Westwater Resources(WWR) - 2019 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements Westwater Resources reported a $3.2 million net loss for Q1 2019, with decreased assets and a working capital deficit, raising going concern doubts Condensed Consolidated Balance Sheet (in thousands) | | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Current Assets | $3,358 | $4,180 | | Total Assets | $28,206 | $29,958 | | Total Current Liabilities | $4,052 | $3,172 | | Total Liabilities | $10,076 | $9,167 | | Total Stockholders' Equity | $18,130 | $20,791 | Condensed Consolidated Statement of Operations (in thousands) | | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Total operating expenses | $(2,619) | $(3,510) | | Net Loss | $(3,174) | $(3,419) | | Comprehensive Loss | $(3,084) | $(4,356) | | Basic and Diluted Loss Per Share | $(2.15) | $(6.11) | Condensed Consolidated Statement of Cash Flows (in thousands) | | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(2,740) | $(3,696) | | Net Cash Provided by Investing Activities | $1,786 | $628 | | Net Cash Provided by Financing Activities | $414 | $651 | | Net decrease in cash, cash equivalents and restricted cash | $(540) | $(2,417) | Note 1: Basis of Presentation Unaudited financial statements are prepared under U.S. GAAP, reflecting a new lease accounting standard adoption and a retroactive 1-for-50 reverse stock split - On April 22, 2019, the company executed a 1-for-50 reverse stock split, reducing outstanding shares from approximately 74.7 million to 1.5 million, with all share data retroactively adjusted[21] - The company adopted the new lease accounting standard (ASU No. 2016-02) on January 1, 2019, recording a $0.6 million right-of-use lease asset and corresponding liability[22] Note 2: Liquidity and Going Concern Substantial doubt exists about the company's ability to continue as a going concern due to a $1.0 million working capital deficit and reliance on external financing - Events and conditions raise substantial doubt about the Company's ability to continue as a going concern, as it may be unable to meet its obligations within one year[30] Liquidity Position as of March 31, 2019 | Metric | Amount (in millions) | | :--- | :--- | | Cash Balance | $1.0 | | Working Capital Deficit | $1.0 | - The company plans to fund future operations through a $2.25 million payment from an asset sale due by June 30, 2019, and an anticipated public equity offering of up to $10.0 million[33] Note 3: Acquisitions The company acquired 100% of Alabama Graphite Corp. for $8.9 million in April 2018, primarily allocating value to mineral interests Alabama Graphite Acquisition Consideration (in thousands) | Consideration Type | Value | | :--- | :--- | | Cash | $2,397 | | Issuance of Common Shares | $6,394 | | Issuance of Options & Warrants | $89 | | Total Consideration | $8,880 | Note 5: Assets Held for Sale The company agreed to sell uranium royalty interests and a promissory note for a total of $2.75 million, with $2.25 million due by June 30, 2019 - The company entered an agreement to sell four royalty interests and the Laramide promissory note for a total of $2.75 million[46] - Consideration includes a $0.5 million cash deposit received on March 5, 2019, and a final payment of $2.25 million due on or before June 30, 2019[47] Note 8: Mineral Property Expenditures Mineral property expenditures for Q1 2019 decreased to $0.63 million, primarily for Texas projects' standby and maintenance Mineral Property Expenditures by Location (Q1, in thousands) | Location | 2019 | 2018 | | :--- | :--- | :--- | | Texas projects | $547 | $689 | | Alabama Projects | $80 | $— | | Turkey projects | $— | $79 | | Other projects | $7 | $14 | | Total | $634 | $782 | Note 10: Common Stock The company executed a 1-for-50 reverse stock split and sold 57,205 shares for $0.4 million net proceeds in Q1 2019 - In Q1 2019, the company sold 57,205 shares for net proceeds of $0.4 million under its ATM Offering with Cantor Fitzgerald[57] Note 15: Geographic and Segment Information The company operates in uranium, lithium, and graphite segments, with 100% of long-term assets in the U.S. and the corporate segment reporting the largest loss - The company operates in three reportable segments: uranium, lithium, and graphite mining activities[79] Long-Term Assets by Segment (March 31, 2019, in thousands) | Segment | Long-Term Assets | | :--- | :--- | | Uranium | $15,173 | | Graphite | $8,982 | | Corporate | $693 | | Lithium | $— | | Total | $24,848 | Loss from Operations by Segment (Q1 2019, in thousands) | Segment | Loss from Operations | | :--- | :--- | | Corporate | $1,280 | | Uranium | $1,093 | | Graphite | $245 | | Lithium | $1 | | Total | $2,619 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's focus on battery materials, recent asset sales, a reverse stock split, and a $3.2 million net loss for Q1 2019, with ongoing going concern doubts Recent Developments Key recent developments include arbitration against Turkey, a $2.75 million asset sale, a 1-for-50 reverse stock split, and promising vanadium discoveries - In December 2018, Westwater filed a Request for Arbitration against the Republic of Turkey for the illegal taking of its Temrezli and Şefaatli uranium projects[89] - On March 5, 2019, the company agreed to sell four uranium royalties and a promissory note for $2.75 million, with $2.25 million due by June 30, 2019[93] - A 1-for-50 reverse stock split was effected on April 22, 2019, to regain compliance with Nasdaq's $1.00 minimum bid price requirement[99] - The company announced the discovery of significant vanadium concentrations at its Coosa Project and has commenced an exploration program[96] Results of Operations The consolidated net loss for Q1 2019 was $3.2 million, an improvement driven by decreased mineral property expenses but impacted by a $0.7 million loss on marketable securities Net Loss Comparison (Q1) | Period | Net Loss (in millions) | Loss Per Share | | :--- | :--- | :--- | | 2019 | $3.2 | $2.15 | | 2018 | $3.4 | $6.11 | - Mineral property expenses decreased by $0.2 million, primarily due to the revocation of mining licenses in Turkey and reduced reclamation activities at the Vasquez and Rosita Projects[103][104] - A loss of $0.7 million was recognized from the sale of Laramide common shares and warrants[106] Liquidity and Capital Resources The company's going concern ability is in substantial doubt, with $1.0 million cash and a $1.0 million working capital deficit, relying on future asset sales and equity offerings - The financial statements are prepared on a 'going concern' basis, but substantial doubt exists about the company's ability to continue due to recurring losses and negative cash flow[110] Financial Position (March 31, 2019) | Metric | Amount (in millions) | | :--- | :--- | | Cash Balance | $1.0 | | Working Capital Deficit | $1.0 | - Expected funding sources include a $2.25 million payment from an asset sale by June 30, 2019, and a planned public equity offering for up to $10.0 million[113] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Westwater Resources is not required to provide quantitative and qualitative disclosures about market risk in its Quarterly Reports - The company is not required to provide quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company[119] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2019, with significant modifications to internal controls due to a new lease accounting standard - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2019[121] - Significant modifications were made to internal controls to accommodate the adoption of the new lease accounting standard, ASU 2016-02[122] PART II - OTHER INFORMATION Item 1. Legal Proceedings No material changes have occurred in legal proceedings since the 2018 Annual Report on Form 10-K - No material changes have occurred in legal proceedings since the 2018 Annual Report on Form 10-K[123] Item 1A. Risk Factors The company faces substantial risks, primarily concerning its ability to continue as a going concern due to historical losses, a working capital deficit, and the need for additional capital - There is substantial doubt about the company's ability to continue as a going concern due to significant historical losses and a working capital deficit of approximately $1.0 million as of March 31, 2019[125][126][127] - The company may fail if it is unable to raise additional capital, which would likely result in substantial dilution to existing shareholders if successful[128][129] - The company faces significant risks related to its new battery-graphite manufacturing business, including competition, lack of experience, and potential delays and cost overruns in plant construction[138][141] - The company is not in compliance with Nasdaq's minimum bid price requirement and faces potential delisting, which would adversely affect the stock's liquidity and value[178][179] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - The company reported no unregistered sales of equity securities during the period[183] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including an Asset Purchase Agreement, Sarbanes-Oxley certifications, and XBRL data files - Exhibits filed include the Asset Purchase Agreement with Uranium Royalty Corp., Sarbanes-Oxley certifications, and XBRL instance documents[188]