XML 36 R21.htm IDEA: XBRL DOCUMENT v3.24.3
FAIR VALUE ACCOUNTING
 9 Months Ended
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 as of September 30, 2024 and December 31, 2023 include cash, cash equivalents, 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.
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 include certain 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 used significant unobservable inputs within the Level 3 fair value hierarchy, including: (i) volatility 60%, and (ii) yield of 9.5%. 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. Between February 14, 2023 and November 3, 2023, enCore early redeemed $40.00 million of the principal value of the Convertible Note. On November 9, 2023, the Company sold the remaining unpaid balance of $20 million owed under the secured Convertible Note for total consideration of $21.00 million plus $1.50 million in unpaid accrued interest, less a sales commission of $0.10 million paid to a third-party broker. As a result of enCore’s earlier pay-down and the $22.40 million received in connection with the sale of the Convertible Note, the Company received payment in full for the Alta Mesa Transaction, and no further consideration is owed in connection therewith.
The Company used the discounted cash flow approach, which is an income statement technique, to estimate the fair value of the its contingent consideration payment to RadTran using an indicated discount rate of 10.2%, as of the acquisition date, August 16, 2024 and 8.2% as of September 30, 2024, which is based on significant inputs not observable in the market, and thus represents a Level 3 measurement within the fair value hierarchy.
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. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
Level 1Level 2Level 3Total
September 30, 2024
Assets
Cash equivalents(1)
$— $18,468 $— $18,468 
Marketable debt securities— 77,333 — 77,333 
Marketable equity securities23,742 79 — 23,821 
Total assets$23,742 $95,880 $— $119,622 
Liabilities
Contingent consideration— — 1,727 1,727 
December 31, 2023
Assets
Cash equivalents(1)
$— $40,512 $— $40,512 
Marketable debt securities— 107,466 — 107,466 
Marketable equity securities25,554 24 — 25,578 
$25,554 $148,002 $— $173,556 
(1)     Cash and cash equivalents are comprised of U.S. Treasury Bills, Government Agency Bonds, U.S. Non-Redeemable Term Deposits and mutual funds purchased within three months of their maturity date.
Changes in Level 3 Fair Value Measurements
The following table is a reconciliation of the beginning and ending balance recorded for the contingent consideration classified as Level 3 in the fair value hierarchy:
Beginning balance, August 16, 2024$1,690 
Increase to intellectual property37 
Ending balance, September 30, 2024$1,727 
Investments Accounted for at Fair Value
The fair value of investments accounted for at fair value was calculated as the quoted market price of the marketable equity security multiplied by the quantity of shares held by the Company. During the nine months ended September 30, 2023, the
Company held ownership interests in Virginia Energy Resources, Inc. (“Virginia Energy”) and Consolidated Uranium Inc. (“CUR”). These investments provided the Company with the ability to have significant influence, but not control, over their operations. The Company elected the fair value option for each of these investments.
On January 24, 2023, CUR acquired 100% of the issued and outstanding common shares of Virginia Energy for 0.26 common shares of CUR for every one 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.
On December 5, 2023, IsoEnergy Ltd. (“IsoEnergy”) acquired all of the issued and outstanding common shares of CUR (the “CUR Shares”). Pursuant to the arrangement, CUR’s shareholders received 0.500 common shares of IsoEnergy for every CUR Share. When converted, the Company's CUR Shares result in an approximate ownership interest in IsoEnergy of 5.0%. On October 19, 2023, IsoEnergy completed its marketed private placement offering of 8,134,500 subscription receipts of IsoEnergy (the “Subscription Receipts”) at a price of Cdn$4.50 per Subscription Receipt; in order to retain its post-arrangement ownership interest in IsoEnergy, the Company purchased 406,650 Subscription Receipts for Cdn$1.83 million. Each outstanding Subscription Receipt was converted into one common share of IsoEnergy. Following completion of this arrangement, the Company owned 8,501,424 shares of IsoEnergy for an approximate ownership interest of 5.0% as of December 5, 2023.
Upon completion of this arrangement, the Company does not have significant influence over IsoEnergy as a result of no representation on the Board of Directors of IsoEnergy and its reduced ownership interest. Therefore, the investment is no longer accounted for as an equity method investment. The Company's judgment regarding the level of influence over its equity method investments includes considering key factors such as the Company's ownership interest, representation on the Board of Directors and participation in the policy-making decisions of equity method investees. As such, the Company's shares in IsoEnergy are accounted for as marketable securities with the fair value option elected on its Consolidated Balance Sheet and changes in value are included in Other income (loss) in the Consolidated Statement of Operations and Comprehensive Income.
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. The unrealized gain (loss) related to these investments is included in Other income in the Condensed Consolidated Statement of Operations and Comprehensive Income.