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FAIR VALUE ACCOUNTING | 9 Months Ended
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Sep. 30, 2023
Fair Value Disclosures [Abstract] |
Fair Value Accounting | FAIR VALUE ACCOUNTING Assets and Liabilities Measured at Fair Value on a Recurring Basis Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Fair value accounting utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 – Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). The Company’s financial instruments include cash, restricted cash, accounts receivable, accounts payable and current accrued liabilities. These instruments are carried at cost, which approximates fair value due to the short-term maturities of the instruments. Allowances for doubtful accounts are recorded against the accounts receivable balance to estimate net realizable value. As of September 30, 2023 and December 31, 2022, the fair values of cash, restricted cash, short-term deposits, receivables, accounts payable and accrued liabilities approximate their carrying values because of the short-term nature of these instruments. The Company’s investments in marketable equity securities are publicly traded stocks measured at fair value and classified within Level 1 and Level 2 in the fair value hierarchy. Level 1 marketable equity securities use quoted prices for identical assets in active markets, while Level 2 marketable equity securities utilize inputs based upon quoted prices for similar instruments in active markets. The Company’s investments in marketable debt securities are valued using quoted prices of a pricing service and, as such, are classified within Level 2 of the fair value hierarchy. The Company’s investments accounted for at fair value consisting of Common Shares are valued using quoted market prices in active markets and, as such, are classified within Level 1 of the fair value hierarchy. The Company’s investments accounted for at fair value consisting of warrants are valued using the Black-Scholes option model based on observable inputs and, as such, are classified within Level 2 of the hierarchy. The Convertible Note received as part of the Alta Mesa Transaction was valued as of February 14, 2023, upon closing, using a binomial lattice model. The fair value calculation uses significant unobservable inputs, including: (i) volatility 60%, and (ii) yield of 9.5%. The Company used the same binomial lattice model to value the Convertible Note as of September 30, 2023. As of September 30, 2023, the fair value calculation uses significant unobservable inputs, including: (i) volatility of 55%, and (ii) yield of 10.3%. Increases or decreases in the volatility and/or the selected yield can result in an increase or decrease in the fair value of the Convertible Note. The following tables set forth the fair value of the Company’s assets and liabilities measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy as of September 30, 2023 and December 31, 2022. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
September 30, 2023 | Level 1 |  | Level 2 |  | Level 3 |  | Total
Cash equivalents(1) | $ | — |  |  | $ | 11,995 |  |  | $ | — |  |  | $ | 11,995 |
Investments accounted for at fair value | 26,063 |  |  | 6 |  |  | — |  |  | 26,069 |
Marketable debt securities | — |  |  | 69,418 |  |  | — |  |  | 69,418 |
Convertible note | — |  |  | — |  |  | 46,610 |  |  | 46,610 |
Marketable equity securities | 1,180 |  |  | 25 |  |  | — |  |  | 1,205 |
| $ | 27,243 |  |  | $ | 81,444 |  |  | $ | 46,610 |  |  | $ | 155,297 |
(1) Cash equivalents are comprised of U.S. Treasury Bills, Government Agency Bonds and mutual funds purchased within three months of their maturity dates.
December 31, 2022 | Level 1 |  | Level 2 |  | Level 3 |  | Total
Cash equivalents(1) | $ | — |  |  | $ | 30,336 |  |  | $ | — |  |  | $ | 30,336 |
Investments accounted for at fair value | 19,263 |  |  | 66 |  |  | — |  |  | 19,329 |
Marketable debt securities | — |  |  | 11,125 |  |  | — |  |  | 11,125 |
Marketable equity securities | 1,033 |  |  | 34 |  |  | — |  |  | 1,067 |
| $ | 20,296 |  |  | $ | 41,561 |  |  | $ | — |  |  | $ | 61,857 |
(1) Cash equivalents are comprised of U.S. Treasury Bills and Government Agency Bonds purchased within three months of their maturity dates. Changes in Level 3 Fair Value Measurements The following table is a reconciliation of the beginning and ending balance recorded for the Convertible Note classified as Level 3 in the fair value hierarchy:
Beginning balance, February 14, 2023 | $ | 59,457 |
Principal redeemed (1) | (20,000) |
Realized gain included in other income (loss) (1) | 181 |
Unrealized gain included in other income (loss) | 6,972 |
Ending balance, September 30, 2023 | $ | 46,610 |
(1) During the three and nine months ended September 30, 2023, enCore redeemed $20.00 million of the principal amount of the Convertible Note. Unpaid interest for the redeemed principal is $0.39 million. As of September 30, 2023, the difference between the fair value of the Convertible Note and the unpaid principal amount was $6.61 million. Investments Accounted for at Fair Value The fair value of the investments is calculated as the quoted market price of the marketable equity security multiplied by the quantity of shares held by the Company. As of December 31, 2022, the Company held a 17.4% ownership interest in its investment in Consolidated Uranium Inc. (“CUR”) and a 13.5% ownership interest in its investment in Virginia Energy Resources Inc. (“Virginia Energy”). These investments provide the Company with the ability to have significant influence, but not control, over their operations. The Company has elected the fair value option for each of these investments. As of December 31, 2022, the fair value of the Company’s investments in CUR and Virginia Energy were $16.50 million and $2.83 million, respectively. On January 24, 2023, CUR acquired 100% of the issued and outstanding common shares of Virginia Energy for 0.26 common shares of CUR per common share of Virginia Energy. As a result, the Company’s 9,439,857 common shares of Virginia Energy were converted into 2,454,362 million common shares of CUR (the “Conversion”). Following the Conversion, the Company owned 16,189,548 common shares of CUR, which represented an ownership interest of 16.7% in CUR as of closing. As of September 30, 2023, the fair value of the Company’s investment in CUR was $26.07 million and its ownership interest was 15.7%. The Company had an unrealized gain of $8.89 million and $6.70 million, respectively, for the three and nine months ended September 30, 2023. For the three and nine months ended September 30, 2022, the Company had an unrealized gain (loss) of $3.12 million and $13.72 million, respectively. The unrealized gain (loss) related to these investments is included in Other income (loss) in the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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