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LIQUIDITY | 12 Months Ended
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Dec. 31, 2020
LIQUIDITY |
LIQUIDITY | 2. LIQUIDITY The Company last recorded revenues from operations in 2009. Since 2009, the Company has relied on equity financings, debt financings and asset sales to fund its operations. The Company expects to rely on debt and equity financing to fund its operations. The Company will also continue its cost reduction initiatives to identify ways to reduce its cash expenditures. In 2016, the Company began to expand its business plan into acquisition and development of energy-related materials. Between 2016 and 2020 the Company obtained mineral leases in Nevada and Utah and evaluated a green-fields exploration program for lithium. In 2018, the Company acquired Alabama Graphite Corp. and its Coosa Graphite Project for the purpose of developing the only commercial sized graphite mineral deposit in the contiguous United States and production of advanced graphite products for use in batteries. In the third quarter of 2020, as further discussed below and as further discussed in Note 3, the Company made the strategic decision to focus most of its resources on its graphite business, discontinuing its investment in its lithium mineral properties and selling its uranium business. As of December 31, 2020, execution of the business plan for development of the Coosa Graphite Project was underway, with the commissioning of pilot programs for processing flake graphite into battery-grade graphite products. The start-up of operations for those pilots commenced in the 4 th quarter of 2020 and the Company expects the pilot program phase to last into mid-2021. The Company will use the data generated from the pilot operations to inform the requirements and specifications for building a commercial sized graphite processing facility. Pursuant to the Company’s Preliminary Economic Assessment of the Coosa Graphite Project as modified, financing required for the estimated capital expenditures to construct the commercial plant is approximately $120 million. Subject to financing, the Company expects the construction phase for the commercial plant to begin in the second half of 2021 and be completed in 2022. The Company expects to begin generating revenues from sales of advanced graphite products from the Coosa Graphite Project in 2023. In furtherance of the Company’s strategic shift to graphite battery materials, on December 31, 2020 the Company entered into a securities purchase agreement (“Purchase Agreement”) to sell its U.S. uranium business, including its U.S. uranium exploration assets in New Mexico and idled production assets in Texas to enCore Energy Corp. (“enCore”) (see Note 3). The transaction closed on December 31, 2020. The sale included the elimination of a $9.3 million bonding liability, the elimination of $5.2 million in asset retirement obligations, and the elimination of more than $4.0 million in annual expenditures related to reclamation and compliance costs at the Company’s Kingsville, Vasquez, and Rosita sites in South Texas and its New Mexico land holding costs. The Company received approximately US$1.8 million of enCore common stock and retained royalty interests on the New Mexico uranium properties as consideration for the sale. The Company retained its uranium interests in Turkey, which are subject to ongoing international arbitration proceeding. The Company’s strategic shift to focus solely on its graphite business also resulted in its decision not to renew its lithium mineral leases in Nevada and Utah when the annual rentals of approximately $0.2 million came due in late August 2020. At December 31, 2020 the Company’s cash balances were $50.3 million. During the month of January 2021, the Company sold 9.3 million shares of common stock for net proceeds of $47.3 million pursuant to its Controlled Equity Offering SM Sales Agreement with Cantor Fitzgerald & Co. (“Cantor”) and 0.9 million shares of common stock for net proceeds of $6.6 million pursuant to the December 2020 PA with Lincoln Park (see Note 15). The funding provided by this financing facility has resulted in a cash balance of approximately $101 million at February 11, 2021. The Company is pursuing project financing to support primary funding of the capital expenditures for construction of the commercial plant set to occur in the second half of 2021. Management believes the Company’s current cash balance is sufficient to fund its planned non-discretionary expenditures through 2022. In addition to pursuing other project financing, the Company is evaluating the continued use of the Cantor and Lincoln Park financing facilities for use in funding any required contributions by the Company to support project financing for construction of the commercial graphite facility. While the Company has been successful in the past in 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 to it in amounts sufficient to meet its needs, or on terms acceptable to the Company. Stock price volatility and uncertain economic conditions caused by the COVID-19 pandemic could significantly impact the Company’s ability to raise funds through equity financing. In the event funds are not available for project financing to complete construction of the commercial facility in 2022, the Company will be able to fund its non-discretionary expenditures, however, the Company may be required to change its planned business strategies.

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- Definition The entire disclosure when substantial doubt is raised about the ability to continue as a going concern. Includes, but is not limited to, principal conditions or events that raised substantial doubt about the ability to continue as a going concern, management's evaluation of the significance of those conditions or events in relation to the ability to meet its obligations, and management's plans that alleviated or are intended to mitigate the conditions or events that raise substantial doubt about the ability to continue as a going concern. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 40 -URI http://asc.fasb.org/subtopic&trid=51888271 + Details
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