Note 3 - Acquisition of Uranium One Americas Inc.

6 Months Ended

Jan. 31, 2022

Notes to Financial Statements

Business Combination Disclosure [Text Block]

NOTE 3: ACQUISITION OF URANIUM ONE AMERICAS, INC.

On December 17, 2021, we completed the acquisition of all the issued and outstanding shares of Uranium One Americas, Inc. (“U1A”), a Nevada corporation, from Uranium One Investments Inc., a subsidiary of Uranium One Inc., for total cash consideration of $128,494,545 (the “U1A Acquisition”). Subsequent to the completion of the U1A Acquisition, we changed the name of U1A to UEC Wyoming Corp. (“UEC Wyoming”) and, in conjunction therewith, we also changed the name of U1A’s wholly-owned subsidiary, Uranium One USA Inc., a Delaware corporation, to UEC Uranium Corp.

The UEC Wyoming’s portfolio of projects (the “UEC Wyoming Portfolio”) primarily consists of 12 projects located in Wyoming, six of which are located in the Powder River Basin with four fully permitted, and six of which are located in the Great Divide Basin.  The U1A Acquisition creates a Wyoming hub-and-spoke operation for UEC, which is anchored by UEC Wyoming’s Irigaray processing facility.

The U1A Acquisition was accounted for as a business combination with UEC identified as the acquirer.  The Company’s assumption that the U1A Acquisition is a business combination is based on the Company’s assessment that substantially all the fair value of the assets are not concentrated in a single asset or group of similar assets.  In accordance with the acquisition method of accounting, the purchase price has been allocated to the assets acquired and liabilities assumed, based on their estimated fair values at the acquisition date.  In connection with the U1A Acquisition, we incurred acquisition-related costs of $2,644,980, which were expensed in the three and six months ended January 31, 2022.

As of January 31, 2022, we had not yet completed the analysis to assign fair values to all assets acquired and liabilities assumed and, therefore the purchase price allocation for the U1A Acquisition is preliminary. The preliminary purchase price allocation may be subject to further refinement and adjustments which may result in material changes to the estimated fair value of assets acquired and liabilities assumed.  The purchase price allocation adjustments can be made throughout the end of UEC’s measurement period, which is not to exceed one year from the acquisition date.

The table below sets forth the consideration paid and the preliminary purchase price allocation to the fair value of the assets acquired and liabilities assumed for the U1A Acquisition:

Consideration paid
Cash	$	125,592,602
Working capital adjustment (1)		2,901,943
Total consideration paid	$	128,494,545
Assets acquired and liabilities assumed
Cash & cash equivalents (1)	$	1,183,369
Prepaid expenses and deposits (1)		1,549,166
Other current assets (1)		73,200
Inventories (1)		192,015
Mineral rights and properties (2)		110,413,823
Property, plant and equipment (3)		13,159,570
Restricted cash		13,754,533
Other non-current assets (4)		1,736,527
Total assets		142,062,203
Accounts payable and accrued liabilities (1)		95,807
Other liabilities (4)		764,603
Asset retirement obligations (5)		12,707,248
Total liabilities		13,567,658
Total net assets	$	128,494,545

Notes:

(1) Working capital adjustment represents the working capital of UEC Wyoming at the date of acquisition, which was comprised of: (i) cash and cash equivalents of $1,183,369; (ii) prepaid expenses and deposits of $1,549,166; (iii) other current assets of $73,200; (iv) inventories of $192,015; and (v) accounts payable and accrued liabilities of $95,807. The fair value of these working capital items approximates their respective carrying values at the date of the acquisition.

(2) Preliminary fair value of mineral rights and properties was determined using a discounted cash flow model (being the net present value of expected future cash flows). Expected future cash flows are based on estimates of future uranium prices and projected future revenues, estimated quantities of mineral resources and production, expected future production costs, and capital expenditures based on the life of mine plans as at the acquisition date.

(3) Preliminary fair value of property, plant and equipment was determined using a replacement cost approach.

(4) Other non-current assets included certain material and supply inventories classified as non-current and right-of-use (“ROU”) assets associated with UEC Wyoming’s operating leases. The preliminary fair value of long-term inventory was determined to approximate its carrying value. ROU assets and lease liabilities for operating leases are measured based on the present value of the future lease payments over the remaining lease terms at the acquisition date.

(5) Preliminary fair value of asset retirement obligations was measured based on the expected costs and timing for final well closure, plant and equipment decommissioning and removal, and environmental remediation, which are discounted to present value using credit adjusted risk-free rates.

Since it has been consolidated from December 17, 2021, UEC Wyoming’s losses totaling $919,617 were included in UEC’s consolidated statements of operations and comprehensive loss for the three and six months ended January 31, 2022.

The following unaudited proforma financial information presents consolidated results assuming the U1A Acquisition occurred on August 1, 2020.

	Three Months Ended January 31,						Six Months Ended January 31,
	2022			2021			2022			2021
Sales and Service Revenue	$	13,233,917		$	30,091		$	13,327,357		$	30,091
Net Loss		(6,423,162	)		(5,021,843	)		(10,027,917	)		(11,784,482	)