cash equivalents	$ 1,366	$ 7,496
Restricted cash - pledged deposits for performance bonds	3,668	3,668
Cash, cash equivalents and restricted cash shown in the statement of cash flows	$ 5,034	$ 11,164

Funds deposited by the Company for collateralization of performance obligations are not available for the payment of general corporate obligations and are not included in cash equivalents. Restricted cash consists of pledged certificates of deposit and money market accounts. The bonds are collateralized performance bonds required for future restoration and reclamation obligations related to the Company’s South Texas production properties.

Notes Receivable

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Assets with lives beyond one year are carried at amortized cost using the effective interest method less any provision for impairment. Assets with lives under a year are undiscounted and carried at full cost. Management monitors these assets for credit quality and recoverability on a quarterly basis, including the value of any collateral. If the value of the collateral, less selling or recovery costs, exceeds the recorded investment in the asset, no impairment costs would be recorded.

2. LIQUIDITY

The Company last recorded revenues from operations in 2009. Since that time, the Company has relied on equity financings, debt financings and asset sales to fund its operations. The Company expects to rely on these forms of financing to fund its operations into the near future.

The Company’s current business plan requires working capital to fund non-discretionary expenditures for uranium reclamation activities, mineral property holding costs, business development costs and administrative costs. The Company intends to pursue project financing to support execution of the graphite business plan, including discretionary capital expenditures associated with graphite battery-material product development, construction of pilot plant facilities and construction of commercial production facilities. The Company’s current lithium business plan will be funded by working capital, however, the Company is pursuing project financing including possible joint venture partners to fund discretionary greenfield exploration activities.

At September 30, 2018, the Company had cash and cash equivalents of $1.4 million and working capital of $0.9 million. As of October 31, 2018, the Company had cash and cash equivalents of $1.7 million. Other financing resources available to the Company include a promissory note in the amount of $3.5 million due from Laramide Resources Ltd. (“Laramide”) (Note 4) and the Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co. (“Cantor”) acting as sales agent, pursuant to which the Company has registered the offer and sale from time to time of shares of its common stock having an aggregate offering price of up to $8.0 million (the “ATM Offering”). As of October 31, 2018, approximately $4.5 million is available for future sales under the ATM Offering. The Company will also continue to pursue opportunities to monetize its non-core assets and identify ways to reduce its cash expenditures. These sources and actions, along with other anticipated financings, are expected to provide the Company with the necessary liquidity to fund non-discretionary expenditures through January 2020.

These interim condensed consolidated financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. While the Company has been successful in raising funds in the past 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 the Company’s needs or on terms acceptable to the Company. In the event that funds are not available, the Company may be required to materially change its business plans.

3. ACQUISITIONS

Acquisition of Alabama Graphite

On April 23, 2018, the Company completed its acquisition of 100% of the outstanding securities of Alabama Graphite Corp. (“Alabama Graphite”) for total consideration of $8.9 million. Alabama Graphite is a Canadian entity that indirectly holds a 100% interest in the Coosa graphite project and Coosa mineral properties located in Alabama. The consideration was comprised of $2.4 million in cash used to fund Alabama Graphite’s operating activities prior to completion of the Alabama Graphite transaction and certain related transaction costs, $6.4 million in common stock of the Company and $89,000 for warrants and options in the Company. Each Alabama Graphite ordinary share was exchanged for 0.08 common share of WWR. Each warrant and option of Alabama Graphite was also exchanged for warrants and options exercisable for common shares of WWR on the same terms and conditions as were applicable prior to the Alabama Graphite transaction, except that the exercise price was converted for the 0.08 share exchange ratio and for the USD exchange rate on the agreement date which was $0.77809 (CAD to USD) on December 13, 2017. As a result, the Company issued 11,625,210 new shares, 364,000 options and 2,144,378 warrants. The value of the Company’s common stock issued as consideration was based upon the opening share price on April 23, 2018 of $0.55. The operating results of Alabama Graphite are included in the Consolidated Statement of Operations commencing April 23, 2018.

The Alabama Graphite loan from WWR was $1.8 million on April 23, 2018 and was incorporated into the final acquisition accounting and therefore was eliminated as of June 30, 2018. Acquisition related costs were $1.9 million as of June 30, 2018, of which, $0.6 million was capitalized as additional cash consideration at the acquisition date for certain transaction costs that were directly related to the asset acquisition.

The acquisition of Alabama Graphite was accounted for as an asset acquisition in accordance with ASC 360 as “substantially all” of the purchase consideration was concentrated in a single identifiable asset for graphite mineral interests. WWR controls the Board of Directors and senior management positions of Alabama Graphite and has overall control over the day-to-day activities of the acquired entity.

The following summarizes the preliminary allocation of purchase price to the fair value of assets acquired and liabilities assumed as of the acquisition date (in thousands):


Consideration:
Cash		$ 2,397
Issuance of 11,625,210 common shares for replacement of Alabama Graphite shares		6,394
Issuance of 364,000 options for replacement of Alabama Graphite options		35
Issuance of 2,144,378 warrants for replacement of Alabama Graphite warrants		54
		$ 8,880

The fair value of the consideration given was allocated as follows:
Assets:
Cash and cash equivalents		$ 17
Short-term receivables		113
Prepaid expenses		42
Property, plant, equipment and graphite mineral interests		8,973
Total assets		9,145
Liabilities:
Accounts payable and accrued liabilities		265
Total liabilities		265
Net assets		$ 8,880

The carrying value of the current assets acquired and liabilities assumed approximated the fair value due to the short-term nature of these items. The fair value of the graphite mineral interests was estimated using a discounted cash flow approach and market comparables. Key assumptions used in the discounted cash flow analysis include discount rates, mineral resources, future timing of production, recovery rates and future capital and operating costs.

4. NOTES RECEIVABLE

Alabama Graphite Corp. Note Receivable

In conjunction with its entry into the arrangement agreement to acquire Alabama Graphite, on December 13, 2017, the Company executed a secured convertible loan agreement (the “Alabama Graphite Loan”), whereby the Company agreed to provide a non-revolving convertible loan facility of up to USD $2,000,000 to Alabama Graphite for the purpose of funding operations until the acquisition could be finalized. Total loan advances up to the closing of the acquisition on April 23, 2018 was $1.8 million with accrued interest receivable of $13,457. During 2018, advances under the loan were $0.9 million and accrued interest was $12,227.

With the completion of the acquisition on April 23, 2018 (as discussed in Note 3), the Alabama Graphite Loan became part of the consideration paid for the acquisition and was incorporated into the purchase price allocation to the assets and liabilities of the acquired company. Due to the inclusion of the loan in the acquisition purchase price, the loan has been classified as a non-current asset at December 31, 2017 and has been eliminated with the acquisition accounting at June 30, 2018.

Laramide Note Receivable

As part of the consideration for the sale of Hydro Resources, Inc. (HRI), the Company currently holds a $3.5 million promissory note, secured by a mortgage over the Churchrock and Crownpoint projects. The note has a three-year term and carries an initial interest rate of 5% which then increases to 10% upon Laramide’s decision regarding commercial production at the Churchrock project. Principal payment of $1.5 million is due and payable on January 5, 2019, with the balance of $2.0 million due and payable on January 5, 2020. Interest is payable on a quarterly basis. Laramide will have the right to satisfy up to half of each of these principal payments by delivering shares of its common stock to the Company, which shares will be valued by reference to the volume weighted average price (“VWAP”) for Laramide’s common stock for the 20 trading days before the respective anniversary of January 5, on which each payment is due. The fair value of the notes receivable was determined using the present value of the future cash receipts discounted at a market rate of 9.5%.

As of September 30, 2018, the Company has received two tranches of Laramide common shares as partial consideration for the sale of HRI, which has resulted in the receipt of 2,218,133 and 1,982,483 Laramide common shares in January 2017 and January 2018, respectively. These share payments represent the initial consideration from the January 2017 sale of HRI and the first note installment in January 2018. 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. Additionally, Laramide has made interest payments of $0.4 million in cash for the nine months ending September 30, 2018.

For the three months ended September 30, 2018, the Company sold the second tranche of 1,982,483 Laramide common shares resulting in net proceeds of $0.4 million and a net loss on sale of marketable securities of $0.4 million. For the nine months ended September 30, 2018, the Company sold the first and second tranches of 4,200,816 Laramide common shares resulting in net proceeds of $0.8 million and a net loss on sale of marketable securities of $0.5 million.

The following tables show the notes receivable, accrued interest and unamortized discount on the Company’s notes receivable as of September 30, 2018 and December 31, 2017.


	September 30, 2018
(thousands of dollars)	Note Amount		Plus Accrued Interest		Less Unamortized Note Discount		Note Balance per Balance Sheet
Current Assets
Notes receivable Laramide – current	$	1,500		-		-		1,500
Subtotal Notes Receivable – current	$	1,500		-		-		1,500

Non-current Assets
Notes receivable – Laramide – non-current	$	2,000		-		(632)		1,368
Total Notes Receivable – current and non-current	$	3,500		-		(632)		2,868


	December 31, 2017
(thousands of dollars)	Note Amount		Plus Accrued Interest		Less Unamortized Note Discount		Note Balance per Balance Sheet
Current Assets
Notes receivable Laramide – current	$	1,500	$	250	$	-	$	1,750
Subtotal Notes Receivable – current	$	1,500	$	250	$	-	$	1,750

Non-current Assets
Notes receivable – Laramide – non-current	$	3,500	$	-	$	(1,005)	$	2,495
Notes receivable – Alabama Graphite Corp.		832		1		-		833
Subtotal Notes Receivable – non-current	$	4,332	$	1	$	(1,005)	$	3,328
Total Notes Receivable – current and non-current	$	5,832	$	251	$	(1,005)	$	5,078

5. 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).

•

Level 3 includes unobservable inputs that reflect management’s assumptions about what factors market participants would use in pricing the asset or liability. These inputs are developed based on the best information available, including internal data.

The Company believes that the fair value of its assets and liabilities approximate their reported carrying amounts. The following table presents information about assets that were recorded at fair value on a recurring and non-recurring basis as of September 30, 2018 and December 31, 2017 and indicate the fair value hierarchy.


	September 30, 2018
(thousands of dollars)	Level 1		Level 2		Level 3		Total
Current Assets
Short-term available-for-sale investments	$	499	$	-	$	-	$	499
Total current assets recorded at fair value	$	499	$	-	$	-	$	499
Non-current Assets
Restricted cash	$	3,668	$	-		-	$	3,668
Total non-current assets recorded at fair value	$	3,668	$	-	$	-	$	3,668
	December 31, 2017
(thousands of dollars)	Level 1		Level 2		Level 3		Total
Current Assets
Short-term available-for-sale investments	$	1,361	$	-	$	-	$	1,361
Total current assets recorded at fair value	$	1,361	$	-	$	-	$	1,361
Non-current Assets
Restricted cash	$	3,668	$	-		-	$	3,668
Total non-current assets recorded at fair value	$	3,668	$	-	$	-	$	3,668

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

6. PROPERTY, PLANT AND EQUIPMENT


	Net Book Value of Property, Plant and Equipment at September 30, 2018
(thousands of dollars)	Turkey	Texas	Alabama	New Mexico	Corporate	Total
Uranium plant	$ -	$ 8,302	$ -	$ -	$ -	$ 8,302
Mineral rights and properties	-	-	8,972	7,806	-	16,778
Other property, plant and equipment	8	1,055	-	-	175	1,238
Total	$ 8	$ 9,357	$ 8,972	$ 7,806	$ 175	$ 26,318


	Net Book Value of Property, Plant and Equipment at December 31, 2017

(thousands of dollars)	Turkey	Texas	Alabama	New Mexico	Corporate	Total
Uranium plant	$ -	$ 8,304	$ -	$ -	$ -	$ 8,304
Mineral rights and properties	17,968	-	-	7,806	-	25,774
Other property, plant and equipment	11	1,109	-	-	211	1,331
Total	$ 17,979	$ 9,413	$ -	$ 7,806	$ 211	$ 35,409

Impairment of Temrezli and Sefaatli Projects

On June 20, 2018, the General Directorate of Mining Affairs, a department of the Turkish Ministry of Energy and Natural Resources, notified the Company that the mining and exploration licenses for its Temrezli and Sefaatli projects located in Turkey had been revoked and potential compensation will be proffered. While the Company is investigating the legality of this action and what remedies, including compensation, might be available to the Company, the Company has determined that it is more likely than not that the Company will be unable to explore, develop, mine or otherwise benefit from the mineral properties. Therefore, the Company has determined that all of the uranium mineral holding property assets located in Turkey were fully impaired. The Company will recognize compensation for the mining and exploration licenses when the amount of the full and fair compensation is fixed and determinable and the ability to collect is probable.

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.

7. MINERAL PROPERTY EXPENDITURES

Mineral property expenditures by geographical location for the three and nine months ended September 30, 2018 and 2017 are as follows:


	For the Three Months Ended Sept 30,		For the Nine Months Ended Sept 30,
	2018	2017	2018	2017
	(thousands of dollars)
Temrezli project, Turkey	$ 11	$ 63	$ 107	$ 186
Total Turkey projects	11	63	107	186

Kingsville Dome project, Texas	223	197	646	616
Rosita project, Texas	259	188	614	472
Vasquez project, Texas	42	117	374	399
Other projects, Texas	25	26	26	30
Total Texas projects	549	528	1,660	1,517

Cebolleta project, New Mexico	-	-	389	538
Juan Tafoya project, New Mexico	39	38	48	356
Total New Mexico projects	39	38	437	894

Columbus Basin project, Nevada	126	489	248	678
Railroad Valley project, Nevada	79	80	95	238
Total Nevada projects	205	569	343	916

Sal Rica project, Utah	112	118	112	124
Total Utah projects	112	118	112	124

Coosa project, Alabama	39	-	47	-
Total Alabama Projects	39	-	47	-

Total expense for the period	$ 955	1,316	$ 2,706	$ 3,637

8. ASSET RETIREMENT OBLIGATIONS

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


	September 30,	December 31,
	2018	2017
(thousands of dollars)
Balance, beginning of period	$ 5,731	$ 4,789
Liabilities settled	(485)	(97)
Accretion expense	401	1,039
Balance, end of period	5,647	5,731
Less: Current portion	(597)	(1,078)
Non-current portion	$ 5,050	$ 4,653

The Company is currently performing plugging and surface reclamation activities at its Rosita and Vasquez projects located in Duval County, Texas. The Company’s current liability of $0.6 million consists of the estimated costs associated with current reclamation activities through December 2019 at the Company’s Vasquez projects.

9. COMMON STOCK

Common Stock Issued, Net of Issuance Costs

Registered Direct Offering

On June 14, 2018, the Company completed a registered direct offering of securities with Aspire Capital for net proceeds of $2.9 million. The securities consisted of 3,717,773 shares of common stock at a price of $0.34 per share for net proceeds of $1.3 million and 4,968,518 pre-funded common stock warrants at a price of $0.33 per warrant for net proceeds of $1.6 million. The exercise price of the warrants is $0.01 per share and the warrants were exercised on a net basis on August 7, 2018, resulting in the issuance of 4,825,509 shares of common stock. The Company did not incur underwriting discounts or commissions with this offering. The previous Common Stock Purchase Agreement (“CSPA”) with Aspire Capital dated September 25, 2017 was terminated on June 14, 2018 concurrently with the launch of the registered direct offering.

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

On April 14, 2017, the Company entered into the ATM Offering with Cantor acting as sales agent. Under the ATM Offering, the Company may from time to time sell shares of its common stock having an aggregate offering amount up to $30.0 million in “at-the-market” offerings, $8.0 million of which shares are registered for sale under a registration statement on Form S-3, which was declared effective on March 9, 2017. 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. As of October 31, 2018, the Company had sold 16,078,900 shares of common stock for net proceeds of $4.6 million under the ATM Offering, of which, 6,577,070 shares of common stock and net proceeds of $1.8 million was sold in the nine months ended September 30, 2018. As a result, the Company had approximately $25.3 million remaining available for future sales under the ATM Offering, of which $4.5 million has been registered for sale.

Common Stock Purchase Agreement (“CSPA”) with Aspire Capital

On September 27, 2017, pursuant to the CSPA and after satisfaction of certain commencement conditions, Aspire Capital made an initial purchase of 1,428,571 shares of common stock for which the Company received net proceeds of $2.0 million. Through its termination on June 14, 2018 in connection with the registered direct offering described above, Aspire Capital purchased an additional 2,725,096 shares of common stock for which the Company received net proceeds of $1.5 million, of which, 2,575,096 shares of common stock and net proceeds of $1.3 million was received in the nine months ended September 30, 2018.

Common Stock Issued for Acquisition of Alabama Graphite

As discussed in Note 3 above, on April 23, 2018, the Company issued 11,625,210 shares of common stock in exchange for 100% of the outstanding shares of Alabama Graphite as part of the purchase consideration paid to acquire Alabama Graphite.

Common Stock Issued for Purchase of Lithium Properties

On April 18, 2018, the Company issued 200,000 shares of common stock, with a fair value on the date of issuance of $114,000 for an option agreement to purchase a block of unpatented placer mining claims covering an area of approximately 3,000 acres within the Columbus Salt Marsh area of Esmeralda County, Nevada.

Common Stock Issued for Consulting Services

On May 3, 2018, the Company issued 172,727 shares of common stock, with a fair value on the date of issuance of $95,000 for consideration of consulting services that will be provided to the Company over the ensuing twelve months.

10. STOCK-BASED COMPENSATION

Stock-based compensation awards consist of stock options, restricted stock units, restricted stock awards and bonus shares issued under the Company’s equity incentive plans which include: the 2013 Omnibus Incentive Plan (the “2013 Plan”); the Amended and Restated 2004 Directors’ Stock Option and Restricted Stock Plan (the “2004 Directors’ Plan”); and the 2004 Stock Incentive Plan (the “2004 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, the Company’s stockholders approved an amendment to the 2013 Plan to increase the authorized number of shares of common stock available and reserved for issuance under the 2013 Plan by 1.0 million shares and re-approve the material terms of the performance goals under such plan. Under the 2013 Plan, the Company may grant awards of stock options, stock appreciation rights, restricted stock awards (“RSAs”), 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 1,083,333 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 September 30, 2018, 13,905 shares were available for future issuances under the 2013 Plan. For the three months ending September 30, 2018 and 2017, the Company recorded stock-based compensation expense of $145,771 and $24,279, respectively. For the nine months ending September 30, 2018 and 2017, the Company recorded stock-based compensation expense of $308,013 and $62,356, 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 Anatolia Energy Limited in November 2015, the Company issued 374,749 replacement options and performance shares to the option holders and performance shareholders of Anatolia Energy Limited. The number of replacement options and performance shares was based upon the Black-Scholes value with the exercise prices of the replacement options and performance shares determined using the exchange rate of 0.00548. The options and performance shares were issued with the same terms and conditions as were applicable prior to the acquisition of Anatolia Energy Limited. As of September 30, 2018, there were 85,233 replacement options outstanding and no performance shares outstanding.

In addition to the plans above, upon closing of the Company’s acquisition of Alabama Graphite in April 2018, the Company issued 2,508,378 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 0.08. The exercise prices for the option and warrant shares were first converted for the exchange rate of 0.08 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 September 30, 2018, there were 289,600 replacement options and 571,985 replacement warrants outstanding.

Stock Options

The following table summarizes stock options outstanding and changes for the nine-month periods ending September 30, 2018 and 2017:


	September 30, 2018		September 30, 2017
	Number of Stock Options	Weighted Average Exercise Price	Number of Stock Options	Weighted Average Exercise Price
Stock options outstanding at beginning of period	286,174	$ 5.53	110,828	$ 18.24
Granted	812,689	0.98	189,164	1.40
Expired	(80,412)	5.24	(6,001)	104.67
Stock options outstanding at end of period	1,018,451	$ 1.91	293,991	$ 5.64
Stock options exercisable at end of period	1,018,451	$ 1.91	104,722	$ 13.26

The following table summarizes stock options outstanding and exercisable by stock option plan at September 30, 2018:


	Outstanding Stock Options		Exercisable Stock Options
Stock Option Plan	Number of Outstanding Stock Options	Weighted Average Exercise Price	Number of Exercisable Stock Options	Weighted Average Exercise Price
2004 Plan	4,792	$ 35.14	4,792	$ 35.14
2004 Directors’ Plan	556	186.00	556	186.00
2013 Plan	638,270	0.71	638,270	0.71
Replacement Stock Options-Alabama Graphite	289,600	1.61	289,600	1.61
Replacement Stock Options-Anatolia Energy	85,233	8.87	85,233	8.87
	1,018,451	$ 1.91	1,018,451	$ 1.91

Restricted Stock Units

Time-based and performance-based RSUs are valued using the closing share price of the Company’s common stock on the date of grant. The final number of shares issued under performance-based RSUs is generally based on the Company’s prior year performance as determined by the Compensation Committee of the Board of Directors at each vesting date, and the valuation of such awards assumes full satisfaction of all performance criteria.

The following table summarizes RSU activity for the nine-month periods ended September 30, 2018 and 2017:


	September 30,		September 30,
	2018		2017
	Number of RSUs	Weighted-Average Grant Date Fair Value	Number of RSUs	Weighted-Average Grant Date Fair Value
Unvested RSUs at beginning of period	178,897	$ 1.40	8,649	$ 43.71
Granted	-	-	304,064	1.40
Forfeited	(9,429)	1.40	-	-
Vested	-	-	(39,340)	4.16
Unvested RSUs at end of period	169,468	$ 1.40	273,373	$ 1.95

11. 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 1,943,237 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 and nine months ended September 30, 2018.

12. 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. 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 its financial position, results of operations or cash flows.

13. GEOGRAPHIC AND SEGMENT INFORMATION

The Company currently operates in three reportable segments, which are uranium, lithium and graphite mining activities, including exploration, standby operations and restoration and reclamation activities. As a part of these activities, the Company also explores, evaluates and, if warranted, permits uranium, lithium and graphite properties. The Company’s long-term assets were $31.4 million and $42.4 million as of September 30, 2018 and December 31, 2017, respectively. The long-term assets located in the United States totaled $31.4 million or 100% and $24.4 million or 58% of total long-term assets as of September 30, 2018 and December 31, 2017, respectively. The Company reported no revenues during the three and nine months ended September 30, 2018 and September 30, 2017.

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 table below provides a breakdown of the long-term assets by reportable segments as of September 30, 2018 and December 31, 2017:


	September 30, 2018
(thousands of dollars)	Corporate	Uranium	Lithium	Graphite		Total

Net property, plant and equipment	$ 175	$ 17,171	$ -		$ 8,972	$ 26,318
Restricted cash	-	3,668	-		-	3,668
Notes receivable, non-current	-	1,368	-		-	1,368
Total long-term assets	$ 175	$ 22,207	$ -		$ 8,972	$ 31,354


	December 31, 2017
(thousands of dollars)	Corporate	Uranium	Lithium	Graphite		Total

Net property, plant and equipment	$ 211	$ 35,198	$ -		$ -	$ 35,409
Restricted cash	-	3,668	-		-	3,668
Notes receivable, non-current	834	2,494	-		-	3,328
Total long-term assets	$ 1,045	$ 41,360	$ -		$ -	$ 42,405

The table below provides a breakdown of the reportable segments for the three months ended September 30, 2018 and September 30, 2017. Non-mining activities and other administrative operations are reported in the Corporate column.


	Three Months Ended September 30, 2018
(thousands of dollars)	Corporate	Uranium		Lithium		Graphite		Total
Statement of Operations
Mineral property expenses	$ -	$ 600	$ 317		$ 38		$ 955
General and administrative expenses	1,184	478	-		141		1,803
Accretion of asset retirement costs	-	133	-		-		133
Depreciation and amortization	1	26	-		-		27
	1,185	1,237	317		179		2,918
Loss from operations	(1,185)	(1,237)	(317)		(179)		(2,918)
Other (expense) income	(246)	27	-		-		(219)
Loss before taxes	$ (1,431)	$ (1,210)		$ (317)	$ (179)		$ (3,137)


	Three Months Ended September 30, 2017
(thousands of dollars)	Corporate	Uranium		Lithium		Graphite		Total
Statement of Operations
Mineral property expenses	$ -	$ 625	$ 691		$ -		$ 1,316
General and administrative	1,280	420	-		-		1,700
Accretion of asset retirement costs	-	132	-		-		132
Depreciation and amortization	3	24	-		-		27
	1,283	1,201	691		-		3,175
Loss from operations	(1,283)	(1,201)	(691)		-		(3,175)
Other income	185	6	-		-		191
Loss before taxes	$ (1,098)	$ (1,195)		$ (691)	$ -		$ (2,984)

The table below provides a breakdown of the reportable segments for the nine months ended September 30, 2018 and September 30, 2017. Non-mining activities and other administrative operations are reported in the Corporate column.


	Nine Months Ended September 30, 2018
(thousands of dollars)	Corporate	Uranium		Lithium		Graphite		Total
Statement of Operations
Mineral property expenses	$ -	$ 2,204	$ 455		$ 47		$ 2,706
General and administrative expenses	3,901	1,383	-		378		5,662
Acquisition costs	333	-	-		-		333
Accretion of asset retirement costs	-	401	-		-		401
Impairment of uranium properties	-	17,968	-		-		17,968
Depreciation and amortization	3	90	-		1		94
	4,237	22,046	455		426		27,164
Loss from operations	(4,237)	(22,046)	(455)		(426)		(27,164)
Other income	7	144	-		-		151
Loss before taxes	$ (4,230)	$ (21,902)		$ (455)	$ (426)		$ (27,013)


	Nine Months Ended September 30, 2017
(thousands of dollars)	Corporate	Uranium		Lithium		Graphite		Total
Statement of Operations
Mineral property expenses	$ -	$ 2,596	$ 1,041		$ -		$ 3,637
General and administrative expenses	3,799	1,177	-		-		4,976
Accretion of asset retirement costs	-	395	-		-		395
Depreciation and amortization	4	100	-		-		104
	3,803	4,268	1,041		-		9,112
Loss from operations	(3,803)	(4,268)	(1,041)		-		(9,112)
Other income	385	4,949	-		-		5,334
(Loss) Income before taxes	$ (3,418)	$ 681		$ (1,041)	$ -		$ (3,778)

ITEM 2. 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 WWR for the three and nine months ended September 30, 2018 has been prepared based on information available to us as of November 7, 2018. This discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included herewith and the audited Consolidated Financial Statements of WWR for the period ended December 31, 2017 and the related notes thereto filed with our Annual Report on Form 10-K, which have been prepared in accordance with U.S. GAAP. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth elsewhere in this report. See “Cautionary Note Regarding Forward-Looking Statements.”

INTRODUCTION

WWR is an energy minerals exploration and energy-related materials development company. The Company’s battery materials projects include graphite and lithium mineral properties. We established our graphite business with the acquisition of Alabama Graphite on April 23, 2018 and its Coosa Graphite Project along with the associated Coosa Graphite Mine located across 41,900 acres in east-central Alabama. We established our lithium business in 2016 and currently control mineral rights encompassing approximately 36,730 acres across three prospective lithium brine basins in Nevada and Utah. We have continued exploration activities as well as geological evaluation of these properties in 2018 for potential development of lithium resources that may be discovered.

The Company maintains optionality on future rising uranium prices with significant uranium property holdings located in Texas and New Mexico. In Texas, the Company has two licensed and currently idled uranium processing facilities and approximately 11,000 acres (4,400 ha) of prospective in-situ recovery uranium projects. In New Mexico, the Company controls mineral rights encompassing approximately 188,700 acres (76,394 ha) in the prolific Grants Mineral Belt, which is one of the largest concentrations of sandstone-hosted uranium deposits in the world. Incorporated in 1977 as Uranium Resources, Inc., WWR also owns an extensive uranium information database of historic drill hole logs, assay certificates, maps and technical reports for the western United States.

Graphite, Lithium and Uranium Listed as Critical Materials

A Presidential Executive Order on a Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals was issued on December 20, 2017, which we believe will accelerate important energy related mineral development in the United States. In conjunction with Professional Paper 1802, published by the US Geological Service (“USGS”), where 23 minerals are identified as critical to the Country’s security and economy, WWR believes these actions are important steps in support of domestic minerals development. One of the important steps outlined in the Executive Order required a list of critical minerals to be provided by the US Secretary of the Interior. This list was provided and included all three of WWR’s contemplated portfolio products consisting of graphite, lithium and uranium. Graphite and lithium, in particular, are critical to the development of batteries and other energy storage systems essential to the electric vehicle, solar and wind power industries.

RECENT DEVELOPMENTS

Election of New Director

On September 25, 2018, the Board of Directors (the “Board”) of Westwater Resources, Inc. (the “Company”) elected Karli Anderson to serve as an independent director of the Company, effective September 26, 2018. Mrs. Anderson will be compensated for her service on the Board in accordance with the Company’s compensatory and other arrangements for nonemployee directors, which is described in the Company’s definitive proxy statement filed with the Securities and Exchange Commission on March 8, 2018. Mrs. Anderson has not been appointed to serve on any committee of the Board. The Board determined that Mrs. Anderson is independent under the rules of the Nasdaq Stock Market as well as applicable rules and regulations adopted by the Securities and Exchange Commission. On September 27, 2018, the Company filed a Form 8-K announcing the new director appointment and attached a copy of the associated press release as Exhibit 99.1.

Impairment of Temrezli and Sefaatli Projects

On June 20, 2018, the General Directorate of Mining Affairs, a department of the Turkish Ministry of Energy and Natural Resources, notified the Company that the mining and exploration licenses for its Temrezli and Sefaatli projects located in Turkey had been revoked and potential compensation will be proffered. While the Company is investigating the legality of this action and what remedies, including compensation, might be available to the Company, the Company has determined that it is more likely than not that the Company will be unable to explore, develop, mine or otherwise benefit from the mineral properties. Therefore, the Company has determined that all of the uranium mineral holding property assets located in Turkey were fully impaired. The amount of the impairment charge reflects the accounting net book value for the uranium holding property assets and does not reflect fair market value of the assets. The Company will recognize compensation for the mining and exploration licenses when the amount of the full and fair compensation is fixed and determinable and the ability to collect is probable.

Acquisition of Alabama Graphite

On December 13, 2017, the Company entered into a binding arrangement agreement to acquire all of the issued and outstanding securities of Alabama Graphite Corp. through the issuance of new securities in the Company by way of a court-sanctioned plan of arrangement under the Business Corporation Act of British Columbia. Eligible shareholders of Alabama Graphite were offered .08 shares of the Company’s common stock for every one share of Alabama Graphite they owned. Alabama Graphite’s shareholders approved the arrangement on March 9, 2018, and on March 19, 2018, the Supreme Court of British Columbia granted orders approving the Alabama Graphite plan of arrangement implementing the acquisition. On April 19, 2018, the Company’s stockholders approved the arrangement. Following customary Canadian regulatory approvals, the Company closed the acquisition on April 23, 2018. At closing, the Company issued 11,625,210 shares of its common stock to the stockholders of Alabama Graphite who received approximately 28% of the combined company and current stockholders of the Company retained approximately 72%. The Company also issued replacement options and warrants for 2,508,378 shares of its common stock to the previous option and warrant holders of Alabama Graphite.

On April 23, 2018, Westwater completed the acquisition of Alabama Graphite as part of a strategic decision to refocus the Company to supply battery manufacturers with low-cost, advanced, high-quality, and high-margin graphite products. The principal asset acquired is the Coosa Graphite Project (“Coosa Project”), which includes the Coosa Graphite mine located near Sylacauga, Alabama, 50 miles southeast of Birmingham. The Coosa mine is located in an area that has been a past producer of graphite, utilizing a geology trend spanning tens of thousands of acres, known as the “Alabama Graphite Belt.” The State of Alabama remains a friendly business jurisdiction, exemplified by the state successfully securing a $1 billion commitment from Daimler Benz to build a lithium-ion battery factory near its automobile assembly plant in the state.

WWR believes that graphite has an important strategic place in the global economy as a high-demand commodity as electric automobiles and the batteries that power them increase production. WWR is working with over two dozen potential customers, several of which have qualification samples in hand as a first step towards potential sales.

Major components of Westwater’s graphite business plan include constructing a processing facility that purifies readily available graphite concentrates to 99.95% pure carbon. The proposed construction is planned for 2020 based upon pilot-plant operating data that will be developed in 2019 using industry standard processes. Once the graphite is purified, the material is further processed into the three component products which provide graphite materials with enhanced conductivity performance for battery manufacturers: Purified Micronized Graphite (PMG), Delaminated Expanded Graphite (DEXDG), and Coated Spherical Purified Graphite (CSPG).

At the same time, the Company will be developing the Coosa Graphite mine (planned for start-up in 2026) on its 40,000-plus-acre mineral-rights holdings that can serve as a hedge against future feedstock costs and provide in-house quality assurance and quality control (QA/QC) for raw-material inputs.

Equity Financings

Registered Direct Offering

Controlled Equity Offering Sales Agreement with Cantor Fitzgerald

On April 14, 2017, the Company entered into the ATM Offering with Cantor acting as sales agent. Under the ATM Offering, the Company may from time to time sell shares of its common stock having an aggregate offering amount up to $30.0 million in “at-the-market” offerings, $8.0 million of which shares are registered for sale under a registration statement on Form S-3, which was declared effective on March 9, 2017. 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. As of October 31, 2018, the Company had sold 16,078,900 shares of common stock for net proceeds of $4.6 million under the ATM Offering. As a result, the Company had approximately $25.3 million remaining available for future sales under the ATM Offering, of which $4.5 million has been registered for sale.

Common Stock Purchase Agreement (“CSPA”) with Aspire Capital

On September 25, 2017, the Company entered into the CSPA with Aspire Capital to place up to $22.0 million in the aggregate of the Company’s common stock on an ongoing basis when required by the Company over a term of 30 months. As consideration for Aspire Capital entering into the purchase agreement, the Company issued 880,000 shares of its common stock to Aspire Capital. On September 27, 2017, pursuant to the CSPA and after satisfaction of certain commencement conditions, Aspire Capital made an initial purchase of 1,428,571 shares of common stock for which the Company received net proceeds of $2.0 million. Through its termination on June 14, 2018 in connection with the registered direct offering described above, Aspire Capital purchased an additional 2,725,096 shares of common stock for which the Company received net proceeds of $1.5 million.

Results of Operations

Summary

Our consolidated net loss for the three months ended September 30, 2018 was $3.1 million, or $0.06 per share, as compared with a consolidated net loss of $3.0 million, or $0.12 per share for the same period in 2017. For the three months ended September 30, 2018, the increase in our consolidated net loss from the respective prior period was primarily the result of an increase in loss on sale of marketable securities of $0.4 million and an increase in general and administrative expenses of $0.1 million. These increases were mostly offset by a decrease in mineral property expenses of $0.4 million.

Our consolidated net loss for the nine months ended September 30, 2018 was $27.0 million, or $0.68 per share, as compared with $3.8 million, or $0.16 per share for the same period in 2017. For the nine months ended September 30, 2018, the increase in our consolidated net loss of $23.1 million from the respective prior period was the result of an impairment charge for the Temrezli and Sefaatli uranium mineral interests, an increase in non-recurring acquisition related costs of $0.3 million and an increase in general and administrative expenses of $0.7 million. These increases were partially offset by a decrease in mineral property expenses of $0.9 million. Additionally, there was a one-time gain on the disposal of our Churchrock and Crownpoint projects of $4.9 million in the nine months ended September 30, 2017.

Mineral Property Expenses

The following table details our mineral property expenses for the three and nine months ended September 30, 2018 and 2017:


	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2018	2017	2018	2017
	(thousands of dollars)
Restoration/Recovery expenses
Rosita Project	$ 131	$ 71	$ 297	$ 160
Vasquez Project	(51)	-	50	-
Total restoration/recovery expenses	80	71	347	160

Standby care and maintenance expenses
Kingsville Dome Project	181	153	495	477
Rosita Project	97	74	276	258
Vasquez Project	92	117	231	308
Temrezli Project	11	41	107	164
Total standby care and maintenance expenses	381	385	1,109	1,207

Exploration and evaluation costs	18	423	39	609

Land maintenance and holding costs	476	437	1,211	1,661

Total mineral property expenses	$ 955	$ 1,316	$ 2,706	$ 3,637

For the three months ended September 30, 2018, mineral property expenses decreased by $0.4 million from the corresponding periods during 2017. The decrease was primarily due to a reduction in exploration activities in the Lithium projects of $0.4 million. Additionally, for the three months ended September 30, 2018, asset retirement settlements were $0.1 million.

For the nine months ended September 30, 2018, mineral expenses decreased by $0.9 million from the corresponding periods in 2017. The decrease was due to a reduction in land holding costs for the Cebolleta and Juan Tafoya uranium properties of $0.4 million and a reduction of exploration activities in the Lithium projects of $0.6 million during 2018. These decreases were partially offset by a $0.2 million increase in reclamation expenses for the Rosita and Vasquez uranium properties. Additionally, for the nine months ended September 30, 2018, asset retirement settlements were $0.5 million.

Included in the above Restoration/Recovery expenses are Asset Retirement Obligation (ARO) settlements of $130,856 and $485,285 for the three and nine months ended September 30, 2018, respectively. For the comparative periods of three and nine months ended September 30, 2017, asset retirement settlements were $6,885 and $37,479, respectively.

General and Administrative Expenses

Significant expenditures for general and administrative expenses for the three and nine months ended September 30, 2018 and 2017 were:


	For the Three Months Ended Sept 30,		For the Nine Months Ended Sept 30,
	2018	2017	2018	2017
	(thousands of dollars)

Stock compensation expense	$ 146	$ 24	$ 308	$ 62
Salaries and payroll burden	689	614	2,064	1,796
Legal, accounting, public company expenses	643	718	2,042	2,251
Insurance and bank fees	121	149	398	370
Consulting and professional services	81	21	396	44
Office expenses	102	148	338	364
Other expenses	21	26	116	89
Total	$ 1,803	$ 1,700	$ 5,662	$ 4,976

For the three months ended September 30, 2018, general and administrative charges increased by $0.1 million as compared with the corresponding period in 2017. This increase was primarily due to an increase in stock compensation expenses of $0.1 million. For the nine months ended September 30, 2018, general and administrative charges increased by $0.7 million as compared with the corresponding period in 2017. This increase was due to increases in salaries and payroll burden of $0.3 million and consulting and professional expenses of $0.4 million, primarily related to post-acquisition Alabama Graphite operations. Additionally, stock compensation expense increased by $0.2 million as compared to the corresponding period in 2017. These increases were partially offset by a decrease in legal, accounting and public company expenses of $0.2 million.

Other Income and Expenses

Sale of Scrap Metal

During the nine months ended September 30, 2018, the Company received proceeds of $0.1 million from the sale of scrap metal at our Texas uranium facility. There were no such sales of scrap metal in the 2017 periods.

Loss on Sale of Marketable Securities

Financial Position

Operating Activities

Net cash used in operating activities was $9.0 million for the nine months ended September 30, 2018, as compared with $8.9 million for the same period in 2017. The increase was primarily due to an increase in cash used for general working capital requirements for the nine months ending September 30, 2018.

Investing Activities

Net cash provided by investing activities was $0.4 million for the nine months ended September 30, 2018, as compared with $1.9 million of cash provided by investing activities for the nine months ended September 30, 2017. For the 2018 period, the Company received note and related interest payments on the Laramide note in the amount of $1.1 million in cash. Additionally, the Company received net proceeds of $0.8 million from the sale of Laramide securities. These increases were mostly offset by cash used for note advances to Alabama Graphite of $0.9 million and related Alabama Graphite acquisition transaction costs of $0.6 million. For the 2017 period, cash provided of $1.9 million relates to initial proceeds from the sale of our wholly-owned subsidiary, HRI to Laramide which closed on January 5, 2017.

Financing Activities

Net cash provided by financing activities was $5.9 million for the nine months ended September 30, 2018. For the nine months ended September 30, 2018, the Company received net cash proceeds of $1.3 million, $2.9 million and $1.7 million from the sale of common stock sold through the Company’s Aspire CSPA, Aspire RDO and Cantor ATM Offering agreements, respectively.

Net cash provided by financing activities was $10.9 million for the nine months ended September 30, 2017. For the nine months ended September 30, 2017, net cash proceeds of $15.4 million were received upon equity financings completed in January and February and September 2017, respectively. Additionally, $1.0 million was received from the sale of common stock sold through the Company’s ATM Offering. This increase was offset by the repayment of $5.5 million outstanding under the RCF Loan.

Liquidity and Capital Resources

At September 30, 2018, the Company had working capital of $0.9 million compared to working capital of $3.9 million at December 31, 2017. The decrease in working capital of $3.0 million for the nine months ended September 30, 2018 was mostly due to the following:

–

loan advances and acquisition costs for the acquisition of Alabama Graphite of $1.5 million.

–

reductions in accounts payable and accrued liabilities of $0.4 million, and;

–

continued funding of operating losses from the sale proceeds of available-for-sale marketable securities of $0.8 million

and from note receivable proceeds of $1.1 million.

The Company last recorded revenues from operations in 2009. Since 2013, the Company has raised $62.1 million from debt and equity financings, including six registered direct equity offerings ($24.8 million), a confidentially marketed public offering ($8.9 million), a convertible debt offering ($8.0 million) and three equity line of credit financings ($20.4 million). The Company will rely on these forms of financing to fund its ongoing operations into the near future.

The Company’s current business plan requires working capital to fund non-discretionary expenditures for uranium reclamation activities, mineral property holding costs, business development costs and administrative costs. The Company is pursuing project financing to support execution of the graphite business plan, including discretionary capital expenditures associated with graphite battery-material product development, construction of pilot plant facilities and construction of commercial production facilities. The Company’s current lithium business plan will be funded by working capital, however, the Company is pursuing project financing including possible joint venture partners to fund discretionary greenfield exploration activities.

At September 30, 2018 and at October 31, 2018, the Company had cash and cash equivalents of $1.4 million and $1.7 million, respectively. Other financing resources available to the Company include a promissory note in the amount of $3.5 million due from Laramide Resources Ltd. (“Laramide”) (Note 4) and the Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co. (“Cantor”) acting as sales agent, pursuant to which the Company has registered the offer and sale from time to time of shares of its common stock having an aggregate offering price of up to $8.0 million (the “ATM Offering”). As of October 31, 2018, approximately $4.5 million is available for future sales under the ATM Offering. The Company will also continue to pursue opportunities to monetize its non-core assets and identify ways to reduce its cash expenditures. These sources and actions, along with other anticipated financings, are expected to provide the Company with the necessary liquidity to fund non-discretionary expenditures through January 2020.

Off- Balance Sheet Arrangements

We have no off-balance sheet arrangements.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

With the exception of historical matters, the matters discussed in this report are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from projections or estimates contained herein. 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 potential improvements contained in the Company’s initial optimization study of the Coosa Graphite Project, the future production of graphite, including on a pilot scale, 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. Factors that could cause actual results to differ materially from these forward-looking statements include, among others:

•

the availability of capital to WWR;

•

the spot price and long-term contract price of graphite, lithium and uranium;

•

risks associated with our foreign and domestic operations;

•

the ability of WWR to enter into and successfully close acquisitions, dispositions or other material transactions, and to successfully integrate acquired businesses, including Alabama Graphite;

•

government and tribal regulation of the graphite industry, uranium industry and lithium industry and the power industry;

•

operating conditions at our mining projects;

•

the world-wide supply and demand of graphite, lithium and uranium;

•

weather conditions;

•

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

•

the results of our exploration activities, and the possibility that future exploration results may be materially less promising than initial exploration result;

•

any graphite, lithium or uranium discoveries not being in high enough concentration to make it economic to extract the metals;

•

currently pending or new litigation or arbitration; and

•

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

as well as other factors described elsewhere in this Quarterly Report on Form 10-Q, our 2017 Annual Report on Form 10-K and the other reports we file with the SEC. Most of these factors are beyond our ability to predict or control. Future events and actual results could differ materially from those set forth herein, contemplated by or underlying the forward-looking statements. Forward-looking statements speak only as of the date on which they are made. We disclaim any obligation to update any forward-looking statements made herein, except as required by law.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide this information in our Quarterly Reports.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its filings with the Securities and Exchange Commission (“SEC”) is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management has recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply judgment in evaluating the Company’s controls and procedures.

During the fiscal period covered by this report, the Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2018.

Changes in Internal Controls

During the three months ended September 30, 2018, no changes have been made in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information regarding reportable legal proceedings is contained in Part I, Item 3, “Legal Proceedings,” in our Annual Report on Form 10-K for the year ended December 31, 2017. There have been no material changes to the legal proceedings previously disclosed in the Annual Report on Form 10-K, other than as set forth below.

DISPUTE WITH DOUGLAS C. BOLTON

On May 15, 2018, Alabama Graphite Corp. (“AGC”) was named as a defendant in a lawsuit filed in the Superior Court of Justice in Ontario, Canada and styled Bolton & Bolton, Inc. v. Alabama Graphite Corp., CV-18-00597888. The plaintiff in the lawsuit is the corporate entity for Douglas C. Bolton (“Bolton”) who served as AGC’s Chief Financial Officer from September 2015 until January 2018. The statement of claim alleges that the original consulting agreement between Bolton and AGC was supposedly amended in the August-September 2017 time frame to provide for a 12-month severance payment that was allegedly owed as a result of AGC’s termination of Bolton in January 2018. The statement of claim seeks $108,349.45 in damages, pre-judgment and post-judgment interest, Bolton’s legal costs and other relief as may be just and proper. On June 21, 2018, AGC filed a request to inspect documents that are identified by reference in the statement of claim. On August 8, 2018, Bolton provided AGC with the requested documents. On August 17, 2018, AGC filed a statement of defense that denies the substantive allegations contained in Bolton’s statement of claim, asserts that the original consulting agreement between Bolton and AGC was not amended to provide for a 12-month severance payment, and seeks a dismissal of the lawsuit with costs on a substantial indemnity basis.

ITEM 1A. RISK FACTORS.

There have been no material changes from those risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2017, except for the following:

The timing and amount of compensation relating to the revocation of the mining and exploration licenses for our Temrezli and Sefaatli projects is uncertain.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None

ITEM 6. EXHIBITS.


Exhibit Number		Description


31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS:		XBRL Instance Document

101.SCH:		XBRL Taxonomy Extension Schema Document

101.CAL:		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF:		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB:		XBRL Taxonomy Extension Label Linkbase Document

101.PRE:		XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	WESTWATER RESOURCES, INC.

Dated: November 7, 2018	By:	/s/ Christopher M. Jones
		Christopher M. Jones
		President and Chief Executive Officer (Principal Executive Officer)

Dated: November 7, 2018	By:	/s/ Jeffrey L. Vigil
		Jeffrey L. Vigil
		Vice President - Finance and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

WESTWATER RESOURCES, INC. - FORM 10-Q - November 7, 2018

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WESTWATER RESOURCES, INC. Reports