The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements for Westwater Resources, Inc. (the Company, we, us, WWR or Westwater), formerly known as Uranium Resources, Inc., have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying statements should be read in conjunction with the audited financial statements included in Westwater Resources, Inc.s 2017 Annual Report on Form 10-K. In the opinion of management, all adjustments (which are of a normal, recurring nature) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for any other period including the full year ending December 31, 2018.
Recently Adopted Accounting Pronouncements
In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows: Restricted Cash, which will require that a statement of cash flows explain the change during a period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The ASU applies to all entities and is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years beginning after December 15, 2019, with early adoption permitted. Upon adopting ASU 2016-18, the Company has included the restricted cash amount in its beginning-of-period and end-of-period reconciliations of cash on its statement of cash flows and has removed restricted cash releases of $23,000 from the investing activities section of the cash flow statement for the nine months ended September 30, 2017.
In January 2017, the FASB issued Accounting Standards Update No. 2017-01 (ASU 2017-01), Business Combinations: Clarifying the Definition of a Business, which clarifies the definition of a business when determining whether a company has acquired or sold a business. The ASU applies to all entities and is effective for annual periods ending after December 15, 2017, and interim periods thereafter, with early adoption permitted under certain circumstances. The Company utilized the updated Definition of a Business in ASC 805 for the Alabama Graphite acquisition and determined that the transaction should be recorded as an asset acquisition under ASC 360.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
, which requires lessees to recognize all leases, including operating leases, unless the lease is a short-term lease or a land lease for mineral properties. ASU 2016-02 also requires additional disclosures regarding leasing arrangements. ASU 2016-02 is effective for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. Currently, the only affected leases the Company holds are for equipment, office space and storage space. The Company has gathered the necessary information for proper disclosure of the leases once the ASU is effective. The Company will continue to monitor any new leases to ensure that it has all the information necessary to handle the transition to the new standard and properly report the transactions. The Company does not anticipate the new standard will affect its net income materially but will result in additional fixed assets and the related lease liabilities.
Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash as reported within the consolidated balance sheet that sum to the total of the same such amounts shown in the statement of cash flows.
|
|
|
|
|
As of September 30,
|
(thousands of dollars)
|
2018
|
|
2017
|
Cash and cash equivalents
|
$
1,366
|
|
$
7,496
|
Restricted cash - pledged deposits for performance bonds
|
3,668
|
|
3,668
|
Cash, cash equivalents and restricted cash shown in the statement of cash flows
|
$
5,034
|
|
$
11,164
|
|
|
|
|
Funds deposited by the Company for collateralization of performance obligations are not available for the payment of general corporate obligations and are not included in cash equivalents. Restricted cash consists of pledged certificates of deposit and money market accounts. The bonds are collateralized performance bonds required for future restoration and reclamation obligations related to the Companys South Texas production properties.
7
Notes Receivable
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Assets with lives beyond one year are carried at amortized cost using the effective interest method less any provision for impairment. Assets with lives under a year are undiscounted and carried at full cost. Management monitors these assets for credit quality and recoverability on a quarterly basis, including the value of any collateral. If the value of the collateral, less selling or recovery costs, exceeds the recorded investment in the asset, no impairment costs would be recorded.
2. LIQUIDITY
The Company last recorded revenues from operations in 2009. Since that time, the Company has relied on equity financings, debt financings and asset sales to fund its operations. The Company expects to rely on these forms of financing to fund its operations into the near future.
The Companys 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 Companys current lithium business plan will be funded by working capital, however, the Company is pursuing project financing including possible joint venture partners to fund discretionary greenfield exploration activities.
At September 30, 2018, the Company had cash and cash equivalents of $1.4 million and working capital of $0.9 million. As of October 31, 2018, the Company had cash and cash equivalents of $1.7 million. Other financing resources available to the Company include a promissory note in the amount of $3.5 million due from Laramide Resources Ltd. (Laramide) (Note 4) and the Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co. (Cantor) acting as sales agent, pursuant to which the Company has registered the offer and sale from time to time of shares of its common stock having an aggregate offering price of up to $8.0 million (the ATM Offering). As of October 31, 2018, approximately $4.5 million is available for future sales under the ATM Offering. The Company will also continue to pursue opportunities to monetize its non-core assets and identify ways to reduce its cash expenditures. These sources and actions, along with other anticipated financings, are expected to provide the Company with the necessary liquidity to fund non-discretionary expenditures through January 2020.
These interim condensed consolidated financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. While the Company has been successful in raising funds in the past through equity and debt financings as well as through the sale of non-core assets, no assurance can be given that additional financing will be available to it in amounts sufficient to meet the Companys needs or on terms acceptable to the Company. In the event that funds are not available, the Company may be required to materially change its business plans.
3.
ACQUISITIONS
Acquisition of Alabama Graphite
On April 23, 2018, the Company completed its acquisition of 100% of the outstanding securities of Alabama Graphite Corp. (Alabama Graphite) for total consideration of $8.9 million. Alabama Graphite is a Canadian entity that indirectly holds a 100% interest in the Coosa graphite project and Coosa mineral properties located in Alabama. The consideration was comprised of $2.4 million in cash used to fund Alabama Graphites operating activities prior to completion of the Alabama Graphite transaction and certain related transaction costs, $6.4 million in common stock of the Company and $89,000 for warrants and options in the Company. Each Alabama Graphite ordinary share was exchanged for 0.08 common share of WWR. Each warrant and option of Alabama Graphite was also exchanged for warrants and options exercisable for common shares of WWR on the same terms and conditions as were applicable prior to the Alabama Graphite transaction, except that the exercise price was converted for the 0.08 share exchange ratio and for the USD exchange rate on the agreement date which was $0.77809 (CAD to USD) on December 13, 2017. As a result, the Company issued 11,625,210 new shares, 364,000 options and 2,144,378 warrants. The value of the Companys common stock issued as consideration was based upon the opening share price on April 23, 2018 of $0.55. The operating results of Alabama Graphite are included in the Consolidated Statement of Operations commencing April 23, 2018.
The Alabama Graphite loan from WWR was $1.8 million on April 23, 2018 and was incorporated into the final acquisition accounting and therefore was eliminated as of June 30, 2018. Acquisition related costs were $1.9 million as of June 30, 2018, of which, $0.6 million was capitalized as additional cash consideration at the acquisition date for certain transaction costs that were directly related to the asset acquisition.
8
The acquisition of Alabama Graphite was accounted for as an asset acquisition in accordance with ASC 360 as substantially all of the purchase consideration was concentrated in a single identifiable asset for graphite mineral interests. WWR controls the Board of Directors and senior management positions of Alabama Graphite and has overall control over the day-to-day activities of the acquired entity.
The following summarizes the preliminary allocation of purchase price to the fair value of assets acquired and liabilities assumed as of the acquisition date (in thousands):
|
|
|
Consideration:
|
|
|
Cash
|
|
$
2,397
|
Issuance of 11,625,210 common shares for replacement of Alabama Graphite shares
|
|
6,394
|
Issuance of 364,000 options for replacement of Alabama Graphite options
|
|
35
|
Issuance of 2,144,378 warrants for replacement of Alabama Graphite warrants
|
|
54
|
|
|
$
8,880
|
|
|
|
The fair value of the consideration given was allocated as follows:
|
|
|
Assets:
|
|
|
Cash and cash equivalents
|
|
$
17
|
Short-term receivables
|
|
113
|
Prepaid expenses
|
|
42
|
Property, plant, equipment and graphite mineral interests
|
|
8,973
|
Total assets
|
|
9,145
|
Liabilities:
|
|
|
Accounts payable and accrued liabilities
|
|
265
|
Total liabilities
|
|
265
|
Net assets
|
|
$
8,880
|
The carrying value of the current assets acquired and liabilities assumed approximated the fair value due to the short-term nature of these items. The fair value of the graphite mineral interests was estimated using a discounted cash flow approach and market comparables. Key assumptions used in the discounted cash flow analysis include discount rates, mineral resources, future timing of production, recovery rates and future capital and operating costs.
4.
NOTES RECEIVABLE
Alabama Graphite Corp. Note Receivable
In conjunction with its entry into the arrangement agreement to acquire Alabama Graphite, on December 13, 2017, the Company executed a secured convertible loan agreement (the Alabama Graphite Loan), whereby the Company agreed to provide a non-revolving convertible loan facility of up to USD $2,000,000 to Alabama Graphite for the purpose of funding operations until the acquisition could be finalized. Total loan advances up to the closing of the acquisition on April 23, 2018 was $1.8 million with accrued interest receivable of $13,457. During 2018, advances under the loan were $0.9 million and accrued interest was $12,227.
With the completion of the acquisition on April 23, 2018 (as discussed in Note 3), the Alabama Graphite Loan became part of the consideration paid for the acquisition and was incorporated into the purchase price allocation to the assets and liabilities of the acquired company. Due to the inclusion of the loan in the acquisition purchase price, the loan has been classified as a non-current asset at December 31, 2017 and has been eliminated with the acquisition accounting at June 30, 2018.
Laramide Note Receivable
As part of the consideration for the sale of Hydro Resources, Inc. (HRI), the Company currently holds a $3.5 million promissory note, secured by a mortgage over the Churchrock and Crownpoint projects. The note has a three-year term and carries an initial interest rate of 5% which then increases to 10% upon Laramides decision regarding commercial production at the Churchrock project. Principal payment of $1.5 million is due and payable on January 5, 2019, with the balance of $2.0 million due and payable on January 5, 2020. Interest is payable on a quarterly basis. Laramide will have the right to satisfy up to half of each of these principal payments by delivering shares of its common stock to the Company, which shares will be valued by reference to the volume weighted average price (VWAP) for Laramides common stock for the 20 trading days before the respective anniversary of January 5, on which each payment is due. The fair value of the notes receivable was determined using the present value of the future cash receipts discounted at a market rate of 9.5%.
9
As of September 30, 2018, the Company has received two tranches of Laramide common shares as partial consideration for the sale of HRI, which has resulted in the receipt of 2,218,133 and 1,982,483 Laramide common shares in January 2017 and January 2018, respectively. These share payments represent the initial consideration from the January 2017 sale of HRI and the first note installment in January 2018. The first note installment in the amount of $1.5 million in January 2018, consisted of $750,000 in cash and the issuance of 1,982,483 of Laramides common shares. Additionally, Laramide has made interest payments of $0.4 million in cash for the nine months ending September 30, 2018.
For the three months ended September 30, 2018, the Company sold the second tranche of 1,982,483 Laramide common shares resulting in net proceeds of $0.4 million and a net loss on sale of marketable securities of $0.4 million. For the nine months ended September 30, 2018, the Company sold the first and second tranches of 4,200,816 Laramide common shares resulting in net proceeds of $0.8 million and a net loss on sale of marketable securities of $0.5 million.
The following tables show the notes receivable, accrued interest and unamortized discount on the Companys notes receivable as of September 30, 2018 and December 31, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018
|
(thousands of dollars)
|
|
Note
Amount
|
|
|
Plus Accrued
Interest
|
|
|
Less
Unamortized
Note
Discount
|
|
|
Note Balance
per Balance
Sheet
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes receivable Laramide current
|
|
$
|
1,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,500
|
Subtotal Notes Receivable current
|
|
$
|
1,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes receivable Laramide non-current
|
|
$
|
2,000
|
|
|
|
-
|
|
|
|
(632)
|
|
|
|
1,368
|
Total Notes Receivable current and non-current
|
|
$
|
3,500
|
|
|
|
-
|
|
|
|
(632)
|
|
|
|
2,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
(thousands of dollars)
|
|
Note
Amount
|
|
|
Plus Accrued
Interest
|
|
|
Less
Unamortized
Note
Discount
|
|
|
Note Balance
per Balance
Sheet
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes receivable Laramide current
|
|
$
|
1,500
|
|
|
$
|
250
|
|
|
$
|
-
|
|
|
$
|
1,750
|
Subtotal Notes Receivable current
|
|
$
|
1,500
|
|
|
$
|
250
|
|
|
$
|
-
|
|
|
$
|
1,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes receivable Laramide non-current
|
|
$
|
3,500
|
|
|
$
|
-
|
|
|
$
|
(1,005)
|
|
|
$
|
2,495
|
Notes receivable Alabama Graphite Corp.
|
|
|
832
|
|
|
|
1
|
|
|
|
-
|
|
|
|
833
|
Subtotal Notes Receivable non-current
|
|
$
|
4,332
|
|
|
$
|
1
|
|
|
$
|
(1,005)
|
|
|
$
|
3,328
|
Total Notes Receivable current and non-current
|
|
$
|
5,832
|
|
|
$
|
251
|
|
|
$
|
(1,005)
|
|
|
$
|
5,078
|
5. FINANCIAL INSTRUMENTS
Applicable accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and establishes a fair-value hierarchy that prioritizes the inputs used to measure fair value using the following definitions (from highest to lowest priority):
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that are observable at the measurement date.
Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
10
Level 3 includes unobservable inputs that reflect managements assumptions about what factors market participants would use in pricing the asset or liability. These inputs are developed based on the best information available, including internal data.
The Company believes that the fair value of its assets and liabilities approximate their reported carrying amounts. The following table presents information about assets that were recorded at fair value on a recurring and non-recurring basis as of September 30, 2018 and December 31, 2017 and indicate the fair value hierarchy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018
|
|
(thousands of dollars)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term available-for-sale investments
|
|
$
|
499
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
499
|
|
Total current assets recorded at fair value
|
|
$
|
499
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
499
|
|
Non-current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
$
|
3,668
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
3,668
|
|
Total non-current assets recorded at fair value
|
|
$
|
3,668
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,668
|
|
|
|
December 31, 2017
|
|
(thousands of dollars)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term available-for-sale investments
|
|
$
|
1,361
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,361
|
|
Total current assets recorded at fair value
|
|
$
|
1,361
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,361
|
|
Non-current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
$
|
3,668
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
3,668
|
|
Total non-current assets recorded at fair value
|
|
$
|
3,668
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,668
|
|
Assets that are measured on a recurring basis include the Companys marketable securities and restricted cash.
6. PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Book Value of Property, Plant and Equipment at September 30, 2018
|
(thousands of dollars)
|
Turkey
|
|
Texas
|
|
Alabama
|
|
New Mexico
|
|
Corporate
|
|
Total
|
Uranium plant
|
$
-
|
|
$
8,302
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
8,302
|
Mineral rights and properties
|
-
|
|
-
|
|
8,972
|
|
7,806
|
|
-
|
|
16,778
|
Other property, plant and equipment
|
8
|
|
1,055
|
|
-
|
|
-
|
|
175
|
|
1,238
|
Total
|
$
8
|
|
$
9,357
|
|
$
8,972
|
|
$
7,806
|
|
$
175
|
|
$
26,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Book Value of Property, Plant and Equipment at December 31, 2017
|
|
|
(thousands of dollars)
|
Turkey
|
|
Texas
|
|
Alabama
|
|
New Mexico
|
|
Corporate
|
|
Total
|
Uranium plant
|
$
-
|
|
$
8,304
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
8,304
|
Mineral rights and properties
|
17,968
|
|
-
|
|
-
|
|
7,806
|
|
-
|
|
25,774
|
Other property, plant and equipment
|
11
|
|
1,109
|
|
-
|
|
-
|
|
211
|
|
1,331
|
Total
|
$
17,979
|
|
$
9,413
|
|
$
-
|
|
$
7,806
|
|
$
211
|
|
$
35,409
|
|
|
|
|
|
|
|
|
|
|
|
|
11
Impairment of Temrezli and Sefaatli Projects
On June 20, 2018, the General Directorate of Mining Affairs, a department of the Turkish Ministry of Energy and Natural Resources, notified the Company that the mining and exploration licenses for its Temrezli and Sefaatli projects located in Turkey had been revoked and potential compensation will be proffered. While the Company is investigating the legality of this action and what remedies, including compensation, might be available to the Company, the Company has determined that it is more likely than not that the Company will be unable to explore, develop, mine or otherwise benefit from the mineral properties. Therefore, the Company has determined that all of the uranium mineral holding property assets located in Turkey were fully impaired. The Company will recognize compensation for the mining and exploration licenses when the amount of the full and fair compensation is fixed and determinable and the ability to collect is probable.
The Company reviews and evaluates its long-lived assets for impairment on an annual basis or more frequently when events or changes in circumstances indicate that the related carrying amounts may not be recoverable.
7. MINERAL PROPERTY EXPENDITURES
Mineral property expenditures by geographical location for the three and nine months ended September 30, 2018 and 2017
are as follows:
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended Sept 30,
|
|
For the Nine Months Ended Sept 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
(thousands of dollars)
|
Temrezli project, Turkey
|
|
$
11
|
|
$
63
|
|
$
107
|
|
$
186
|
Total Turkey projects
|
|
11
|
|
63
|
|
107
|
|
186
|
|
|
|
|
|
|
|
|
|
Kingsville Dome project, Texas
|
|
223
|
|
197
|
|
646
|
|
616
|
Rosita project, Texas
|
|
259
|
|
188
|
|
614
|
|
472
|
Vasquez project, Texas
|
|
42
|
|
117
|
|
374
|
|
399
|
Other projects, Texas
|
|
25
|
|
26
|
|
26
|
|
30
|
Total Texas projects
|
|
549
|
|
528
|
|
1,660
|
|
1,517
|
|
|
|
|
|
|
|
|
|
Cebolleta project, New Mexico
|
|
-
|
|
-
|
|
389
|
|
538
|
Juan Tafoya project, New Mexico
|
|
39
|
|
38
|
|
48
|
|
356
|
Total New Mexico projects
|
|
39
|
|
38
|
|
437
|
|
894
|
|
|
|
|
|
|
|
|
|
Columbus Basin project, Nevada
|
|
126
|
|
489
|
|
248
|
|
678
|
Railroad Valley project, Nevada
|
|
79
|
|
80
|
|
95
|
|
238
|
Total Nevada projects
|
|
205
|
|
569
|
|
343
|
|
916
|
|
|
|
|
|
|
|
|
|
Sal Rica project, Utah
|
|
112
|
|
118
|
|
112
|
|
124
|
Total Utah projects
|
|
112
|
|
118
|
|
112
|
|
124
|
|
|
|
|
|
|
|
|
|
Coosa project, Alabama
|
|
39
|
|
-
|
|
47
|
|
-
|
Total Alabama Projects
|
|
39
|
|
-
|
|
47
|
|
-
|
|
|
|
|
|
|
|
|
|
Total expense for the period
|
|
$
955
|
|
1,316
|
|
$
2,706
|
|
$
3,637
|
12
8. ASSET RETIREMENT OBLIGATIONS
The following table summarizes the changes in the reserve for future restoration and reclamation costs on the balance sheet:
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
2018
|
|
2017
|
(thousands of dollars)
|
|
|
|
|
Balance, beginning of period
|
|
$
5,731
|
|
$
4,789
|
Liabilities settled
|
|
(485)
|
|
(97)
|
Accretion expense
|
|
401
|
|
1,039
|
Balance, end of period
|
|
5,647
|
|
5,731
|
Less: Current portion
|
|
(597)
|
|
(1,078)
|
Non-current portion
|
|
$
5,050
|
|
$
4,653
|
The Company is currently performing plugging and surface reclamation activities at its Rosita and Vasquez projects located in Duval County, Texas. The Companys current liability of $0.6 million consists of the estimated costs associated with current reclamation activities through December 2019 at the Companys Vasquez projects.
9. COMMON STOCK
Common Stock Issued, Net of Issuance Costs
Registered Direct Offering
On June 14, 2018, the Company completed a registered direct offering of securities with Aspire Capital for net proceeds of $2.9 million. The securities consisted of 3,717,773 shares of common stock at a price of $0.34 per share for net proceeds of $1.3 million and 4,968,518 pre-funded common stock warrants at a price of $0.33 per warrant for net proceeds of $1.6 million. The exercise price of the warrants is $0.01 per share and the warrants were exercised on a net basis on August 7, 2018, resulting in the issuance of 4,825,509 shares of common stock. The Company did not incur underwriting discounts or commissions with this offering. The previous Common Stock Purchase Agreement (CSPA) with Aspire Capital dated September 25, 2017 was terminated on June 14, 2018 concurrently with the launch of the registered direct offering.
Controlled Equity Offering Sales Agreement with Cantor Fitzgerald (Cantor)
On April 14, 2017, the Company entered into the ATM Offering with Cantor acting as sales agent. Under the ATM Offering, the Company may from time to time sell shares of its common stock having an aggregate offering amount up to $30.0 million in at-the-market offerings, $8.0 million of which shares are registered for sale under a registration statement on Form S-3, which was declared effective on March 9, 2017. The Company pays Cantor a commission of up to 2.5% of the gross proceeds from the sale of any shares pursuant to the ATM Offering. As of October 31, 2018, the Company had sold 16,078,900 shares of common stock for net proceeds of $4.6 million under the ATM Offering, of which, 6,577,070 shares of common stock and net proceeds of $1.8 million was sold in the nine months ended September 30, 2018. As a result, the Company had approximately $25.3 million remaining available for future sales under the ATM Offering, of which $4.5 million has been registered for sale.
Common Stock Purchase Agreement (CSPA) with Aspire Capital
On September 25, 2017, the Company entered into the CSPA with Aspire Capital to place up to $22.0 million in the aggregate of the Companys common stock on an ongoing basis when required by the Company over a term of 30 months. As consideration for Aspire Capital entering into the purchase agreement, the Company issued 880,000 shares of its common stock to Aspire Capital.
On September 27, 2017, pursuant to the CSPA and after satisfaction of certain commencement conditions, Aspire Capital made an initial purchase of 1,428,571 shares of common stock for which the Company received net proceeds of $2.0 million. Through its termination on June 14, 2018 in connection with the registered direct offering described above, Aspire Capital purchased an additional 2,725,096 shares of common stock for which the Company received net proceeds of $1.5 million, of which, 2,575,096 shares of common stock and net proceeds of $1.3 million was received in the nine months ended September 30, 2018.
13
Common Stock Issued for Acquisition of Alabama Graphite
As discussed in Note 3 above, on April 23, 2018, the Company issued 11,625,210 shares of common stock in exchange for 100% of the outstanding shares of Alabama Graphite as part of the purchase consideration paid to acquire Alabama Graphite.
Common Stock Issued for Purchase of Lithium Properties
On April 18, 2018, the Company issued 200,000 shares of common stock, with a fair value on the date of issuance of $114,000 for an option agreement to purchase a block of unpatented placer mining claims covering an area of approximately 3,000 acres within the Columbus Salt Marsh area of Esmeralda County, Nevada.
Common Stock Issued for Consulting Services
On May 3, 2018, the Company issued 172,727 shares of common stock, with a fair value on the date of issuance of $95,000 for consideration of consulting services that will be provided to the Company over the ensuing twelve months.
10. STOCK-BASED COMPENSATION
Stock-based compensation awards consist of stock options, restricted stock units, restricted stock awards and bonus shares issued under the Companys equity incentive plans which include: the 2013 Omnibus Incentive Plan (the 2013 Plan); the Amended and Restated 2004 Directors Stock Option and Restricted Stock Plan (the 2004 Directors Plan); and the 2004 Stock Incentive Plan (the 2004 Plan). Upon approval of the 2013 Plan by the Companys stockholders on June 4, 2013, the Companys authority to grant new awards under all plans other than the 2013 Plan was terminated. On July 18, 2017, the Companys stockholders approved an amendment to the 2013 Plan to increase the authorized number of shares of common stock available and reserved for issuance under the 2013 Plan by 1.0 million shares and re-approve the material terms of the performance goals under such plan. Under the 2013 Plan, the Company may grant awards of stock options, stock appreciation rights, restricted stock awards (RSAs), restricted stock units (RSUs), unrestricted stock, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards and cash bonus awards to eligible persons. The maximum number of the Companys common stock that may be reserved for issuance under the 2013 Plan is 1,083,333 shares of common stock, plus unissued shares under the prior plans. Equity awards under the 2013 Plan are granted from time to time at the discretion of the Compensation Committee of the Board (the Committee), with vesting periods and other terms as determined by the Committee with a maximum term of 10 years. The 2013 Plan is administered by the Committee, which can delegate the administration to the Board, other Committees or to such other officers and employees of the Company as designated by the Committee and permitted by the 2013 Plan.
As of September 30, 2018, 13,905 shares were available for future issuances under the 2013 Plan. For the three months ending September 30, 2018 and 2017, the Company recorded stock-based compensation expense of $145,771 and $24,279, respectively. For the nine months ending September 30, 2018 and 2017, the Company recorded stock-based compensation expense of $308,013 and $62,356, respectively. Stock compensation expense is recorded in general and administrative expenses.
In addition to the plans above, upon closing of the Companys acquisition of Anatolia Energy Limited in November 2015, the Company issued 374,749 replacement options and performance shares to the option holders and performance shareholders of Anatolia Energy Limited. The number of replacement options and performance shares was based upon the Black-Scholes value with the exercise prices of the replacement options and performance shares determined using the exchange rate of 0.00548. The options and performance shares were issued with the same terms and conditions as were applicable prior to the acquisition of Anatolia Energy Limited. As of September 30, 2018, there were 85,233 replacement options outstanding and no performance shares outstanding.
In addition to the plans above, upon closing of the Companys acquisition of Alabama Graphite in April 2018, the Company issued 2,508,378 replacement options and warrants to the option and warrant holders of Alabama Graphite. The number of replacement options and warrants shares was determined using the arrangement exchange rate of 0.08. The exercise prices for the option and warrant shares were first converted for the exchange rate of 0.08 and then converted to USD using the exchange rate on December 13, 2017 of 0.77809 (CAD to USD). The options and warrant shares were issued with the same terms and conditions as were applicable prior to the acquisition of Alabama Graphite. As of September 30, 2018, there were 289,600 replacement options and 571,985 replacement warrants outstanding.
14
Stock Options
The following table summarizes stock options outstanding and changes for the nine-month periods ending September 30, 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018
|
|
September 30, 2017
|
|
|
Number of Stock Options
|
|
Weighted Average Exercise Price
|
|
Number of Stock Options
|
|
Weighted Average Exercise Price
|
Stock options outstanding at beginning of period
|
|
286,174
|
|
$
5.53
|
|
110,828
|
|
$
18.24
|
Granted
|
|
812,689
|
|
0.98
|
|
189,164
|
|
1.40
|
Expired
|
|
(80,412)
|
|
5.24
|
|
(6,001)
|
|
104.67
|
Stock options outstanding at end of period
|
|
1,018,451
|
|
$
1.91
|
|
293,991
|
|
$
5.64
|
Stock options exercisable at end of period
|
|
1,018,451
|
|
$
1.91
|
|
104,722
|
|
$
13.26
|
The following table summarizes stock options outstanding and exercisable by stock option plan at September 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
Outstanding Stock Options
|
|
Exercisable Stock Options
|
Stock Option Plan
|
|
Number of Outstanding Stock Options
|
|
Weighted Average Exercise Price
|
|
Number of
Exercisable
Stock Options
|
|
Weighted Average Exercise Price
|
2004 Plan
|
|
4,792
|
|
$
35.14
|
|
4,792
|
|
$
35.14
|
2004 Directors Plan
|
|
556
|
|
186.00
|
|
556
|
|
186.00
|
2013 Plan
|
|
638,270
|
|
0.71
|
|
638,270
|
|
0.71
|
Replacement Stock Options-Alabama Graphite
|
|
289,600
|
|
1.61
|
|
289,600
|
|
1.61
|
Replacement Stock Options-Anatolia Energy
|
|
85,233
|
|
8.87
|
|
85,233
|
|
8.87
|
|
|
1,018,451
|
|
$
1.91
|
|
1,018,451
|
|
$
1.91
|
Restricted Stock Units
Time-based and performance-based RSUs are valued using the closing share price of the Companys common stock on the date of grant. The final number of shares issued under performance-based RSUs is generally based on the Companys prior year performance as determined by the Compensation Committee of the Board of Directors at each vesting date, and the valuation of such awards assumes full satisfaction of all performance criteria.
The following table summarizes RSU activity for the nine-month periods ended September 30, 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
September 30,
|
|
|
2018
|
|
2017
|
|
|
Number of RSUs
|
|
Weighted-Average Grant Date Fair Value
|
|
Number of RSUs
|
|
Weighted-Average Grant Date Fair Value
|
Unvested RSUs at beginning of period
|
|
178,897
|
|
$
1.40
|
|
8,649
|
|
$
43.71
|
Granted
|
|
-
|
|
-
|
|
304,064
|
|
1.40
|
Forfeited
|
|
(9,429)
|
|
1.40
|
|
-
|
|
-
|
Vested
|
|
-
|
|
-
|
|
(39,340)
|
|
4.16
|
Unvested RSUs at end of period
|
|
169,468
|
|
$
1.40
|
|
273,373
|
|
$
1.95
|
15
11. EARNINGS PER SHARE
Basic and diluted loss per common share have been calculated based on the weighted-average shares outstanding during the period. Additionally, potentially dilutive shares of 1,943,237 were excluded from the calculation of earnings per share because the effect on the basic income per share would be anti-dilutive for the three and nine months ended September 30, 2018.
12. COMMITMENTS AND CONTINGENCIES
The Companys uranium recovery operations are subject to federal and state regulations for the protection of the environment, including water quality. Future closure and reclamation costs are provided for as each pound of uranium is produced on a unit-of-production basis. The Company reviews its reclamation obligations each year and determines the appropriate unit charge. The Company also evaluates the status of current environmental laws and their potential impact on their accrual for costs. The Company believes its operations are materially compliant with current environmental regulations.
At any given time, the Company may enter into negotiations to settle outstanding legal proceedings and any resulting accruals will be estimated based on the relevant facts and circumstances applicable at that time. We do not expect that such settlements will, individually or in the aggregate, have a material effect on its financial position, results of operations or cash flows.
13. GEOGRAPHIC AND SEGMENT INFORMATION
The Company currently operates in three reportable segments, which are uranium, lithium and graphite mining activities, including exploration, standby operations and restoration and reclamation activities. As a part of these activities, the Company also explores, evaluates and, if warranted, permits uranium, lithium and graphite properties. The Companys long-term assets were $31.4 million and $42.4 million as of September 30, 2018 and December 31, 2017, respectively. The long-term assets located in the United States totaled $31.4 million or 100% and $24.4 million or 58% of total long-term assets as of September 30, 2018 and December 31, 2017, respectively. The Company reported no revenues during the three and nine months ended September 30, 2018 and September 30, 2017.
The reportable segments are those operations whose operating results are reviewed by the Chief Executive Officer to make decisions about resources to be allocated to the segment and assess its performance provided those operations pass certain quantitative thresholds. Operations whose revenues, earnings or losses or assets exceed or are expected to exceed 10% of the total consolidated revenue, earnings or losses or assets are reportable segments. Information about current assets and liabilities of the segments has not been provided because the information is not used to assess performance.
The table below provides a breakdown of the long-term assets by reportable segments as of September 30, 2018 and December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018
|
(thousands of dollars)
|
|
Corporate
|
|
Uranium
|
|
Lithium
|
|
Graphite
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
$
175
|
|
$
17,171
|
|
$
-
|
|
$
8,972
|
|
$
26,318
|
Restricted cash
|
|
-
|
|
3,668
|
|
-
|
|
-
|
|
3,668
|
Notes receivable, non-current
|
-
|
|
1,368
|
|
-
|
|
-
|
|
1,368
|
Total long-term assets
|
|
$
175
|
|
$
22,207
|
|
$
-
|
|
$
8,972
|
|
$
31,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
(thousands of dollars)
|
|
Corporate
|
|
Uranium
|
|
Lithium
|
|
Graphite
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
$
211
|
|
$
35,198
|
|
$
-
|
|
$
-
|
|
$
35,409
|
Restricted cash
|
|
-
|
|
3,668
|
|
-
|
|
-
|
|
3,668
|
Notes receivable, non-current
|
834
|
|
2,494
|
|
-
|
|
-
|
|
3,328
|
Total long-term assets
|
|
$
1,045
|
|
$
41,360
|
|
$
-
|
|
$
-
|
|
$
42,405
|
16
The table below provides a breakdown of the reportable segments for the three months ended September 30, 2018 and September 30, 2017. Non-mining activities and other administrative operations are reported in the Corporate column.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2018
|
(thousands of dollars)
|
|
Corporate
|
|
Uranium
|
|
Lithium
|
|
Graphite
|
|
Total
|
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
Mineral property expenses
|
|
$
-
|
|
$
600
|
|
$
317
|
|
$
38
|
|
$
955
|
General and administrative expenses
|
|
1,184
|
|
478
|
|
-
|
|
141
|
|
1,803
|
Accretion of asset retirement costs
|
|
-
|
|
133
|
|
-
|
|
-
|
|
133
|
Depreciation and amortization
|
|
1
|
|
26
|
|
-
|
|
-
|
|
27
|
|
|
1,185
|
|
1,237
|
|
317
|
|
179
|
|
2,918
|
Loss from operations
|
|
(1,185)
|
|
(1,237)
|
|
(317)
|
|
(179)
|
|
(2,918)
|
Other (expense) income
|
|
(246)
|
|
27
|
|
-
|
|
-
|
|
(219)
|
Loss before taxes
|
|
$
(1,431)
|
|
$
(1,210)
|
|
$
(317)
|
|
$
(179)
|
|
$
(3,137)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2017
|
(thousands of dollars)
|
|
Corporate
|
|
Uranium
|
|
Lithium
|
|
Graphite
|
|
Total
|
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
Mineral property expenses
|
|
$
-
|
|
$
625
|
|
$
691
|
|
$
-
|
|
$
1,316
|
General and administrative
|
|
1,280
|
|
420
|
|
-
|
|
-
|
|
1,700
|
Accretion of asset retirement costs
|
|
-
|
|
132
|
|
-
|
|
-
|
|
132
|
Depreciation and amortization
|
|
3
|
|
24
|
|
-
|
|
-
|
|
27
|
|
|
1,283
|
|
1,201
|
|
691
|
|
-
|
|
3,175
|
Loss from operations
|
|
(1,283)
|
|
(1,201)
|
|
(691)
|
|
-
|
|
(3,175)
|
Other income
|
|
185
|
|
6
|
|
-
|
|
-
|
|
191
|
Loss before taxes
|
|
$
(1,098)
|
|
$
(1,195)
|
|
$
(691)
|
|
$
-
|
|
$
(2,984)
|
The table below provides a breakdown of the reportable segments for the nine months ended September 30, 2018 and September 30, 2017. Non-mining activities and other administrative operations are reported in the Corporate column.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2018
|
(thousands of dollars)
|
|
Corporate
|
|
Uranium
|
|
Lithium
|
|
Graphite
|
|
Total
|
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
Mineral property expenses
|
|
$
-
|
|
$
2,204
|
|
$
455
|
|
$
47
|
|
$
2,706
|
General and administrative expenses
|
|
3,901
|
|
1,383
|
|
-
|
|
378
|
|
5,662
|
Acquisition costs
|
|
333
|
|
-
|
|
-
|
|
-
|
|
333
|
Accretion of asset retirement costs
|
|
-
|
|
401
|
|
-
|
|
-
|
|
401
|
Impairment of uranium properties
|
|
-
|
|
17,968
|
|
-
|
|
-
|
|
17,968
|
Depreciation and amortization
|
|
3
|
|
90
|
|
-
|
|
1
|
|
94
|
|
|
4,237
|
|
22,046
|
|
455
|
|
426
|
|
27,164
|
Loss from operations
|
|
(4,237)
|
|
(22,046)
|
|
(455)
|
|
(426)
|
|
(27,164)
|
Other income
|
|
7
|
|
144
|
|
-
|
|
-
|
|
151
|
Loss before taxes
|
|
$
(4,230)
|
|
$
(21,902)
|
|
$
(455)
|
|
$
(426)
|
|
$
(27,013)
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2017
|
(thousands of dollars)
|
|
Corporate
|
|
Uranium
|
|
Lithium
|
|
Graphite
|
|
Total
|
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
Mineral property expenses
|
|
$
-
|
|
$
2,596
|
|
$
1,041
|
|
$
-
|
|
$
3,637
|
General and administrative expenses
|
|
3,799
|
|
1,177
|
|
-
|
|
-
|
|
4,976
|
Accretion of asset retirement costs
|
|
-
|
|
395
|
|
-
|
|
-
|
|
395
|
Depreciation and amortization
|
|
4
|
|
100
|
|
-
|
|
-
|
|
104
|
|
|
3,803
|
|
4,268
|
|
1,041
|
|
-
|
|
9,112
|
Loss from operations
|
|
(3,803)
|
|
(4,268)
|
|
(1,041)
|
|
-
|
|
(9,112)
|
Other income
|
|
385
|
|
4,949
|
|
-
|
|
-
|
|
5,334
|
(Loss) Income before taxes
|
|
$
(3,418)
|
|
$
681
|
|
$
(1,041)
|
|
$
-
|
|
$
(3,778)
|
|
|
|
|
|
18