LIQUIDITY

12 Months Ended

Dec. 31, 2021

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 into the near future. 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 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, 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, 2021, execution of the business plan for development of the Coosa Project was underway, with the completion of the pilot program for processing flake graphite into battery-grade graphite products. The start-up of operations for the pilot program commenced in the fourth quarter of 2020 and was completed during the fourth quarter of 2021. The Company used the data generated from the pilot program to inform the DFS and the requirements and specifications for building the Coosa Plant. Subject to financing, the Company expects the construction phase for Phase I of the Coosa Plant to continue throughout 2022 and to be completed in the first half of 2023, at which time the Company expects to begin generating revenues from sales of battery-grade graphite products.

At December 31, 2021 the Company’s cash balances were $115.3 million. During the year ended December 31, 2021, the Company sold approximately 10.0 million shares of common stock for net proceeds of $49.5 million pursuant to the ATM Offering Agreement and 6.1 million shares of common stock for net proceeds of $34.6 million pursuant to the 2020 Lincoln Park PA. As of December 31, 2021, the Company has $47.7 million remaining available for future sales under the ATM Offering Agreement and has 9,700,252 shares of common stock available for future sales pursuant to the 2020 Lincoln Park PA.

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 $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.

Management believes the Company’s current cash balance is sufficient to fund its planned non-discretionary expenditures through 2022. The Company may use of the ATM Offering Agreement and the 2020 Lincoln Park PA to support construction of Phase I of the Coosa Plant.

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 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, including the recent emergence of variant strains of the virus, could significantly impact the Company’s ability to raise funds through equity financing. Market conditions, including but not limited to, inflation and supply chain disruptions, could adversely impact the planned cost of Phase I of the Coosa Plant. Along with evaluating the continued use of the ATM Offering Agreement and the 2020 Lincoln Park PA, the Company may consider project financing for additional funding needed to completed Phase I of the Coosa Plant. The alternative sources of project financing could include, but are not limited to, convertible debt or pursuing a partnership or joint venture. In the event funds are not available for project financing to complete construction of Phase I of the Coosa Plant in 2023, the Company expects to be able to fund its non-discretionary expenditures, however, the Company may be required to change its planned business development strategies.