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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 8/10/22 Westwater Resources, Inc. 10-Q 6/30/22 44:3.6M Toppan Merrill Bridge/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 934K
2: EX-31.1 Certification -- §302 - SOA'02 HTML 18K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 18K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 15K
5: EX-32.2 Certification -- §906 - SOA'02 HTML 15K
11: R1 Document and Entity Information HTML 67K
12: R2 Condensed Consolidated Balance Sheets HTML 104K
13: R3 Condensed Consolidated Balance Sheets HTML 25K
(Parenthetical)
14: R4 Condensed Consolidated Statements of Operations HTML 67K
15: R5 Condensed Consolidated Statements of Cash Flows HTML 76K
16: R6 Condensed Consolidated Statements of Stockholders' HTML 58K
Equity
17: R7 Basis of Presentation HTML 20K
18: R8 Liquidity HTML 20K
19: R9 Property, Plant and Equipment HTML 52K
20: R10 Common Stock HTML 26K
21: R11 Stock-Based Compensation HTML 101K
22: R12 Earnings Per Share HTML 17K
23: R13 Commitments and Contingencies HTML 18K
24: R14 Leases HTML 80K
25: R15 Basis of Presentation (Policies) HTML 18K
26: R16 Property, Plant and Equipment (Tables) HTML 49K
27: R17 Stock-Based Compensation (Tables) HTML 99K
28: R18 Leases (Tables) HTML 83K
29: R19 Liquidity (Details) HTML 28K
30: R20 PROPERTY, PLANT AND EQUIPMENT - Net Book Value of HTML 33K
Property, Plant and Equipment (Details)
31: R21 PROPERTY, PLANT AND EQUIPMENT - Construction in HTML 20K
Progress & Impairment of Property, Plant and
Equipment (Details)
32: R22 COMMON STOCK - Common Stock Issued, Net of HTML 44K
Issuance Costs (Details)
33: R23 STOCK-BASED COMPENSATION - Narrative (Details) HTML 50K
34: R24 STOCK-BASED COMPENSATION - Summary of Stock HTML 33K
Options Outstanding (Details)
35: R25 STOCK-BASED COMPENSATION - Summary of Stock HTML 36K
Options Outstanding and Exercisable by Stock
Option Plan (Details)
36: R26 STOCK-BASED COMPENSATION - Summary of RSU Activity HTML 36K
(Details)
37: R27 Earnings Per Share (Details) HTML 16K
38: R28 LEASES - Narrative (Details) HTML 64K
39: R29 LEASES - Maturities of lease liabilities (Details) HTML 26K
42: XML IDEA XML File -- Filing Summary XML 70K
40: XML XBRL Instance -- wwr-20220630x10q_htm XML 847K
41: EXCEL IDEA Workbook of Financial Reports XLSX 62K
7: EX-101.CAL XBRL Calculations -- wwr-20220630_cal XML 81K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM i 10-Q
i ☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended i June 30, 2022
Or
i ☐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 i 001-33404
i WESTWATER RESOURCES, INC.
(Exact Name of Registrant as Specified in Its Charter)
i Delaware | | i 75-2212772 |
(State of Incorporation) | | (I.R.S. Employer Identification No.) |
i 6950 S. Potomac Street, Suite 300, i Centennial, i Colorado i 80112
(Address of Principal Executive Offices, Including Zip Code)
( i 303) i 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 |
i Common Stock, $0.001 par value | | i WWR | | i NYSE American |
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. i 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). i 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 ☐ |
| | |
i Non-accelerated Filer ☒ | | Smaller reporting company i ☒ |
| | |
| | Emerging growth company i ☐ |
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 i ☐ 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 | | i 47,218,702 as of August 10, 2022 |
WESTWATER RESOURCES, INC.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 17 |
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 22 |
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22 | |
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22 | |
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 22 |
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24 |
7
2
DEFINITIONS
When used in this Form 10-Q, the following terms have the meaning indicated.
Term | Meaning |
Alabama Graphite | Alabama Graphite Company, Inc., an Alabama corporation and wholly owned subsidiary of Westwater Resources |
Annual Report | Westwater Resources, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021. |
AGP | Alabama Graphite Products, LLC, an Alabama limited liability company and wholly-owned subsidiary of Westwater Resources. |
ATM Offering Agreement | Controlled Equity Offering Sale Agreement between Westwater Resources and Cantor Fitzgerald & Co. dated April 14, 2017. |
Cantor | Cantor Fitzgerald & Co. |
Coosa Graphite Deposit | The Company’s graphite mineral deposit located near Rockford, Alabama. |
EU Critical Raw Minerals List | The list of raw materials that are crucial to Europe’s economy published by the European Commission. |
Inducement Plan | The Employment Inducement Incentive Award Plan adopted in compliance with NYSE Listing Company Manual Rule 303A.08 and NYSE American Company Guide 711. The Inducement Plan provides for the grant of equity-based awards, including restricted stock units, restricted stock, performance shares and performance units, and its terms are substantially similar to the Company’s 2013 Omnibus Incentive Plan. |
Kellyton Graphite Plant | The Company’s planned battery-grade graphite processing facility near Kellyton, Alabama. |
graphite | A naturally occurring carbon material with electrical properties that enhance the performance of electrical storage batteries, listed on the US Critical Minerals List as well as the EU Critical Raw Materials List. |
Gross acres | Total acreage of land under which we have mineral rights. May include unleased fractional ownership. |
Lincoln Park | Lincoln Park Capital Fund, LLC |
U.S. Critical Minerals List | The list of critical minerals that are crucial to the United States of America economy published by the Department of Interior. |
vanadium | A rare-earth metal used as a strengthening alloy in steelmaking, and in certain types of batteries, listed on the US Critical Minerals List. |
Westwater Resources | Westwater Resources, Inc. |
2020 Lincoln Park PA | Purchase Agreement dated as of December 4, 2020 between Westwater Resources and Lincoln Park Capital Fund, LLC |
USE OF NAMES
In this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms “we”, “us”, “our”, “WWR”, “Westwater”, “Westwater Resources”, “Corporation”, or the “Company” refer to Westwater Resources, Inc. and its subsidiaries.
3
CURRENCY
The accounts of the Company are maintained in U.S. dollars. All dollar amounts referenced in this Quarterly Report on Form 10-Q and the consolidated financial statements are stated in U.S. dollars.
4
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WESTWATER RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(expressed in thousands of dollars, except share amounts)
(unaudited)
| | | | | | |
|
| June 30, |
| |||
| | 2022 | | 2021 | ||
ASSETS |
| |
|
| |
|
| | | | | | |
Current Assets: |
| |
|
| |
|
Cash and cash equivalents |
| $ | i 109,038 |
| $ | i 115,293 |
Prepaid and other current assets |
|
| i 724 |
|
| i 320 |
Total Current Assets |
|
| i 109,762 |
|
| i 115,613 |
| | | | | | |
Property, plant and equipment, at cost: |
|
|
|
|
|
|
Property, plant and equipment |
|
| i 43,845 |
|
| i 14,593 |
Less: Accumulated depreciation |
|
| ( i 169) |
|
| ( i 114) |
Net property, plant and equipment |
|
| i 43,676 |
|
| i 14,479 |
Operating lease right-of-use assets |
|
| i 157 |
|
| i 226 |
Other long-term assets |
|
| — |
|
| i 2,665 |
Total Assets |
| $ | i 153,595 |
| $ | i 132,983 |
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
| | | | | | |
Current Liabilities: |
|
|
|
|
|
|
Accounts payable |
| $ | i 4,928 |
| $ | i 3,043 |
Accrued liabilities |
|
| i 2,012 |
|
| i 2,129 |
Operating lease liability - current |
|
| i 152 |
|
| i 152 |
Total Current Liabilities |
|
| i 7,092 |
|
| i 5,324 |
| | | | | | |
Operating lease liability, net of current |
|
| i 12 |
|
| i 83 |
Other long-term liabilities |
|
| i 1,378 |
|
| i 1,378 |
Total Liabilities |
|
| i 8,482 |
|
| i 6,785 |
| | | | | | |
Commitments and Contingencies (see note 7) |
|
| | | | |
| | | | | | |
Stockholders’ Equity: |
|
|
|
|
|
|
Common stock, i i 100,000,000 / shares authorized, $ i i .001 / par value; |
|
|
|
|
|
|
Issued shares - i 47,218,863 and i 35,279,724 respectively |
|
|
|
|
|
|
Outstanding shares - i 47,218,702 and i 35,279,563 respectively |
|
| i 47 |
|
| i 35 |
Paid-in capital |
|
| i 493,445 |
|
| i 468,578 |
Accumulated deficit |
|
| ( i 348,121) |
|
| ( i 342,157) |
Less: Treasury stock ( i i 161 / shares), at cost |
|
| ( i 258) |
|
| ( i 258) |
Total Stockholders’ Equity |
|
| i 145,113 |
|
| i 126,198 |
| | | | | | |
Total Liabilities and Stockholders’ Equity |
| $ | i 153,595 |
| $ | i 132,983 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
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 | | For the Six Months Ended | ||||||||
| | June 30, | | |||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Operating Expenses: |
| | | | | | | | | | | |
Product development expenses | | $ | ( i 367) | | $ | ( i 2,109) | | $ | ( i 600) | | $ | ( i 3,932) |
Exploration expenses | | | ( i 201) | | | ( i 384) | | | ( i 409) | | | ( i 529) |
General and administrative expenses | | | ( i 2,644) | | | ( i 2,198) | | | ( i 4,855) | | | ( i 4,282) |
Arbitration costs | | | — | | | ( i 13) | | | ( i 142) | | | ( i 1,545) |
Depreciation and amortization | | | ( i 34) | | | ( i 1) | | | ( i 56) | | | ( i 2) |
Total operating expenses | | | ( i 3,246) | | | ( i 4,705) | | | ( i 6,062) | | | ( i 10,290) |
| | | | | | | | | | | | |
Non-Operating Income: | |
|
|
|
| | |
|
|
|
|
|
Unrealized gain on equity securities | |
| — |
|
| i 1,218 | |
| — |
|
| i 1,411 |
Other income | | | i 91 | | | i 7 | | | i 98 | | | i 9 |
Total other income | |
| i 91 |
|
| i 1,225 | |
| i 98 |
|
| i 1,420 |
| |
| |
|
|
| |
| |
|
|
|
Net Loss | | $ | ( i 3,155) |
| $ | ( i 3,480) | | $ | ( i 5,964) |
| $ | ( i 8,870) |
| |
|
|
|
|
| |
|
|
|
|
|
BASIC AND DILUTED LOSS PER SHARE | | $ | ( i 0.07) | | $ | ( i 0.11) | | $ | ( i 0.14) | | $ | ( i 0.29) |
| | | | | | | | | | | | |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | |
| i 47,083,720 |
|
| i 32,431,919 | |
| i 41,949,062 |
|
| i 30,525,520 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
WESTWATER RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in thousands of dollars)
(unaudited)
| | | | | | |
| | For the Six Months Ended June 30, | ||||
|
| 2022 |
| 2021 | ||
Operating Activities: |
| |
|
| |
|
Net loss |
| $ | ( i 5,964) | | $ | ( i 8,870) |
Reconciliation of net loss to cash used in operations: |
|
| | |
| |
Non-cash lease expense |
|
| ( i 2) | |
| — |
Depreciation and amortization |
|
| i 56 | |
| i 2 |
Stock compensation expense |
|
| i 370 | |
| i 295 |
Unrealized gain on equity securities | | | — | | | ( i 1,411) |
Effect of changes in operating working capital items: | | | | | | |
Increase in prepaids and other assets |
|
| ( i 404) | |
| ( i 74) |
Increase in payables and accrued liabilities |
|
| i 33 | |
| i 925 |
Net Cash Used In Operating Activities |
|
| ( i 5,911) | |
| ( i 9,133) |
| | | | | | |
Cash Flows From Investing Activities: |
|
|
| |
|
|
Proceeds from PPP loan escrow |
|
| — | |
| i 333 |
Building deposit | | | — | | | ( i 100) |
Capital expenditures |
|
| ( i 24,853) | |
| — |
Net Cash (Used In)/Provided By Investing Activities |
|
| ( i 24,853) | |
| i 233 |
| | | | | | |
Cash Flows From Financing Activities: |
|
|
| |
|
|
Issuance of common stock, net |
|
| i 24,541 | |
| i 77,863 |
Payment of minimum withholding taxes on net share settlements of equity awards |
|
| ( i 32) | |
| ( i 150) |
Net Cash Provided By Financing Activities |
|
| i 24,509 | |
| i 77,713 |
|
|
|
| |
|
|
Net (decrease) increase in Cash, Cash Equivalents and Restricted Cash |
|
| ( i 6,255) | |
| i 68,813 |
Cash, Cash Equivalents and Restricted Cash, Beginning of Period |
|
| i 115,293 | |
| i 50,325 |
Cash, Cash Equivalents and Restricted Cash, End of Period |
| $ | i 109,038 | | $ | i 119,138 |
| | | | | | |
Supplemental Non-Cash Information with Respect to Investing and Financing Activities: |
|
|
| |
|
|
Accrued capital expenditures (at end of period) | | | i 2,516 | | | — |
Total Non-Cash Investing and Financing Activities for the Period |
| $ | i 2,516 | | $ | — |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
WESTWATER RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(expressed in thousands of dollars, except share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | |
Six months ended June 30, 2022 | | Common Stock | | Paid-In | | Accumulated | | Treasury | | | | ||||||
| | Shares | | Amount | | Capital | | Deficit | | Stock | | Total | |||||
Balances, January 1, 2022 |
| i 35,279,724 | | $ | i 35 | | $ | i 468,578 | | $ | ( i 342,157) | | $ | ( i 258) | | $ | i 126,198 |
Net loss |
| — | |
| — | | | — | |
| ( i 5,964) | |
| — | |
| ( i 5,964) |
Common stock issued, net of issuance costs |
| i 11,822,366 | |
| i 12 | | | i 24,529 | |
| — | |
| — | |
| i 24,541 |
Stock compensation expense and related share issuances, net of shares withheld for payment of taxes |
| i 116,773 | |
| — | | | i 370 | |
| — | |
| — | |
| i 370 |
Minimum withholding taxes on net share settlements of equity awards | | — | | | — | | | ( i 32) | | | — | | | — | | | ( i 32) |
Balances, June 30, 2022 |
| i 47,218,863 | | $ | i 47 | | $ | i 493,445 | | $ | ( i 348,121) | | $ | ( i 258) | | $ | i 145,113 |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Three months ended June 30, 2022 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Balances, March 31, 2022 | | i 42,817,584 | | $ | i 43 | | $ | i 484,160 | | $ | ( i 344,966) | | $ | ( i 258) | | $ | i 138,979 |
Net loss |
| — | | | — | |
| — | |
| ( i 3,155) | |
| — | |
| ( i 3,155) |
Common stock issued, net of issuance costs |
| i 4,376,279 | |
| i 4 | |
| i 8,981 | |
| — | |
| — | |
| i 8,985 |
Stock compensation expense and related share issuances, net of shares withheld for payment of taxes |
| i 25,000 | |
| — | |
| i 304 | |
| — | |
| — | |
| i 304 |
Balances, June 30, 2022 |
| i 47,218,863 | | $ | i 47 | | $ | i 493,445 | | $ | ( i 348,121) | | $ | ( i 258) | | $ | i 145,113 |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Six months ended June 30, 2021 | | Common Stock | | Paid-In | | Accumulated | | Treasury | | | | ||||||
|
| Shares |
| Amount |
| Capital |
| Deficit |
| Stock |
| Total | |||||
Balances, January 1, 2021 |
| i 19,172,020 | | $ | i 19 | | $ | i 383,723 | | $ | ( i 326,013) | | $ | ( i 258) | | $ | i 57,471 |
Net loss |
| — | |
| — | |
| — | |
| ( i 8,870) | |
| — | |
| ( i 8,870) |
Common stock issued, net of issuance costs |
| i 14,307,270 | |
| i 14 | |
| i 77,849 | |
| — | |
| — | |
| i 77,863 |
Stock compensation expense and related share issuances, net of shares withheld for payment of taxes | | i 57,186 | |
| — | |
| i 295 | | | — | | | — | | | i 295 |
Minimum withholding taxes on net share settlements of equity awards |
| — | |
| — | |
| ( i 150) | |
| — | |
| — | |
| ( i 150) |
Balances, June 30, 2021 |
| i 33,536,476 | | $ | i 33 | | $ | i 461,717 | | $ | ( i 334,883) | | $ | ( i 258) | | $ | i 126,609 |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Three months ended June 30, 2021 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Balances, March 31, 2021 | | i 32,336,476 | | $ | i 32 | | $ | i 455,854 | | $ | ( i 331,403) | | $ | ( i 258) | | $ | i 124,225 |
Net loss |
| — | |
| — | |
| — | |
| ( i 3,480) | |
| — | |
| ( i 3,480) |
Common stock issued, net of issuance costs |
| i 1,200,000 | |
| i 1 | | | i 5,659 | |
| — | |
| — | |
| i 5,660 |
Stock compensation expense and related share issuances, net of shares withheld for the payment of taxes |
| — | |
| — | |
| i 204 | |
| — | |
| — | |
| i 204 |
Balances, June 30, 2021 |
| i 33,536,476 | | $ | i 33 | | $ | i 461,717 | | $ | ( i 334,883) | | $ | ( i 258) | | $ | i 126,609 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
i1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements for Westwater 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 Annual Report. 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 six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for any other period including the full year ending December 31, 2022.
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.
iRecently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments”. ASU 2016-13 will change how companies account for credit losses for most financial assets and certain other instruments. For trade receivables, loans and held-to-maturity debt securities, companies will be required to estimate lifetime expected credit losses and recognize an allowance against the related instruments. For available for sale debt securities, companies will be required to recognize an allowance for credit losses rather than reducing the carrying value of the asset. The adoption of this update, if applicable, will result in earlier recognition of losses and impairments. ASU 2016-13 will be effective for interim and annual periods beginning after December 15, 2022.
In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to ASC 326, Financial Instruments – Credit Losses.” ASU 2016-13 introduced an expected credit loss methodology for the impairment of financial assets measured at amortized cost basis. That methodology replaces the probable, incurred loss model for those assets. ASU 2018-19 is the final version of Proposed Accounting Standards Update 2018-270, which has been deleted. Additionally, the amendments clarify that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842, Leases. ASU 2018-19 will be effective for interim and annual periods beginning after December 15, 2022.
The Company is currently evaluating ASU 2016-13 and ASU 2018-19 for the potential impact of adopting this guidance on its financial reporting.
/
i2. LIQUIDITY
The Company last recorded revenues from operations in 2009. Since 2009, the Company has relied on equity financings, debt financings and asset sales to fund its operations. The Company expects to rely on debt and equity financings to fund its operations for the foreseeable future.
During the first six months of 2022, the Company continued construction activities related to the Kellyton Graphite Plant. The Company also continued its exploration project to investigate the size and extent of both graphite and vanadium mineral concentrations at the Coosa Graphite Deposit. Drilling was completed in April 2022 and the Company expects to complete a resource model by the end of the year.
9
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
On June 30, 2022, the Company’s cash balance was approximately $ i 109.0 million. During the six months ended June 30, 2022, the Company sold i 11.8 million shares of common stock for net proceeds of $ i 24.5 million pursuant to the ATM Offering Agreement (see Note 4).
Management believes the Company’s current cash balance is sufficient to fund its planned non-discretionary expenditures through the third quarter of 2023. The Company has in place the ATM Offering Agreement and the 2020 Lincoln Park PA, which could be used to support construction of Phase I of the Kellyton Graphite Plant. While the Company has been successful in the past in raising funds through equity and debt financings as well as through the sale of non-core assets, no assurance can be given that additional financing will be available in amounts sufficient to meet its needs, or on terms acceptable to the Company. Stock price volatility and uncertain economic conditions caused in part by the COVID-19 pandemic and the emergence of variant strains of the virus could significantly impact the Company’s ability to raise funds through equity financing. Market conditions, including but not limited to, inflation, labor shortages and supply chain disruptions could also adversely impact the planned cost and the construction and commissioning timeline of Phase I of the Kellyton Graphite Plant.
Along with evaluating the continued use of the ATM Offering Agreement and the 2020 Lincoln Park PA, the Company is considering other forms of project financing to fund the construction of the Kellyton Graphite Plant, including both Phase I and Phase II. The alternative sources of project financing could include, but are not limited to, project debt, convertible debt, government loans or grants, or pursuing a partnership or joint venture. In the event funds are not available under the Company’s financing facilities or alternative financing arrangements to fund the construction of Phase I of the Kellyton Graphite Plant, the Company expects to be able to fund its non-discretionary expenditures, however, the Company may be required to change its planned business development strategies.
i3. PROPERTY, PLANT AND EQUIPMENT
i
| | | | | | | | | |
| | Net Book Value of Property Plant and Equipment at June 30, 2022 | |||||||
(thousands of dollars) |
| Alabama |
| Corporate |
| Total | |||
Mineral rights and properties | | $ | i 8,972 | | $ | — | | $ | i 8,972 |
Other property, plant and equipment | |
| i 5,686 | |
| i 27 | |
| i 5,713 |
Construction in progress | | | i 28,991 | | | — | | | i 28,991 |
Total | | $ | i 43,649 | | $ | i 27 | | $ | i 43,676 |
| | | | | | | | | |
| | Net Book Value of Property Plant and Equipment at December 31, 2021 | |||||||
(thousands of dollars) |
| Alabama |
| Corporate |
| Total | |||
Mineral rights and properties | | $ | i 8,972 | | $ | — | | $ | i 8,972 |
Other property, plant and equipment | |
| i 4,462 | |
| i 28 | |
| i 4,490 |
Construction in progress | | | i 1,017 | | | — | | | i 1,017 |
Total | | $ | i 14,451 | | $ | i 28 | | $ | i 14,479 |
Construction in Progress
Construction in progress represents assets that are not ready for service or are in the construction stage. Assets are depreciated based on the estimated useful life of the asset once it is placed in service.
During the first quarter of 2022, the manufacturing of certain equipment commenced, for which the Company made cash deposits of $ i 2.7 million as of December 31, 2021. As such, the deposits as of December 31, 2021 are now reflected as construction in progress, and will continue to be included in construction in progress until such assets are placed into service.
/10
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Impairment of Property, Plant and Equipment
The Company reviews and evaluates its long-lived assets for impairment on an annual basis or more frequently when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. For the six months ended June 30, 2022, no events or changes in circumstance are believed to have impacted recoverability of the Company’s long-lived assets. Accordingly, it was determined that i no interim impairment was necessary.
i4. COMMON STOCK
Common Stock Issued, Net of Issuance Costs
December 2020 Purchase Agreement with Lincoln Park Capital Fund, LLC
On December 4, 2020, the Company entered into the 2020 Lincoln Park PA with Lincoln Park to place up to either $ i 100.0 million or i 16.0 million shares in the aggregate of the Company's common stock on an ongoing basis over a term of i 36 months. The Company controls the timing and amount of any sales to Lincoln Park, and Lincoln Park is obligated to make purchases in accordance with the 2020 Lincoln Park 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 agreement may be terminated by the Company at any time, in its sole discretion, without any additional cost or penalty.
The 2020 Lincoln Park PA specifically provides that the Company may not issue or sell any shares of its common stock under the agreement if such issuance or sale would breach any applicable rules of the NYSE American Stock Exchange (“NYSE American”). In particular, NYSE American General Rule 713(a) provides that the Company may not issue or sell more than i 19.99% of the number of shares of the Company’s common stock that were outstanding immediately prior to the execution of the 2020 Lincoln Park PA unless (i) shareholder approval is obtained or (ii) the average price of all applicable sales of common stock to Lincoln Park under the 2020 Lincoln Park PA, equals or exceeds $ i 6.15. The Company held its 2021 Annual Shareholders Meeting on May 21, 2021 and obtained shareholder approval for the issuance of more than i 19.99% of the shares of the Company’s common stock outstanding under the 2020 Lincoln Park 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 2020 Lincoln Park PA if it would result in Lincoln Park beneficially owning more than i 9.99% of its common stock at any one point in time.
Since inception, the Company has sold 6.3 million shares of common stock to Lincoln Park pursuant to the 2020 Lincoln Park PA.
During the three and six months ended June 30, 2022, the Company did i i no / t sell any shares of common stock pursuant to the 2020 Lincoln Park PA compared to i 1.2 million and i 5.0 million shares of common stock sold for net proceeds of $ i 5.7 million and $ i 30.6 million, respectfully for the three and six months ended June 30, 2021.
Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co.
On April 14, 2017, the Company entered into the ATM Offering Agreement with Cantor acting as the sales agent. Under the ATM Offering Agreement, the Company may from time to time sell shares of its common stock in “at-the-market” offerings. The Company pays Cantor a commission of up to i 2.5% of the gross proceeds from the sale of any shares pursuant to the ATM Offering Agreement.
/11
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
During the three and six months ended June 30, 2022, the Company sold i 4.4 million and 11.8 million shares of common stock for net proceeds of $ i 9.0 million and $24.5 million, respectfully, pursuant to the ATM Offering Agreement. The Company did not sell any shares of common stock pursuant to the ATM Offering Agreement for the three months ended June 30, 2021, but sold i 9.3 million shares of common stock for net proceeds of $ i 47.3 million pursuant to the ATM Offering Agreement for the six months ended June 30, 2021.
As of June 30, 2022, the Company has received total gross proceeds of $ i 27.6 million since inception under the ATM Offering Agreement, pursuant to a prospectus supplement for a total of $ i 50.0 million in aggregate sales, filed on August 20, 2021, and in accordance with Rule 424(b)(5) as a takedown off the Company’s shelf registration statement on Form S-3, which was declared effective by the Commission on July 8, 2021.
i5. STOCK-BASED COMPENSATION
Stock-based compensation awards consist of stock options, restricted stock units and bonus shares issued under the Company’s equity incentive plans which include the 2013 Omnibus Incentive Plan (the “2013 Plan”) and the Amended and Restated 2004 Directors’ Stock Option and Restricted Stock Plan (the “2004 Directors’ Plan”). Upon approval of the 2013 Plan by the Company’s stockholders on June 4, 2013, the Company’s authority to grant new awards under all plans other than the 2013 Plan was terminated. On July 18, 2017, April 18, 2019, April 28, 2020, and May 21, 2021, the Company’s stockholders approved amendments to the 2013 Plan to increase the authorized number of shares of common stock available and reserved for issuance under the 2013 Plan by i 20,000, i 66,000, i 350,000, and i 1,500,000 shares, respectively, and in 2017 re-approved the material terms of the performance goals under the 2013 Plan. Under the 2013 Plan, the Company may grant awards of stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), unrestricted stock, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards and cash bonus awards to eligible persons. 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 i 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 June 30, 2022, i 132,626 shares were available for future issuances under the 2013 Plan. For three and six months ended June 30, 2022, the Company recorded stock-based compensation expense of $ i 0.3 million and $ i 0.4 million, respectively, compared to $ i 0.2 million and $ i 0.3 million, respectively in the same periods in 2021. Stock compensation expense is recorded in general and administrative expenses.
In addition to the plans above, on May 9, 2022, the Board of Directors adopted the Inducement Plan and on May 13, 2022, the Company filed the Form S-8 Registration Statement to register an aggregate of i 250,000 shares of the Company’s common stock. These shares may be issued pursuant to the Inducement Plan as equity awards to be granted for the sole purpose of recruiting and hiring new employees. i No shares have been issued as of June 30, 2022.
/12
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Stock Options
Stock options are valued using the Black-Scholes option pricing model on the date of grant. The Company accounts for forfeitures upon occurrence.
The following tables summarize stock options outstanding and changes for the six months ended June 30, 2022 and 2021:
i
| | | | | | | | | | |
| | | ||||||||
|
| |
| Weighted |
| |
| Weighted | ||
| | Number of | | Average | | Number of | | Average | ||
| | Stock | | Exercise | | Stock | | Exercise | ||
| | Options | | Price | | Options | | Price | ||
Stock options outstanding at beginning of period |
| i 277,576 | | $ | i 6.18 |
| i 185,054 | | $ | i 7.99 |
Granted |
| i 78,720 | |
| i 1.09 |
| i 94,522 | |
| i 3.91 |
Expired |
| i — | |
| i — |
| ( i 2,000) | |
| i 73.54 |
Stock options outstanding at end of period |
| i 356,296 | | | i 5.06 |
| i 277,576 | | | i 6.18 |
Stock options exercisable at end of period |
| i 277,576 | | $ | i 6.18 |
| i 183,054 | | $ | i 7.35 |
/The weighted average remaining term for stock options outstanding as of June 30, 2022, is approximately i 8.4 years.
The following table summarizes stock options outstanding and exercisable by stock option plan at June 30, 2022:
i
| | | | | | | | | | |
| | Outstanding Stock Options | | Exercisable Stock Options | ||||||
|
| Number of |
| Weighted |
| Number of |
| Weighted | ||
| | Outstanding | | Average | | Stock Options | | Average | ||
Stock Option Plan | | Stock Options | | Exercise Price | | Exercisable | | Exercise Price | ||
2004 Plan |
| i 92 | | $ | i 1,638.00 |
| i 92 | | $ | i 1,638.00 |
2004 Directors’ Plan |
| i 3 | |
| i 10,380.00 |
| i 3 | |
| i 10,380.00 |
2013 Plan |
| i 356,201 | |
| i 4.55 |
| i 277,481 | |
| i 5.53 |
|
| i 356,296 | | $ | i 5.06 |
| i 277,576 | | $ | i 6.18 |
As of June 30, 2022, the Company had less than $ i 0.1 million of unrecognized compensation costs related to non-vested stock options that will be recognized over a period of approximately i 1 year.
13
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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 Committee 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 six months ended June 30, 2022 and 2021:
i
| | | | | | | | | | |
| | June 30, | | |||||||
| | 2022 | | 2021 | ||||||
|
| |
| Weighted- |
| |
| Weighted- | ||
| | | | Average | | | | Average | ||
| | Number of | | Grant Date | | Number of | | Grant Date | ||
| | RSUs | | Fair Value | | RSUs | | Fair Value | ||
Unvested RSUs at beginning of period |
| i 385,004 | | $ | i 3.18 |
| i 236,403 | | $ | i 2.10 |
Granted |
| i 1,148,003 | |
| i 1.16 |
| i 184,290 | |
| i 4.13 |
Forfeited/Expired |
| ( i 122,692) | |
| i 3.09 |
| i — | |
| i — |
Vested |
| ( i 130,793) | |
| i 2.61 |
| ( i 78,801) | |
| i 2.10 |
Unvested RSUs at end of period |
| i 1,279,522 | | $ | i 1.43 |
| i 341,892 | | $ | i 3.08 |
As of June 30, 2022, the Company had $ i 1.1 million of unrecognized compensation costs related to non-vested restricted stock units that will be recognized over a period of approximately i 2.5 years.
i6. 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 i i 1,635,818 / were excluded from the calculation of earnings per share because the effect on the basic income per share would be anti-dilutive, as the Company had a net loss for the three and six months ended June 30, 2022.
/
i7. COMMITMENTS AND CONTINGENCIES
Future operations on the Company’s properties are subject to federal and state regulations for the protection of the environment, including air and water quality. The Company evaluates the status of current environmental laws and their potential impact on current operating costs and accrual for future costs. The Company believes its operations are materially compliant with current environmental regulations.
At any given time, the Company may enter into negotiations to settle outstanding legal proceedings and any resulting accruals will be estimated based on the relevant facts and circumstances applicable at that time. We do not expect that such settlements will, individually or in the aggregate, have a material effect on our financial position, results of operations or cash flows.
i8. LEASES
The Company’s lease portfolio consists of operating leases for corporate offices, storage space and equipment. The leases have remaining lease terms of i 0.25 years to i 1.1 years, one of which includes an option to extend the corporate office lease for i 3 years. Under our corporate office lease, we are required to reimburse the lessor each month for common use expenses such as maintenance and security services. i Because these amounts are variable from year to year and not
/14
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
specifically set in the lease terms, they are not included in the measurement of the right-of-use asset and related lease liability, but rather expensed in the period incurred.
The Company is party to several leases that have terms that are less than a year in length. These include leases for land used in exploration activities, office equipment, machinery, office space, storage and other. The Company has elected the short-term lease exemption allowed under the new leasing standards, whereby leases with initial terms of i one year or less are not capitalized and instead expensed on a straight-line basis over the lease term. In addition, the Company holds several leases related to mineral exploration and production to which it has not applied the new leasing standard. Leases to explore or use minerals and similar nonregenerative resources are specifically excluded by ASC 842, “Leases.”
The right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities were recognized at the commencement date of the lease based on the present value of lease payments over the lease term using a discount rate of i 9.5%. This rate is the Company’s estimated incremental borrowing rate at the lease commencement date.
The components of lease expense are as follows:
i
| | | | | | |
|
| For the Six Months Ended | ||||
| | June 30, | ||||
(thousands of dollars) | | 2022 | | 2021 | ||
Operating lease cost | | $ | i 77 | | $ | i 77 |
Supplemental cash flow information related to the Company’s operating leases is as follows:
i
| | | | | | |
| | For the Six Months Ended | ||||
| | June 30, | ||||
(thousands of dollars) |
| 2022 | | 2021 | ||
Cash paid for amounts included in lease liabilities: |
| |
| | |
|
Operating cash flows from operating leases | | $ | i 79 | | $ | i 77 |
| | | | | | |
Right-of-use assets obtained in exchange for lease obligations: | |
|
| |
|
|
Operating leases | | $ | i 157 | | $ | i 291 |
Supplemental balance sheet information related to the Company’s operating leases is as follows:
i
| | | | | | |
|
| June 30, | | December 31, | ||
(thousands of dollars) | | 2022 | | 2021 | ||
Operating Leases |
| |
| | |
|
Operating lease right-of-use assets | | $ | i 157 | | $ | i 226 |
| | | | | | |
Current portion of lease liabilities | | | i 152 | | | i 152 |
Operating lease liabilities – long term portion | |
| i 12 | |
| i 83 |
Total operating lease liabilities | | $ | i 164 | | $ | i 235 |
15
WESTWATER RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Weighted-average remaining lease term and discount rate for the Company’s operating leases are as follows:
i
| | | | | | | |
| | | For the Six Months Ended | ||||
| | | |||||
| | | 2022 | | 2021 | ||
Weighted Average Remaining Lease Term (in years) | |
| i 1.1 | | | i 2.0 | |
| | | | | | | |
Discount Rate | |
| i 9.5 | % | | i 9.5 | % |
Maturities of lease liabilities for the Company’s operating leases are as follows:
i
| | | |
Lease payments by year |
| June 30, | |
(in thousands) | | 2022 | |
2022 (remainder of year) | | $ | i 79 |
2023 | | | i 92 |
2024 | |
| — |
Total lease payments | |
| i 171 |
Less imputed interest | |
| ( i 7) |
Total | | $ | i 164 |
As of June 30, 2022, the Company has $ i 0.2 million in right-of-use assets and $ i 0.2 million in related lease liabilities ($ i 0.2 million of which is current). The most significant operating lease is for the Company’s corporate office in Centennial, Colorado, with $ i 0.2 million remaining in undiscounted cash payments through the end of the lease term in 2023. The total undiscounted cash payments remaining on operating leases through the end of their respective terms is $ i 0.2 million.
16
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 Westwater for the three and six months ended June 30, 2022, has been prepared based on information available to us as of August 10, 2022. This discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included herewith and the audited Consolidated Financial Statements of Westwater for the period ended December 31, 2021 and the related notes thereto filed with our Annual Report, 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” herein.
INTRODUCTION
Westwater Resources, Inc., originally incorporated in 1977, is an almost 45-year-old company focused on developing battery-grade natural graphite materials after its acquisition of Alabama Graphite in April 2018. Alabama Graphite holds mineral rights to explore and potentially mine the Coosa Graphite Deposit. During the first half of 2022, AGP continued construction activities related to Phase I of the Kellyton Graphite Plant and in April of 2022 Alabama Graphite completed the initial drilling stage of its exploration program to further investigate the size and extent of both graphite and vanadium mineral concentrations at the Coosa Graphite Deposit. The Coosa Graphite Deposit is located near Rockford, Alabama at 32 ° 54’ 30” North and 86 ° 24’ 00” West.
RECENT DEVELOPMENTS
Kellyton Graphite Plant – Construction Update
During the second quarter of 2022, the Company continued construction activities related to Phase I of its Kellyton Graphite Plant, including earthwork and site grading, which was completed in July 2022. Construction activity during the second quarter also included the mobilization of the general contractor, receipt of the first components of long-lead equipment, and beginning underground utilities, foundations, and the manufacturing of plant buildings.
In April 2022, the Company completed the buildout of its Kellyton administrative offices, hosted a groundbreaking ceremony at the site of the Kellyton Graphite Plant, and selected a general contractor. In June, the Company received its air permit from the Alabama Department of Environmental Management and consequently has all necessary permits to complete the construction of Phase I of the Kellyton Graphite Plant. The Company also applied for its wastewater disposal permit that is needed before commencing operations. The Company has estimated the cost to construct and commission Phase I of the Kellyton Graphite Plant to be approximately $202 million, of which approximately $30.0 million has been incurred to date. Subject to global supply chain disruptions and challenges, and its ability to raise the remaining capital necessary to complete Phase I of the Kellyton Graphite Plant, the Company is targeting to begin commissioning of Phase I by the end of the second quarter of 2023.
Coosa Graphite Deposit – Exploration Program
The Company began an exploration project in April 2021 to investigate the size and extent of both graphite and vanadium mineral concentrations at the Coosa Graphite Deposit. In April 2022, the Company completed the drilling activity related to this exploration program and expects to complete a resource model by the end of the year. The exploration program was conducted on approximately 4,000 acres of the approximately 41,900 acres to which Westwater holds mineral rights. In addition, as part of the resource model, vanadium mineralization is expected to be evaluated using extractive metallurgy techniques to ascertain the economic potential, if any. Subject to its own definitive feasibility study, the availability of financing, and regulatory approval, the Coosa Graphite Deposit and related mining operation is planned for start-up by the end of 2028.
17
Graphite and Vanadium as Critical Materials
Presently, the United States is almost 100% dependent on imports for battery-grade graphite, which is currently the primary anode material in the Lithium-ion batteries that power electric vehicles, smartphones, laptops, and store power generated from intermittent renewable energy sources. Westwater intends to process natural flake graphite into battery-grade graphite for all types of batteries including Lithium-ion batteries.
On March 31, 2022, President Biden invoked the Defense Production Act to encourage the domestic production of critical materials, including graphite, for advanced batteries for electric vehicles and clean energy storage.
On May 2, 2022, the U.S. Department of Energy (“DOE”) released Funding Opportunity Announcement (“FOA”) No. DE-FOA-0002678, entitled Bipartisan Infrastructure Law – Battery Materials Processing and Battery Manufacturing. The intent of this FOA is to ensure that the U.S. has a viable battery materials processing industry, to expand capabilities in advanced battery manufacturing, and to enhance domestic processing capacity of minerals, such as graphite, necessary for advanced batteries. Under this FOA, the DOE expects to provide approximately $3.1 billion to fund investments within the electric vehicle battery supply chain and increase domestic battery manufacturing. Westwater has engaged expert advisors to assist the Company in evaluating the FOA to determine the benefit, if any, to the Company and its shareholders, as well as monitor other DOE initiatives related to critical minerals. While the FOA has been issued, there can be no guarantee that Westwater will qualify or be able to obtain access to such funding.
Westwater has and will continue to support the efforts by the relevant United States governmental agencies to ensure that they remain aware of the importance of natural battery-grade graphite, its importance to the nation’s security, and how the Kellyton Graphite Plant and the Coosa Graphite Deposit fit into the critical minerals-equation.
Equity Financings
Capital Raises during three and six months ended June 30, 2022 and 2021
During the three and six months ended June 30, 2022, the Company sold 4.4 million and 11.8 million shares of common stock for net proceeds of $9.0 million and $24.5 million, respectfully, pursuant to the ATM Offering Agreement, resulting in a cash balance of approximately $109.0 million at June 30, 2022. The 4.4 million shares sold during the three months ended June 30, 2022, and the related net cash proceeds received occurred during the first week of April 2022.
See Note 4 to the financial statements for additional information.
Changes in the Executive Team
On June 20, 2022, the Board of Directors of Westwater accepted the decision of Jeffrey L. Vigil, currently serving as Chief Financial Officer and Vice President – Finance for Westwater, to retire effective August 26, 2022. As part of a thoughtful and planned succession strategy, on June 20, 2022, the Board of Directors elected Steven M. Cates, currently serving as Chief Accounting Officer and Controller for Westwater, as its new Chief Financial Officer and Vice President – Finance effective August 26, 2022.
RESULTS OF OPERATIONS
Summary
Our net loss for the three months ended June 30, 2022, was $3.2 million, or $0.07 per share, as compared with a net loss of $3.5 million, or $0.11 per share for the same period in 2021. The $0.3 million decrease in our net loss was due primarily to lower product development and exploration costs; offset partially by no unrealized gain on equity securities, which were sold in the fourth quarter of 2021 and increases in general and administrative expenses.
Our net loss for the six months ended June 30, 2022, was $6.0 million, or $0.14 per share, as compared with a net loss of $8.9 million, or $0.29 per share for the same period in 2021. The $2.9 million decrease in our net loss was due primarily to decreases in product development expenses, arbitration costs, and exploration expenses; offset partially by no
18
unrealized gain on equity securities, which were sold in the fourth quarter of 2021 and increases in general and administrative expenses.
Product Development Expenses
Product development expenses for the three and six months ended June 30, 2022, were $0.4 million and $0.6 million, a decrease of $1.7 million and $3.3 million, respectively compared to the same periods in 2021. Product development costs for the three and six months ended June 30, 2022, primarily relate to continued product development and product optimization costs. Product development costs in the comparable periods of 2021 were primarily comprised of expenses for our definitive feasibility study related to Phase I of the Kellyton Graphite Plant, which began in February 2021 and was completed in October 2021, and our graphite processing pilot program that was completed in 2021.
Arbitration Costs
During the three months ended June 30, 2022, the Company did not incur any arbitration costs compared to less than $0.1 million for the same period in 2021.
During the six months ended June 30, 2022, the Company incurred $0.1 million of arbitration costs compared to $1.5 million for the same period in 2021. The decrease in arbitration costs during the first half 2022 was due to lower legal fees related the Company’s request for Arbitration against the Republic of Turkey. During the first half of 2021 the Company incurred legal fees in preparation for the hearing on substantive issues, which was conducted during the week of September 13-17, 2021. For further reference, see Part I, Item 3 of the Annual Report.
General and Administrative Expenses
General and administrative expenses for the three and six months ended June 30, 2022, increased by $0.4 million and $0.6 million, respectively compared to the same periods in 2021. The increases are due primarily to increased personnel costs as the Company continues to build its Kellyton team.
Exploration Expenses
Exploration expenses for the three and six months ended June 30, 2022, decreased by $0.2 million and $0.1 million compared to the same periods in 2021. The decrease for the three and six month periods of 2022 compared to the same periods in 2021 is due primarily to the Company completing the drilling stage of its exploration program in April 2022.
FINANCIAL POSITION
Operating Activities
Net cash used in operating activities of $5.9 million for the six months ended June 30, 2022, represents a decrease of $3.2 million compared to the same period in 2021. The decrease in cash used in operating activities was due primarily to decreases in product development expenses and arbitration costs as discussed in Results of Operations.
Investing Activities
Net cash used in investing activities increased by $25.1 million for the six months ended June 30, 2022, as compared to the same period in 2021. The increase was a result of capital expenditures related to the construction of Phase I of the Kellyton Graphite Plant, which began construction in December 2021. The capital expenditures in the first six months of 2022 primarily related to earthwork and site grading, which was completed in July 2022, and progress payments related to long-lead equipment items, detailed design engineering and project management activities.
19
Financing Activities
Net cash provided by financing activities was $24.5 million for the six months ended June 30, 2022, due to sales of common stock through the Company’s ATM Offering Agreement. Net cash provided by financing activities for the same period in 2021 was $77.7 million. The $53.2 million decrease was due to lower sales activity under the 2020 Lincoln Park PA and the ATM Offering Agreement during the first six months of 2022 compared to the same period in 2021. Of the shares sold during the first half of 2022, 4.4 million shares were sold in the first week of April 2022 for net proceeds of $9.0 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company last recorded revenues from operations in 2009. Since 2009, the Company has relied on equity financings, debt financings and asset sales to fund its operations. The Company expects to rely on debt and equity financing to fund its operations and business plan for the foreseeable future.
During the first six months of 2022, the Company continued construction activities related to the Kellyton Graphite Plant. Subject to global supply chain disruptions and challenges, and its ability to raise the remaining capital necessary to complete Phase I of the Kellyton Graphite Plant, the Company is targeting to begin commissioning of Phase I by the end of the second quarter of 2023. The Company also continued its exploration project to investigate the size and extent of both graphite and vanadium mineral concentrations at the Coosa Graphite Deposit. Drilling was completed in April 2022 and the Company expects to complete resource model by the end of the year.
On June 30, 2022, the Company’s cash balance was approximately $109.0 million. During the three and six months ended June 30, 2022, the Company sold 4.4 million and 11.8 million shares of common stock for net proceeds of $9.0 million and $24.5 million, respectfully, pursuant to the ATM Offering Agreement. As of June 30, 2022, the Company has $22.4 million remaining available for future sales under the ATM Offering Agreement and has 9.7 million shares of common stock available for future sales pursuant to the 2020 Lincoln Park PA.
Management believes the Company’s current cash balance is sufficient to fund its planned non-discretionary expenditures through the third quarter of 2023. The Company has in place the ATM Offering Agreement and the 2020 Lincoln Park PA, which could be used to support construction of the commercial graphite processing facility. While the Company has been successful in the past in raising funds through equity and debt financings as well as through the sale of non-core assets, no assurance can be given that additional financing will be available in amounts sufficient to meet its needs, or on terms acceptable to the Company. Stock price volatility and uncertain economic conditions caused in part by the COVID-19 pandemic, including the emergence of variant strains of the virus, could significantly impact the Company’s ability to raise funds through equity financing. Market conditions, including but not limited to, inflation, labor shortages and supply chain disruptions could adversely impact the planned cost and the construction and commissioning timeline of Phase I of the Kellyton Graphite Plant.
Along with evaluating the continued use of the ATM Offering Agreement and the 2020 Lincoln Park PA, the Company is considering other forms of project financing to fund the construction of the Kellyton Graphite Plant, including both Phase I and Phase II. The alternative sources of project financing could include, but are not limited to, project debt, convertible debt, government loans or grants, or pursuing a partnership or joint venture. In the event funds are not available under the Company’s financing facilities or alternative financing to fund the construction of Phase I of the Kellyton Graphite Plant, the Company expects to be able to fund its non-discretionary expenditures, however, the Company may be required to change its planned business development strategies.
OFF-BALANCE SHEET ARRANGEMENTS
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
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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, access to capital, financing activities, the timing or occurrence of any future drilling or production from the Company’s properties, potential effects of the continued COVID-19 pandemic, the strategic goals of the business, arbitration matters, costs of Phase I of the Kellyton Graphite Plant and estimated completion date, expected feasibility study and start date of the Coosa Graphite Deposit, 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” , “target” 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 spot price and long-term contract price of graphite (both flake graphite feedstock and purified graphite products) and vanadium, and the world-wide supply and demand of graphite and vanadium; |
| ● | the effects, extent and timing of the entry of additional competition in the markets in which we operate; |
| ● | the ability to obtain contracts with customers; |
| ● | available sources and transportation of graphite feedstock; |
| ● | the ability to control costs and avoid cost and schedule overruns during the development, construction and operation of the Kellyton Graphite Plant; |
| ● | the ability to construct and operate the Kellyton Graphite Plant in accordance with the requirements of permits and licenses and the requirements of tax credits and other incentives; |
| ● | effects of inflation; |
| ● | the availability and supply of equipment and materials needed to construct the Kellyton Graphite Plant; |
| ● | stock price volatility; |
| ● | government regulation of the mining and processing industries in the United States; |
| ● | 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 results; |
| ● | any graphite or vanadium discoveries not being in high enough concentration to make it economic to extract the metals; |
| ● | our ability to finance growth plans; |
| ● | the potential effects of the continued COVID-19 pandemic; |
| ● | currently pending or new litigation or arbitration; and |
| ● | our ability to maintain and timely receive mining and other permits from regulatory agencies. |
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In addition, other factors are described in our Annual Report, 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 June 30, 2022.
Changes in Internal Controls
There were no changes in our internal control over financial reporting during the six months ended June 30, 2022 that 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. There have been no material changes to the legal proceedings previously disclosed in the Annual Report.
ITEM 1A. RISK FACTORS.
See “Risk Factors” in Item 1A in our Annual Report for a discussion of the risk factors of the Company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
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ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
| ||
Exhibit |
| Description |
10.1* | | |
| | |
10.2* | | |
| | |
10.3* | | |
| | |
10.4* | | |
| | |
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: | | Inline XBRL Instance Document |
| | |
101.SCH: | | Inline XBRL Taxonomy Extension Schema Document |
| | |
101.CAL: | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| | |
101.DEF: | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| | |
101.LAB: | | Inline XBRL Taxonomy Extension Label Linkbase Document |
| | |
101.PRE: | | XBRL Taxonomy Extension Presentation Linkbase Document |
| | |
101.PRE: | | XBRL Taxonomy Extension Presentation Linkbase Document |
| | |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Indicates management contract or compensatory plan or arrangement.
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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: August 10, 2022 | By: | /s/ Chad M. Potter | |||
| | ||||
| | President and Chief Executive Officer | |||
| | | |||
Dated: August 10, 2022 | By: | /s/ Jeffrey L. Vigil | |||
| | ||||
| | Vice President - Finance and Chief Financial Officer | |||
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| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 12/31/22 | ||||
| 12/15/22 | ||||
| 8/26/22 | ||||
| Filed on: | 8/10/22 | |||
| For Period end: | 6/30/22 | |||
| 6/20/22 | 8-K | |||
| 5/13/22 | 8-K, 8-K/A, S-8 | |||
| 5/9/22 | 4, 8-K | |||
| 5/2/22 | ||||
| 3/31/22 | 10-Q | |||
| 1/1/22 | ||||
| 12/31/21 | 10-K, 4 | |||
| 8/20/21 | 424B5, 8-K | |||
| 7/8/21 | 4, EFFECT | |||
| 6/30/21 | 10-Q, 4 | |||
| 5/21/21 | 4, 8-K, DEF 14A | |||
| 3/31/21 | 10-Q | |||
| 1/1/21 | ||||
| 12/4/20 | 424B5, 8-K | |||
| 4/28/20 | 3, 8-K, DEF 14A, PRE 14A | |||
| 4/18/19 | 8-K | |||
| 7/18/17 | 3, 8-K | |||
| 4/14/17 | 424B5, 8-K | |||
| 6/4/13 | 4, 8-K, DEF 14A | |||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 6/23/22 Westwater Resources, Inc. 8-K:1,5,8,9 6/20/22 13:421K Toppan Merrill/FA 5/13/22 Westwater Resources, Inc. 8-K:5,9 5/09/22 11:369K Toppan Merrill/FA 2/25/22 Westwater Resources, Inc. 8-K:1,5,9 2/21/22 11:308K Toppan Merrill/FA |