EU

Business Context and Reporting Period

Company: Encore Energy Corp. (enCore)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2026
Business Overview: enCore is a U.S.-focused uranium exploration and extraction company utilizing in-situ recovery (ISR) technology. It operates primarily in Texas (Alta Mesa, Rosita), South Dakota (Dewey Burdock), and Wyoming (Gas Hills). The company is classified as an "Exploration Stage Issuer" as it has not yet established proven or probable mineral reserves.

Key Financial Metrics (Six Months Ended June 30, 2026)

Uranium Sales Data (Six Months): Sold 485,000 lbs of U3O8 at an average realized price of $70.10/lb. Weighted average cost of sales was $75.54/lb.

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased 55% to $33.997 million from $21.904 million in the prior year period, driven by a 39% increase in sales volume (135,000 lbs) and a 12% increase in realized sales price.
• Cost of Sales: Increased 76% to $36.637 million. The weighted average cost per pound rose to $75.54 from $59.42, primarily due to a higher mix of purchased uranium (costing ~$81.85/lb) versus extracted uranium (costing ~$57.36/lb).
• Operating Expenses: Total operating costs decreased 53% to $16.897 million from $36.011 million. This significant decrease is largely due to a one-time gain on sale of mineral properties of $34.438 million recognized from the sale of NM Energy Canada assets to Verdera Energy Corp.
• Market Securities: The company recorded an unrealized loss of $25.918 million on marketable securities, compared to a loss of $7.066 million in the prior period, reflecting unfavorable market conditions.
• Debt: Interest expense increased 520% to $3.634 million due to the issuance of $115 million in Convertible Senior Notes in August 2025.

Guidance, Outlook, and Risks

Operational Outlook:

• Production: The company anticipates reduced overall production estimates for 2026 due to permitting delays in South Texas (Alta Mesa and Upper Spring Creek).
• Cost Reduction: Beginning in April 2026, the company reduced its headcount by approximately 20% to align with strategic objectives and expects annualized cost savings.
• Permitting: Significant progress was made at the Dewey Burdock Project in South Dakota, with NRC license renewal and BLM Plan of Operations approval received in June 2026.

Capital Resources:

• The company believes existing cash, operating cash flows, and potential future financings are sufficient for the next 12 months.
• On August 13, 2026, the company entered into a Controlled Equity Offering Sales Agreement to sell up to $250 million of common shares.

Risks and Contingencies:

• Internal Controls: Disclosure controls and procedures were deemed ineffective as of June 30, 2026, due to previously reported material weaknesses, though remediation is ongoing.
• Litigation: A putative securities class action filed in March 2025 alleges failures in internal controls and capitalization of costs. Management believes an adverse outcome is not probable or estimable.
• Market Volatility: Significant exposure to uranium spot prices and unrealized losses on marketable securities.

Investor Verification Checklist

• Permitting Status: Verify the timeline for TCEQ approvals for the Upper Spring Creek waste disposal well and Alta Mesa PAA-8 production authorization, as these are critical for revenue growth.
• Cost Structure: Confirm the sustainability of the cost reduction plan following the 20% headcount reduction and the impact of the higher mix of purchased uranium on gross margins.
• Internal Controls: Monitor the progress of the remediation plan for material weaknesses in internal controls over financial reporting.
• Verdera Transaction: Track the status of the distribution of Verdera Energy Corp. shares to enCore shareholders and the valuation of the remaining equity interest.
• Liquidity: Assess the burn rate given the net cash used in operating activities of $42.5 million for the six-month period.