WESTWATER RESOURCES, INC. Fair Value Disclosure
6. FAIR VALUE MEASUREMENTS
Recurring Fair Value Measurements
The following tables set forth by level, within the fair value hierarchy, the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 and 2024. In accordance with U.S. GAAP, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The carrying amounts of certain financial instruments, including cash, accrued liabilities and accounts payable approximate fair value due to their short maturities. Consequently, such financial instruments are not included in the following tables.
December 31, 2025 | ||||||||||||
(thousands of dollars) | | Level 1 | | Level 2 | | Level 3 | | Total | ||||
Current assets |
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Cash equivalent: | ||||||||||||
Money market account | $ | 48,395 | $ | — | $ | — | $ | 48,395 | ||||
Current liabilities |
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Series A-1 Convertible Notes | — | — | (1,848) | (1,848) | ||||||||
Series B-1 Convertible Notes | — | — | (4,125) | (4,125) | ||||||||
Total current assets (liabilities), net recorded at fair value | $ | 48,395 | $ | — | $ | (5,973) | $ | 42,422 | ||||
December 31, 2024 | ||||||||||||
(thousands of dollars) | | Level 1 | | Level 2 | | Level 3 | | Total | ||||
Current assets |
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Cash equivalent: | ||||||||||||
Money market account | $ | 3,675 | $ | — | $ | — | $ | 3,675 | ||||
Total current assets recorded at fair value | $ | 3,675 | $ | — | $ | — | $ | 3,675 | ||||
The fair value of the Convertible Notes is considered Level 3 as the Company considers unobservable inputs related to the probability of the occurrence of certain contingent redemption features in its determination of fair value, and unobservable inputs related to potential changes in the Company’s future stock prices based on a binomial lattice pricing model. Changes in those unobservable inputs could significantly impact the estimated fair value of the Convertible Notes.
The estimated fair value of the Convertible Notes as of December 31, 2025, were computed using the following assumptions:
December 31, 2025 | ||||
| Series A-1 Convertible Notes | | Series B-1 Convertible Notes | |
Expected volatility | 104.2% | 99.6% | ||
Expected dividend rate | — | — | ||
Risk-free interest rate | 3.48% | 3.47% | ||
The Company did not make any transfers into or out of Level 3 of the fair value hierarchy during the years ended December 31, 2025 and 2024.
As of December 31, 2025, the remaining principal balance for the Series A-1 Convertible Notes and Series B-1 Convertible Notes Convertible Notes were approximately $1.4 million and $3.3 million, respectively.
The net carrying amounts of the liability are summarized as follows:
Balances, | For the Year Ended December 31, 2025 | Balances, | |||||||||||||
(thousands of dollars) | December 31, 2024 | Issuances | Conversions | Change in Fair Value | December 31, 2025 | ||||||||||
Series A-1 Convertible Notes | $ | — | $ | (5,000) | $ | 3,650 | $ | (498) | $ | (1,848) | |||||
Series B-1 Convertible Notes | — | (5,000) | 1,700 | (825) | (4,125) | ||||||||||
Total | $ | — | $ | (10,000) | $ | 5,350 | $ | (1,323) | $ | (5,973) | |||||
Losses on Convertible Notes related to both conversions and were recognized within the “Other expense, net” line item within the Consolidated Statement of Operations for the year ended December 31, 2025, as the losses were unrelated to instrument specific credit risk (see Note 11, Other Expense, Net for more details). During the year ending December 31, 2025, the Company issued 10,367,477 shares of the Company’s Common Stock to settle approximately $4.7 million of net carrying amount related to the Convertible Notes that were entered into during 2025.
Non-recurring Fair Value Measurements
There were no assets or liabilities recognized at fair value on a non-recurring basis by level as of December 31, 2025 and 2024.
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.