Westwater Resources(WWR) - 2019 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements Westwater Resources reported a net loss of $5.9 million for H1 2019, a significant improvement from H1 2018, with ongoing going concern doubts and reliance on future financing Condensed Consolidated Balance Sheets The balance sheet highlights changes in assets, liabilities, and equity, including a shift to a working capital deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 | December 31, 2018 | Change | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $1,156 | $1,577 | ($421) | | Assets held for sale | $1,767 | $1,545 | $222 | | Total Current Assets | $3,402 | $4,180 | ($778) | | Net property, plant and equipment | $20,505 | $20,553 | ($48) | | Total Assets | $28,216 | $29,958 | ($1,742) | | Liabilities & Equity | | | | | Total Current Liabilities | $6,075 | $3,172 | $2,903 | | Total Liabilities | $12,116 | $9,167 | $2,949 | | Total Stockholders' Equity | $16,100 | $20,791 | ($4,691) | - The company's working capital shifted from a surplus of $1.0 million at year-end 2018 to a deficit of $2.7 million at June 30, 2019, primarily driven by an increase in accounts payable and accrued liabilities[9][34] Condensed Consolidated Statements of Operations The statement of operations details the net loss and operating expenses, significantly impacted by prior-year impairment charges Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2019 | Q2 2018 | Six Months 2019 | Six Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Total operating expenses | $(2,933) | $(20,736) | $(5,552) | $(24,246) | | Impairment of uranium properties | $0 | $(17,968) | $0 | $(17,968) | | Net Loss | $(2,775) | $(20,457) | $(5,949) | $(23,876) | | Basic and Diluted Loss Per Share | $(1.81) | $(25.63) | $(3.95) | $(35.14) | - The significant decrease in net loss for both the three and six-month periods of 2019 compared to 2018 is primarily attributable to a $18.0 million impairment charge on Turkish uranium properties recorded in June 2018[11][54] Condensed Consolidated Statements of Cash Flows The cash flow statement summarizes cash movements from operating, investing, and financing activities, resulting in a net decrease in cash Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | $(4,324) | $(6,090) | | Net Cash Provided By Investing Activities | $2,786 | $26 | | Net Cash Provided By Financing Activities | $1,153 | $4,725 | | Net decrease in cash | $(385) | $(1,339) | - Investing activities in H1 2019 were primarily driven by a $1.5 million deposit received for the sale of assets to URC and $0.8 million in payments on the Laramide note receivable[13][126][127] - Financing activities consisted of $1.2 million raised from common stock issuances[13][127] Notes to Financial Statements Key notes detail a reverse stock split, new lease accounting, going concern doubts, an asset sale agreement, and segment reporting - The company effected a 1-for-50 reverse stock split on April 22, 2019, reducing shares outstanding from approximately 74.7 million to 1.5 million[22][59] - Management concluded there is substantial doubt about the company's ability to continue as a going concern, citing a history of losses since 2009, a working capital deficit of $2.7 million, and reliance on future financing[31][32][36] - The company entered an agreement to sell uranium royalty interests and the remaining $2.0 million Laramide promissory note to Uranium Royalty Corp. for $2.75 million, receiving a $1.5 million deposit as of June 30, 2019[47][49] - The company operates in three reportable segments: uranium, lithium, and graphite, with long-term assets allocated as follows: Uranium ($15.2M), Graphite ($9.0M), Lithium ($0), and Corporate ($0.7M) as of June 30, 2019[86][89] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the strategic focus on battery materials, reduced net loss, liquidity efforts, and ongoing arbitration against Turkey, reiterating going concern doubts - The company's portfolio products—graphite, lithium, and uranium—have all been included on the U.S. government's list of critical minerals, which may support domestic development[96] - In response to a Section 232 investigation, the U.S. President opted not to impose trade actions on uranium imports but established a Nuclear Fuel Working Group to recommend ways to revive domestic production, acknowledging it as a national security issue[98][99][100] - The company is pursuing international arbitration against the Republic of Turkey for the unlawful cancellation of its Temrezli and Şefaatli uranium project licenses in June 2018[110][112][113] - To address liquidity, the company entered into agreements with Lincoln Park Capital for up to $10.0 million in equity financing and sold shares through its Cantor ATM facility[102][127] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Westwater Resources is not required to provide market risk disclosures in its Quarterly Reports - The company is not required to provide quantitative and qualitative disclosures about market risk because it qualifies as a smaller reporting company[137] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period, June 30, 2019[139] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[140] PART II - OTHER INFORMATION Legal Proceedings The company is pursuing international arbitration against Turkey through ICSID for the unlawful cancellation of its uranium project licenses - On December 13, 2018, Westwater filed a Request for Arbitration against the Republic of Turkey with ICSID due to the cancellation of its uranium project licenses[142] - The company alleges that Turkey's actions, which rendered its investment worthless, were unlawful and violated Westwater's rights under Turkish and international law[142] - A three-member ICSID panel for the arbitration was established on May 1, 2019, and the parties are working to finalize a procedural order to govern the arbitration[143] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's prior quarterly report - The company states there have been no material changes to the risk factors disclosed in its prior quarterly report for the period ending March 31, 2019[144] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None reported[145] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None reported[146] Mine Safety Disclosures This item is not applicable to the company for this reporting period - Not applicable[147] Other Information The company reported no other information for this item - None reported[148] Exhibits Key exhibits filed include agreements with Lincoln Park Capital Fund, LLC and an amendment to the Asset Purchase Agreement with Uranium Royalty Corp - Key exhibits filed include the Securities Purchase Agreement and Purchase Agreement with Lincoln Park Capital Fund, LLC, and an amendment to the Asset Purchase Agreement with Uranium Royalty Corp[149]