Westwater Resources(WWR) - 2019 Q4 - Annual Report

Part I Item 1. Description of Business The company is a diversified energy materials developer focusing on graphite, lithium, and uranium assets - Westwater Resources has transitioned from a uranium mining company to a diversified energy materials developer, focusing on graphite, lithium, and uranium[18] - The core strategy is to build a battery-graphite manufacturing business in Alabama while holding uranium assets for a potential market upswing[21][22] - The company filed for arbitration against the Republic of Turkey for the expropriation of its uranium licenses, seeking $36.5 million in compensation[36][39][40] - The company secured up to $10.0 million in equity financing and raised $5.8 million in gross proceeds by year-end 2019[28][31] - A one-for-fifty reverse stock split was effected in April 2019 to maintain Nasdaq listing compliance[33][34] Item 1A. Risk Factors The company faces significant risks including a going concern warning, reliance on external capital, and development uncertainties - There is substantial doubt about the company's ability to continue as a going concern due to significant losses and a working capital deficit of $1.3 million[112][113] - The company is not currently producing any minerals and has no source of operating cash, depending on asset sales or capital raises[116][118] - The proposed battery-graphite business carries significant development risks, including competition and the need for additional capital[124][125] - The outcome of the arbitration against Turkey is uncertain, and an adverse result could negatively impact financial conditions[121][122][123] - The company has no known lithium or vanadium mineral reserves, and exploration faces a high risk of business failure[128][129] - The company may not maintain compliance with Nasdaq's listing requirements, which could lead to delisting and affect stock liquidity[163][164][165] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments - None[169] Item 2. Properties The company's assets include the Coosa Graphite Project, lithium projects in Nevada and Utah, and various uranium properties - The Coosa Graphite Project in Alabama consists of a long-term lease on approximately 41,964 acres of mineral rights[173][174] - The company holds two primary lithium exploration projects: the Columbus Basin Project in Nevada (~14,200 acres) and the Sal Rica Project in Utah (~13,260 acres)[183][184][193] - Uranium assets include two idled Texas processing facilities, Kingsville Dome and Rosita, each with a capacity of 800,000 pounds of U3O8 per year[201][203] - In New Mexico, the company holds significant uranium properties, including the Cebolleta Project (~6,717 acres) and the Juan Tafoya Project (~4,212 acres)[250][262] Work Completed on Properties in 2019 (in thousands) | Property | Operating Expenses | Mineral Property Expenses | Impairment | Restoration Liability | Total Expenditures | | :--- | :--- | :--- | :--- | :--- | :--- | | Total | $1,330 | $1,522 | $143 | $293 | $3,288 | | Rosita project | $370 | $161 | $— | $126 | $657 | | Kingsville Dome project | $559 | $157 | $143 | $— | $859 | | Vasquez project | $401 | $93 | $— | $167 | $661 | | Coosa project | $— | $194 | $— | $— | $194 | | Cebolleta project | $— | $440 | $— | $— | $440 | | Juan Tafoya project | $— | $223 | $— | $— | $223 | Item 3. Legal Proceedings The company is engaged in a defamation lawsuit and a significant arbitration claim against the Republic of Turkey - The company's subsidiary is a defendant in a defamation lawsuit and has filed a counterclaim for CAD $7.0 million[278] - Westwater filed a Request for Arbitration against the Republic of Turkey with ICSID due to the cancellation of its uranium licenses[279][281] Item 4. Mine Safety Disclosures This section is not applicable to the company - Not Applicable[283] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the Nasdaq Capital Market, and no dividends are anticipated - The company's common stock trades on the Nasdaq Capital Market under the symbol "WWR"[285] - The company has never paid dividends and does not plan to in the foreseeable future, intending to retain earnings for business development[286] Item 6. Selected Financial Data As a smaller reporting company, this information is not required - Smaller reporting companies are not required to provide the information required by this item[287] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The net loss decreased significantly in 2019, but the company's financial position remains precarious with a going concern notice Consolidated Net Loss Summary (in thousands) | | For the year ended December 31, | | :--- | :--- | :--- | | | 2019 | 2018 | | Mineral property expenses | $ (2,852) | $ (3,538) | | General and administrative | $ (6,086) | $ (7,357) | | Arbitration costs | $ (1,378) | $ — | | Impairment of uranium properties | $ (143) | $ (23,712) | | Total Net Loss | $ (10,565) | $ (35,684) | - The decrease in net loss is mainly due to a $23.7 million impairment charge on uranium properties in 2018 that was not repeated[311][317][318] - The company's ability to continue as a going concern is in substantial doubt, with cash of $1.9 million and a working capital deficit of $1.3 million[324][327] - Net cash from financing activities was $6.7 million in 2019, primarily from sales of common stock[322] - Net cash from investing activities was $3.8 million in 2019, driven by the sale of uranium royalty assets for $2.75 million[301][320] Item 7A. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, this information is not required - Smaller reporting companies are not required to provide the information required by this item[334] Item 8. Financial Statements and Supplementary Data The audited financial statements show a reduced net loss for 2019 but include a going concern uncertainty paragraph - The independent auditor's report contains an explanatory paragraph expressing substantial doubt about the Company's ability to continue as a going concern[338] Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,870 | $1,577 | | Total Current Assets | $2,361 | $4,180 | | Net property, plant and equipment | $20,337 | $20,553 | | Total Assets | $26,979 | $29,958 | | Total Current Liabilities | $3,669 | $3,172 | | Total Liabilities | $9,915 | $9,167 | | Total Stockholders' Equity | $17,064 | $20,791 | Consolidated Statement of Operations Data (in thousands, except per share) | | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | | :--- | :--- | :--- | | Total operating expenses | $(10,922) | $(36,049) | | Net Loss | $(10,565) | $(35,684) | | Basic and Diluted Loss Per Share | $(5.39) | $(38.47) | Consolidated Statement of Cash Flows Data (in thousands) | | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | $(10,049) | $(11,649) | | Net Cash Provided By Investing Activities | $3,756 | $525 | | Net Cash Provided By Financing Activities | $6,651 | $8,711 | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. The company reports no changes in or disagreements with its accountants - None[459] Item 9A. Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were effective as of year-end 2019 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2019[461] - Management concluded that internal control over financial reporting was effective as of December 31, 2019, based on the COSO 1992 framework[464] Item 9B. Other Information The company reports no other information - None[467] Part III Item 10. Directors, Executive Officers and Corporate Governance This section details the composition of the Board of Directors, executive officers, and corporate governance policies - The Board of Directors is comprised of five members: Terence J. Cryan (Chairman), Christopher M. Jones, Marvin K. Kaiser, Tracy D. Pagliara, and Karli S. Anderson[469][472] - The key executive officers are Christopher M. Jones (President & CEO), Jeffrey L. Vigil (CFO), and Dain A. McCoig (VP-Operations)[490] - The company has adopted a Code of Ethics for senior financial officers and all employees[493] - The Board has determined that Marvin K. Kaiser is an "audit committee financial expert"[495] Item 11. Executive Compensation This section outlines compensation for named executive officers and directors, including salaries, bonuses, and severance provisions 2019 Summary Compensation Table | Name and Principal Position | Year | Salary ($) | Option Awards ($) | Bonus ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | Christopher M. Jones, President and CEO | 2019 | 303,200 | 183,260 | 136,440 | 624,153 | | Jeffrey L. Vigil, Vice President – Finance and CFO | 2019 | 220,500 | 66,644 | 49,613 | 337,571 | | Dain A. McCoig, Vice President – Operations | 2019 | 202,000 | 61,042 | 45,450 | 309,745 | - Employment agreements for the CEO and CFO include change-of-control provisions that provide for severance payments[501][504][511] - Non-employee directors received a $50,000 annual cash retainer in 2019, plus additional fees for committee service[520][521] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Management and directors as a group own less than 1% of common stock, and details of equity compensation plans are provided - As of December 31, 2019, all current directors and executive officers as a group beneficially owned less than 1% of the company's common stock[527][530] Equity Compensation Plan Information (as of Dec 31, 2019) | Plan Category | Number of shares issuable under outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 37,786 | $37.42 | 45,886 | Item 13. Certain Relationships and Related Transactions, and Director Independence The company reports no related party transactions and confirms the independence of four of its five directors - The company reports no related party transactions for the fiscal year[535] - The Board has determined that four of its five directors are independent under Nasdaq standards[536] Item 14. Principal Accounting Fees and Services The company's audit fees paid to Moss Adams LLP increased in 2019, with all services pre-approved by the Audit Committee Audit and Non-Audit Fees | Fee Category | 2019 | 2018 | | :--- | :--- | :--- | | Audit fees | $251,525 | $196,823 | - All audit and non-audit services performed by the independent auditor were pre-approved by the Audit Committee[539] Part IV Item 15. Exhibits and Financial Statement Schedules This section lists all exhibits filed with the Form 10-K, including key financing and asset purchase agreements - Key filed exhibits include the Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co. (Exhibit 1.1)[542] - The Asset Purchase Agreement with Uranium Royalty Corp. from March 2019 and its amendment are filed as exhibits[542] - Financing agreements with Lincoln Park Capital Fund, LLC, are filed as exhibits[544] Item 16. Form 10-K Summary The company reports no Form 10-K summary - None[547]