Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
Market risk is the risk to the Company of adverse financial impact due to changes in the fair value or future cash flows of financial instruments because of fluctuations in interest rates and foreign currency exchange rates.
Commodity Price Risk
The Company is subject to commodity price risk related to the market price of uranium. Future sales would be impacted by both spot and long-term uranium price fluctuations. Historically, uranium prices have been subject to fluctuation, and the price of uranium has been and will continue to be affected by numerous factors beyond our control, including the demand for nuclear power, political and economic conditions, governmental legislation in uranium producing and consuming countries, and production levels and costs of production of other producing companies. The average spot market price was $86.73 per pound as of March 4, 2026.
70
Table of Contents
Transactions with Related Parties
During the year ended December 31, 2025, we did not participate in any reportable material transactions with related parties.
Proposed Transactions
As is typical of the mineral exploration, development, and mining industry, we will consider and review potential merger, acquisition, investment and venture transactions and opportunities that could enhance shareholder value. Timely disclosure of such transactions is made as soon as reportable events arise.
New Accounting Pronouncements Which were Implemented this Year
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires additional disaggregation of the reconciliation between the statutory and effective tax rate for an entity and of income taxes paid. The amendments improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, and is applied either prospectively or retrospectively at the option of the Company. The Company adopted this standard on January 1, 2025, which resulted in expanded income tax disclosures in these consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures, which includes amendments to require the disclosure of certain specific costs and expenses that are included in a relevant expense caption on the face of the income statement. Specific costs and expenses that would be required to be disclosed include: purchases of inventory, employee compensation, depreciation and intangible asset amortization. Additionally, a qualitative description of other items is required, equal to the difference between the relevant expense caption and the separately disclosed specific costs. The amendments in ASU 2024-03 are effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, and are applied either prospectively or retrospectively at the option of the Company. We are evaluating the impact of the amendments on our consolidated financial statements and disclosures.
Critical Accounting Estimates
Our significant accounting policies are described in note 2 of Notes to Consolidated Financial Statements. As described in note 2, we are required to make estimates and assumptions that affect the reported amounts and related disclosures of assets, liabilities, revenue, and expenses. Our estimates are based on our experience and our interpretation of economic, political, regulatory, and other factors that affect our business prospects. Actual results may differ significantly from certain critical accounting estimates as discussed below.
Inventory
We allocate the production costs of the Lost Creek facility to estimated inventory quantities at various stages of production to determine inventory valuation. We estimate the net realizable value of the inventory based on estimated prices and revenues from the sale of the inventory. Our inventories are then valued at the lower of the estimated cost or net realizable value. Changes in these estimates may materially impact the value of the inventory.
Impairment Testing
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Management applies significant judgment to assess mineral properties and capital assets for impairment indicators that could give rise to the requirement to conduct a formal impairment test. Circumstances that could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; significant changes in expected capital, operating, or reclamation costs; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.
When potential impairment is indicated, management calculates the estimated undiscounted future net cash flows relating to the asset or asset group using estimated future prices, recoverable resources and operating, capital, and reclamation costs. When the carrying
71
Table of Contents
value of an asset exceeds the related undiscounted cash flows, the asset is written down to its estimated fair value, which is determined using discounted future net cash flows, or other measures of fair value. Changes in these estimates may materially impact the carrying value of the assets. Management did not identify impairment indicators that would require a formal impairment test.
Lost Creek has been the Company’s sole source of U 3 O 8 produced and sold to generate sales revenues since 2013. The economic viability of the Company’s mining activities, including the expected duration and profitability of Lost Creek and of any future ISR mines, such as Shirley Basin, has many risks and uncertainties. These include, but are not limited to: (i) a significant, prolonged decrease in the market price of uranium; (ii) difficulty in marketing and/or selling uranium concentrates; (iii) significantly higher than expected capital costs to construct the mine and/or processing plant; (iv) significantly higher than expected extraction costs; (v) significantly lower than expected uranium extraction; (vi) significant delays, reductions or stoppages of uranium extraction activities; and (vii) the introduction of significantly more stringent regulatory laws and regulations.
Our mining activities may change because of any one or more of these risks and uncertainties and there is no assurance that any mineral deposit from which we extract uranium or other minerals will result in profitable mining activities.
Asset Retirement Obligations
For mining properties, various federal and state mining laws and regulations require the Company to reclaim the surface areas and restore groundwater quality to the pre-existing quality or a concentration that supports a class of use after the completion of mining. The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs an obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets.
Asset retirement obligations consist of estimated final well abandonments, plant closure and removal and associated reclamation and restoration costs to be incurred by the Company in the future. The estimated fair value of the asset retirement obligation is based on the current cost escalated at an inflation rate and discounted at a credit adjusted risk-free rate. This liability is capitalized as part of the cost of the related asset and amortized over its remaining productive life. The liability is accreted until it reaches the estimated future reclamation cost and remains until the Company settles the obligation. Changes in these estimates may materially impact the value of the obligations.
Derivative Financial Instruments
We record derivative financial instruments on our consolidated balance sheets at fair value as either an asset or a liability with changes in fair value recognized currently in earnings. As of December 31, 2025, we have recognized four separate derivative instruments on our consolidated balance sheets, two of which are associated with our 2025 Convertible Notes.
The valuation methodology used as the basis of determining the amount allocated to the Conversion Option Derivative instrument and the related mark-to-market gain (loss) was a with-and-without methodology utilizing a binomial lattice model (Level 3). This model required the use of assumptions that were subjective and, had different assumptions been used, the resulting mark to market gain (loss) and amount reflected as a discount to the respective Convertible Notes could have been materially different.
The valuation methodology used as the basis of determining the amount allocated to the Capped Call Derivative and the related mark-to-market gain (loss) was a Black Scholes fair value model (Level 2). This model used implied volatility assumptions that the Capped Call counterparty banks utilized and are subjective and, had different assumptions been used, the resulting mark to market gain (loss) could have been materially different.
The valuation methodology used as the basis of determining the amount allocated to the warrant liability and the related mark-to-market gain (loss) was a Black Scholes fair value model (Level 2). The valuation methodology used to determine the inventory derivative obligation associated with the Company’s agreement whereby the Company has borrowed 250,000 pounds as of December 31, 2025, is based on the current average U 3 O 8 spot price and the number of pounds borrowed, adjusted for the inventory loan deposit paid (Level 2). While these two derivative instruments incorporate certain assumptions into their valuations, these assumptions are less subjective in nature relative to the Conversion Option Derivative and the Capped Call Derivative but, nevertheless, had different assumptions been used, the resulting mark to market gain (loss) could have been materially different.
72
Table of Contents