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YoY shift: Lean +
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.30pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.10pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.49pp
Lean +
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+3
conflict+2
unable+1
volatility+1
failure+1
Positive rising
achieve+2
attaining+1
stable+1
advances+1
Risk Factors (Item 1A)
7,032 words
ITEM 1A. RISK FACTORS
Our business activities are subject to significant risks, including those described below. Every investor or potential investor in our securities should carefully consider these risks. If any of the described risks actually occurs, our business, financial position and results of operations could be materially adversely affected. Such risks are not the only ones we face and additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business.
Risks Related to Our Business
Our business could be negatively impacted by inflationary pressures, which may result in increased costs of operations and negatively impact our ability to access capital.
The U.S. has experienced rising inflation for the past several years and U.S. inflation is currently at a high level. This inflation has resulted in an increase in our costs for labor, services, and materials. Further, our suppliers face inflationary impacts such as the tight labor market and supply chain disruptions, that could increase the costs to construct and commission the Kellyton Graphite Plant, explore and develop the Coosa Graphite Deposit, and conduct our day-to-day operations. The rate and scope of these various inflationary factors may increase our operating costs materially, which may not be readily recoverable, and have an effect on our costs, operating margins, results of operations and financial condition.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
termination+2
absence+2
critical+1
volatility+1
unexpectedly+1
Positive rising
progress+3
efficient+2
opportunities+1
advantage+1
improvements+1
MD&A (Item 7)
3,872 words
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our consolidated financial statements as of and for the years ended December 31, 2025 and 2024, and the related notes thereto appearing elsewhere in this Annual Report on Form 10-K, which have been prepared in accordance with U.S. GAAP. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. 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 under the section heading “ Item 1A. Risk Factors” above and elsewhere in this Annual Report on Form 10-K. See “ Cautionary Note Regarding Forward-Looking Statements ” above.
INTRODUCTION
Westwater Resources, Inc. is an energy technology company focused on developing battery-grade natural graphite materials through its two primary projects, the Kellyton Graphite Plant and the Coosa Graphite Deposit, both located in Coosa County, Alabama. Once operational, Westwater expects the Kellyton Graphite Plant to process natural
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flake graphite and, based on current studies and estimates, produce 12,500 mt per year of CSPG in Phase I of the Kellyton Graphite Plant, primarily for use in lithium-ion batteries. Westwater also holds mineral rights to explore and potentially mine the Coosa Graphite Deposit, which Westwater anticipates will eventually provide natural graphite flake concentrate to the Kellyton Graphite Plant.
Further, sustained inflation has caused and may continue to cause the Federal Reserve Board to raise the target for the federal funds rate, which correspondingly causes increased interest rates. Increased interest rates could have a negative effect on the securities markets generally which may, in turn, have a material adverse effect on the Company’s ability to access capital, particularly debt financing, and the market price of equity securities, including the Company’s Common Stock, which usually decrease as interest rates rise. To the extent that we access debt financing or issue variable interest rate instruments in the future, any increase in interest rates would increase our cost of borrowing and our interest expense.
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability – particularly, the ongoing military conflict between Russia and Ukraine, ongoing war and conflict in the Middle East, and economic impacts relating to tariffs, anti-dumping and countervailing duties. Our business, financial condition and results of operations could be materially adversely affected by any negative impact on the global economy and capital markets resulting from these conflicts and other geopolitical tensions.
Ongoing wars, military conflicts and geopolitical tensions have caused broad disruption. Although the length, impact and outcome of those conflicts is highly unpredictable, any one of the conflicts could lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, higher inflation, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences, demands for battery storage related to grid applications, electric vehicle adoption rates, as well as increases in cyberattacks and espionage. While we expect any direct impacts to our business to be limited, the indirect impacts on the economy and on the mining industry and other industries in general could negatively affect our business and may make it more difficult for us to raise equity or debt financing. In addition, the impact of other current macro-economic factors on our business, which may be exacerbated by the conflicts including inflation, supply chain constraints and geopolitical events, is likely to have an adverse effect on our business.
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We face a variety of risks related to our graphite manufacturing business serving multiple end markets.
We plan to develop a graphite manufacturing business that produces low-cost, high-quality, and high-margin graphite products for a range of applications, including lithium-ion and other battery technologies for electric vehicles, battery energy storage systems, grid-scale storage, data centers and other stationary storage applications, as well as potential defense, aerospace, nuclear, industrial and other specialty applications. The planned graphite manufacturing business is significantly different from our historic mining operations and carries a number of risks, including, without limitation:
unanticipated liabilities or contingencies;
the need for additional capital and other resources to expand into the graphite manufacturing business and downstream products business, including as part of a potential vertical integration strategy from mining through purification and graphite production;
competition from better-funded public and private companies, including from producers of synthetic graphite, and competition from foreign companies that are not subject to the same environmental and other regulations as the Company;
difficulty in hiring personnel or acquiring the intellectual property rights and know-how needed for the proposed graphite manufacturing business; and
the potential for interruptions in our sources of graphite prior to operation of the Coosa Graphite Deposit due to environmental risks, geopolitical war and conflict, supply chain disruptions and transportation risks, and regulatory changes.
Entry into a new line of business may also subject us to new laws and regulations with which we are not familiar and may lead to increased litigation and regulatory risk. Our ability to penetrate and compete in diverse end markets, including defense-related, nuclear, energy storage and other industrial markets, will depend on our ability to meet stringent technical specifications, regulatory requirements, qualification processes and security requirements, which may be more rigorous than those applicable to traditional battery markets. Further, our graphite manufacturing business model and strategy are still evolving and are continually being reviewed and revised, and we may not be able to successfully implement our business model and strategy. We may not be able to produce graphite with the characteristics needed for various end uses, including but not limited to battery anode material, specialty graphite applications, defense-related technologies, nuclear applications or stationary energy storage systems, and we may not be able to attract a sufficiently large number of customers. Although we have gained experience over the past several years, neither the Company nor any member of its management team has directly engaged in producing graphite before, and our lack of this specific experience may result in delays or further complications to the new business. If we are unable to successfully implement our graphite manufacturing business and vertical integration strategy, our revenue and profitability may not grow as we expect, our competitiveness may be materially and adversely affected, and our reputation and business may be harmed.
In developing our graphite manufacturing business, we have and will continue to invest significant time and resources. Initial timetables for the development of our business may not be achieved. Failure to successfully manage these risks in the development and implementation of our business plan could have a material adverse effect on our business, results of operations and financial condition.
The construction and operation of the Kellyton Graphite Plant is subject to delays, cost overruns, and may not produce expected benefits.
Construction projects similar to our plant construction are subject to broad and strict government supervision and approval procedures, including but not limited to project approvals and filings; construction, land and project planning approvals; environment protection approvals; pollution discharge permits; work safety approvals; and the completion of inspection and acceptance by relevant authorities. As a result, construction and operation of the Kellyton Graphite Plant may be subject to administrative uncertainty, fines or the suspension of work on such projects. Construction delays related to the Kellyton Graphite Plant or failure to operate the Kellyton Graphite Plant in accordance with agreements with the State of Alabama and local municipalities could result in the loss of otherwise available tax credits and incentives.
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Delays or cost overruns could also result from inaccuracies in the estimates and findings in the DFS; difficulties in negotiation of construction contracts; challenges with managing contractors and vendors; subcontractor performance; adverse weather conditions and natural disasters; increased costs, shortages, or inconsistent quality of equipment, materials, and labor; judicial or regulatory action; nonperformance under construction or other agreements; engineering or design problems; initial production, plant start-up, attaining customer product specifications, and operating risks; future pandemic health events; work stoppages; environmental and geological conditions; or challenges with start-up activities and operational performance.
The Kellyton Graphite Plant has not yet operated at commercial scale, and we have never operated a full-scale graphite processing facility. As a result, we face significant scale-up risks, including the risk that equipment, processes or technologies may not perform as expected at commercial throughput levels; that yields, recoveries or production rates may be lower than anticipated; that product quality may be inconsistent; or that we may be unable to meet customer technical specifications on a repeatable and consistent basis. The transition from pilot-scale operations to sustained commercial production involves significant engineering, operational and quality control challenges, and there can be no assurance that we will achievestable operations within expected timeframes or budgets. Failure to achieve consistent production volumes and product specifications could delay customer qualification, give rise to contractual penalties offtake agreement terminations, and materially and adversely affect our business and reputation.
To the extent we are unable to successfully complete construction on time, in accordance with milestones, or at all, or to commission, ramp up and operate the Kellyton Graphite Plant at commercial scale in a reliable manner, our ability to develop the Kellyton Graphite Plant could be adversely affected, which in turn could have a material adverse effect on our business, growth prospects, results of operations and financial condition.
The Company is not producing any products at a commercial scale at this time. As a result, we do not currently have a reliable source of operating cash. If we cannot successfully transition to commercial scale production of graphite and vanadium, partner with another company that has cash resources, find other means of generating and/or access additional sources of private or public capital, we may not be able to remain in business.
We do not have a committed source of financing for the development of our graphite or vanadium projects. Through December 31, 2025, we have incurred costs of approximately $128 million. While the remaining capital expenditures to construct Phase I of the Kellyton Graphite Plant are currently estimated at approximately $117 million, inclusive of contingencies, delays in constructing the commercial scale processing facility and other cost overruns may increase that estimate. As of December 31, 2025, we have approximately $48.6 million in cash, and there can be no assurance that we will be able to obtain financing on commercially reasonable terms, if at all, for the remainder of the amount needed to construct Phase I of the Kellyton Graphite Plant or develop our properties. Our inability to construct the Kellyton Graphite Plant or develop our properties would have a material adverse effect on our future operations.
We are a pre-revenue company, have incurred losses and have had no revenue from operations since 2009, and we expect to continue to incur losses until the Kellyton Graphite Plant becomes operational. We have no way to generate cash inflows outside of financing activities and we will continue to incur operating losses until we begin graphite and/or vanadium production on a scale sufficient to generate revenue to fund continuing operations, which cannot be assured. Our future production of purified graphite products is dependent on completion of the Kellyton Graphite Plant and successful implementation of graphite purification technology. Our future mining of graphite and vanadium is dependent upon the completion of an evaluation that will assess the amount, location and size of graphite and vanadium concentrations at our Coosa Graphite Deposit. We can provide no assurance that we will successfully produce graphite or vanadium on a commercial scale, that our properties will be placed into production or that we will be able to continue to find, develop, acquire and finance additional mineral resources or reserves. If we fail to reach commercial scale production and cannot find other means of generating revenue other than producing graphite and vanadium and/or access additional sources of private or public capital, we may not be able to remain in business and holders of our securities may lose their entire investment.
We currently rely entirely on financing activities to fund our operations and capital expenditures. Our business plan is capital intensive and dependent upon our ability to access financing. Volatility in the capital markets, changes in investor sentiment toward critical minerals, energy transition or mining companies, or Company-specific developments
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may materially and adversely affect our ability to raise additional capital. If we are unable to raise sufficient funds when needed, we may be required to delay, scale back or discontinue construction, development or commercialization plans for the Kellyton Graphite Plant, which could materially harm our business.
Volatility in graphite and vanadium prices may result in the Company not receiving an adequate return on invested capital.
Unless and until the Company produces natural graphite from the Coosa Graphite Deposit, the Company will be exposed to fluctuations in the price of natural flake graphite, which may increase substantially as the demand for graphite increases. In addition, the Company’s graphite and vanadium exploration and development activities may be significantly adversely affected by volatility in the price of graphite or vanadium. The success of our mining operations and ability to achievepositive cash flow is dependent on our ability to develop our properties and then operate them at a profit sufficient to finance further mining activities and for the acquisition and development of additional properties. Any profit will necessarily be dependent upon, and affected by, the long and short-term market prices of graphite and vanadium.
The market for graphite is global and serves multiple end uses, including stationary energy storage systems, grid infrastructure, data centers, defense and aerospace technologies, nuclear applications and various industrial uses. Demand in any of these sectors may be cyclical, policy-driven or subject to technological substitution. Changes in battery chemistries, advances in alternative anode materials, reduced growth in electric vehicle adoption, slower deployment of BESS or grid storage, or reduced defense or infrastructure spending could adversely affect overall graphite demand and pricing.
Mineral prices fluctuate widely and are affected by numerous factors beyond the Company’s control such as global and regional supply and demand, interest rates, exchange rates, inflation or deflation, fluctuation in the value of the U.S. dollar and foreign currencies, and the political and economic conditions of mineral-producing countries throughout the world. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in the Company’s graphite and vanadium activities not producing an adequate return on invested capital to be profitable or viable. In addition, a significant, sustained drop in graphite and vanadium prices would cause us to recognize impairment of the carrying value of our graphite and vanadium or other assets, which could have an adverse impact on the Company’s financial conditions and results of operations.
Our operations are subject to environmental risks.
We are required to comply with environmental protection laws, regulations and permitting requirements in the U.S., and we anticipate that we will be required to continue to do so in the future in connection with the construction and operations at our Kellyton Graphite Plant and Coosa Graphite Deposit. We have expended significant resources, both financial and managerial, to comply with environmental protection laws, regulations and permitting requirements, and we anticipate that we will be required to continue to do so in the future. The material environmental laws and regulations within the U.S. include the Clean Air Act, Clean Water Act (“CWA”), Safe Drinking Water Act, Federal Land Policy Management Act, National Park System Mining Regulations Act, State Department of Environmental Quality regulations, rules and regulations of the NEPA, NPDES, and Section 404 of the CWA as applicable.
We cannot predict what environmental legislation, regulation or policy will be enacted or adopted in the future or how future laws and regulations will be administered or interpreted, particularly given the recent change in administration. The recent trend in environmental legislation and regulation, generally, has been toward stricter standards, and this trend is likely to continue in the future. This recent trend includes, without limitation, laws and regulations relating to air and water quality, reclamation, waste handling and disposal, the protection of certain species, the preservation of certain lands, and epidemics and pandemics to the degree they impact us or our activities. These regulations may require the acquisition of permits or other authorizations for certain activities. These laws and regulations may also limit or prohibit activities on certain lands. Compliance with more stringent laws and regulations, as well as potentially more vigorous enforcement policies or stricter interpretation of existing laws, may necessitate significant capital outlays, may materially affect our results of operations and business or may cause material changes or delay to our intended activities.
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Our operations may require additional analysis in the future including environmental, cultural and social impact and other related studies. Certain activities require the submission and approval of environmental impact assessments. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and their directors, officers and employees. We cannot provide assurance that we will be able to obtain or maintain all necessary permits that may be required to continue our operation or exploration of our properties or, if feasible, to commence development, construction or operation of production or mining facilities at such properties on terms which enable operations to be conducted at economically justifiable costs. If we are unable to obtain or maintain permits or water rights for development of our properties or otherwise fail to manage adequately future environmental issues, our operations could be materially and adversely affected.
Competition from better-capitalized companies affects prices and our ability to acquire both properties and personnel.
There is global competition for capital, graphite and vanadium customers, and qualified personnel. In the production and marketing of graphite and vanadium, there are a number of producing entities, some of which are government controlled and most of which are significantly larger and better capitalized than we are. Many of these organizations also have substantially greater financial, technical, manufacturing and distribution resources than we have. If we are unable to compete effectively in any of these areas, our ability to operate could be materially and adversely affected.
Because we have limited capital, inherent manufacturing and mining risks pose a significant threat to us compared with our larger competitors.
Because we have limited capital, we may be unable to withstand significant losses that can result from risks associated with manufacturing and mining activities, including environmental hazards, industrial accidents, flooding, earthquake, pandemics, interruptions due to weather conditions and other acts of nature that larger competitors could more easily withstand. Such risks could result in damage to or destruction of our infrastructure and production facilities, as well as to adjacent properties, personal injury, environmental damage and processing and production delays, causing monetary losses and possible legal liability.
We are dependent on experts and subject to workforce factors that could affect operations.
Our business and mineral exploration and processing programs depend upon our ability to employ the services of geologists, engineers and other experts. In operating our business and in order to continue our operations, we compete with other mineral exploration and processing companies and businesses for the services of professionals. Our ability to maintain and expand our business and continue our development of the Kellyton Graphite Plant and the Coosa Graphite Deposit may be impaired if we are unable to continue to engage those parties currently providing services and expertise to us or identify and engage other qualified personnel to do so in their place.
We must attract, train and retain a workforce to meet future needs for the development of the Kellyton Graphite Plant and the Coosa Graphite Deposit. To retain key employees, we may face increased compensation costs, including potential new incentive stock grants and there can be no assurance that the incentive measures we implement will be successful in helping us retain our key personnel. Increased costs and reduced supply of labor may lead to operating challenges. Failure to hire and adequately train employees and retain key employees may adversely affect the Company’s ability to manage and operate its business.
Registration of shares issuable under the Company ’ s incentive plans may give rise to rescission rights in favor of award recipients.
We have adopted, and from time-to-time have amended, our equity incentive plans pursuant to which we grant equity incentive awards to our employees and directors, and intend to amend our current Omnibus Incentive Plan to increase shares available under that plan at the upcoming meeting of stockholders. Once a plan, or any increase in the shares available under a plan, is approved by our stockholders, the shares issuable under such plan must be registered on a registration statement filed with the SEC. To the extent that we issue awards under our equity incentive plans before
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such a registration statement is declared effective, employees and directors may have rescission rights with respect to such awards.
Our patent and other protective measures may not adequately protect our proprietary intellectual property, and we may be infringing on the rights of others.
Our intellectual property, which is primarily related to our proprietary rights to an improved method for the purification of graphite concentrate, is important to our business. We have obtained an issued patent and have one patent application pending in the U.S., and we generally enter into confidentiality and invention agreements with our employees and consultants. While the Company has received its first U.S. Patent related to its graphite purification method, we can make no assurances that other patent applications will result in an issued patent and our failure to secure rights under the patent application may limit our ability to protect some intellectual property rights of our proposed graphite production business. In addition, such patent protection and agreements and various other measures we take to protect our intellectual property from use by others may not be effective for various reasons generally applicable to patents and their granting and enforcement. In addition, the costs associated with enforcing patents, confidentiality and invention agreements or other intellectual property rights may be expensive. Our inability to protect our proprietary intellectual property rights or gain a competitive advantage from such rights could harm our ability to generate revenue and, as a result, our business and operations.
We could also become subject to litigationclaiming that our intellectual property or proprietary information infringes the rights of a third party. In that event, we could incur substantial defense costs and, if such litigation is successful, we could be required to pay the claimant damages and royalties for our past and future use of such intellectual property or proprietary information, or we could be prohibited from using it in the future, which could prevent us from pursuing our graphite production business, or we could be required to modify our process and facilities. Our inability to use our intellectual property and proprietary information on a cost-effective basis in the future could have a material adverse effect on our revenue, cash flow and profitability.
Pandemics, epidemics or disease outbreaks, including the novel coronavirus (COVID-19 virus), may disrupt our business, supply chains and the business of our business partners, which could materially affect our operations, liquidity and results of operations.
We face various risks related to health epidemics, pandemics and similar outbreaks, including the global outbreak of coronavirus (“COVID-19”). The spread of COVID-19 led to disruption and volatility in the global capital markets, which increased the cost of capital and had an adverse impact on our access to capital. If significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, facility closures or other restrictions in connection with any pandemic, our operations will likely be impacted. In addition, our costs may increase as a result of pandemics. These cost increases may not be fully recoverable or adequately covered by insurance. The extent to which any pandemic may impact our business, financial condition, liquidity, results of operations and prospects is uncertain and cannot be predicted with confidence.
Any reduction, elimination, or discriminatory application of government subsidies and economic incentives because of policy changes, or the reduced need for such subsidies and incentives due to the perceived success of the electric vehicle or other reasons, may result in the diminished competitiveness of the alternative fuel and electric vehicle industry generally, and a resulting decrease in the demand for our graphite products by automotive manufacturers.
While certain tax credits and other incentives for alternative energy production, alternative fuel, and electric vehicles have been available in the past, there is no guarantee these programs will be available in the future. For example, the IRA provides a 10% tax credit for the costs of producing certain critical minerals, including graphite and vanadium. Further, the IRA sets a minimum domestic content threshold for the percentage of the value of applicable critical minerals contained in the battery of the electric vehicles. Moreover, if a vehicle battery’s critical minerals were extracted, processed or recycled by a “foreign entity of concern,” such as China, the tax credit would not apply.
This risk is particularly heightened under the current Presidential administration, because such tax credits and existing trade policy are subject to heightened political scrutiny and uncertainty. The current Presidential administration
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or changing legislative priorities could materially alter legislation and laws, governmental regulations and policies supporting electric vehicles and climate change programs resulting in a materially adverse effect on our business and growth strategy.
Any future changes to tax incentives that make it less likely for electric vehicles in which our CSPG products are an integrated component to qualify for such incentives could have a material adverse effect on our business, prospects, financial condition, results of operations, and cash flows.
Additionally, federal, state and local laws may impose additional barriers to electric vehicle adoption, including additional costs. For example, many states have enacted or proposed laws imposing additional registration fees for certain hybrids and electric vehicles to support transportation infrastructure, such as highway repairs and improvements, which have traditionally been funded through federal and state gasoline taxes. Any of the foregoing could materially and adversely affect the growth of the alternative fuel automobile markets – which we intend to support through the supply of our graphite products for high-capacity batteries – and resultingly, our business, prospects, financial condition, results of operations, and cash flows.
Because of our focus on producing and supplying low-cost, high-quality, and high-margin battery-grade natural graphite products for battery manufacturers, o ur future growth will be partially dependent on the demand for, and upon consumer’s willingness to adopt electric vehicles.
The electric vehicle market is rapidly evolving and there are several factors that may influence the adoption of electric vehicles including:
• perceptions about electric vehicle quality, safety, design, performance and cost, especially if negative events or accidents occur that are linked to the quality or safety of electric vehicles resulting in adverse publicity and harm to consumer perceptions of electric vehicles generally;
• perceptions about vehicle safety in general, in particular safety issues that may be attributed to the use of advanced technology including electric vehicle systems;
• the quality and availability of electric vehicle charging stations;
• the costs and challenges of installing home charging equipment, including for multi-family, rental and densely populated urban housing;
• the higher initial upfront purchase price of electric vehicles, despite lower cost of ongoing operating and maintenance costs, compared to other vehicles; and
• the environmental consciousness of consumers, and their adoption of electric vehicles.
Reductions, expirations, modifications or other changes to tariffs, anti-dumping and countervailing duties, or other changes to existing trade regulations could decrease demand for our products.
In 2019, the Trump administration announced tariffs on goods imported from China. In February 2026, the U.S. Department of Commerce (“DOC”) issued an initial affirmative countervailing duty determination; however, in March 2026, the U.S. International Trade Commission (“USITC”) unexpectedly rescinded that determination. The total tariffs have been subject to frequent administration changes and are likely to continue to evolve. Changes to these trade measures, including reductions or changes to existing tariffs, anti-dumping and countervailing duties, or changes in U.S. or foreign
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trade remedies or export controls could materially alter relative pricing and competition for graphite and graphite-derived products and thereby result in a reduction of demand for our products.
Risks Related to Exploration and Mining Activities
Our Coosa property is in the exploration stage. There is no assurance that we can establish the existence of any Mineral Reserve on the property in commercially exploitable quantities. Until we can do so, we cannot earn any revenue from the property, and if we do not do so, and are unable to enter into a joint venture or sell the property, we will lose all of the funds that we expend on exploration. If we do not discover any Mineral Reserves in a commercially exploitable quantity, our business could be adversely impacted.
We have established Mineral Resources at the Coosa Graphite Deposit but have not established any Mineral Reserves according to recognized reserve guidelines, nor can there be any assurance that we will be able to do so. A Mineral Reserve is defined by the SEC in S-K 1300 as that part of a mineral deposit, which could be economically and legally extracted or produced at the time of the reserve determination. There is no guarantee that a deposit will also be a "reserve" that meets the requirements of S-K 1300. If Mineral Reserves on our property are established in the future, there can be no assurance that the property can be developed into a producing mine to extract those minerals. Both mineral exploration and development involve a high degree of risk.
Exploration and development of graphite and vanadium properties are risky and subject to great uncertainties.
The exploration for and development of graphite and vanadium deposits involve significant risks. It is impossible to ensure that the current and future exploration programs on our existing properties will establish reserves. Whether an ore body will be commercially viable depends on a number of factors, including, but not limited to: the particular attributes of the deposit, such as size, grade and proximity to infrastructure; graphite and vanadium prices, which cannot be predicted and which have been highly volatile in the past; mining, processing and transportation costs; perceived levels of political risk and the willingness of lenders and investors to provide project financing; availability of labor, labor costs and possible labor strikes; availability of drilling rigs; and governmental regulations, including, without limitation, regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting materials, foreign exchange, environmental protection, employment, worker safety, transportation, and reclamation and closure obligations. Most exploration projects do not result in the discovery of commercially mineable deposits of minerals and there can be no assurance that any of our exploration stage properties will be commercially mineable or can be brought into production.
The extent of the Company’s vanadium mineral reserves at the Coosa Graphite Deposit is unknown and may not be in sufficient quantities to make its extraction and processing economically feasible.
The Company discovered vanadium at the Coosa Graphite Deposit and is executing an exploration plan to further investigate the size and extent of resources. While there can be no assurance that the extent of those concentrations will end up being economically feasible, even if the Company finds vanadium in sufficient quantities to warrant recovery, it ultimately may not be recoverable. Finally, even if any vanadium is recoverable, the Company does not know whether recovery can be done at a profit. Our vanadium activities are highly prospective, face a high risk of failure and may not result in any benefit to the Company.
Potential investors should be aware of the difficulties normally encountered by new mineral exploration ventures and the high rate of failure of such ventures. The likelihood of success of the Company’s vanadium exploration activities must be considered in light of the potential problems, expenses, difficulties, complications and delays encountered in connection with the exploration of new mineral properties. These potential problems include, but are not limited to, unanticipatedproblems relating to exploration and additional costs and expenses that may exceed current estimates. The expenditures to be made by the Company in the exploration of its new vanadium claims may not result in the discovery of new vanadium deposits. Problems such as unusual or unexpected formations and other conditions are encountered in new mineral exploration and often result in unsuccessful exploration efforts. If the results of the Company’s new exploration ventures do not reveal viable commercial mineralization, it may decide to abandon its claims. If this happens, the Company will not benefit from any of the expenditures it will incur in pursuing the claims.
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The Company does not have and may not be able to obtain surface or access rights to all or a portion of the Coosa Graphite Deposit.
Although the Company has rights to the minerals in the ground at the Coosa Graphite Deposit, the Company does not have rights to, or ownership of, the ground surface of the areas covered by its mineral rights. While applicable mining laws usually provide for rights of access to the surface for the purpose of carrying on mining activities, the enforcement of such rights through the courts can be costly and time consuming. It may be necessary for the Company to negotiate surface access or to purchase the surface rights if long-term access is required. There can be no guarantee that, despite having the right at law to access the surface and carry-on mining activities, the Company will be able to negotiate satisfactory agreements with any existing or future landowners/occupiers for such access or purchase such surface rights, and therefore we may be unable to carry out planned exploration or mining activities at the Coosa Graphite Deposit. In addition, in circumstances where such access is denied, or no agreement can be reached, the Company may need to rely on the assistance of local officials or the courts in such jurisdiction, the outcomes of which cannot be predicted with any certainty. The inability of the Company to secure surface access or purchase required surface rights could materially and adversely affect the timing, cost or overall ability of the Company to develop any mineral deposits it may locate at the Coosa Graphite Deposit.
Because mineral exploration and development activities are inherently risky, we may be exposed to environmental liabilities and other dangers. If we are unable to maintain adequate insurance, or liabilities exceed the limits of our insurance policies, we may be unable to continue operations.
The business of mineral exploration and extraction involves a high degree of risk. Few properties that are explored are ultimately developed into production. Unusual or unexpected formations, formation pressures, fires, power outages, labor disruptions, flooding, explosions, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment or labor are some of the risks involved in extraction operations and the conduct of exploration programs. Previous mining operations may have caused environmental damage at certain of our properties. It may be difficult or impossible to assess the extent to which such damage was caused by us or by the activities of previous operators, in which case, any indemnities and exemptions from liability may be ineffective.
Although we carry property and liability insurance with respect to our mineral development and exploration operations, we may become subject to liability for damage to life and property, environmental damage, cave-ins or hazardsagainst which we cannot insure or against which we may elect not to insure because of cost or other business reasons. In addition, the insurance industry is undergoing change and premiums are increasing. Material uninsured environmental or similar liabilities could cause us to be forced to cease operations.
Title to the Coosa Graphite Deposit may be subject to defects in title or other claims, which could affect our property rights and claims.
There are risks that title to the Coosa Graphite Deposit may be challenged or impugned. There may be valid challenges to the title of the Coosa Graphite Deposit which, if successful, could impair development or operations. This is particularly the case because we hold our interest solely through leases, as such interest is substantially based on contract as opposed to a direct interest in the property.
The lease agreements pursuant to which the Company has interests in the Coosa Graphite Deposit provide that the Company must make a series of cash payments over certain time periods. Failure by the Company to make such payments in a timely fashion may result in the Company losing its interest in the Coosa Graphite Deposit. There can be no assurance that the Company will have, or be able to obtain, the necessary financial resources to be able to maintain the lease agreements in good standing, or to be able to comply with all of its obligations thereunder, which could result in the Company forfeiting its interest in the Coosa Graphite Deposit.
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Risks Related to Ownership of Our Common Stock
Our stock price has been and may continue to be volatile and may fluctuate significantly, which may adversely impact investor confidence and results and increase the likelihood of securities class action litigation.
Our Common Stock price has experienced substantial volatility in the past and may remain volatile in the future. During 2025, the sale price of our Common Stock ranged from a high of $3.48 per share to a low of $0.46 per share. Volatility in our stock price can be driven by many factors including, but not limited to, general market conditions, market conditions in the energy materials industry, announcements that we may make regarding our business plans or strategy, including announcements concerning our anticipated battery-graphite business, the substantial increase in the sale and issuance of shares of our Common Stock to finance our operations and the accuracy of expectations and predictions of financial analysts and the market as they pertain to our future business prospects. In addition, the price of our Common Stock may increase or decrease substantially for reasons unrelated to our operating performance or prospects. If our Common Stock continues to experience substantial price volatility, any shares investors purchase may rapidly lose some or substantially all of their value.
Shareholders of a public company sometimes bring securities class action suits against the company following periods of instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay damages, which could have a material adverse effect on our results of operations and financial condition.
Furthermore, our ability to raise funds through the issuance of equity or otherwise use our Common Stock as consideration is impacted by the price of our Common Stock. A low stock price may adversely impact our ability to fund our operating and growth plans, including Phase I of the Kellyton Graphite Plant, which would harm our business and prospects.
The Company has no history of paying dividends on its Common Stock, and we do not anticipate paying dividends in the foreseeable future.
The Company has not previously paid dividends on its Common Stock. We currently anticipate that we will retain all of our available cash, if any, for use as working capital and for other general corporate purposes. Any payment of future dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends and other considerations that our Board of Directors deems relevant. Investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize a return on their investment.
Terms of subsequent financings may adversely impact holders of our securities.
In order to finance our future production plans and working capital needs, we may have to raise funds through the issuance of equity or debt securities. Depending on the type and the terms of any financing we pursue, holders of our securities’ rights and the value of their investment in our common stock could be reduced. A financing could involve one or more types of securities including common stock, convertible debt or warrants to acquire common stock. These securities could be issued at or below the then prevailing market price for our Common Stock. We currently have no authorized preferred stock. In addition, if we issue secured debt securities, the holders of the debt would have a claim to our assets that would be senior to the rights of holders of our other securities until the debt is paid. Interest on these debt securities would increase financing and interest costs and could negatively impact our operating results. If the issuance of new securities results in diminished rights to holders of our Common Stock, the market price of our Common Stock could be negatively impacted.
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Shareholders would be diluted if we use common stock to raise capital, and the perception that such sales may occur could cause the price of our Common Stock to fall.
We plan to seek additional capital to carry out our business plan. This financing could involve one or more types of securities including common stock, convertible debt or warrants to acquire common stock. These securities could be issued at or below the then prevailing market price for our Common Stock. Any issuance of additional shares of our Common Stock could be dilutive to existing holders of our securities and could adversely affect the market price of our Common Stock.
SUMMARY OF RECENT DEVELOPMENTS
Customer Engagement Update
The global landscape for the U.S. supply of critical minerals, including natural graphite, continues to evolve. On November 3, 2025, FCA, which is part of the Stellantis group of companies, unexpectedlyterminated its Offtake Agreement with the Company. FCA was one of three companies, including SK On and Hiller Carbon, with offtake agreements with Westwater.
The offtake agreements with SK On and Hiller Carbon remain in effect. While FCA has indicated it may be open to considering a new arrangement with the Company, any future agreement would be subject to current market conditions and other terms to be negotiated. The Company continues to explore additional offtake opportunities with other prospective customers and, as part of these efforts, has provided and expects to continue providing product samples to support customer evaluation and qualification processes.
Westwater continues to respond to inquiries from prospective customers as they evaluate the impact of announced and potential changes to global trade and industrial policy, including tariffs, export restrictions, domestic content requirements, countervailing and antidumping duties, the Section 45X advanced manufacturing production tax credit, and related policy measures that may affect demand for domestic battery-grade natural graphite. Many of these prospective customers include large, global lithium-ion battery manufacturers and original equipment manufacturers (“OEMs”).
Issuance of Patent for Graphite Purification
On September 17, 2025, the Company announced that it had received its U.S. Patent related to its graphite purification method. The Company believes its purification process provides a more environmentally sustainable alternative to certain conventional purification techniques used in China and other countries. In particular, the purification process is designed to avoid the use of hydrofluoric acid, a hazardous substance that is commonly used in certain traditional purification methods. The Company believes its patented approach supports the production of high-purity graphite and provides a competitive advantage as customers increasingly consider tariff restrictions, ESG, permitting and domestic supply chain requirements.
Kellyton Graphite Plant – Construction and Estimated Cost Update
During the year, construction activities at the Kellyton Graphite Plant included equipment installation and electrical work to establish the power distribution center, transition off temporary power generation, and connection of the facility to the Alabama power grid. The Company has installed micronization (sizing) and spheroidization (shaping) mills in the SG building and has commissioned and started one micronization and one spheroidization mill.
Westwater has constructed and continues to operate its R&D Lab. The R&D Lab supports ongoing product development and optimization with potential customers and provides in-house quality control testing capabilities. The Company believes the R&D Lab increases flexibility to refine and produce future samples in accordance with customer specifications.
Since inception of the Kellyton Graphite Plant, and inclusive of liabilities as of December 31, 2025, the Company has incurred costs of approximately $128.2 million. Refer to Note 5 of the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further details. The Company continued Phase I construction activities at a measured pace during 2025. With additional financing raised during 2025, the Company has ordered certain long-lead equipment items to further advance Phase I in 2026; however, the Company currently intends to maintain a measured approach to capital deployment.
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In light of the Company’s customer engagement and commercial discussions, the Company completed an evaluation to optimize the Phase I capital plan for of the Kellyton Graphite Plant in December of 2025. Management notes that the original budget for Phase I was approximately $271 million and, through prior optimization and debottlenecking efforts, was reduced to approximately $245 million. While the Company’s additional optimization review in December 2025 resulted in additional potential cost reductions, the Company is also experiencing certain cost pressures related to tariffs and energy costs as a result of the current geopolitical climate and related uncertainties. As such, the Company is maintaining its current cost estimate of $245 million, of which approximately $117 million has not yet been incurred, including approximately $19 million related to contingency and potential cost escalations.
Qualification Line Development at Kellyton Graphite Plant
During 2025, the Company operated its qualification line at the Kellyton Graphite Plant and produced multiple customer samples, including aggregate production in excess of one metric ton of CSPG, for use in pre-production evaluations and testing. Throughout the year, the Company made incremental improvements to the qualification line to improve cycle times, yield, and graphite flow rates and to enhance overall operating performance.
The CSPG produced on the qualification line is representative of CSPG material produced in a future commercial setting. The Company expects the continued operation of the qualification line will support the production of bulk CSPG samples in one to ten metric ton batches for customer qualification activities. The qualification line is also being used for operations training and process familiarization, which the Company believes may support a more efficient commissioning and start-up of the Kellyton Graphite Plant.
During 2025, the Company commissioned one micronization mill and one shaping mill. These commissioned mills are being used in conjunction with the qualification line to produce additional customer samples, and the Company expects these assets to transition to the mass production line when Phase I of the Kellyton Graphite Plant is completed and becomes operational.
Coosa Graphite Deposit
On October 27, 2025, Westwater announced plans to progress the permitting process for future mine development at its Coosa Graphite Deposit. The Company has retained a third-party permitting and engineering firm to support and manage permitting activities and expects to engage with the U.S. Army Corps of Engineers, the Alabama Department of Environmental Management, and other state and local authorities as the process progresses. The permitting effort is expected to include the preparation of environmental studies and the submission of applications under applicable federal and state frameworks, including, as relevant, water discharge, wetlands and air permits, and other approvals associated with the construction and operation of the Coosa Graphite Deposit. These results will inform ongoing mine planning and design efforts, as Westwater continues to evaluate and optimize the Coosa Graphite Deposit for efficient, responsible production of natural graphite.
Certain permitting activities commenced in the fourth quarter of 2025, and subsequent to year end, the Company filed an application for a NPDES permit with the ADEM and submitted its project application to the FAST-41 Federal Permitting Council dashboard. Established by the U.S. Congress in 2015, the FAST-41 program is intended to streamline the federal permitting process by improving timeliness and predictability through publicly posted permitting timelines and procedures. The program also provides formal issue‑resolution mechanisms, and its federal permitting dashboard allows project stakeholders and the general public to track a project’s progress, including opportunities for public comment.
Financing Update
During 2025, the Company entered into the Series Purchase Agreements pursuant to which the Company issued and sold in registered public offerings Convertible Notes in the aggregate principal amount of $10.0 million, which are convertible into shares of the Company’s Common Stock.
The Company continued to raise capital through its ATM Sales Agreement and 2024 Lincoln Park PA which resulted in net proceeds of $53.4 million and $3.2 million, respectively.
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Refer to Note 5, Convertible Notes, and Note 9, Stockholders’ Equity , of the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further details.
Debt Financing Update
Following the unexpectedtermination of the FCA Offtake Agreement in the fourth quarter, which the Company had expected to be a key commercial underpinning for the debt syndication, the Company, together with its investment banker, paused efforts related to syndication of a secured debt facility. While the private debt syndication process has been paused, the Company continues to receive interest from lenders that may be interested in providing financing pending sufficient commercial offtake. No assurance can be given that the Company will ultimately enter into a lending arrangement, or that financing will be available in amounts sufficient to meet its needs, or on terms acceptable to the Company. Further, we continue to pursue other potential financing sources including, but not limited to, governmental financing and opportunity zones.
In April 2025, Westwater received a letter of interest from EXIM related to the Kellyton Graphite Plant, under EXIM’s “Make More in America Initiative” and “China and Transformational Exports Program.” The Company’s application remains pending. Progression from an EXIM letter of interest to a loan commitment is subject to, among other things, additional offtake to support loan repayment, submission and acceptance of a formal application, completion of EXIM due diligence and underwriting, and negotiation and finalization of definitive terms and conditions. No assurance can be given that the Company will enter into a loan transaction with EXIM.
In addition to the EXIM loan application, Westwater has engaged advisors to support ongoing efforts to evaluate and pursue other sources of government funding that may be available.
RESULTS OF OPERATIONS
Summary
Consolidated net loss from operations for the year ended December 31, 2025 was $27.3 million, or $0.32 per share, as compared with $12.7 million, or $0.22 per share for the same period in 2024. The $14.6 million increase in our consolidated net loss from operations was primarily due to costs associated with conversions and fair value adjustments of the Convertible Notes, an increase in stock compensation expense, debt issuance costs, greater depreciation expense and costs associated with progressing the permitting of the Coosa Graphite Deposit.
These increases were offset by the reduction of other expenses related to a loss on sales and a write-down of raw material inventory in the prior year. See below for further details related to these changes.
Product Development Expenses
Product development expenses for the year ended December 31, 2025 were $1.1 million and remained relatively flat, as compared to the same period in 2024.
Exploration Expenses
Exploration expenses for the year ended December 31, 2025 , increased by $0.2 million, compared to the same period in 2024. The increase was a result of completing a substantial body of work during the fourth quarter of 2025 essential to advancing the Coosa Graphite Deposit through early stage permitting, environmental baseline characterization, cultural resource compliance, and preliminary engineering design. The combination of engineering design, environmental fieldwork, regulatory mapping, hydrologic studies, and agency coordination is intended to help the Company progress toward obtaining required permits and preparing the site for development activities.
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General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2025, were $12.4 million, an increase of approximately $2.4 million as compared to the prior year. The increase was primarily due to $2.6 million in higher stock compensation expense as a result of larger and broadly distributed restricted stock unit awards granted in May 2025, compared to awards granted in prior years. Refer to Note 10, Stock-based Compensation, of the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further details.
Depreciation and Amortization
Depreciation and amortization for the year ended December 31, 2025 , increased by $0.5 million, compared to the same period in 2024, due to an increase in depreciation expense resulting from the qualification line, which was placed in service in January of 2025.
Mineral Property Expenses
Mineral property expenses were less than $0.1 million for the year ended December 31, 2025, remaining flat compared to the prior year. These costs include payments to land and surface owners.
Other Expense, net
Other expense, net for the year ended December 31, 2025 was $12.8 million, as compared to $1.2 million for the same period in the prior year. The increase in other expense, net was primarily due to expense for issuance costs, conversions, and fair value adjustments of the Convertible Notes. Other expense related to the conversions and adjustments to the Convertible Notes was impacted by the Company’s higher stock price during 2025. T he Company also recognized deferred debt issuance costs as a result of placing the syndication process on hold upon the termination of the FCA Offtake Agreement. The increase in other expense, net in the current period was partially offset by the absence of a loss on sales and a write-down of raw material inventory in the current year, compared to the same period of the prior year. Refer to Note 11, Other Expense, net, of the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further details.
FINANCIAL POSITION
Operating Activities
Net cash used in operating activities of $9.9 million for the year ended December 31, 2025, represents an increase of $4.1 million compared to the same period in 2024. The increase in cash used in operating activities was primarily due to the absence of $3.6 million of cash collected on sales of raw material inventory in 2024, and changes in other working capital.
Investing Activities
Net cash used in investing activities increased by $6.8 million for the year ended December 31, 2025, as compared to the same period in 2024. For both periods, the investing activity represents construction capital expenditures as the Company continues a managed approach to construction activity of Phase I of the Kellyton Graphite Plant, slightly offset by cash received from sales of assets. Refer to Note 4, Property, Plant and Equipment of the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further details.
Financing Activities
Net cash provided by financing activities increased by $61.8 million for the year ended December 31, 2025, as compared to the same period in 2024. The increase was primarily due to net cash proceeds received for the Convertible Notes issued in the current year and an increase in shares of Common Stock sold under the ATM Sales Agreement and 2024 Lincoln Park PA during the current year, compared to the same period in 2024.
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LIQUIDITY AND CAPITAL RESOURCES
The Company has not recorded revenue from its graphite operations, and as such, Westwater is subject to all the risks associated with a development stage company. Management expects to continue to incur cash losses to further advance the Coosa Graphite Deposit, to continue construction activity at the Kellyton Graphite Plant and for general and administrative expenses until operations commence at the Kellyton Graphite Plant. Operations at the Kellyton Graphite Plant are dependent on securing the additional funding needed to complete construction of Phase I of the Kellyton Graphite Plant.
During the year ended December 31, 2025, and through the date the consolidated financial statements are issued, the Company continued construction activities related to the Kellyton Graphite Plant. However, the construction activities have been significantly reduced from anticipated levels until additional funding is secured to advance Phase I of the Kellyton Graphite Plant. The Company’s construction-related contracts include termination provisions at the Company’s election that do not obligate the Company to make payments beyond what is incurred by the third-party service provider, including purchases of long lead equipment, through the date of such termination.
During the year ended December 31, 2025, the Company sold approximately 36.1 million shares of Common Stock for net proceeds of $53.4 million pursuant to the ATM Sales Agreement, and sold approximately 5.1 million shares of Common Stock for net proceeds of $3.2 million pursuant to 2024 Lincoln Park PA. Additionally, during the year ended December 31, 2025, the Company had proceeds of $10.0 million related to the Convertible Notes.
On December 31, 2025, the Company’s cash balance was $48.6 million. As of December 31, 2025, the Company had approximately $71.9 million remaining available for future sales under the ATM Sales Agreement and approximately $26.2 million worth of shares of Common Stock available for sale under the 2024 Lincoln Park PA, subject to certain limitations contained within the Convertible Notes.
See Note 9, Stockholders’ Equity of the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further details regarding the Company’s equity financing agreements.
While the Company has advanced its business plan and has been successful in the past 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. Recent volatility in the equity and debt capital markets, higher interest rates, inflation, electric vehicle production and adoption rates, uncertain economic conditions and regulatory policy and enforcement, tariff policy and import/export restrictions, and unstable geopolitical conditions, could significantly impact the Company’s ability to access the necessary funding to advance its business plan. On July 3, 2024, the Company filed a Registration Statement on Form S-3 (the “Registration Statement”), which was declared effective by the SEC on August 29, 2024. The Company’s ability to raise additional funds under the ATM Sales Agreement and the 2024 Lincoln Park PA may be limited by the Company’s market capitalization, share price and trading volume.
Management believes the Company’s current cash balance is sufficient to fund its planned non-discretionary expenditures beyond a year after the date that this Annual Report on Form 10 K was issued. For additional disclosure, refer to Note 2, Liquidity of the consolidated financial statements in Item 8 of this Annual Report on Form 10-K.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our significant accounting policies are described in Note 1, The Company and Significant Accounting Policies to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K. We believe our most critical accounting policies involve those requiring the use of significant estimates and assumptions in determining values or projecting future costs.
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Property, Plant and Equipment
The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company considers events or changes in circumstances such as, but not limited to, significant negative impacts in the market price or demand of graphite or potential graphite products, a significant adverse change in the extent or manner to which the Company will use its long-lived asset (or asset group), adverse social or political developments, accumulation of costs over projected budget or accumulation of costs in excess of potential future cash flows of a long-lived asset (or asset group).
Graphite Processing Facilities and Equipment
Impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets. An impairmentloss is measured and recorded based on discounted estimated future cash flows or upon an estimate of fair value that may be received in an exchange transaction. Future cash flows are estimated based on expected graphite prices, production levels, and operating and capital costs over the estimated useful life of the project. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The Company’s estimate of future cash flows requires significant management judgement and is based on numerous assumptions. Actual future cash flows may be significantly different than the estimates, as actual future quantities of production, future changes in market price or demand of graphite, operating and capital costs, and availability and cost of capital are each subject to significant risks and uncertainties.
Mineral Properties
Impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets. An impairmentloss is measured and recorded based on discounted estimated future cash flows or upon an estimate of fair value that may be received in an exchange transaction. Future cash flows are estimated based on quantities of recoverable minerals, projected graphite prices, production levels, and operating and capital costs, based upon the projected remaining future graphite or vanadium production. Existing proven and probable reserves and value beyond proven and probable reserves, including mineralization that is not part of the measured, indicated or inferred resource base, are included when determining the fair value of mine site reporting unit at acquisition and, subsequently, in determining whether the assets are impaired. The term “recoverable minerals” refers to the estimated amount of graphite or vanadium that will be obtained after taking into account losses during processing and treatment. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The Company’s estimate of future cash flows requires significant management judgement and is based on numerous assumptions. Actual future cash flows may be significantly different than the estimates, as actual future quantities of recoverable minerals, future changes in market price or demand of graphite, production levels and operating costs of production and availability and cost of capital are each subject to significant risks and uncertainties.
Convertible Notes
The Convertible Notes are reflected at fair value because the Company elected to measure these financial instruments utilizing the fair value option, in accordance with ASC 825, Financial Instruments , for the entirety of the term of the Convertible Notes given that the embedded conversion elements would likely require bifurcation. The fair value of the Convertible Notes is considered Level 3 as the Company considers unobservable inputs related to the probability of the occurrence of certain contingent redemption features in its determination of fair value, and unobservable inputs related to potential changes in the Company’s future stock prices based on a binomial lattice pricing model. Changes in those unobservable inputs could significantly impact the estimated fair value of the Convertible Notes and the Company may experience volatility in reported earnings until the Convertible Notes are converted.
