Note 4 - Anfield Debt Settlement and Property Swap

12 Months Ended

Jul. 31, 2022

Notes to Financial Statements

Debt Settlement and Property Swap [Text Block]

NOTE 4: ANFIELD DEBT SETTLEMENT AND PROPERTY SWAP

In connection with the U1A Acquisition, we acquired certain indebtedness totaling $18,342 due from Anfield, which was owed to U1A prior to the closing of the U1A Acquisition (the “Anfield Debt”). We assigned a value of $Nil to the Anfield Debt net of the expected credit loss on the preliminary purchase price allocation given that the probability of the Anfield Debt being collectable was remote at December 17, 2021.

On April 19, 2022, we entered into a debt settlement agreement (the “Settlement Agreement”) and a property swap agreement (the “Swap Agreement”; and together with the Settlement Agreement, the “Anfield Agreements”) with Anfield to settle the Anfield Debt. Pursuant to the Anfield Agreements, the Anfield Debt was settled by the payment by Anfield to UEC of $9,171 in cash and the issuance by Anfield to UEC in units of Anfield (each, an “Anfield Unit”) with a deemed value of $9,171, with each such Anfield Unit being comprised of one common share in the capital of Anfield (each, an “Anfield Common Share”) and one Anfield Common Share purchase warrant (each whole such warrant being an “Anfield Warrant”). Each Anfield Warrant entitles UEC to acquire one Anfield Common Share at a price of CA$0.18 until May 12, 2027 (collectively, the “Anfield Debt Settlement”). Completion of the Anfield Agreements was contingent on Anfield raising additional financing.

On June 7, 2022, we closed the Anfield Debt Settlement whereby we received $9,171 in cash and Anfield Units, being comprised of 96,272,918 Anfield Common Shares with a fair value of $7,702 and 96,272,918 Anfield Warrants with a fair value of $3,249. As a result, UEC owns approximately 16% of Anfield’s outstanding shares. 

Anfield Common Shares were measured using the Anfield share price of US$0.08 per share at the date of issuance. Anfield Warrants were measured at US$0.03 per share using the Black-Sholes Valuation Model at the date of issuance with the following assumptions.

Expected Risk Free Interest Rate	2.93	%
Annual Volatility	64.94	%
Life in Years	4.94
Expected Annual Dividend Yield	0	%

Our investment in Anfield Common Shares and Anfield Warrants are accounted for as Investment in Equity Securities with changes in fair value charged to Unrealized Gain or Loss from Equity Securities on our consolidated statements of operations and comprehensive income.

Consequently, we reversed the entire expected credit loss on the debt receivable and recognized a recovery on debt receivable of $18,342 on our consolidated statements of operations and comprehensive income.  The fair value of the cash and the Anfield Common Shares and Anfield Warrants totaled $20,122, which exceeded the amounts of $18,342 previously written off at the date of U1A Acquisition by $1,780.  In accordance with ASC 326 Financial Instruments – Credit Loss, as amended by ASU 2019-04, “expected recoveries of amounts previously written off and expected to be written off shall be included in the valuation account and shall not exceed the aggregate of amounts previously written off and expected to be written off by an entity.”  As a result, we recorded a gain of $1,780 on settlement of the Anfield Debt receivable on our consolidated statements of operations and comprehensive income.

Concurrent with the Anfield Debt Settlement, we completed the Swap Agreement whereby we have received from Anfield 25 ISR uranium projects with a fair value of $6,500 located in Wyoming in exchange for the Company’s  Slick Rock Project and Long Park Project located in Colorado with a total carrying value of $92.  The Property Swap was considered a nonmonetary transaction, and in accordance with ASC 850 – Nonmonetary Transactions, the accounting for nonmonetary transactions should be based on the fair values of the assets involved. The cost of a nonmonetary asset acquired in exchange for another nonmonetary asset is the fair value of the asset surrendered to obtain it, and a gain or loss is recognized on the exchange.  The fair value of properties we surrendered was estimated to be $6,500 using the discounted cash flow model.  As a result, we recorded a gain of $6,408 on disposition of assets on our consolidated statements of operations and comprehensive income.