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EX-32.2 - EX-32.2 - WESTWATER RESOURCES, INC.wwr-20200331ex322ced933.htm
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EX-31.2 - EX-31.2 - WESTWATER RESOURCES, INC.wwr-20200331ex312a69b38.htm
EX-31.1 - EX-31.1 - WESTWATER RESOURCES, INC.wwr-20200331ex311ea5d7c.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2020

Or

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)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

    

Trading Symbol(s)

    

Name of Each Exchange on Which Registered

Common Stock, $0.001 par value

 

WWR

 

Nasdaq Capital Market

 

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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 ☐

 

Accelerated filer ☐

 

 

 

Non-accelerated filer ☒

 

Smaller reporting company ☒

 

 

 

 

 

Emerging growth company ☐

 

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.      ☐

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

 

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

 

5,568,094 as of May 13, 2020

 

 

 

 

 

2

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WESTWATER RESOURCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(expressed in thousands of dollars, except share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

    

    

    

March 31, 

    

December 31, 

 

 

Notes

 

2020

 

2019

ASSETS

 

  

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

Current Assets:

 

  

 

 

  

 

 

  

Cash and cash equivalents

 

1

 

$

877

 

$

1,870

Prepaid and other current assets

 

  

 

 

843

 

 

491

Total Current Assets

 

  

 

 

1,720

 

 

2,361

 

 

 

 

 

 

 

 

 

Property, plant and equipment, at cost:

 

  

 

 

  

 

 

  

Property, plant and equipment

 

  

 

 

91,701

 

 

91,746

Less accumulated depreciation and depletion

 

  

 

 

(71,377)

 

 

(71,409)

Net property, plant and equipment

 

6

 

 

20,324

 

 

20,337

Operating lease right-of-use assets

 

13

 

 

454

 

 

484

Restricted cash

 

1,5

 

 

3,806

 

 

3,797

Total Assets

 

  

 

$

26,304

 

$

26,979

 

 

  

 

 

  

 

 

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

  

 

 

  

 

 

  

Accounts payable

 

  

 

$

1,486

 

$

852

Accrued liabilities

 

 

 

 

1,227

 

 

1,770

Asset retirement obligations - current

 

8

 

 

1,090

 

 

894

Operating lease liability - current

 

13

 

 

153

 

 

153

Total Current Liabilities

 

  

 

 

3,956

 

 

3,669

 

 

 

 

 

 

 

 

 

Asset retirement obligations, net of current

 

8

 

 

5,290

 

 

5,406

Other long-term liabilities

 

 

 

 

500

 

 

500

Operating lease liability, net of current

 

13

 

 

310

 

 

340

Total Liabilities

 

  

 

 

10,056

 

 

9,915

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

12

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

  

 

 

  

 

 

  

Common stock, 100,000,000 shares authorized, $.001 par value;

 

  

 

 

  

 

 

  

Issued shares – 4,762,794 and 3,339,541 respectively

 

  

 

 

  

 

 

  

Outstanding shares - 4,762,633 and 3,339,380 respectively

 

9

 

 

 5

 

 

 3

Paid-in capital

 

9,10

 

 

322,227

 

 

319,758

Accumulated deficit

 

  

 

 

(305,726)

 

 

(302,439)

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

 

  

 

 

(258)

 

 

(258)

Total Stockholders’ Equity

 

  

 

 

16,248

 

 

17,064

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders’ Equity

 

  

 

$

26,304

 

$

26,979

 

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

3

WESTWATER RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(expressed in thousands of dollars, except share and per share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

 

 

 

 

March 31, 

 

 

 

    

Notes

    

2020

   

2019

    

    

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

  

 

 

  

 

 

  

 

 

Mineral property expenses

 

7

 

$

(728)

 

$

(634)

 

 

General and administrative expenses

 

  

 

 

(1,779)

 

 

(1,705)

 

 

Arbitration costs

 

 

 

 

(669)

 

 

(131)

 

 

Accretion of asset retirement obligations

 

8

 

 

(106)

 

 

(126)

 

 

Depreciation and amortization

 

  

 

 

(13)

 

 

(23)

 

 

Total operating expenses

 

  

 

 

(3,295)

 

 

(2,619)

 

 

 

 

  

 

 

  

 

 

  

 

 

Non-Operating Income/(Expenses):

 

  

 

 

  

 

 

  

 

 

Loss on sale of marketable securities

 

3,5

 

 

 —

 

 

(720)

 

 

Interest income

 

3

 

 

 —

 

 

166

 

 

Other income (expense)

 

  

 

 

 8

 

 

(1)

 

 

Total other income (expense)

 

  

 

 

 8

 

 

(555)

 

 

 

 

  

 

 

 

 

 

  

 

 

Net Loss

 

  

 

$

(3,287)

 

$

(3,174)

 

 

 

 

  

 

 

  

 

 

  

 

 

Other Comprehensive Income (Loss)

 

  

 

 

  

 

 

  

 

 

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

 

  

 

 

 —

 

 

90

 

 

Comprehensive Loss

 

  

 

$

(3,287)

 

$

(3,084)

 

 

 

 

  

 

 

  

 

 

  

 

 

BASIC AND DILUTED LOSS PER SHARE

 

  

 

$

(0.82)

 

$

(2.15)

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

 

  

 

 

4,004,948

 

 

1,478,233

 

 

 

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

4

WESTWATER RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND SUPPLEMENTAL CASH FLOW INFORMATION

(expressed in thousands of dollars)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 

 

    

Notes

    

2020

    

2019

Operating Activities:

 

  

 

 

  

 

 

  

Net loss

 

  

 

$

(3,287)

 

$

(3,174)

Reconciliation of net loss to cash used in operations:

 

  

 

 

  

 

 

 

Non-cash lease expense

 

  

 

 

 —

 

 

 5

Accretion of asset retirement obligations

 

8

 

 

106

 

 

126

Costs incurred for restoration and reclamation activities

 

8

 

 

(26)

 

 

(335)

Amortization of note receivable discount

 

3

 

 

 —

 

 

(123)

Depreciation and amortization

 

  

 

 

13

 

 

23

Stock compensation expense

 

10

 

 

 —

 

 

 8

Loss on sale of marketable securities

 

3

 

 

 —

 

 

720

Increase in prepaids and other assets

 

  

 

 

(352)

 

 

(32)

Increase in payables and accrued liabilities

 

  

 

 

91

 

 

42

Net Cash Used In Operating Activities

 

  

 

 

(3,455)

 

 

(2,740)

 

 

 

 

 

 

 

 

 

Cash Flows From Investing Activities

 

  

 

 

  

 

 

  

Proceeds from disposal of uranium assets, net

 

4

 

 

 —

 

 

500

Proceeds from the sale of securities, net

 

3

 

 

 —

 

 

536

Proceeds from note receivable

 

3

 

 

 —

 

 

750

Net Cash Provided By Investing Activities

 

  

 

 

 —

 

 

1,786

 

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities:

 

  

 

 

  

 

 

  

Issuance of common stock, net

 

9

 

 

2,471

 

 

415

Payment of minimum withholding taxes on net share settlements of equity awards

 

  

 

 

 —

 

 

(1)

Net Cash Provided By Financing Activities

 

  

 

 

2,471

 

 

414

 

 

  

 

 

  

 

 

  

Net decrease in cash, cash equivalents and restricted cash

 

  

 

 

(984)

 

 

(540)

Cash, Cash Equivalents and Restricted Cash, Beginning of Period

 

  

 

 

5,667

 

 

5,309

Cash, Cash Equivalents and Restricted Cash, End of Period

 

  

 

$

4,683

 

$

4,769

Cash Paid During the Period for:

 

  

 

 

  

 

 

  

Interest

 

  

 

$

 1

 

$

 1

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

 

  

 

 

  

 

 

  

Securities received for payment of notes receivable – Laramide

 

  

 

 

 —

 

 

750

Total Non-Cash Investing and Financing Activities for the Period

 

  

 

$

 —

 

$

750

 

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

5

WESTWATER RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(expressed in thousands of dollars, except share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

Paid-In

 

Comprehensive

 

Accumulated

 

Treasury

 

 

 

 

 

Shares

 

Amount

 

Capital

 

Income (Loss)

 

Deficit

 

Stock

 

Total

Balances, December 31, 2019

 

3,339,541

 

$

 3

 

$

319,758

 

$

 -

 

$

(302,439)

 

$

(258)

 

$

17,064

Net loss

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(3,287)

 

 

 —

 

 

(3,287)

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

 

1,422,742

 

 

 2

 

 

2,469

 

 

 —

 

 

 —

 

 

 —

 

 

2,471

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

 

511

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Balances, March 31, 2020

 

4,762,794

 

$

 5

 

$

322,227

 

$

 -

 

$

(305,726)

 

$

(258)

 

$

16,248

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, December 31, 2018

 

1,436,555

 

$

 1

 

$

313,012

 

$

(90)

 

$

(291,874)

 

$

(258)

 

$

20,791

Net loss

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(3,174)

 

 

 —

 

 

(3,174)

Common stock issued, net of issuance costs

 

57,205

 

 

 —

 

 

416

 

 

 —

 

 

 —

 

 

 —

 

 

416

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

 

393

 

 

 —

 

 

 8

 

 

 —

 

 

 —

 

 

 —

 

 

 8

Minimum withholding taxes on net share settlements of equity awards

 

 —

 

 

 —

 

 

(1)

 

 

 —

 

 

 —

 

 

 —

 

 

(1)

Transfer to realized loss upon sale of available for sale securities

 

 —

 

 

 —

 

 

 —

 

 

90

 

 

 —

 

 

 —

 

 

90

Balances, March 31, 2019

 

1,494,153

 

$

 1

 

$

313,435

 

$

 -

 

$

(295,048)

 

$

(258)

 

$

18,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

6

Table of Contents

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

 

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements for Westwater Resources, Inc. (the “Company,” “we,” “us,” “WWR” or “Westwater”), have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10‑Q and Rule 8‑03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying statements should be read in conjunction with the audited financial statements included in Westwater Resources, Inc.’s 2019 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 months ended March 31, 2020 are not necessarily indicative of the results that may be expected for any other period including the full year ending December 31, 2020.

Significant Accounting Policies

Our significant accounting policies are detailed in Note 1, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements within our Annual Report on Form 10‑K for the year ended December 31, 2019.

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU 2018‑13, “Fair Value Measurement (ASC 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement”. This update modifies the disclosure requirements for fair value measurements by removing, modifying or adding disclosures. The Company adopted this pronouncement effective January 1, 2020. The adoption of ASU 2018-13 has not had a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, “Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740)” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 will be effective for interim and annual periods beginning after December 15, 2020.

In June 2016, the FASB issued ASU 2016‑13, “Measurement of Credit Losses on Financial Instruments”. ASU 2016‑13 will change how companies account for credit losses for most financial assets and certain other instruments. For trade receivables, loans and held-to-maturity debt securities, companies will be required to estimate lifetime expected credit losses and recognize an allowance against the related instruments. For available for sale debt securities, companies will be required to recognize an allowance for credit losses rather than reducing the carrying value of the asset. The adoption of this update, if applicable, will result in earlier recognition of losses and impairments. ASU 2016-13 will be effective for interim and annual periods beginning after January 1, 2023.

In November 2018, the FASB issued ASU 2018‑19, “Codification Improvements to ASC 326, Financial Instruments – Credit Losses.” ASU 2016‑13 introduced an expected credit loss methodology for the impairment of financial assets measured at amortized cost basis. That methodology replaces the probable, incurred loss model for those assets. ASU 2018‑19 is the final version of Proposed Accounting Standards Update 2018‑270, which has been deleted. Additionally, the amendments clarify that receivables arising from operating leases are not within the scope of Subtopic 326‑20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842, Leases. ASU 2018-19 will be effective for interim and annual periods beginning after January 1, 2023.

7

Table of Contents

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

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

Cash, Cash Equivalents and Restricted Cash

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

 

 

 

 

 

 

 

 

 

 

As of March 31, 

(thousands of dollars)

    

2020

    

2019

Cash and cash equivalents

 

$

877

 

$

1,019

Restricted cash - pledged deposits for performance bonds

 

 

3,806

 

 

3,750

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

 

$

4,683

 

$

4,769

 

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

 

2. LIQUIDITY AND GOING CONCERN

The interim Condensed Consolidated Financial Statements of the Company have been prepared on a “going concern” basis, which means that the continuation of the Company is presumed even though events and conditions exist that, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern because it is possible that the Company will be required to adversely change its current business plan or may be unable to meet its obligations as they become due within one year after the date that these financial statements were issued.

The Company last recorded revenues from operations in 2009 and expects to continue to incur losses as a result of costs and expenses related to maintaining its properties and general and administrative expenses. Since 2009, the Company has relied on equity financings, debt financings and asset sales to fund its operations and the Company expects to rely on these forms of financing to fund its operations into the near future. The Company will also continue to identify ways to reduce its cash expenditures.

The Company’s current business plan requires working capital to fund non-discretionary expenditures for uranium reclamation activities, mineral property holding costs, 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 March 31, 2020 the Company’s cash balances were $0.9 million and the Company had a working capital deficit balance of $2.2 million. The Company’s cash balance at May 8, 2020 is $0.5 million. Subsequent to May 8, 2020, the Company expects to fund operations as follows:

·

The new Stock Purchase Agreement with Lincoln Park Capital, LLC., approved by the Company’s shareholders at the annual shareholders meeting on April 28, 2020, whereby the Company may place up to $12.0 million in the aggregate of the Company's common stock on an ongoing basis when required by the Company over a term of 24-months after execution of the agreement.

8

Table of Contents

WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

·

The Controlled Equity Offering Sales Agreement (the “ATM Offering Agreement”) with Cantor Fitzgerald & Co. The Company currently has registered the offer and sale from time to time of shares of its common stock having an aggregate offering price of up to $3.1 million. As of May 8, 2020, $2.8 million registered shares are available for future sales under the ATM Offering Agreement.

·

The loan proceeds in the amount of $0.3 million received from the Paycheck Protection Program (“PPP”) by URI, Inc., a wholly owned subsidiary of WWR, on May 4, 2020. See Note 15. The Company plans to use the proceeds from this loan for payroll and benefits costs for its South Texas operations, which are eligible expenses in accordance with the PPP. Under the terms of the promissory note executed by URI, principal and accrued interest are forgivable after eight weeks as long as the proceeds are used for eligible purposes. Any unforgiven portion of the loan is payable over two years at an interest rate of 1% with a deferral of payments for the first six months. 

·

Other debt and equity financings and asset sales.

While the Company has been successful in the past in raising funds through equity and debt financings as well as through the sale of non-core assets, no assurance can be given that additional financing will be available to it in amounts sufficient to meet its needs, or on terms acceptable to the Company. Stock price volatility and uncertain economic conditions caused by the recent Covid-19 pandemic could significantly impact the Company’s ability to raise funds through equity financing. In the event that we are unable to raise sufficient additional funds, we may be required to delay, reduce or severely curtail our operations or otherwise impede our on-going business efforts, which could have a material adverse effect on our business, operating results, financial condition, long-term prospects and ability to continue as a viable business. Considering all of the factors above, the Company believes there is substantial doubt regarding its ability to continue as a going concern.

 

3. NOTES RECEIVABLE

Laramide Note Receivable

As part of the consideration for the sale of Hydro Resources, Inc. (HRI) in January 2017, the Company received a promissory note in the amount of $5.0 million, secured by a mortgage over the Churchrock and Crownpoint properties owned by Laramide Resources Ltd. (“Laramide”). The note had a three-year term and carried an initial interest rate of 5%. The Company received the first two installment payments of $1.5 million each in January 2018 and January 2019. The final principal payment of $2.0 million was due and payable on January 5, 2020. Interest was payable on a quarterly basis during the final year. Laramide had the right to satisfy up to half of the principal payments by delivering shares of its common stock to the Company, which shares were valued by reference to the volume weighted average price (“VWAP”) for Laramide’s common stock for the 20 trading days before their respective anniversaries of the initial issuance date in January. The fair value of this note receivable was determined using the present value of the future cash receipts discounted at a market rate of 9.5%.

On August 30, 2019, the Company sold the promissory note (Note 4). Prior to August 30, 2019, the Company had received three tranches of Laramide common shares as partial consideration for the sale, which had resulted in the receipt of 2,218,133,  1,982,483 and 2,483,034 Laramide common shares in January 2017, January 2018 and January 2019, respectively. These share payments represented the initial consideration from the January 2017 sale of HRI and two note installments in January 2018 and January 2019. The first note installment in the amount of $1.5 million in January 2018, consisted of $750,000 in cash and the issuance of 1,982,483 of Laramide’s common shares. The second note installment in the amount of $1.5 million in January 2019, consisted of $750,000 in cash and the issuance of 2,483,034 of Laramide’s common shares. Additionally, Laramide made interest payments in the amount of $96,022 in cash during the year ending December 31, 2019.

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WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

On March 25, 2019, the Company sold the third tranche of 2,483,034 Laramide common shares and 2,218,133 Laramide warrants resulting in net proceeds of $0.5 million and a net loss on sale of marketable securities of $0.7 million.

 

 

4. SALE OF URANIUM ASSETS

On March 5, 2019, the Company entered into an Asset Purchase Agreement with Uranium Royalty (USA) Corp. and Uranium Royalty Corp. (together “URC”) for the sale of four of its royalty interests on future uranium production from mineral properties located in South Dakota, Wyoming and New Mexico, as well as the remaining amount of the Laramide promissory note in the amount of $2.0 million as discussed in Note 3 above, for $2.75 million, including $0.5 million paid at signing. On June 28, 2019, Westwater and URC entered into an Amendment to the Asset Purchase Agreement. The Amendment extended the date for closing from July 31, 2019 to August 30, 2019. URC delivered an additional $1.0 million as deposit to the Company upon signing the Amendment. The transaction closed on August 30, 2019 at which time the Company transferred ownership of the royalties and promissory note in exchange for the final payment of $1.25 million.

The sale of these uranium assets was accounted for as an asset disposal. The Company recorded the following gain on disposal of uranium assets on its  Consolidated Statements of Operations for the year ended December 31, 2019:

 

 

 

 

URC Transaction

    

 

 

(thousands of dollars)

 

 

 

Total cash consideration received, net of transaction costs

 

$

2,470

Carrying value of promissory note

 

 

(1,741)

Carrying value of royalty interests

 

 

 —

Gain on disposal of uranium assets

 

$

729

 

 

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.

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WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

(thousands of dollars)

    

Level 1

    

Level 2

    

Level 3

    

Total

Current Assets

 

 

  

 

 

  

 

 

  

 

 

  

Short-term available-for-sale investments

 

$

 —

 

$

 —

 

$

 —

 

$

 —

Total current assets recorded at fair value

 

$

 —

 

$

 —

 

$

 —

 

$

 —

Non-current Assets

 

 

  

 

 

  

 

 

  

 

 

  

Restricted cash

 

$

3,806

 

$

 —

 

 

 —

 

$

3,806

Total non-current assets recorded at fair value

 

$

3,806

 

$

 —

 

$

 —

 

$

3,806

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

(thousands of dollars)

    

Level 1

    

Level 2

    

Level 3

    

Total

Current Assets

 

 

  

 

 

  

 

 

  

 

 

  

Short-term available-for-sale investments

 

$

 —

 

$

 —

 

$

 —

 

$

 —

Total current assets recorded at fair value

 

$

 —

 

$

 —

 

$

 —

 

$

 —

Non-current Assets

 

 

  

 

 

  

 

 

  

 

 

  

Restricted cash

 

$

3,797

 

$

 —

 

 

 —

 

$

3,797

Total non-current assets recorded at fair value

 

$

3,797

 

$

 —

 

$

 —

 

$

3,797

 

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 March 31, 2020

(thousands of dollars)

    

Turkey

    

Texas

    

Alabama

    

New Mexico

    

Corporate

    

Total

Uranium plant

 

$

 —

 

$

3,112

 

$

 —

 

$

 —

 

$

 —

 

$

3,112

Mineral rights and properties

 

 

 —

 

 

 —

 

 

8,972

 

 

7,806

 

 

 —

 

 

16,778

Other property, plant and equipment

 

 

 5

 

 

326

 

 

 —

 

 

 —

 

 

103

 

 

434

Total

 

$

 5

 

$

3,438

 

$

8,972

 

$

7,806

 

$

103

 

$

20,324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

(thousands of dollars)

    

Turkey

    

Texas

    

Alabama

    

New Mexico

    

Corporate

    

Total

Uranium plant

 

$

 —

 

$

3,112

 

$

 —

 

$

 —

 

$

 —

 

$

3,112

Mineral rights and properties

 

 

 —

 

 

 —

 

 

8,972

 

 

7,806

 

 

 —

 

 

16,778

Other property, plant and equipment

 

 

 6

 

 

327

 

 

 —

 

 

 —

 

 

114

 

 

447

Total

 

$

 6

 

$

3,439

 

$

8,972

 

$

7,806

 

$

114

 

$

20,337

 

 

The Company reviews and evaluates its long-lived assets for impairment on an annual basis or more frequently when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. For the three months ended March 31, 2020 no events or changes in circumstance, including any affects from the COVID-19 pandemic, are believed to have impacted recoverability of the Company’s long-lived assets. Accordingly, it was determined that no interim impairment was necessary.

 

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WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

7. MINERAL PROPERTY EXPENDITURES

Mineral property expenditures by geographical location for the three months ended March  31, 2020 and 2019 are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 

 

 

 

    

2020

    

2019

    

    

 

 

(thousands of dollars)

 

Kingsville Dome project, Texas

 

$

265

 

$

244

 

 

Rosita project, Texas

 

 

91

 

 

117

 

 

Vasquez project, Texas

 

 

240

 

 

186

 

 

Total Texas projects

 

 

596

 

 

547

 

 

 

 

 

 

 

 

 

 

 

Juan Tafoya project, New Mexico

 

 

 6

 

 

 6

 

 

Total New Mexico projects

 

 

 6

 

 

 6

 

 

 

 

 

 

 

 

 

 

 

Sal Rica project, Utah

 

 

 —

 

 

 1

 

 

Total Utah projects

 

 

 —

 

 

 1

 

 

 

 

 

 

 

 

 

 

 

Coosa project, Alabama

 

 

126

 

 

80

 

 

Total Alabama projects

 

 

126

 

 

80

 

 

 

 

 

 

 

 

 

 

 

Total expense for the period

 

$

728

 

$

634

 

 

 

 

8. ASSET RETIREMENT OBLIGATIONS

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

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

(thousands of dollars)

 

2020

 

2019

Balance, beginning of period

 

$

6,300

 

$

6,203

Liabilities settled

 

 

(26)

 

 

(293)

Accretion expense

 

 

106

 

 

390

Balance, end of period

 

 

6,380

 

 

6,300

Less: Current portion

 

 

(1,090)

 

 

(894)

Non-current portion

 

$

5,290

 

$

5,406

 

The Company is currently performing plugging and surface reclamation activities at its Kingsville Dome, Rosita and Vasquez projects located in Kleberg and Duval Counties in Texas. The Company’s current liability of $1.1 million consists of the estimated costs associated with current reclamation activities through March 2021 at the Company’s Kingsville Dome, Rosita and Vasquez projects.

 

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WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

9. COMMON STOCK

Common Stock Issued, Net of Issuance Costs

Purchase Agreement (“PA”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”)

On June 6, 2019, the Company entered into the PA with Lincoln Park to place up to $10.0 million in the aggregate of the Company’s common stock on an ongoing basis when required by the Company over a term of 24 months. Westwater will control the timing and amount of any sales to Lincoln Park, and Lincoln Park is obligated to make purchases in accordance with the PA. Any common stock that is sold to Lincoln Park will occur at a purchase price that is based on an agreed upon fixed discount to the Company’s prevailing market prices at the time of each sale and with no upper limits to the price Lincoln Park may pay to purchase common stock. The PA may be terminated by Westwater at any time, in its sole discretion, without any additional cost or penalty.

The PA specifically provides that the Company may not issue or sell any shares of its common stock under the PA if such issuance or sale would breach any applicable rules of The Nasdaq Capital Market. In particular, Nasdaq Listing Rule 5635(d) provides that the Company may not issue or sell more than 19.99% of the shares of the Company’s common stock outstanding immediately prior to the execution of the PA without shareholder approval. On August 6, 2019 the Company conducted a Special Meeting of Shareholders whereby the Company received such approval to sell up to 3,200,000 shares of common stock under the PA.

Lincoln Park has no right to require the Company to sell any shares of common stock to Lincoln Park, but Lincoln Park is obligated to make purchases as the Company directs, subject to certain conditions. In all instances, the Company may not sell shares of its common stock to Lincoln Park under the PA if it would result in Lincoln Park beneficially owning more than 9.99% of its common stock.

Following effectiveness of a registration statement on Form S-1 relating to the resale of the shares subject to the PA on June 18, 2019, the Company began selling shares of its common stock to Lincoln Park under the terms of the PA. On September 11, 2019, October 28, 2019 and February 28, 2020 we filed subsequent registration statements on Form S-1, which were declared effective on September 20, 2019, November 7, 2019 and March 6, 2020, respectively, registering for resale additional shares under the PA. Inception-to-date through March 31, 2020, the Company has sold 2,576,764 shares of common stock for gross proceeds of $7.1 million. In April 2020, the Company sold the remaining 623,236 registered shares of common stock for gross proceeds of $0.6 million.

Stock Purchase Agreement with Lincoln Park Capital Fund, LLC. ("Lincoln Park")

On May 24, 2019, Westwater entered into a securities purchase agreement, as amended by Amendment No. 1 thereto dated as of May 30, 2019 (as so amended, the "Securities Purchase Agreement"), with Lincoln Park, pursuant to which the Company agreed to issue and sell to Lincoln Park, and Lincoln Park agreed to purchase from the Company (i) 104,294 shares of the Company's common stock and (ii) warrants to initially purchase an aggregate of up to 182,515 shares of common stock, at an exercise price of $5.062 per share. On May 30, 2019, the Company issued and sold the common shares and the warrants to Lincoln Park and received aggregate gross proceeds before expenses of $550,751. The warrants became exercisable on November 30, 2019 and may be exercised at any time thereafter until November 30, 2024.

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

On April 14, 2017, the Company entered into the "ATM Offering Agreement” with Cantor acting as sales agent. Under the ATM Offering Agreement, the Company may from time to time sell shares of its common stock in “at-the-market” offerings and $3.1 million of which shares were registered for sale under a registration statement on Form S‑3, which was declared effective on April 13, 2020. The Company pays Cantor a commission of up to 2.5% of the gross proceeds from the sale of any shares pursuant to the ATM Offering Agreement. As of March  31, 2020, the Company had

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WESTWATER RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

sold 1,029,197 shares of common stock for net proceeds of $7.2 million under the ATM Offering Agreement, of which 540,512 shares of common stock and net proceeds of $1.1 million was sold in the three months ended March  31, 2020.  

Warrants

The following table summarizes warrants outstanding and changes for the three-month periods ending March 31, 2020 and 2019:

 

 

 

 

 

 

 

 

March 31, 2020

 

March 31, 2019

 

    

 

    

 

 

 

Number of

 

Number of

 

 

Warrants

 

Warrants

Warrants outstanding at beginning of period

 

197,622

 

15,107

Issued

 

 —

 

 —

Expired

 

 —

 

 —

Warrants outstanding at end of period

 

197,622