WARRANT LIABILITY |
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May 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| WARRANT LIABILITY | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| WARRANT LIABILITY | 11.WARRANT LIABILITY On February 24, 2026, in connection with the PIPE financing (Note 12), the Company issued warrants to an accredited investor to purchase an aggregate of 2,500,000 shares of common stock of the Company at an exercise price of $12.00 per share, in addition to 29,700 Series A Cumulative Convertible Preferred Stock. The fair value of warrants upon issuance was $4,174,276. These warrants are accounted for as derivative liabilities as they contain a put option that may be exercised in the event of a fundamental transaction of the Company, pursuant to ASC 480-10, Distinguishing Liabilities from Equity. As such, the warrants are recognized initially at fair value and subsequently remeasured at fair value through earnings, reported as change in fair value of warrant liability in the unaudited condensed consolidated interim statements of operations. The warrant liability is classified within Level 3 of the fair value hierarchy, as the valuation technique uses significant unobservable inputs, including expected volatility and, at issuance, a discount for lack of marketability. The following is a continuity of the Company’s derivative warrant liabilities:
The entire change in fair value of the warrant liability during the six months ended May 31, 2026 relates to warrants still outstanding as of May 31, 2026, as none of the warrants have been exercised or . The fair value of the warrant liability arising from 2,500,000 warrants issued with the PIPE financing was calculated using the Monte Carlo model, performed by a third-party valuation specialist. The key inputs used in the Monte Carlo model were as follows:
A Monte Carlo model is utilized due to the existence of an exercise price reset mechanism attached to these warrants, that could be triggered on the twenty-first trading day following the date that is six months after issuance if the 20-day VWAP of the common stock of the Company (“Measurement Price”) is less than the exercise price of $12.00 per share, with the exercise price being reduced to the greater of the Measurement Price and $7.50. As of May 31, 2026, a discount for lack of marketability for warrant liability valuation has been reduced from 64.1% at issuance to nil, as a resale registration statement became effective on April 24, 2026, making the underlying shares freely tradable. A discount for lack of marketability of 64.1% was selected as of February 24, 2026 to calibrate the valuation model to the transaction price of the PIPE Financing, in line with the AICPA’s Valuation of Portfolio Company Investments of Venture Capital and Private Equity Funds and Other Investment Companies guide. Expected volatility was estimated based on the median observed historical share price volatility of a set of comparable publicly traded exploration stage uranium companies that have similar risk considerations as the Company, due to the Company’s limited trading history. The fair value of the warrant liability is sensitive to changes in the significant unobservable inputs described above. In general, an increase in expected volatility, or a decrease in discount for lack of marketability, would result in a higher fair value of the warrant liability; while a decrease in expected volatility, or an increase in discount for lack of marketability, would result in a lower fair value. The Company’s expected volatility, in particular, was estimated using a limited set of comparable peer companies given the Company’s limited trading history, and different reasonable judgments about the composition of that peer set could have resulted in a different volatility estimate and a materially different fair value measurement as at May 31, 2026. |
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