Nasdaq.com) immediately preceding the signing of the binding agreement, or (ii) the average closing price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the signing of the binding agreement (the “Nasdaq 20% Rule”). Under applicable Nasdaq rules, the Nasdaq 20% Rule continues to apply to transactions we entered into while our common stock was listed on the Nasdaq Capital Market, despite our subsequent decision to delist our common stock from the Nasdaq Capital Market.
In addition, because our common stock has been listed on the NYSE American commencing March 19, 2021, we are subject to the NYSE American listing rules, including Rule 713(a) of the NYSE American Company Guide (together with the Nasdaq 20% Rule, the “20% Rules”). Rule 713(a) of the NYSE American Company Guide requires stockholder approval of a transaction, other than a public offering, involving the sale, issuance or potential issuance by an issuer of common stock at a price less than the greater of book or market value which together with sales by officers, directors or principal stockholders of the issuer equals 20% or more of presently outstanding common stock.
Accordingly, to comply with the Exchange Cap and 20% Rules, we are seeking stockholder approval of the issuance of shares of our common stock under the Purchase Agreement. Through March 25, 2021, we have sold 3,800,000 shares of common stock (plus the 150,000 commitment shares) for aggregate gross proceeds of $24,922,200 under the Purchase Agreement, and $75,077,800 of the $100.0 million total commitment under the Purchase Agreement remains available for sale. We may sell up to an additional 4,370 shares under the Purchase Agreement without seeking additional stockholder approval in compliance with the 20% Rules.
In order to fully utilize the $100.0 million expected to be available to us, we believe that we would need to issue 12,000,000 additional shares of common stock to Lincoln Park, which would be in excess of the 20% Rules. Accordingly, in order to be able to sell to Lincoln Park the full amount available under the Purchase Agreement, we are seeking stockholder approval to issue more than 19.99% of our outstanding shares as of the date we entered into the Purchase Agreement with Lincoln Park.
In order to comply with the 20% Rules and to satisfy conditions under the Purchase Agreement, we are seeking stockholder approval to permit issuance of more than 19.99% of our common stock to Lincoln Park pursuant to the Purchase Agreement. We are seeking stockholder approval for the issuance of up to 15,950,000 shares of our common stock under the Purchase Agreement. We would seek additional stockholder approval before issuing more than such 15,950,000 shares.
Effect of Failure to Obtain Stockholder Approval
If the stockholders do not approve this Proposal 1, we will be unable to issue shares of common stock to Lincoln Park pursuant to the Purchase Agreement in excess of the Exchange Cap. As a result, the Company would need to seek alternative sources of financing in order to complete engineering and design and to commence construction of the processing facility for the Coosa Graphite Project. Those alternative sources of financing could include a traditional capital raise, which from past experience have been quite costly, are generally limited in size, may result in significant price discounts for stock offerings, and could include the concurrent issuance of warrants. Without the availability of the Purchase Agreement, Westwater also may need to consider putting into place a convertible debt facility, but those facilities could include significant discounts and could contain terms that may materially impact the value of the Coosa Graphite Project. Yet another option if the Purchase Agreement is not approved is the use of a partner or joint venture, but finding and negotiating with such entities takes time and, in the end, it is likely that Westwater would have to share a substantial portion of the anticipated profits from the Coosa Graphite Project, which is currently wholly-owned by Westwater.
Reasons for Transaction and Effect on Current Stockholders
The Board of Directors has determined that the Purchase Agreement with Lincoln Park is in the best interests of the Company and its stockholders because the right to sell shares to Lincoln Park provides the Company with a reliable source of capital at low cost as compared to other sources, and the ability to access that capital when and as needed, which de-risks the Coosa Graphite Project.