EX-2

EX-99.2 3 d595893dex992.htm EX-2 EX-2

Exhibit 2

DENISON MINES CORP.

AMENDED AND RESTATED BUSINESS ACQUISITION REPORT

PURSUANT TO PART 8 OF NATIONAL INSTRUMENT 51-102

ACQUISITION DATE: APRIL 26, 2013

Denison Mines Corp.

Form 51-102F4

Amended and Restated Business Acquisition Report

Item 1 – Identity of Company

1.1

Name and Address of Company

Denison Mines Corp. (“Denison”)

Atrium on Bay

595 Bay Street

Toronto, ON, Canada

M5G 2C2

1.2

Executive Officer

David Cates

Vice President Finance & Tax, Chief Financial Officer

(416)-979-1991

Item 2 – Details of Acquisition

2.1

Nature of Business Acquired

On April 26, 2013 Denison acquired all of the issued and outstanding common shares of Fission Energy Corp. (“Fission”) by way of a court approved plan of arrangement (the “Arrangement”) pursuant to Section 192 of the Canada Business Corporations Act. The Arrangement was effected pursuant to an arrangement agreement dated effective March 7, 2013 (the “Arrangement Agreement”). Fission is a Canadian based uranium exploration company with properties located in Canada and internationally. Pursuant to the Arrangement Agreement, certain of Fission’s properties were spun out into a newly formed exploration company called Fission Uranium Corp. (“Fission Uranium”) and pursuant to the Arrangement, the shares of Fission Uranium were distributed to the former shareholders of Fission on the Closing Date (as defined below).

The Arrangement was approved by the shareholders and optionholders of Fission on April 23, 2013.

2.2

Acquisition Date

April 26, 2013 (the “Closing Date”).

2.3

Consideration

Under the terms of the Arrangement, the shareholders of Fission exchanged each common share of Fission held for (a) a new common share of Fission (“New Fission Share”) and (b) one common share in the capital of Fission Uranium. Subsequent to the exchange, each shareholder of a New Fission Share received 0.355 of one common share of Denison (the “Exchange Ratio”)and $0.0001 for each New Fission Share held. As a result, Denison acquired all of the issued and outstanding common shares of Fission. Unexercised options to purchase Fission shares were exchanged for options to acquire common shares of Denison and Fission Uranium on the basis set out in the plan of arrangement. The holders of warrants to purchase Fission shares are entitled to receive, upon exercise of their warrants, the number of common shares of Denison and Fission Uranium which the warrantholders would have been entitled to receive as a result of the Arrangement, if immediately prior to the effective date the warrantholders had exercised their warrants.

2.4

Effect on Financial Position

There are no plans or proposals for material changes to the affairs of the acquired business that may have a significant effect on the results of operations and financial position of Denison.

2.5

Date of Report

September 6, 2013.

Item 3 – Financial Statements and Other Information

The following financial statements and the related notes thereto form part of this business acquisition report:

Audited financial statements of Fission for the for the year ended June 30, 2012 and June 30, 2011 which are attached as Schedule “A”;

ii.

Interim financial statements of Fission for the interim period ended December 31, 2012 with comparative figures for the interim period ended December 31, 2011 which are attached as Schedule “B”; and

iii.

Unaudited pro forma financial statements of Denison as at and for the year ended December 31, 2012, showing the effect of the Arrangement attached as Schedule “C”.

Denison has not requested or obtained the consent of the auditors of the above noted financial statements and reports, to incorporate by reference their audit reports in this business acquisition report.

This Amended and Restated Business Acquisition Report replaces the report filed by Denison on SEDAR on July 3, 2013. The audit report and annual financial statements filed by Fission for the year ended June 30, 2011 have been removed from Schedule “A” as they are not required.

- 2 -

SCHEDULE “A”

FISSION ENERGY CORP. ANNUAL FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30,

2012 AND JUNE 30, 2011

(See attached)

LOGO

Consolidated Financial Statements

Fission Energy Corp.

For the Year Ended

June 30, 2012

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of

Fission Energy Corp.

We have audited the accompanying consolidated financial statements of Fission Energy Corp., which comprise the consolidated statements of financial position as at June 30, 2012 and 2011, and July 1, 2010 and the consolidated statements of comprehensive loss, changes in equity and cash flows for the years ended June 30, 2012 and 2011, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

LOGO

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Fission Energy Corp. as at June 30, 2012 and 2011, and July 1, 2010, and its financial performance and its cash flows for the years ended June 30, 2012 and 2011 in accordance with International Financial Reporting Standards.


Vancouver, Canada,
October 4, 2012.		Chartered Accountants

LOGO

- 2 -

Fission Energy Corp.

Consolidated Financial Statements

For the Year Ended

June 30, 2012

Table of contents


Consolidated statements of financial position			1

Consolidated statements of comprehensive loss			2

Consolidated statements of shareholders’ equity			3

Consolidated statements of cash flows			4

Notes to the consolidated financial statements			5-38

Fission Energy Corp.

Consolidated statements of financial position

(Expressed in Canadian dollars)


			June 30			June 30			July 1
	Note		2012			2011			2010
			$			$			$
						(Note 3)			(Note 3)
Assets
Current assets
Cash and cash equivalents				14,940,759			18,451,471			11,941,329
Short-term investments		5		30,956			138,000			198,000
Amounts receivable		6		731,101			861,042			71,007
Prepaid expenses				244,966			102,359			22,765

				15,947,782			19,552,872			12,233,101
Property and equipment		7		227,067			97,304			80,860
Exploration and evaluation assets		8		36,564,672			29,693,183			18,086,503

Total Assets				52,739,521			49,343,359			30,400,464

Liabilities
Current liabilities
Accounts payable and accrued liabilities		9		1,225,668			1,232,431			1,481,932

Total Liabilities				1,225,668			1,232,431			1,481,932

Shareholders’ equity
Share capital		10		68,199,020			56,968,021			38,637,879
Other capital reserves		10		10,870,753			9,876,933			4,911,760
Deficit				(27,555,920	)		(18,734,026	)		(14,631,107	)

				51,513,853			48,110,928			28,918,532

Total Liabilities and Shareholder’s Equity				52,739,521			49,343,359			30,400,464

Commitments (Note 8(c))

Contingency (Note 15)

Subsequent Events (Note 18)

Approved by the board and authorized for issue on October 4, 2012.

“Frank Estergaard”

Director

“Dev Randhawa”

Director

The accompanying notes from an integral part of these financial statements

Page 1

Fission Energy Corp.

Consolidated statements of comprehensive loss

(Expressed in Canadian dollars)


	Note			Year Ended June 30 2012			Year Ended June 30 2011
				$			$
							(Note 3)
Expenses
Business development					694,839			398,353
Consulting and directors fees					959,848			778,572
Depreciation		7			53,701			29,652
Flow-through share tax					55,697			26,057
Office and administration					542,425			401,006
Professional fees					303,876			196,743
Public relations and communications					723,606			381,568
Share-based compensation		10	(c)		1,012,624			1,432,756
Trade shows and conferences					255,008			291,187
Wages and benefits					733,907			460,623

					5,335,531			4,396,517

Loss before other items					(5,335,531	)		(4,396,517	)

Other items - income/(expense)
Exploration management fee income					503,125			389,936
Interest and miscellaneous income					176,344			178,421
Rental income					20,314			—
Foreign exchange loss					(5,143	)		(8,918	)
Unrealized loss on investments					(107,044	)		(60,000	)
Gain on disposal of property and equipment					2,612			—
Flow-through premium recovery					—			993,372
Exploration and evaluation write-down		8			(3,897,649	)		(1,058,289	)

					(3,307,441	)		434,522

Loss before income taxes					(8,642,972	)		(3,961,995	)
Deferred income tax expense		13			(178,922	)		(140,924	)

Net loss and comprehensive loss for the year					(8,821,894	)		(4,102,919	)

Basic and diluted loss per common share					(0.08	)		(0.05	)

Weighted average number of common shares outstanding					109,951,688			83,138,666

The accompanying notes from an integral part of these financial statements

Page 2

Fission Energy Corp.

Consolidated statements of changes in equity

(Expressed in Canadian dollars)


				Share capital					Other capital						Total shareholders’
	Note			Shares		Amount			reserves			Deficit			equity
						$			$			$			$
Balance, July 1, 2010 (Note 3)					69,269,111		38,637,879			4,911,760			(14,631,107	)		28,918,532
Common share units and flow-through common shares issued for cash		10	(a)		24,958,700		18,002,186			3,292,079			—			21,294,265
Flow-through share premium		3	(b)		—		(440,022	)		—			—			(440,022	)
Share issuance costs		3	(c)		516,465		(2,039,688	)		567,566			—			(1,472,122	)
Exercise of stock options/warrants					4,805,674		2,807,666			(775,447	)		—			2,032,219
Share-based compensation		3	(a)		—		—			1,880,975			—			1,880,975
Net loss and comprehensive loss					—		—			—			(4,102,919	)		(4,102,919	)

Balance, June 30, 2011 (Note 3)					99,549,950		56,968,021			9,876,933			(18,734,026	)		48,110,928
Flow-through common shares issued for cash		10	(a)		11,800,000		10,030,000			—			—			10,030,000
Share issuance costs					—		(900,828	)		364,064			—			(536,764	)
Exercise of stock options/warrants					3,461,855		2,101,827			(686,042	)		—			1,415,785
Share-based compensation		10	(c)		—		—			1,315,798			—			1,315,798
Net loss and comprehensive loss					—		—			—			(8,821,894	)		(8,821,894	)

Balance, June 30, 2012					114,811,805		68,199,020			10,870,753			(27,555,920	)		51,513,853

See accompanying notes to the consolidated financial statements.

Page 3

Fission Energy Corp.

Consolidated statements of cash flows

(Expressed in Canadian dollars)


	Year Ended June 30 2012			Year Ended June 30 2011
	$			$
				(Note 3)
Operating activities
Net loss and comprehensive loss		(8,821,894	)		(4,102,919	)
Items not involving cash:
Depreciation		53,701			29,652
Share-based compensation		1,012,624			1,432,756
Gain on disposal of property and equipment		(2,612	)		—
Unrealized loss on investments		107,044			60,000
Flow-through premium recovery		—			(993,372	)
Exploration and evaluation write-down		3,897,649			1,058,289
Deferred income tax expense		178,922			140,924

		(3,574,566	)		(2,374,670	)
Change in non-cash working capital
Increase in amounts receivable		(83,447	)		(790,035	)
Increase in prepaid expenses		(142,607	)		(79,594	)
Increase (decrease) in accounts payable and accrued liabilities		1,545,323			(10,574	)

Cash flow used in operating activities		(2,255,297	)		(3,254,873	)

Investing activities
Property and equipment additions		(185,852	)		(46,096	)
Property and equipment disposals		5,000			—
Exploration and evaluation additions		(12,746,403	)		(11,902,327	)
Exploration and evaluation cost recoveries		941,741			—

Cash flow used in investing activities		(11,985,514	)		(11,948,423	)

Financing activities
Proceeds from issuance of common share units and flow-through common shares net of share issuance costs		9,314,314			19,681,219
Proceeds from exercise of stock options/warrants		1,415,785			2,032,219

Cash flow from financing activities		10,730,099			21,713,438

(Decrease) increase in cash and cash equivalents during the year		(3,510,712	)		6,510,142
Cash and cash equivalents, beginning of year		18,451,471			11,941,329

Cash and cash equivalents, end of year		14,940,759			18,451,471

Supplemental disclosure with respect to cash flows (Note 11)

See accompanying notes to the consolidated financial statements.

Page 4

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

1.	Nature of operations

Fission Energy Corp. (the “Company”) was formed on July 17, 2007 under the laws of the Canada Business Corporations Act as a result of a plan of arrangement undertaken to reorganize Strathmore Minerals Corp. (“Strathmore”). The Company’s principal business activity is the acquisition and exploration of exploration and evaluation interests. To date, the Company has not generated significant revenues from operations and is considered to be in the exploration stage. The Company’s head office is located at 700 – 1620 Dickson Ave., Kelowna, BC, V1Y 9Y2 and it is listed on the TSX-Venture Exchange under the symbol FIS and on the U.S. OTCQX under the symbol FSSIF.

The Company has not yet determined whether its exploration and evaluation assets contain ore reserves that are economically recoverable. The recoverability of the amounts shown for the exploration and evaluation assets, including acquisition costs, is dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development of those reserves and upon future profitable production.

These financial statements have been prepared on the basis of accounting principles applicable to a going concern which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. Continued operations of the Company are dependent on its ability to develop its exploration and evaluation assets, receive continued financial support, complete equity financings, or generate profitable operations in the future. The financial statements do not include any adjustments to assets and liabilities should the Company be unable to continue as a going concern.

2.	Significant accounting policies

(a)

Statement of Compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRICs”) and the former Standing Interpretations Committee (“SICSs”).

These are the Company’s first consolidated financial statements prepared in accordance with IFRS. Previously the Company prepared its consolidated financial statements in accordance with Canadian Generally Accepted Accounting Principles (“GAAP”). The comparative figures presented in these financial statements are in accordance with IFRS.

(b)

Basis of Presentation

These consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair value.

Page 5

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

2.	Significant accounting policies (continued)

(c)

Basis of Consolidation

The consolidated financial statements of the Company include the following subsidiaries:


Name of Subsidiary	Place of Incorporation	Ownership Interest			Basis of Presentation
Fission Energy Peru S.A.C	Peru		100	%	Consolidated
Minera Peruran S.A.C	Peru		100	%	Consolidated
Waterbury Lake Uranium Corporation	Canada		60.00	%	Proportionately consolidated
Waterbury Lake Uranium Limited Partnership	Canada		59.99	%	Proportionately consolidated

The Company consolidates the wholly owned subsidiaries on the basis that it controls these subsidiaries through its ability to govern their financial and operating policies. The Company also proportionally consolidates its interest in joint ventures, Waterbury Lake Uranium Corporation (“WLUC”) and Waterbury Lake Uranium Limited Partnership (“WLULP”), based on its ownership interests.

Intercompany transactions and resulting balances with the Company’s wholly owned subsidiaries, and WLUC and WLULP have been eliminated to the extent of the Company’s interests.

(d)

Financial Assets

All financial assets are initially recorded at fair value and designated upon initial recognition into one of the following four categories: held to maturity, available for sale, loans and receivables or at fair value through profit or loss (“FVTPL”).

Financial assets are designated as FVTPL if the Company manages such investments and makes sure purchase and sale decisions are based on the fair value in accordance with the Company’s risk management strategy. Financial assets classified as FVTPL are measured at fair value with unrealized gains and losses recognized through profit or loss.

Transaction costs associated with FVTPL financial assets are expensed as incurred, while transaction costs associated with all other financial assets are included in the initial carrying amount of the asset.

The Company has classified its cash and cash equivalents and short-term investments as FVTPL. Financial assets classified as loans and receivables and held to maturity assets are measured at amortized cost. The Company’s amounts receivable are classified as loans and receivables. Financial assets classified as available for sale are measured at fair value with unrealized gains and losses recognized in other comprehensive income and loss except for losses in value that are considered other than temporary which are recognized in profit or loss. At June 30, 2012, June 30, 2011, and July 1, 2010, the Company has not classified any financial assets as available for sale.

Page 6

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

2.	Significant accounting policies (continued)

(e)

Cash and Cash Equivalents

Cash and cash equivalents consist of deposits in banks and redeemable term deposits that are readily convertible to cash with an original term less than 90 days. The Company’s cash and cash equivalents are invested with major financial institutions and are not invested in any asset backed deposits/investments.

(f)

Short-term Investments

Marketable securities are recorded at their fair market value on the date of acquisition and are classified as FVTPL. The carrying value of the securities is adjusted at each subsequent reporting period to the fair value (based upon the market price and the Bank of Canada quoted exchange rate if applicable) with the resulting unrealized gains or losses included in profit or loss for the period. Transaction costs relating to the purchase of marketable securities are expensed directly to profit or loss.

(g)

Foreign Currency Translation

The consolidated financial statements are presented in Canadian dollars. The financial statements for each of the Company’s subsidiaries are measured using the currency of the primary economic environment in which the subsidiary operates (the “functional currency”). Each entity in the Company determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. The functional currency determinations were conducted through an analysis of the consideration factors identified in IAS 21, The Effects of Changes in Foreign Exchange Rates.

The functional currency of the Company, the Company’s subsidiaries, and the Company’s joint ventures are as follows:

(i)

Fission Energy Corp. – Canadian dollar

(ii)

Fission Energy Peru S.A.C. – Peruvian New Sol

(iii)

Minera Peruran S.A.C. – Peruvian New Sol

(iv)

Waterbury Lake Uranium Corporation – Canadian dollar

(v)

Waterbury Lake Uranium Limited Partnership – Canadian dollar

Transactions and Balances

Foreign currency transactions are translated into the Company’s functional currency using the exchange rates prevailing at the dates of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at exchange rates prevailing at the reporting date are recognized in profit or loss.

Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.

Page 7

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

2.	Significant accounting policies (continued)

(g)

Foreign Currency Translation (continued)

Foreign Operations

The assets and liabilities of foreign operations are translated into Canadian dollars at the rate of exchange prevailing at the reporting date and income and expenses are translated at exchange rates prevailing at the dates of transactions. The exchange differences arising on the translation are recognized in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognized in profit or loss.

(h)

Property and Equipment

Property and equipment is stated at cost, less accumulated depreciation. Depreciation is calculated on a straight line basis at the following annual rates based on estimated useful lives:


• Geological equipment	20	%
• Office equipment	20	%
• Computer equipment	30	%
• Computer software	50	%
• Vehicles	30	%
• Building	4	%

An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in profit or loss.

When an item of property and equipment comprises major components with different useful lives, the components are accounted for as separate items of property and equipment.

(i)

Exploration and Evaluation Assets

The Company records exploration and evaluation assets which consists of the costs of acquiring licenses for the right to explore and costs associated with exploration and evaluation activity, at cost. All direct and indirect costs related to the acquisition, exploration and development of exploration and evaluation assets are capitalized by property.

The exploration and evaluation assets are capitalized until the exploration and evaluation assets to which they relate are placed into production, disposed of through sale or where management has determined there to be an impairment. If an exploration and evaluation property interest is abandoned, both the acquisition costs and the exploration and evaluation cost will be written off to operations in the period of abandonment.

Page 8

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

2.	Significant accounting policies (continued)

(i)

Exploration and Evaluation Assets (continued)

On an ongoing basis, exploration and evaluation assets are reviewed on a property-by-property basis to consider if there are any indicators of impairment. If any indication of impairment exists, an estimate of the exploration and evaluation assets’ recoverable amount is calculated. The recoverable amount is determined as the fair value less costs to sell for the exploration and evaluation property interest and their value in use. The fair value less costs to sell and the value in use is determined for an individual exploration and evaluation property interest, unless the exploration and evaluation property interest does not generate cash inflows that are largely independent of other exploration and evaluation property interests. If this is the case, the exploration and evaluation property interests are grouped together into cash generating units (“CGUs”) for impairment purposes.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the period.

The Company’s determination for impairment is also based on:

(i)

whether the exploration programs on the exploration and evaluation assets have significantly changed, such that previously identified resource targets are no longer being pursued;

(ii)

whether exploration results to date are promising and whether additional exploration work is being planned in the foreseeable future; and

(iii)

whether remaining claim tenure terms are sufficient to conduct necessary studies or exploration work.

Where an impairment subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate and its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or CGU) in prior periods. A reversal of an impairment loss is recognized in the period in which that determination was made in profit or loss.

(j)

Financial Liabilities

All financial liabilities are initially recorded at fair market value and designated upon initial recognition as FVTPL or other financial liabilities.

Financial liabilities classified as other financial liabilities are initially recognized at fair value. After initial recognition, other financial liabilities are subsequently measured at amortized cost using the effective interest rate method. The effective interest rate method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. The Company’s accounts payable and accrued liabilities and future income tax liability are classified as other financial liabilities.

Page 9

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

2.	Significant accounting policies (continued)

(j)

Financial Liabilities (continued)

Derivatives, including separate embedded derivatives are also classified as FVTPL and recognized at fair value with changes in fair value recognized in earnings unless they are designated as effective hedging instruments. The Company has no liabilities or derivatives classified as FVTPL. Fair value changes on financial liabilities classified as FVTPL are recognized in profit or loss.

(k)

Flow-through Shares

Resource expenditure deductions for income tax purposes related to exploration activities funded by flow-through share arrangements are renounced to investors under Canadian income tax legislation. On issuance, the Company separates the flow-through share into i) a flow-through share premium, equal to the difference between the current market price of the Company’s common shares and the issue price of the flow through share and ii) share capital. Upon expenses being incurred, the Company recognizes a deferred tax liability for the amount of tax reduction renounced to the shareholders. The premium is recognized as other income and the related deferred tax is recognized as a tax provision.

Proceeds received from the issuance of flow-through shares must be expended on Canadian resource property exploration within a period of two years. Failure to expend such funds after the end of the first year as required under the Canadian income tax legislation will result in a Part XII.6 tax to the Company on flow-through proceeds renounced under the “Look-back” Rule. When applicable, this tax is accrued as a financial expense until paid.

(l)

Share-based Payments

The Company has a stock option plan whereby it is authorized to grant stock options to directors, officers, employees and consultants. Directors, officers, employees and consultants are classified as employees who render personal services to the entity and either i) regarded as employees for legal or tax purposes, ii) work for an entity under its direction in the same way as directors, officers, employees and consultants who are regarded as employees for legal or tax purposes, or iii) the services rendered are similar to those rendered by employees.

The fair value of stock options issued to employees is measured on the grant date, using the Black-Scholes option pricing model with assumptions for risk-free interest rates, dividend yields, volatility of the expected market price of the Company’s common shares and an expected life of the options. The fair value less estimated forfeitures is charged either to profit or loss, or capitalized to the exploration and evaluation costs over the vesting period of the related options with a corresponding credit to other capital reserves in equity. Stock options granted with graded vesting schedules are accounted for as separate grants with different vesting periods and fair values.

Page 10

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

2.	Significant accounting policies (continued)

(l)

Share-based Payments (continued)

The share-based awards issued to non-employees are generally measured on the fair value of goods or services received unless that fair value cannot be reliably measured. This fair value shall be measured at the date the entity obtains the goods or the counterparty renders service. If the fair value of goods or services received cannot be reliably measured, the fair value of the share-based payments to non-employees are periodically re-measured using the Black-Scholes option pricing model until the counterparty performance is complete, and any change therein is recognized over the vesting period of the award. The cost of share-based payments to non-employees that are fully vested and non-forfeitable at the date of grant are measured and recognized at that date.

When the stock options are exercised, the proceeds are credited to share capital and the fair value of the options exercised is reclassified from other capital reserves to share capital.

The estimated forfeitures are based on historical experience and reviewed on a quarterly basis to determine the appropriate forfeiture rate based on past, present and expected forfeitures. Management uses the dynamic model to calculate the estimated forfeitures.

(m)

Interest in Joint Venture

The Company has an interest in the Waterbury Lake property through jointly controlled entities, WLUC and WLULP, whereby the venturers have a contractual arrangement that establishes joint control over the economic activities of the entity. The agreement requires unanimous agreement for financial and operating decisions among the venturers. The Company recognizes its interest in the joint venture using the proportionate consolidation method. The Company combines its proportionate share of each of the assets, liabilities, income and expenses of the joint venture with similar items, line by line, in its consolidated financial statements.

Adjustments are made in the Company’s consolidated financial statements to eliminate the Company’s share of intercompany balances and transactions. The joint venture is proportionately consolidated until the date on which the Company ceases to have a joint control over the joint venture.

(n)

Income Taxes

Current tax is the expected tax payable or receivable on the local taxable income or loss for the year, using local tax rates enacted or substantively enacted at the end of each reporting period, and includes any adjustments to tax payable or receivable in previous years.

Deferred income taxes are recorded using the liability method whereby deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they are realized or settled, based on the laws that have been enacted or substantively enacted by the end of the reporting period.

Page 11

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

2.	Significant accounting policies (continued)

(n)

Income Taxes (continued)

Deferred tax is not recognized for temporary differences which arise on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting, nor taxable profit or loss.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future tax profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

(o)

Earnings (Loss) per Share

The Company presents basic and diluted earnings (loss) per share for its common shares, calculated by dividing the earnings (loss) attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted loss per share does not adjust the gain or loss attributable to common shareholders when the effect is anti-dilutive.

(p)

Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant control over the other party in making financial and operating decisions. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources, services or obligations between related parties.

(q)

New Standards, Amendments and Interpretations Not Yet Effective

Certain new standards, interpretations and amendments to existing standards have been issued by the IASB or IFRIC that are mandatory for accounting periods beginning after July 1, 2010, or later periods. Some updates that are not applicable or are not consequential to the Company may have been excluded from the list below.

Accounting standards anticipated to be effective July 1, 2012

IAS 1, Presentation of Financial Statements

The presentation in the statement of shareholders’ equity or in the notes to the financial statements of other comprehensive income is amended. The Company does not anticipate a significant impact on its consolidated financial statements.

IAS 12, Deferred Tax: Recovery of Underlying Assets

An amendment was made to IAS 12 that provides a practical solution to determine the expected manner of recovery of investment properties as it relates to the accounting for deferred income taxes. The Company is currently evaluating the impact on its consolidated financial statements.

IAS 24, Related Party Disclosures

The definition of related parties is clarified. The Company does not anticipate a significant impact on its consolidated financial statements.

Page 12

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

2.	Significant accounting policies (continued)

(q)

New Standards, Amendments and Interpretations Not Yet Effective (continued)

Accounting standards anticipated to be effective July 1, 2013

IFRS 7, Financial Instruments: Disclosures

The amendments to disclosure requirements in IFRS 7 emphasize the interaction between quantitative and qualitative disclosures and the nature and extent of risks and amends credit risk disclosures. The Company is currently evaluating the impact to its consolidated financial statements.

IFRS 10, Consolidated financial statements

IFRS 10 requires an entity to consolidate an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Under existing IFRS, consolidation is required when an entity has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. IFRS 10 replaces SIC-12 Consolidation-Special Purpose Entities and parts of IAS 27 Consolidated and Separate Financial Statements. The Company is currently evaluating the impact the final standard is expected to have on its consolidated financial statements.

IAS 28, Investments in Associates

The standard was amended to include joint ventures in its scope and to address the changes in IFRS 10 to IFRS 12. This amendment is effective for annual periods beginning on or after January 1, 2013. Earlier adoption is permitted. The Company does not anticipate the application of IAS 28 to have a significant impact on its consolidated financial statements.

IFRS 11, Joint Arrangements

In May 2011, the IASB issued IFRS 11, Joint Arrangements, which supersedes IAS 31, Interests in Joint Ventures and SIC 13, Jointly Controlled Entities – Non-Monetary Contributions by Venturers. The standard requires the Company to classify its interest in a joint arrangement as a joint venture or joint operation. This standard will eliminate the use of proportionate consolidation when accounting for joint ventures, as they will be accounted for using the equity method, whereas joint operations will be accounted for by recognizing the venturer’s share of the assets, liabilities, revenue and expenses. Management anticipates that this standard will be adopted in the Company’s financial statements for the period beginning July 1, 2013. The Company is currently evaluating the impact IFRS 11 is expected to have on its consolidated financial statements.

IFRS 12, Disclosure of Interests in Other Entities

The IASB has issued IFRS 12 Disclosure of Interest in Other Entities, which includes disclosure requirements about subsidiaries, joint ventures, and associates, as well as unconsolidated structured entities and replaces existing disclosure requirements. This standard will become effective for annual periods beginning on or after July 1, 2013. Earlier adoption is permitted. The Company will adopt this new standard as of its effective date. The Company is currently analyzing the possible impact of this standard on its consolidated financial statements.

Page 13

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

2.	Significant accounting policies (continued)

(q)

New Standards, Amendments and Interpretations Not Yet Effective (continued)

Accounting standards anticipated to be effective July 1, 2013 (continued)

IFRS 13, Fair Value Measurement

IFRS 13, Fair Value Measurement: effective for annual periods beginning on or after January 1, 2013, with early adoption permitted, sets out in a single IFRS a framework for measuring fair value and new required disclosures about fair value measurements. Management anticipates that this standard will be adopted in the Company's financial statements for the period beginning July 1, 2013, and has not yet considered the potential impact of the adoption of IFRS 13.

Accounting standards anticipated to be effective July 1, 2015

IFRS 9, Financial instruments

IFRS 9 Financial Instruments: Classification and Measurement will replace IAS 39 Financial Instruments: Recognition and Measurement. On December 16, 2011, the IASB amended the effective date of IFRS 9 to annual periods beginning on or after January 1, 2015, with early adoption permitted. IFRS 9 introduces new requirements for the impairment of financial assets measured at amortized cost and classification and measurement of financial instruments. Management anticipates that this standard will be adopted in the Company's financial statements for the period beginning July 1, 2015, and has not yet considered the potential impact of the adoption of IFRS 9.

3.	First Time Adoption of IFRS

The Company has adopted IFRS with a transition date of July 1, 2010 (“Transition Date”). Under IFRS 1 First-time Adoption of International Financial Reporting Standards, the IFRS are applied retrospectively at the transition date with all adjustments to assets and liabilities as stated under Canadian GAAP taken to deficit unless certain exemptions are applied.

The guidance for first-time adoption of IFRS is set out in IFRS 1. IFRS 1 provides for certain mandatory exceptions and optional exemptions for first time adopters of IFRS. The Company is applying the following exemptions on first-time adoption of IFRS:

•

Cumulative currency translation differences for all foreign operations are deemed to be zero as at transition date; and

•

IFRS 2 Share-based Compensation has only been applied to equity instruments granted after November 7, 2002 which had not vested as at the Transition Date.

The IFRS 1 elections, identified above, and the significant accounting policies, set out in note 2, have been applied in preparing these consolidated financial statements and selected comparative information presented below. The following tables reconcile the Company’s statement of financial position, statement of comprehensive loss and statement of cash flows prepared in accordance with IFRS with those previously prepared and reported in accordance with Canadian GAAP.

Page 14

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

3.	First time adoption of IFRS (continued)

Consolidated statements of financial position

As at July 1, 2010


	Note	Canadian GAAP			Adoption Adjustments			IFRS
		$			$			$
Assets
Current assets
Cash and cash equivalents			11,941,329			—			11,941,329
Short-term investments			198,000			—			198,000
Amounts receivable			71,007			—			71,007
Prepaid expenses			22,765			—			22,765

			12,233,101			—			12,233,101
Property and equipment			80,860			—			80,860
Exploration and evaluation assets			18,086,503			—			18,086,503

Total Assets			30,400,464			—			30,400,464

Liabilities
Current liabilities
Accounts payable and accrued liabilities	3(b)		928,582			553,350			1,481,932

Total Liabilities			928,582			553,350			1,481,932
Shareholders’ equity
Share capital	3(b)		39,191,229			(553,350	)		38,637,879
Other capital reserves	3(a)		4,729,559			182,201			4,911,760
Deficit	3(a)		(14,448,906	)		(182,201	)		(14,631,107	)

			29,471,882			(553,350	)		28,918,532

Total Liabilities and Shareholder’s Equity			30,400,464			—			30,400,464

Page 15

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

3.	First time adoption of IFRS (continued)

Consolidated statements of financial position

As at June 30, 2011


	Note	Canadian GAAP			Adoption Adjustments			IFRS
		$			$			$
Assets
Current assets
Cash and cash equivalents			18,451,471			—			18,451,471
Short-term investments			138,000			—			138,000
Amounts receivable			861,042			—			861,042
Prepaid expenses			102,359			—			102,359

			19,552,872			—			19,552,872
Property and equipment			97,304			—			97,304
Exploration and evaluation assets	3(a), 3(c)		31,252,141			(1,558,958	)		29,693,183

Total Assets			50,902,317			(1,558,958	)		49,343,359

Liabilities
Current liabilities
Accounts payable and accrued liabilities			1,232,431			—			1,232,431

			1,232,431			—			1,232,431
Deferred tax liability	3(c)		1,966,870			(1,966,870	)		—

Total Liabilities			3,199,301			(1,966,870	)		1,232,431

Shareholders’ equity
Share capital	3(b), 3(c)		55,947,836			1,020,185			56,968,021
Other capital reserves	3(a)		9,431,162			445,771			9,876,933
Deficit	3(a) -3(c)		(17,675,982	)		(1,058,044	)		(18,734,026	)

			47,703,016			407,912			48,110,928

Total Liabilities and Shareholder’s Equity			50,902,317			(1,558,958	)		49,343,359

Page 16

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

3.	First time adoption of IFRS (continued)

Consolidated statements of comprehensive loss

Year Ended June 30, 2011


	Note	Canadian GAAP			Adoption Adjustments			IFRS

		$			$			$
Expenses
Business development			398,353			—			398,353
Consulting and directors fees			778,572			—			778,572
Depreciation			29,652			—			29,652
Flow-through share tax			26,057			—			26,057
Office and administration			401,006			—			401,006
Professional fees			196,743			—			196,743
Public relations and communications			381,568			—			381,568
Share-based compensation	3(a)		1,617,405			(184,649	)		1,432,756
Trade shows and conferences			291,187			—			291,187
Wages and benefits			460,623			—			460,623

			4,581,166			(184,649	)		4,396,517

Loss before other items			(4,581,166	)		184,649			(4,396,517	)

Other items—income/(expense)
Exploration management fee income			389,936			—			389,936
Interest and miscellaneous income			178,421			—			178,421
Foreign exchange loss			(8,918	)		—			(8,918	)
Unrealized loss on investments			(60,000	)		—			(60,000	)
Flow-through premium recovery	3(b)		—			993,372			993,372
Exploration and evaluation write-down	3(a)		(1,051,112	)		(7,177	)		(1,058,289	)

			(551,673	)		986,195			434,522

Loss before income taxes			(5,132,839	)		1,170,844			(3,961,995	)
Deferred income tax recovery (expense)	3(b), 3(c)		1,905,763			(2,046,687	)		(140,924	)

Net loss and comprehensive loss			(3,227,076	)		(875,843	)		(4,102,919	)

Page 17

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

3.	First time adoption of IFRS (continued)

Consolidated statements of cash flows

Year Ended June 30, 2011


	Note	Canadian GAAP			Adoption Adjustments			IFRS
		$			$			$
Operating activities
Net loss and comprehensive loss	3(a) - 3(c)		(3,227,076	)		(875,843	)		(4,102,919	)
Items not involving cash:
Depreciation			29,652			—			29,652
Share-based compensation	3(a)		1,617,405			(184,649	)		1,432,756
Unrealized loss on investments			60,000			—			60,000
Flow-through premium recovery	3(b)		—			(993,372	)		(993,372	)
Exploration and evaluation write-down	3(a)		1,051,112			7,177			1,058,289
Deferred income tax expense (recovery)	3(c)		(1,905,763	)		2,046,687			140,924

			(2,374,670	)		—			(2,374,670	)
Change in non-cash working capital
Increase in amounts receivable			(790,035	)		—			(790,035	)
Increase in prepaid expenses			(79,594	)		—			(79,594	)
Decrease in accounts payable and accrued liabilities			(10,574	)		—			(10,574	)

Cash flow used in operating activities			(3,254,873	)		—			(3,254,873	)

Investing activities
Property and equipment additions			(46,096	)		—			(46,096	)
Exploration and evaluation additions			(11,902,327	)		—			(11,902,327	)

Cash flow used in investing activities			(11,948,423	)		—			(11,948,423	)

Financing activities
Proceeds from issuance of common share units and flow-through common shares net of share issuance costs			19,681,219			—			19,681,219
Proceeds from exercise of stock options/warrants			2,032,219			—			2,032,219

Cash flow from financing activities			21,713,438			—			21,713,438

Increase in cash and cash equivalents during the year			6,510,142			—			6,510,142
Cash and cash equivalents, beginning of year			11,941,329			—			11,941,329

Cash and cash equivalents, end of year			18,451,471			—			18,451,471

Page 18

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

3.	First time adoption of IFRS (continued)

Notes to the IFRS reconciliation are as follows:

(a)

Share-based compensation

Under Canadian GAAP, the Company measured share-based compensation related to share purchase options as the fair value of the options granted using Black-Scholes option pricing model and recognized this expense over the vesting period of the options. IFRS 2 Share-based Compensation, which is similar to Canadian GAAP, requires the Company to measure share-based compensation related to share purchase options granted at the fair value of the options on the date of the grant and recognize such expense over the vesting period of the options. IFRS 2 also requires each tranche in an award with graded vesting be considered as a separate grant with different vesting date and fair value whereas the total fair value of the award was recognized on a straight-line basis over the vesting period under Canadian GAAP.

IFRS 2 also has a broader definition of an employee allowing the Company to group employees and others providing similar services together. This has resulted in certain consultants to be classified as employees.

Adjustments were calculated only for unvested options issued and outstanding after the Transition Date. As a result of these differences, the Company has adjusted its share-based payments. The amounts recorded in other capital reserves for share-based compensation increased by $182,201 as at July 1, 2010, increased by $263,570 for the year ended June 30, 2011 (cumulatively increased by $445,771). In addition, exploration and evaluation assets have increased by $441,042, net of $7,177 write-down, as at June 30, 2011.

(b)

Flow-through shares

Current Canadian tax legislation permits mining entities to issue flow-through shares to investors, which are securities issued to investors, whereby the deductions for tax purposes related to exploration and evaluation expenditures may be claimed by investors instead of the Company. Under Canadian GAAP, in accordance with EIC-146 Flow-through Shares, a deferred tax liability is recognized on the date that the Company files renouncement documents with the Canadian tax authorities assuming there is reasonable assurance the expenditures will be made.

In accordance with IFRS, the issue of flow-through share is in substance an issue of ordinary shares and the sale of tax deductions. At the time the Company issues flow-through shares, the sale of tax deductions is deferred and presented as other liabilities in the statement of financial position to recognize the obligation to incur and renounce eligible exploration and evaluation expenditures. Accordingly, the Company recognized a flow-through share premium of $553,350 and of $440,022 for the flow-through share issuances on April 7, 2010 and December 2, 2010 respectively.

As the renouncement documents have been filed with the tax authorities, the tax benefit passed to the shareholder and the liability has been recognized in profit or loss as a flow-through premium recovery during the year ended June 30, 2011.

Page 19

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

3.	First time adoption of IFRS (continued)

(c)

Income taxes

Unlike Canadian GAAP, IAS 12 prohibits the recognition of deferred taxes at the time of an acquisition where the transaction is not a business combination. Accordingly, as at June 30, 2011, the Company has reversed the deferred income tax liability of $2,000,000 and the related deferred income tax valuation allowance of $33,130 that was recognized on the acquisition of the additional 10% interest in WLULP as described in Note 8(c). In addition, in accordance with IFRS, the Company recognized $140,924 of deferred income tax in respect of prior years’ share issuance cost as a recovery in equity.

(d)

Foreign currency translation

In accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates, each entity determines its functional currency. The wholly owned subsidiaries changed their functional currency from Canadian dollar to Peruvian New Sol. The carrying value of the Peruvian exploration and evaluation assets are written off at the end of each reporting period, and therefore there is no impact on the consolidated financial statements at the date of transition.

4.	Key Estimates and Assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

(a)

Exploration and evaluation expenditure

The Company’s accounting policy for exploration and evaluation expenditure results in certain items of expenditure being capitalized for an area of interest where it is considered likely to be recovered by future exploitation or sale where the activities have not reached a stage which permits a reasonable assessment of existence of reserves. This policy requires management to make certain estimates and assumptions as to future events and circumstance, in particular whether an economically viable extraction operation can be established. Any such estimates and assumptions may change as new information becomes available. If, after having capitalized the expenditure under the policy, a judgment is made that the recovery of the expenditure is unlikely, the relevant capitalized amount will be written off in the statement of comprehensive loss in the period when the new information becomes available.

(b)

Share-based compensation

Page 20

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

4.	Key Estimates and Assumptions (continued)

(b)

Share-based compensation (continued)

This estimate also requires the determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating share-based compensation transactions are disclosed in Note 10.

5.	Short-term Investments

Short–term investments are recorded at fair value and are comprised of the following:


	Fair Market Value
		Number of Shares		June 30 2012		June 30 2011		July 1 2010
				$		$		$
Stratton Resources Inc.	(a)		60,000		10,200		42,000		18,000
Great Bear Resources Ltd.	(b)		400,000		20,000		96,000		180,000
Iron Tank Resources Corp.	(b)		8,888		756		—		—

					30,956		138,000		198,000

The Company has determined the fair value of its investments based on the level 1 quoted market prices at June 30, 2012, June 30, 2011, and July 1, 2010.

6.	Amounts Receivable


	June 30 2012		June 30 2011		July 1 2010
	$		$		$
HST receivable		238,286		369,865		58,345
Due from joint venture participants		206,455		357,798		—
Cost recoveries due from government agencies		213,388		—		—
Other receivables		72,972		133,379		12,662

		731,101		861,042		71,007

The Company does not have any significant balances that are past due. Significant amounts receivable are current, and the Company does not have any allowance for doubtful accounts. Due to their short-term maturities, the fair value of accounts receivable approximates their carrying value.

Page 21

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

7.	Property and Equipment

Property and equipment consists of the following:


Cost	Geological Equipment		Office Equipment		Computer Hardware			Computer Software		Vehicles		Building		Total
	$		$		$			$		$		$		$
As at July 1, 2010		63,857		26,480		33,313			4,484		—		20,190		148,324
Additions		—		—		6,076			9,239		30,781		—		46,096
Disposals		—		—		—			—		—		—		—

As at June 30, 2011		63,857		26,480		39,389			13,723		30,781		20,190		194,420
Additions		64,076		80,170		30,851			10,755		—		—		185,852
Disposals		—		—		(13,871	)		—		—		—		(13,871	)

As at June 30, 2012		127,933		106,650		56,369			24,478		30,781		20,190		366,401

Accumulated Depreciation
As at July 1, 2010		35,969		11,836		13,361			4,484		—		1,814		67,464
Depreciation		12,780		5,304		9,609			385		770		804		29,652

As at June 30, 2011		48,749		17,140		22,970			4,869		770		2,618		97,116
Depreciation		17,401		7,465		13,432			5,359		9,240		804		53,701
Disposals		—		—		(11,483	)		—		—		—		(11,483	)

As at June 30, 2012		66,150		24,605		24,919			10,228		10,010		3,422		139,334

Net Book Value
As at July 1, 2010		27,888		14,644		19,952			—		—		18,376		80,860
As at June 30, 2011		15,108		9,340		16,419			8,854		30,011		17,572		97,304
As at June 30, 2012		61,783		82,045		31,450			14,250		20,771		16,768		227,067

Page 22

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

8.	Exploration and Evaluation Assets


Year Ended June 30, 2012	North Shore Property			Duddridge Lake Property			Waterbury Lake Property			Patterson Lake Property			Patterson Lake South Property			Davy Lake Property			Dieter Lake Property			Other Canadian Properties			Peru Properties			Total
	$			$			$			$			$			$			$			$			$			$
Acquisition costs
Balance, beginning of year		460,422			382,245			6,590,550			149,882			18,752			26,970			636,311			246,298			—			8,511,430
Additions		—			—			—			27,820			53,020			—			28,449			130,357			—			239,646
Write-down		(460,422	)		—			—			—			(1,976	)		—			—			—			—			(462,398	)

Balance, end of year		—			382,245			6,590,550			177,702			69,796			26,970			664,760			376,655			—			8,288,678

Exploration costs
Balance, beginning of year		4,668,183			1,240,806			19,717,613			3,616,110			140,780			3,711,496			2,903,266			563,969			—			36,562,223

Incurred during the period
Geology mapping/sampling		328			6,578			23,488			7,068			54,840			2,723			70,297			105,824			58,680			329,826
Geophysics airborne		—			1,688			990			272			299,780			—			7,388			462,275			300			772,693
Geophysics ground		—			35			730,748			7,602			481,548			—			26,521			173,368			—			1,419,822
Drilling		—			194			5,331,369			375			1,268,135			52			1,618,814			1,211			6,766			8,226,916
Land retention and permitting		3,147			2,084			27,704			2,272			19,819			1,577			46,015			11,333			58,112			172,063
Reporting		—			1,166			36,274			404			6,436			1,069			22,427			11,684			386			79,846
Environmental		—			1,294			886			—			—			—			—			1,519			16,782			20,481
Safety		—			59			44,990			59			56			—			3,481			118			—			48,763
Community Relations		—			—			—			—			—			—			—			—			42,824			42,824
General		—			114			35,440			187			129,152			51			3,073			988			99,208			268,213
Share-based compensation		560			1,429			197,937			1,710			34,827			758			39,618			20,683			5,652			303,174

Additions		4,035			14,641			6,429,826			19,949			2,294,593			6,230			1,837,634			789,003			288,710			11,684,621
Write-down		(4,672,218	)		—			—			—			(12,162	)		—			—			(288	)		(288,710	)		(4,973,378	)

Balance, end of year		—			1,255,447			26,147,439			3,636,059			2,423,211			3,717,726			4,740,900			1,352,684			—			43,273,466

Cumulative cost recoveries
Balance, beginning of year		(1,538,127	)		(1,038,107	)		(12,321,827	)		(65,665	)		(25,395	)		(47,047	)		(179,948	)		(164,354	)		—			(15,380,470	)
Additions		—			—			—			—			(941,982	)		—			(79,297	)		(133,850	)		—			(1,155,129	)
Write-down		1,538,127			—			—			—			—			—			—			—			—			1,538,127

Balance, end of year		—			(1,038,107	)		(12,321,827	)		(65,665	)		(967,377	)		(47,047	)		(259,245	)		(298,204	)		—			(14,997,472	)

Total costs		—			599,585			20,416,162			3,748,096			1,525,630			3,697,649			5,146,415			1,431,135			—			36,564,672

Page 23

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

8.	Exploration and Evaluation Assets (continued)


Year Ended June 30, 2011	North Shore Property			Duddridge Lake Property			Waterbury Lake Property			Patterson Lake Property			Patterson Lake South Property			Davy Lake Property			Dieter Lake Property			Other Canadian Properties			Peru Properties			Total
	$			$			$			$			$			$			$			$			$			$
Acquisition costs
Balance, beginning of year		460,422			382,245			590,550			149,882			17,620			38,350			619,785			170,054			—			2,428,908
Additions		—			—			6,000,000			—			4,926			—			16,526			107,248			—			6,128,700
Write-down		—			—			—			—			(3,794	)		(11,380	)		—			(31,004	)		—			(46,178	)

Balance, end of year		460,422			382,245			6,590,550			149,882			18,752			26,970			636,311			246,298			—			8,511,430

Exploration costs
Balance, beginning of year		4,643,450			1,237,890			14,521,690			3,600,214			110,206			4,103,019			2,188,694			378,436			—			30,783,599

Incurred during the year
Geology mapping/sampling		—			—			12,543			172			15,555			—			292,051			344			20,003			340,668
Geophysics airborne		—			—			8,918			—			218			540			90			225			—			9,991
Geophysics ground		—			—			741,749			218			34,163			20,998			2,905			22,945			—			822,978
Drilling		—			—			3,942,632			8,405			—			399,052			301,318			—			1,881			4,653,288
Land retention and permitting		16,763			1,022			17,883			514			992			5,822			44,372			144,356			30,312			262,036
Reporting		558			55			41,291			110			124			6,932			14,512			1,069			1,297			65,948
Environmental		5			919			23,804			—			—			—			—			—			—			24,728
Safety		—			—			26,196			—			—			—			—			—			—			26,196
Community Relations		—			—			1,625			—			—			—			—			—			16,497			18,122
General		—			—			40,217			6,171			—			—			1,395			—			70,778			118,561
Share-based compensation		7,407			920			339,065			306			1,572			10,554			57,929			23,289			7,177			448,219

Additions		24,733			2,916			5,195,923			15,896			52,624			443,898			714,572			192,228			147,945			6,790,735
Write-down		—			—			—			—			(22,050	)		(835,421	)		—			(6,695	)		(147,945	)		(1,012,111	)

Balance, end of year		4,668,183			1,240,806			19,717,613			3,616,110			140,780			3,711,496			2,903,266			563,969			—			36,562,223

Cumulative cost recoveries
Balance, beginning of year		(1,538,127	)		(1,038,107	)		(12,141,297	)		(22,384	)		(7,795	)		(47,047	)		(166,893	)		(164,354	)		—			(15,126,004	)
Additions		—			—			(180,530	)		(43,281	)		(17,600	)		—			(13,055	)		—			—			(254,466	)
Write-down		—			—			—			—			—			—			—			—			—			—

Balance, end of year		(1,538,127	)		(1,038,107	)		(12,321,827	)		(65,665	)		(25,395	)		(47,047	)		(179,948	)		(164,354	)		—			(15,380,470	)

Total costs		3,590,478			584,944			13,986,336			3,700,327			134,137			3,691,419			3,359,629			645,913			—			29,693,183

Page 24

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

8.	Exploration and Evaluation Assets (continued)

Title to exploration and evaluation interests involves certain inherent risks due to the difficulties of determining the validity of title and/or ownership of claims and exploration and evaluation interests. The Company has investigated title to all of its exploration and evaluation interests, and to the best of its knowledge, title to all of its properties are in good standing.

(a)

North Shore Property, Canada

The Company acquired a 100% interest in a property located in Alberta in fiscal 2008. The property is subject to a 0.75% net smelter returns royalty on certain mineral production and 4% gross overriding royalty on any diamond production from the property.

The Government of Alberta drafted the Lower Athabasca Regional Plan (“LARP”) to conserve land, which has resulted in some of metallic and industrial mineral claims to be under temporary restricted status, which includes some claims held by Fission. On August 22, 2012 the Government of Alberta approved the LARP, and the Company will not be permitted to continue exploration on claims within the zoned land. Accordingly the Company has recorded a write-down of $3,594,513 to the property. The Company will approach the Government of Alberta for compensation of all expenditures incurred plus loss of future opportunities.

(b)

Duddridge Lake Property, Canada

The Company acquired a 100% interest in certain claims located in north-central Saskatchewan in fiscal 2008.

(c)

Waterbury Lake Property, Canada

The Company acquired a 100% interest in certain claims located in Saskatchewan in fiscal 2008. On January 30, 2008, it completed an earn-in agreement on the property with the Korea Waterbury Uranium Limited Partnership (“KWULP”). Under the agreement, the Company granted KWULP the exclusive rights to earn up to a 50% interest in the Waterbury Lake property by funding $14,000,000 of expenditures on or before January 30, 2011. Additionally, the Company retained an overriding royalty interest in the property of 2% of net smelter returns. On April 29, 2010, KWULP had fully funded its $14,000,000 of expenditures and consequently earned a 50% interest in the property.

The earn-in agreement required that on completion of the earn-in period, the joint venture participants agree to form a joint control Limited Partnership to hold the property and on August 16, 2010 the Waterbury Lake Uranium Limited Partnership (“WLULP”) agreement was signed, and now supersedes the original earn-in agreement. WLULP was officially formed December 30, 2010.

The Company had 12 months from the completion of the earn-in agreement during which time it could acquire an additional 10% interest in WLULP for $6,000,000. On April 12, 2011, the Company exercised its back-in option by paying KWULP $6,000,000 and now holds a 60% interest in WLULP. The WLULP agreement also requires that the Company and its partners spend a total of $30,000,000 for exploration and evaluation costs over a three year period in proportion to their interest in WLULP, of which $21,903,339 has been incurred by WLULP as of June 30, 2012. The Company was appointed operator for WLULP and is entitled to a management fee equal to 10% of expenditures for operator services.

Page 25

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

8.	Exploration and Evaluation Assets (continued)

(d)

Patterson Lake Properties, Canada

The Patterson Lake Properties, located in Saskatchewan, comprise both Patterson Lake and Patterson Lake South properties.

(i)

Patterson Lake

The Company acquired a 100% interest in various claims in fiscal 2008. In January 2012 the Company staked one additional claim to pursue exploration at this property.

(ii)

Patterson Lake South

The Company acquired a 100% interest in various claims in fiscal 2008 and, on January 21, 2008, entered into an exploration agreement with ESO Uranium Corporation (“ESO”) to include jointly staked claims on the southern extension of Fission’s 100% owned Patterson Lake claims and ESO’s Hook Lake Property. The joint venture participants share costs in proportion to their interest in the joint venture. This is presently a 50%—50% basis. In November 2011 one additional claim was staked and in December 2011 six claims were staked. During the year ended June 30, 2012, two claims were allowed to lapse. As a result of the two claims lapsing, the Company recorded a $1,976 write-down of acquisition costs and $12,162 write-down of exploration costs.

(e)

Davy Lake Property, Canada

The Company acquired a 100% interest in certain claims located in Saskatchewan in fiscal 2008.

(f)

Dieter Lake Property, Canada

The Company acquired a 100% interest in certain claims located in Quebec during fiscal 2008. In the event a uranium resource of more than 60 million pounds is confirmed at the property, the Company is required to issue 66,667 shares to the vendor. In August 2011, the Company staked one-hundred-seventy-eight claims.

(g)

Other Canadian Properties

(i)

Fort McLeod Property, Canada

The Company staked certain claims in fiscal 2010, however all claims lapsed during the year ended June 30, 2012 and the Company abandoned the property. The Company recorded a 100% write-down of exploration costs totaling $251.

(ii)

Caribou Mountains and Zoo Bay Properties, Canada

On November 30, 2007, the Company acquired a 100% interest in both the Caribou Mountains property in north-central Alberta and the Zoo Bay property in northern Saskatchewan. The Company issued a total of 300,000 common shares for the Caribou Mountains property and 700,000 common shares for the Zoo Bay property, together valued at $620,000.

Page 26

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

8.	Exploration and Evaluation Assets (continued)

(g)

Other Canadian Properties (continued)

(ii)

Caribou Mountains and Zoo Bay Properties, Canada (continued)

As of June 30, 2011, the Company recorded 100% impairment of acquisition costs totalling $211,625 and $434,000, and an impairment of exploration costs totalling $183,893 and $262,179 for the Caribou Mountains property and Zoo Bay property respectively. During the year ended June 30, 2012, the Company abandoned the Caribou Mountains property and recorded a write-down of exploration costs totalling $37.

(iii)

Minor Bay Property, Canada

The Company acquired a 100% interest in the Minor Bay property located in the Athabasca Basin, Saskatchewan in fiscal 2008. In May 2012, the Company staked two additional claims.

(iv)

Torwalt Lake Property, Canada

The Company acquired a 100% interest in the Torwalt Lake property located in the Athabasca Basin, Saskatchewan in fiscal 2008.

(v)

Waterbury Lake North Property, Canada

In July 2009, the Company staked three claims immediately adjacent to the Waterbury Lake property.

(vi)

Waterbury Lake West Property, Canada

In January 2012, the Company staked two claims at this property.

(vii)

Riou Lake Property, Canada

In February 2012, the Company staked 2 claims at Riou Lake Saskatchewan.

(h)

Macusani Properties, Peru

In 2008, the Company acquired a 100% interest in certain properties located in Peru. Ongoing administrative and claim maintenance costs for these properties are expensed during the period in which they are incurred which resulted in a write-down of $288,710 for the year ended June 30, 2012 (June 30, 2011—$140,768).

9.	Accounts payable and accrued liabilities


Maturity dates < 6 months	June 30 2012		June 30 2011		July 1 2010
	$		$		$
Trade payables		1,002,650		1,130,318		590,104
Accrued liabilities		79,726		88,321		36,881
Flow-through share liability		—		—		553,350
Payroll and other payables		143,292		13,792		301,597

		1,225,668		1,232,431		1,481,932

Page 27

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

10.

Share capital and other capital reserves

The Company is authorized to issue an unlimited number of common shares, without par value.

(a)

Private placements

December 2, 2010

The Company completed a private placement of 8,250,000 common share units at $0.80 per unit and 7,333,700 flow-through common shares at $0.90 per share for aggregate gross proceeds of $13,200,330. Each common share unit consists of one common share and one half of one share purchase warrant. Each whole warrant is exercisable into one common share at $1.00 for a period of 2 years. A value of $1,518,214 was attributed to the common share warrants based on the Black-Scholes pricing model and has been included in other capital reserves. $160,955 was reclassified from share issuance costs to other capital reserves for the proportionate share of warrants in share units issued. The Company paid agents’ commissions of $792,020 plus $145,500 of expenses and issued 935,022 Broker Warrants with an attributed value of $469,297 based on the Black-Scholes pricing model which was included in other capital reserves. Each Broker Warrant is exercisable into one common share of the Company for a period of 2 years at a price of $1.00 per share with an expiry date of December 2, 2012. The assumptions used in the Black-Scholes pricing model includes a volatility of 125%, risk free interest rate of 1.68%, expected life of 2 years, and a dividend rate of 0%. All warrants vested immediately on the date of grant. A flow-through liability of $440,022 was recognized, which reduced share capital and was taken into income when the renunciation documents were filed.

February 24, 2011

The Company completed a private placement of 9,375,000 common share units at $0.80 per unit for gross proceeds of $7,500,000. Each common share unit consists of one common share and one half of one share purchase warrant. Each whole warrant is exercisable into one common share at $1.00 for a period of 2 years. A value of $1,773,865 was attributed to the common share warrants based on the Black-Scholes pricing model and has been included in other capital reserves. $293,016 was reclassified from share issuance costs to other capital reserves for the proportionate share of warrants in share units issued. The Company issued 516,465 common shares to finders with a fair value of $593,935, paid $81,541 of expenses and issued 774,696 broker warrants with an attributed value of $552,240 based on the Black-Scholes pricing model which was included in other capital reserves.

Each broker warrant is exercisable into one common share of the Company for a period of 2 years at a price of $1.00 per share with an expiry date of February 24, 2013. The assumptions used in the Black-Scholes pricing model included a volatility of 115%, risk free interest rate of 1.79%, expected life of 2 years, and a dividend rate of 0%. All warrants vested immediately on the date of grant.

Page 28

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

10.

Share capital and other capital reserves (continued)

(a)

Private placements (continued)

November 17, 2011

The Company completed a private placement of 11,800,000 flow-through common shares at $0.85 per share for aggregate gross proceeds of $10,030,000. The Company paid agents’ commissions of $637,915 plus $77,771 of expenses and issued 623,701 non-transferable broker warrants with an attributed value of $364,064 based on the Black-Scholes pricing model which was included in other capital reserves. Each broker warrant is exercisable into one common share of the Company for a period of 2 years at a price of $0.85 per share with an expiry date of November 17, 2013. The assumptions used in the Black-Scholes pricing model includes a volatility of 107%, risk free interest rate of 0.90%, expected life of 2 years, and a dividend rate of 0%. All warrants vested immediately on the date of grant. Since the Company’s share price increased between the date the consideration to be received for the flow through shares was set and the closing date, which was used for the transaction allocation under the residual method, no value was ascribed to the flow through liability.

(b)

Stock options and warrants

The Company has a stock option plan which allows the Board of Directors to grant stock options to employees, directors, officers, and consultants. The exercise price of each option is based on the market price of the Company’s common stock at the date of grant less any applicable discount. The options can be granted for a maximum term of five years and vesting terms are determined by the Board of Directors at the date of grant.

Stock options and share purchase warrants transactions are summarized as follows:


	Stock options					Warrants
	Number outstanding			Weighted average exercise price		Number outstanding			Weighted average exercise price
				$					$
Balance July 1, 2010		4,842,000			0.41		13,043,309			0.63
Granted		4,085,000			0.82		10,522,218			1.00
Exercised		(445,668	)		0.57		(4,360,006	)		0.41
Expired		(18,916	)		—		—			—
Forfeited		(173,916	)		0.41		(714,258	)		0.45

Outstanding, June 30, 2011		8,288,500			0.61		18,491,263			0.90

Granted		1,480,000			0.80		623,701			0.85
Exercised		(276,000	)		0.31		(3,185,855	)		0.42
Expired		(198,334	)		0.79		—			—
Forfeited		(226,916	)		0.79		(4,783,190	)		0.99

Outstanding, June 30, 2012		9,067,250			0.64		11,145,919			0.99

Page 29

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

10.

Share capital and other capital reserves (continued)

(b)

Stock options and warrants (continued)

As at June 30, 2012, incentive stock options and share purchase warrants were outstanding as follows:


Stock Options
Number		Exercise		Number of
outstanding		price		vested options		Expiry date
		$
	150,000		0.85		150,000	March 7, 2013
	50,000		1.05		50,000	March 31, 2013
	430,000		0.20		430,000	November 28, 2013
	1,800,000		0.30		1,800,000	January 13, 2014
	85,000		0.80		56,667	April 18, 2014
	150,000		0.31		150,000	August 6, 2014
	82,500		0.80		41,250	August 6, 2014
	82,500		0.80		27,500	January 12, 2015
	1,217,250		0.55		1,032,750	February 3, 2015
	150,000		0.80		127,500	March 24, 2015
	3,250,000		0.80		2,708,334	December 30, 2015
	450,000		1.00		450,000	January 27, 2016
	1,170,000		0.80		373,331	January 12, 2017

	9,067,250				7,397,332



Warrants
	Number		Exercise
Date issued	outstanding		price		Expiry date
			$
December 2, 2010		5,060,022		1.00	December 2, 2012
February 24, 2011		5,462,196		1.00	February 24, 2013
November 17, 2011		623,701		0.85	November 17, 2013

		11,145,919

(c)

Share-based compensation

During the year ended June 30, 2012, the Company granted 1,480,000 options (June 30, 2011 – 4,085,000). Pursuant to the granting and vesting of options issued, share-based compensation of $1,012,624 during the year ended June 30, 2012 (June 30, 2011—$1,432,756) was recognized in profit or loss and share-based compensation of $303,174 (June 30, 2011—$448,219) was recognized in exploration and evaluation assets. The total amount was also recorded as other capital reserves on the statement of financial position. All options are recorded at fair value using the Black-Scholes option pricing model.

Page 30

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

10.

Share capital and other capital reserves (continued)

(c)

Share-based compensation (continued)

The following assumptions were used for the valuation of stock options:


	June 30		June 30
	2012		2011
Risk Free Interest Rate		0.98% - 1.30%		1.44% - 2.00%
Expected Life—Years		2.1 - 4.5		1.56 - 3.50
Annualised Volatility		103% - 133%		108% - 143%
Dividend Rate		0%		0%

11.

Supplemental disclosure with respect to cash flows


	June 30		June 30		July 1
	2012		2011		2011
	$		$		$
Cash and cash equivalents
Cash		3,919,759		3,382,767		2,690,291
Redeemable Term Deposits		11,021,000		15,068,704		9,251,038

		14,940,759		18,451,471		11,941,329

There were no cash payments for interest and income taxes during the year ended June 30, 2012 and June 30, 2011. During the year ended June 30, 2012 the Company received $214,807 (June 30, 2011 $83,080) in interest income on its redeemable term deposits.

Significant non-cash transactions for the year ended June 30, 2012 included:

(a)

Incurring exploration and evaluation related expenditures of $746,762 through accounts payable and accrued liabilities;

(b)

Recognizing exploration recoveries of $213,388 through amounts receivable;

(c)

Reclassifying $686,042 from other capital reserves to share capital on exercise of warrants and options;

(d)

Reclassifying $364,064 from share capital to other capital reserves for warrants issued as finders’ fees; and

(e)

Recognizing $303,174 of share-based payments in exploration and evaluation assets.

Significant non-cash transactions for the year ended June 30, 2011 included:

(a)

Incurring exploration and evaluation related expenditures of $805,324 through accounts payable and accrued liabilities;

(b)

Reclassifying $775,447 from other capital reserves to share capital on exercise of warrants and options;

(c)

Reclassifying $3,292,079 from share capital to other capital reserves for warrants included in share units issued;

(d)

Reclassifying $453,971 from share issue costs to other capital reserves for the proportionate share of warrants included in share units issued;

Page 31

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

11.

Supplemental disclosure with respect to cash flows (continued)

Significant non-cash transactions for the year ended June 30, 2011 included (continued):

(e)

Reclassifying $1,021,537 from other capital reserves to share issue costs for finder’s warrants; and

(f)

Recognizing $448,219 of share based payments in exploration and evaluation assets.

12.

Related party transactions

The Company identified its directors and certain senior management as its key management personnel. The compensation costs for key management personnel are as follows:


	June 30		June 30
	2012		2011
	$		$
Compensation Costs
Wages and consulting fees paid to key management personnel		1,079,550		984,223
Share-based payments for options granted to key management personnel		560,682		930,595

		1,640,232		1,914,818

Other Income
Exploration management fee income from WLULP		417,491		389,936
Exploration rental income from WLULP		20,315		—

		437,806		389,936

Share-based payments represent the fair value calculations of options in accordance with IFRS 2 Share-based Payments granted to key management personnel.

Included in accounts payable at June 30, 2012 is $20,533 (June 30, 2011—$20,533, July 1, 2010—$17,325) for consulting and directors fees owing to officers, and companies controlled by officers. Included in amounts receivable at June 30, 2012 is $182,138 (June 30, 2011—$335,849, July 1, 2010—$nil) due from WLULP and $24,318 (June 30, 2011—$2,238, July 1, 2010—$nil) due from WLUC for funds advanced to vendors on behalf of WLULP and WLUC respectively.

These transactions were in the normal course of operations and were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

Page 32

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

13.

Income Taxes

A reconciliation of current income taxes at statutory rates (25%) with the period income taxes is as follows:


	June 30			June 30
	2012			2011
	$			$
Loss before income taxes		(8,642,972	)		(3,961,995	)

Expected income tax recovery		(2,225,565	)		(1,089,549	)
Impact of reduction in tax rates on deferred income taxes		54,532			(86,883	)
Permanent differences		277,653			130,326
Benefits of tax attributes not recognized		118,850			(769,681	)
Other		70,687			(319,184	)
Flow through shares		1,882,765			2,275,895

Deferred income tax expense		178,922			140,924

The significant components of the Company’s deferred income tax assets are as follows:


	June 30			June 30
	2012			2011
	$			$
Deferred income tax assets (liabilities)
Non-capital losses		2,677,630			1,652,309
Property and equipment		29,956			18,651
Exporation and evaluation assets		(3,189,983	)		(2,190,430	)
Share issuance costs		482,397			519,470

Net deferred income tax assets (liabilities)		—			—

The Company has available approximately $10,912,000 of non-capital losses which, if unutilized, will expire between 2028 and 2032.

At June 30, 2012, the Company has unrecognized tax attributes aggregating to $136,000, (June 30, 2011—$105,000) as noted below, that are available to offset future taxable income:


	June 30		June 30
	2012		2011
	$		$
Unrecognized deferred tax assets:
Non-capital losses		51,000		33,000
Short-term investments		85,000		72,000

		136,000		105,000

Page 33

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

14.

Segmented Information

The Company primarily operates in one reportable operating segment, being the exploration and development of exploration and evaluation assets. Long-lived assets by geographic area are as follows:


	June 30, 2012				June 30, 2011				July 1, 2010
	Canada		Peru		Canada		Peru		Canada		Peru
	$		$		$		$		$		$
Property and equipment		208,873		18,194		74,020		23,284		51,975		28,885
Exploration & evaluation		36,564,672		—		29,693,183		—		18,086,503		—

		36,773,545		18,194		29,767,203		23,284		18,138,478		28,885

15.

Contingency

In January 2008, the Company received an invoice in the amount of $182,616 from a Canadian drilling company for services allegedly performed during 2007. The plaintiff has commenced legal proceedings and the Company is defending itself against the action. No amount has been accrued in these financial statements in respect of the claim as the outcome is not determinable at this time. Any costs ultimately assessed against the Company in respect of this claim will be recorded in the period in which the actual determination of the liability, if any, is made.

16.

Capital management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue and exploration and development of its exploration and evaluation assets and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk.

The Company depends on external financing to fund its activities. The capital structure of the Company currently consists of common shares, stock options and share purchase warrants.

Changes in the equity accounts of the Company are disclosed in the statement of shareholders’ equity. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, acquire or dispose of assets or adjust the amount of cash, cash equivalents, and short-term investments. The issuance of common shares requires approval of the Board of Directors.

In order to facilitate the management of its capital requirements, the Company prepares annual expenditure budgets, which are approved by the Board of Directors and updated as necessary depending on various factors, including capital deployment and general industry conditions. The Company anticipates continuing to access equity markets and the use of joint ventures to fund continued exploration and development of its exploration and evaluation assets and the future growth of the business.

Page 34

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

17.

Financial instruments and risk management

International Financial Reporting Standards 7, Financial Instruments: Disclosures, establishes a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

Level 1—quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2—inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3—inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Company’s financial instruments consist of cash and cash equivalents, short-term investments, amounts receivable and accounts payable and accrued liabilities. For cash and cash equivalents, amounts receivable and accounts payable and accrued liabilities, carrying value is considered to be a reasonable approximation of fair value due to the short-term nature of these instruments. The fair value of short term investments represents their quoted market price.

Cash and cash equivalents and short-term investments are designated as held for trading and therefore carried at fair value, with the unrealized gain or loss recorded on the statement of comprehensive loss.

The Company’s financial instruments are exposed to a number of financial and market risks, including credit, liquidity and foreign exchange risks. The Company does not currently have in place any active hedging or derivative trading policies to manage these risks since the Company’s management does not believe that the current size, scale and pattern of its operations would warrant such hedging activities.

(a)

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will not discharge its obligations, resulting in a financial loss to the Company. The Company has procedures in place to minimize its exposure to credit risk. Company management evaluates credit risk on an ongoing basis including counterparty credit rating and activities related to trade and other receivables and other counterparty concentrations as measured by amount and percentage.

The primary sources of credit risk for the Company arise from:

Cash and cash equivalents;

Short-term investments; and

Amounts receivable.

The Company has not had any credit losses in the past, nor does it expect to have any credit losses in the future. At June 30, 2012, the Company has no financial assets that are past due or impaired due to credit risk defaults.

Page 35

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

17.

Financial instruments and risk management (continued)

(a)

Credit risk (continued)

The Company’s maximum exposure to credit risk is as follows:


		June 30		June 30		July 1
	Class Level	2012		2011		2010
		$		$		$
Cash and cash equivalents	1		14,940,759		18,451,471		11,941,329
Short-term investments	1		30,956		138,000		198,000
Amounts receivable	N/A		731,101		861,042		71,007

			15,702,816		19,450,513		12,210,336

(b)

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations with respect to financial liabilities as they fall due. The Company’s financial liabilities are comprised of accounts payable and accrued liabilities. The Company frequently assesses its liquidity position by reviewing the timing of amounts due and the Company’s current cash flow position to meet its obligations. The Company manages its liquidity risk by maintaining sufficient cash and cash equivalents and short-term investment balances to meet its anticipated operational needs.

The Company’s financial liabilities, consisting of accounts payable and accrued liabilities, arose as a result of exploration and development of its exploration and evaluation interests and other corporate expenses. Payment terms on these liabilities are typically 30 to 60 days from receipt of invoice and do not generally bear interest. The following table summarizes the remaining contractual maturities of the Company’s financial liabilities.


	Maturity		June 30		June 30		July 1
	Dates		2012		2011		2010
			$		$		$
Accounts payable and accrued liabilities		< 6 months		1,225,668		1,232,431		1,481,932

(c)

Market risk

Market risk is the risk that the fair value for assets classified as held-for-trading and available-for-sale or future cash flows for assets or liabilities considered to be held-to maturity, other financial liabilities and loans or receivables of a financial instrument will fluctuate because of changes in market conditions. The Company evaluates market risk on an ongoing basis and has established policies and procedures for mitigating its exposure to foreign exchange fluctuations. The Company is not exposed to interest rate risk, as it does not hold debt balances and is not charged interest on its accounts payable balances.

(d)

Foreign exchange risk

The Company has foreign subsidiaries and therefore foreign exchange risk exposures arise from transactions denominated in foreign currencies. Although the functional currency of the Company is Canadian dollars, the Company also conducts business in US Dollars (“USD”) and Peruvian New Soles (“PEN”). The Company does not use any derivative instruments to reduce its exposure to fluctuations in foreign currency exchange rates.

Page 36

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

17.

Financial instruments and risk management (continued)

(d)

Foreign exchange risk (continued)

Exchange rate fluctuations may affect the costs that the Company incurs in its operations. However, although the Company’s costs are incurred primarily in Canadian dollars, any change in the value of PEN and USD against the Canadian dollar can affect the costs of operations and capital expenditures. The Company maintains its cash balances in Canadian dollars and exchanges currency to meet its PEN and USD obligations on an as needed basis, thereby reducing the exchange risk on cash balances.

The Company is exposed to currency risk through the following Canadian dollar equivalent of financial assets and liabilities denominated in currencies other than Canadian dollars:


	June 30, 2012					June 30, 2011					July 1, 2010
	PEN		USD			PEN		USD			PEN		USD
Cash and cash equivalents		3,719		10,995			4,171		16,450			3,868		15,738
Accounts payable and accrued liabilities		—		(41,737	)		—		(4,983	)		—		(1,305	)

		3,719		(30,742	)		4,171		11,467			3,868		14,433

Based on the above net exposures at June 30, 2012, a 10% change in USD against the Canadian dollar would result in a $1,099 (June 30, 2011—$1,147, July 1, 2010—$1,443) change in the Company’s net income or loss; similarly a 10% change in the PEN against the Canadian dollar would result in a $372 (June 30, 2011—$417, July 1, 2010—$387) change in the Company’s net income or loss.

18.

Subsequent Events

Subsequent to June 30, 2012:

(a)

On July 5, 2012, the Company completed an Arrangement Agreement to acquire all of the issued and outstanding shares of Pitchstone Exploration Ltd. (“Pitchstone”). Based on 45,208,185 Pitchstone shares outstanding, the Company issued 9,697,159 (ratio of 0.2145) of their Common Shares to complete the transaction, representing approximately 8.4% of the Company’s issued and outstanding Common shares. The 3,825,000 Pitchstone options are exercisable into 820,463 Common Shares of the Company with exercise prices ranging from $0.70 to $2.00. The 2,878,490 Pitchstone warrants are exercisable into 617,436 Common Shares of the Company with exercise prices ranging from $0.65 to $1.17.

Pitchstone is a uranium exploration company operating in three districts in Canada and Namibia. The property portfolio features 13 projects in the eastern Athabasca Basin, Saskatchewan, five of which are 100% owned. In addition, there are two joint venture projects in Namibia and several joint venture projects in the Hornby Bay Basin, Nunavut.

Page 37

Fission Energy Corp.

Notes to the consolidated financial statements

For the year ended June 30, 2012

(Expressed in Canadian dollars)

18.

Subsequent Events (continued)

(a)

As Pitchstone is in the early stage of exploration and does not yet have any processes or outputs, the acquisition will be accounted for as a purchase of assets. The difference between the purchase consideration and the adjusted book values of Pitchstone’s assets and liabilities will be assigned to “Exploration and evaluation assets”. The purchase price of the acquisition will consist of the fair value of the Company’s Common Shares, based on the issuance of 9,697,159 Common shares at $0.445 per share for consideration of $4,315,236, the fair value of stock options and warrants and certain other transaction costs.

(b)

70,000 stock options were expired/forfeited.

Page 38

SCHEDULE “B”

FISSION INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 2012 WITH

COMPARATIVE FIGURES FOR THE INTERIM PERIOD ENDED DECEMBER 31, 2011

(See attached)

- 3 -

LOGO

Condensed Consolidated Interim

Financial Statements

Fission Energy Corp.

For the Six Month Period Ended

December 31, 2012

Fission Energy Corp.

Condensed Consolidated Interim

Financial Statements

For the Six Month Period Ended

December 31, 2012

Table of contents


Condensed consolidated interim statements of financial position			1

Condensed consolidated interim statements of comprehensive loss			2

Condensed consolidated interim statements of changes in equity			3

Condensed consolidated interim statements of cash flows			4

Notes to the condensed consolidated interim financial statements			5-25

Fission Energy Corp.

Condensed consolidated interim statements of financial position

(Expressed in Canadian dollars)


			December 31			June 30
	Note		2012			2012
			$			$
Assets
Current assets
Cash and cash equivalents				14,391,367			14,940,759
Short-term investments		4		27,334			30,956
Amounts receivable		5		489,290			731,101
Prepaid expenses				119,846			244,966

				15,027,837			15,947,782
Property and equipment				227,454			227,067
Exploration and evaluation assets		7		44,843,481			36,564,672

Total Assets				60,098,772			52,739,521

Liabilities
Current liabilities
Accounts payable and accrued liabilities		8		1,946,114			1,225,668

Total Liabilities				1,946,114			1,225,668

Shareholders’ equity
Share capital		9		77,219,072			68,199,020
Other capital reserves		9		11,480,061			10,870,753
Foreign currency translation reserve				(24,558	)		-
Deficit				(30,521,917	)		(27,555,920	)

				58,152,658			51,513,853

Total Liabilities and Shareholders’ Equity				60,098,772			52,739,521

Commitments (Note 7(b))

Contingency (Note 13)

Approved by the board and authorized for issue on March 1, 2013.

“Frank Estergaard”

Director

“George Sanders”

Director

See accompanying notes to the consolidated financial statements.

Page 1

Fission Energy Corp.

Condensed consolidated interim statements of comprehensive loss

(Expressed in Canadian dollars)


				Three Months			Three Months			Six Months			Six Months
				December 31			December 31			December 31			December 31
	Note			2012			2011			2012			2011
				$			$			$			$
Expenses
Business development					157,479			160,215			305,839			247,842
Consulting and directors fees					398,021			437,300			577,138			575,850
Depreciation					18,385			11,348			37,952			22,193
Flow-through share tax					9,795			10,999			28,158			24,825
Office and administration					190,989			126,776			393,163			227,831
Professional fees					164,483			127,336			219,839			186,536
Public relations and communications					198,422			159,780			383,650			347,608
Share-based compensation		9	(d)		283,018			186,443			376,683			454,368
Trade shows and conferences					134,517			46,832			179,682			95,237
Wages and benefits					406,934			340,211			603,870			442,634

					1,962,043			1,607,240			3,105,974			2,624,924

Loss before other items					(1,962,043	)		(1,607,240	)		(3,105,974	)		(2,624,924	)

Other items - income/(expense)
Exploration management fee income					82,445			27,144			180,677			93,940
Interest and miscellaneous income					27,724			50,048			73,050			99,284
Rental income					12,723			—			19,804			—
Foreign exchange loss					(2,040	)		(5,432	)		(7,391	)		(3,649	)
Unrealized gain (loss) on investments					422			(39,200	)		(3,622	)		(83,000	)
Loss on disposal of property
and equipment					—			—			(1,498	)		—
Exploration and evaluation write-down		7			(55,430	)		(49,201	)		(121,043	)		(140,792	)

					65,844			(16,641	)		139,977			(34,217	)

Net loss for the period					(1,896,199	)		(1,623,881	)		(2,965,997	)		(2,659,141	)

Other Comprehensive Loss
Items that may subsequently be classified to income
Foreign currency translation adjustment arising from translating foreign operations					(4,547	)		—			(24,558	)		—

Comprehensive loss for the period					(1,900,746	)		(1,623,881	)		(2,990,555	)		(2,659,141	)

Basic and diluted loss per common share					(0.02	)		(0.01	)		(0.02	)		(0.02	)

Weighted average number of common shares outstanding					125,604,725			108,396,968			124,793,335			105,246,262

See accompanying notes to the consolidated financial statements.

Page 2

Fission Energy Corp.

Condensed consolidated interim statements of changes in equity

(Expressed in Canadian dollars)


												Foreign
												currency						Total
				Share capital					Other capital			translation						shareholders’
	Note			Shares		Amount			reserves			reserve			Deficit			equity
						$			$			$			$			$
Balance, July 1, 2011					99,549,950		56,968,021			9,876,933			—			(18,734,026	)		48,110,928
Flow-through common shares issued for cash		9	(a)		11,800,000		10,030,000			—			—			—			10,030,000
Share issuance costs					—		(1,079,750	)		364,064			—			—			(715,686	)
Exercise of stock options/warrants					3,211,855		2,013,718			(672,933	)		—			—			1,340,785
Share-based compensation		9	(d)		—		—			583,020			—			—			583,020
Net loss					—		—			—			—			(2,659,141	)		(2,659,141	)

Balance, December 31, 2011					114,561,805		67,931,989			10,151,084			—			(21,393,167	)		56,689,906
Share issuance costs					—		178,922			—			—			—			178,922
Exercise of stock options/warrants					250,000		88,109			(13,109	)		—			—			75,000
Share-based compensation					—		—			732,778			—			—			732,778
Net loss					—		—			—			—			(6,162,753	)		(6,162,753	)

Balance, June 30, 2012					114,811,805		68,199,020			10,870,753			—			(27,555,920	)		51,513,853
Common shares issued for the acquisition of Pitchstone		6			9,697,159		4,315,235			—			—			—			4,315,235
Flow-through common shares issued for cash		9	(a)		10,001,001		6,000,601			—			—			—			6,000,601
Flow-through share premium					—		(700,070	)		—			—			—			(700,070	)
Share issuance costs					—		(611,472	)		127,083						—			(484,389	)
Stock options/warrants issued for the acquisition of Pitchstone		6			—		—			24,814			—			—			24,814
Exercise of stock options					25,000		15,758			(8,008	)		—			—			7,750
Share-based compensation		9	(d)		—		—			465,419			—			—			465,419
Net loss					—		—			—			—			(2,965,997	)		(2,965,997	)
Foreign currency translation adjustment arising from translating foreign operations					—		—			—			(24,558	)		—			(24,558	)

Balance, December 31, 2012					134,534,965		77,219,072			11,480,061			(24,558	)		(30,521,917	)		58,152,658

The accompanying notes form an integral part of these financial statements.

Page 3

Fission Energy Corp.

Condensed consolidated interim statements of cash flows

(Expressed in Canadian dollars)


	Three Months			Three Months			Six Months			Six Months
	December 31			December 31			December 31			December 31
	2012			2011			2012			2011
	$			$			$
Operating activities
Net loss		(1,896,199	)		(1,623,881	)		(2,965,997	)		(2,659,141	)
Items not involving cash:
Depreciation		18,385			11,348			37,952			22,193
Share-based compensation		283,018			186,443			376,683			454,368
Unrealized loss (gain) on investments		(422	)		39,200			3,622			83,000
Loss on disposal of property and equipment		—			—			1,498
Exploration and evaluation write-down		55,430			49,201			121,043			140,792

		(1,539,788	)		(1,337,689	)		(2,425,199	)		(1,958,788	)
Change in non-cash working capital
Decrease in amounts receivable		399,155			150,247			306,288			433,396
(Increase) decrease in prepaid expenses		44,277			(7,299	)		(20,038	)		3,320
Increase in accounts payable and accrued liabilities		142,647			292,218			60,733			146,917

Cash flow used in operating activities		(953,709	)		(902,523	)		(2,078,216	)		(1,375,155	)

Investing activities
Property and equipment additions		(10,623	)		(34,643	)		(19,672	)		(34,643	)
Exploration and evaluation additions		(3,138,096	)		(2,650,120	)		(5,363,078	)		(4,577,234	)
Exploration and evaluation cost recoveries		745,194			—			1,031,096			—
Cash acquired on acquisition of Pitchstone Exploration Ltd. net of transaction costs (Note 6)		—			—			356,516			—

Cash flow used in investing activities		(2,403,525	)		(2,684,763	)		(3,995,138	)		(4,611,877	)

Financing activities
Proceeds from issuance of common share units and flow-through common shares net of share issuance costs		5,516,212			9,320,743			5,516,212			9,320,743
Proceeds from exercise of stock options/warrants		7,750			9,301			7,750			1,340,785

Cash flow from financing activities		5,523,962			9,330,044			5,523,962			10,661,528

Increase (decrease) in cash and cash equivalents during the period		2,166,728			5,742,758			(549,392	)		4,674,496
Cash and cash equivalents, beginning of period		12,224,639			17,383,209			14,940,759			18,451,471

Cash and cash equivalents, end of period		14,391,367			23,125,967			14,391,367			23,125,967

Supplemental disclosure with respect to cash flows (Note 10)

The accompanying notes form an integral part of these financial statements.

Page 4

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

1.	Nature of operations

Fission Energy Corp. (the “Company”) was formed on July 17, 2007 under the laws of the Canada Business Corporations Act as a result of a plan of arrangement undertaken to reorganize Strathmore Minerals Corp. (“Strathmore”). The Company’s principal business activity is the acquisition and exploration of exploration and evaluation assets. To date, the Company has not generated significant revenues from operations and is considered to be in the exploration stage. The Company’s head office is located at 700 – 1620 Dickson Ave., Kelowna, BC, V1Y 9Y2 and it is listed on the TSX-Venture Exchange under the symbol FIS and on the U.S. OTCQX under the symbol FSSIF.

2.	Basis of Preparation

(a)

Statement of Compliance

These condensed consolidated interim financial statements are unaudited and have been prepared in accordance with International Accounting Standard IAS 34 Interim Financial Reporting (“IAS 34”) using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRICs”) and the former Standing Interpretations Committee (“SICSs”). The condensed consolidated interim financial statements were authorized for issue by the board of directors on March 1, 2013.

These condensed consolidated interim financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the Company’s audited annual financial statements for the year ended June 30, 2012 prepared in accordance with IFRS.

(b)

Basis of Presentation

These condensed consolidated interim financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair value.

The accounting policies applied in preparation of these unaudited condensed consolidated interim financial statements are consistent with those applied and disclosed in the Company’s consolidated financial statements for the year ended June 30, 2012.

Page 5

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

2.	Basis of Preparation (continued)

(b)

Basis of Presentation (continued)

The IASB issued a number of new and revised International Accounting Standards, IFRS amendments and related interpretations which are effective for the Company’s financial year beginning on or after July 1, 2012. For the purpose of preparing and presenting the financial statements for the relevant periods, the Company has consistently adopted all these new standards for the relevant reporting periods. At the date of the authorization of these financial statements the IASB and IFRIC have issued the following new and revised Standards and Interpretations.

(i)

IFRS Standards Adopted

IAS 1, Presentation of Financial Statements (Amended)

The presentation in the statement of shareholders’ equity or in the notes to the financial statements of other comprehensive income has been amended to differentiate elements of other comprehensive income that may subsequently be measured through profit and loss to be differentiated from those items that will not.

IAS 12, Deferred Tax: Recovery of Underlying Assets (Amended)

An amendment was made to IAS 12 that provides a practical solution to determine the expected manner of recovery of investment properties as it relates to the accounting for deferred income taxes.

(ii)

IFRS Standards Not Yet Adopted

Accounting standards anticipated to be effective July 1, 2013

IFRS 7, Financial Instruments: Disclosures

IFRS 10, Consolidated financial statements

Page 6

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

2.	Basis of Preparation (continued)

(b)

Basis of Presentation (continued)

(ii)

IFRS Standards Not Yet Adopted (continued)

Accounting standards anticipated to be effective July 1, 2013 (continued)

IAS 19, Employee Benefits

In June 2011, the IASB issued an amended IAS 19. The Standard requires recognition of changes in the net defined benefit liability (asset) including immediate recognition of defined benefit cost, disaggregation of defined benefit cost into components, recognition of remeasurements in other comprehensive income, plan amendments, curtailments and settlements. In addition there are modifications in accounting for termination benefits, including distinguishing benefits provided in exchange for service and benefits provided in exchange for the termination of employment and affect the recognition and measurement of termination benefits. The Company does not anticipate a significant impact on its consolidated financial statements.

IAS 28, Investments in Associates

IFRS 11, Joint Arrangements

IFRS 12, Disclosure of Interests in Other Entities

Page 7

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

2.	Basis of Preparation (continued)

(b)

Basis of Presentation (continued)

(ii)

IFRS Standards Not Yet Adopted (continued)

Accounting standards anticipated to be effective July 1, 2013 (continued)

IFRS 13, Fair Value Measurement

IFRS 13, Fair Value Measurement: effective for annual periods beginning on or after January 1, 2013, with early adoption permitted, sets out in a single IFRS a framework for measuring fair value and new required disclosures about fair value measurements. Management anticipates that this standard will be adopted in the Company’s financial statements for the period beginning July 1, 2013, and has not yet considered the potential impact of the adoption of IFRS 13.

Accounting standards anticipated to be effective July 1, 2014

IAS 32, Financial Instruments: Presentation – Offsetting financial assets and financial liabilities

In December 2011, the IASB issued an amendment to IAS 32. The amendment clarifies the meaning of “currently has a legally enforceable right to set-off”. The amendments also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The Company does not anticipate a significant impact to its consolidated financial statements.

Accounting standards anticipated to be effective July 1, 2015

IFRS 9, Financial instruments

IFRS 9 introduces new requirements for the impairment of financial assets measured at amortized cost and classification and measurement of financial instruments. Management anticipates that this standard will be adopted in the Company’s financial statements for the period beginning July 1, 2015, and has not yet considered the potential impact of the adoption of IFRS 9.

Page 8

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

2.	Basis of Preparation (continued)

(c)

Basis of Consolidation

The condensed consolidated interim financial statements of the Company include the following subsidiaries and interests in joint ventures:


Name of Subsidiary	Place of Incorporation	Ownership Interest			Basis of Presentation
Fission Energy Peru S.A.C	Peru		100	%	Consolidated
Minera Peruran S.A.C	Peru		100	%	Consolidated
Pitchstone Exploration Limited	Canada		100	%	Consolidated
Pitchstone Exploration Namibia (Pty.) Ltd.	Africa		73.62	%	Proportionately consolidated
Waterbury Lake Uranium Corporation	Canada		60.00	%	Proportionately consolidated
Waterbury Lake Uranium Limited Partnership	Canada		59.99	%	Proportionately consolidated

The Company consolidates the wholly owned subsidiaries on the basis that it controls these subsidiaries through its ability to govern their financial and operating policies. The Company also proportionally consolidates its interest in joint ventures, Pitchstone Exploration Namibia (Pty) Ltd. (“PENL”), Waterbury Lake Uranium Corporation (“WLUC”) and Waterbury Lake Uranium Limited Partnership (“WLULP”), based on its ownership interests.

Intercompany transactions and resulting balances with the Company’s wholly owned subsidiaries, PENL, WLUC and WLULP have been eliminated to the extent of the Company’s interests.

3.	Key Estimates and Assumptions

(a)

Exploration and evaluation expenditure

Page 9

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

3.	Key Estimates and Assumptions (continued)

(b)

Share-based compensation

The Company measures the cost of equity-settled transactions with employees and non-employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based compensation transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires the determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating share-based compensation transactions are disclosed in Note 9.

4.	Short-term Investments

Short–term investments are recorded at fair value and are comprised of the following:


	Fair Market Value
	Number of Shares		December 31 2012		June 30 2012
			$		$
Stratton Resources Inc.		60,000		10,800		10,200
Great Bear Resources Ltd.		400,000		16,000		20,000
Iron Tank Resources Corp.		8,888		534		756

				27,334		30,956

The Company has determined the fair value of its investments based on the level 1 quoted market prices at December 31, 2012 and June 30, 2012.

5.	Amounts Receivable


	December 31		June 30
	2012		2012
	$		$
HST Receivable		274,567		238,286
Due from joint venture particpants		148,561		206,455
Cost recoveries due from government agencies		—		213,388
Other receivables		66,162		72,972

		489,290		731,101

The Company does not have any significant balances that are past due. Significant amounts receivable are current, and the Company does not have any allowance for doubtful accounts. Due to their short-term maturities, the fair value of amounts receivable approximates their carrying value.

Page 10

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

6.	Acquisition of Pitchstone Exploration Ltd.

On July 5, 2012, the Company completed a Plan of Arrangement to acquire all of the issued and outstanding shares of Pitchstone Exploration Ltd. (“Pitchstone”). Based on 45,208,185 Pitchstone shares outstanding, the Company issued 9,697,159 (ratio of 0.2145) of their common shares to complete the transaction, representing approximately 8.4% of the Company’s issued and outstanding common shares. The 3,825,000 Pitchstone options entitle holders to purchase 820,465 common shares of the Company with exercise prices ranging from $0.70 to $2.00 and expiring between October 5, 2012 and November 1, 2016. The 2,878,490 Pitchstone warrants entitle holders to purchase 617,441 common shares of the Company with exercise prices ranging from $0.65 to $1.17 and expired January 27, 2013 without exercise. The purchase price allocation presented in these statements is preliminary, subject to change and is expected to be finalized by the year ended June 30, 2013.

Pitchstone is a uranium exploration company operating in Canada and Namibia. Pitchstone owns a 73.62% interest in its subsidiary, Pitchstone Exploration Namibia (Pty.) Ltd. The property portfolio features 13 projects in the eastern Athabasca Basin, Saskatchewan, five of which are 100% owned. In addition, there are two joint venture projects in Namibia and several joint venture projects in the Hornby Bay Basin, Nunavut.

As Pitchstone is in the early stage of exploration and does not yet have any processes or outputs, the acquisition was accounted for as a purchase of assets. The difference between the purchase consideration and the adjusted book values of Pitchstone’s assets and liabilities had been assigned to “exploration and evaluation assets”. The purchase price of the acquisition and the assets acquired are described below:


	$
Purchase price
45,208,185 common shares of Pitchstone Exploration Ltd by issue of 9,697,159 Fission shares @ $0.445		4,315,235
3,825,000 Pitchstone options entitling holders to purchase 820,465 Fission shares		22,360
2,878,490 Pitchstone warrants entitling holders to purchase 617,441 Fission shares		2,454
Transaction costs		622,839

Total purchase price		4,962,888

Assets acquired
Net working capital		813,367
Property and equipment		20,165
Exploration and evaluation assets		4,129,356

Net identifiable assets of Pitchstone		4,962,888

The fair value of the stock options and warrants of Pitchstone was estimated as of July 5, 2012 using the Black-Scholes option-pricing model with the following weighted average assumptions:


	Stock Options			Warrants
Risk Free Interest Rate		1.02	%		1.02	%
Expected Life—Years		0.96			0.56
Annualised Volatility		70	%		58	%
Dividend Rate		0	%		0	%

Option pricing models require the input of highly subjective assumptions including the estimate of the share price volatility. Changes in the subjective input assumptions can materially affect the fair value of the Company’s stock options and warrants.

Page 11

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

7.	Exploration and Evaluation Assets


	Duddridge			Waterbury			Patterson			Patterson			Davy			Dieter			Other Fission
6 Months ended	Lake			Lake			Lake			Lake South			Lake			Lake			Canadian			Pitchstone			Peru
December 31, 2012	Property			Property			Property			Property			Property			Property			Properties			Properties			Properties			Total
	$			$			$			$			$			$			$			$			$			$
Acquisition costs
Balance, beginning of period		382,245			6,590,550			177,702			69,796			26,970			664,760			376,655			—			—			8,288,678
Additions		—			—			—			—			—			—			9,517			135,954			—			145,471
Acquired through plan of arrangement		—			—			—			—			—			—			—			4,129,356			—			4,129,356

Balance, end of period		382,245			6,590,550			177,702			69,796			26,970			664,760			386,172			4,265,310			—			12,563,505
Exploration costs
Balance, beginning of period		1,255,447			26,147,439			3,636,059			2,423,211			3,717,726			4,740,900			1,352,684			—			—			43,273,466

Incurred during the period
Geology mapping/sampling		164,816			10,072			93,257			31,065			—			3,210			109,644			17,416			8,307			437,787
Geophysics airborne		275,725			294			297,151			283,113			—			—			70,222			343			—			926,848
Geophysics ground		—			115,697			574,819			244,425			—			—			3,747			9,804			—			948,492
Drilling		7,490			1,058,929			5,594			1,265,734			—			1,346			—			38,216			4,811			2,382,120
Land retention and permitting		1,358			23,820			3,544			12,837			420			1,670			3,843			8,362			36,096			91,950
Reporting		89			27,473			161			6,843			—			12,391			8,969			533			550			57,009
Environmental		21,780			21,311			—			15,735			—			—			—			—			410			59,236
Safety		501			4,983			162			—			—			—			2,644			—			—			8,290
Community Relations		—			225			—			—			—			—			—			—			31,485			31,710
General		116			8,582			290			96,297			—			—			754			6,626			35,836			148,501
Share-based compensation		1,369			48,824			4,262			21,890			—			1,505			3,281			4,057			3,548			88,736

Additions		473,244			1,320,210			979,240			1,977,939			420			20,122			203,104			85,357			121,043			5,180,679
Write-down		—			—			—			—			—			—			—			—			(121,043	)		(121,043	)

Balance, end of period		1,728,691			27,467,649			4,615,299			4,401,150			3,718,146			4,761,022			1,555,788			85,357			—			48,333,102

Cumulative cost recoveries
Balance, beginning of period		(1,038,107	)		(12,321,827	)		(65,665	)		(967,377	)		(47,047	)		(259,245	)		(298,204	)		—			—			(14,997,472	)
Additions		—			—			—			(1,031,096	)		—			—			—			—			—			(1,031,096	)

Balance, end of period		(1,038,107	)		(12,321,827	)		(65,665	)		(1,998,473	)		(47,047	)		(259,245	)		(298,204	)		—			—			(16,028,568	)
Foreign currency translation		—			—			—			—			—			—			—			(24,558	)		—			(24,558	)

Total costs		1,072,829			21,736,372			4,727,336			2,472,473			3,698,069			5,166,537			1,643,756			4,326,109			—			44,843,481

Page 12

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

7.	Exploration and Evaluation Assets (continued)


Year Ended June 30, 2012	North Shore Property			Duddridge Lake Property			Waterbury Lake Property			Patterson Lake Property			Patterson Lake South Property			Davy Lake Property			Dieter Lake Property			Other Canadian Properties			Peru Properties			Total
	$			$			$			$			$			$			$			$			$			$
Acquisition costs
Balance, beginning of year		460,422			382,245			6,590,550			149,882			18,752			26,970			636,311			246,298			—			8,511,430
Additions		—			—			—			27,820			53,020			—			28,449			130,357			—			239,646
Write-down		(460,422	)		—			—			—			(1,976	)		—			—			—			—			(462,398	)

Balance, end of year		—			382,245			6,590,550			177,702			69,796			26,970			664,760			376,655			—			8,288,678

Exploration costs
Balance, beginning of year		4,668,183			1,240,806			19,717,613			3,616,110			140,780			3,711,496			2,903,266			563,969			—			36,562,223

Incurred during the period
Geology mapping/sampling		328			6,578			23,488			7,068			54,840			2,723			70,297			105,824			58,680			329,826
Geophysics airborne		—			1,688			990			272			299,780			—			7,388			462,275			300			772,693
Geophysics ground		—			35			730,748			7,602			481,548			—			26,521			173,368			—			1,419,822
Drilling		—			194			5,331,369			375			1,268,135			52			1,618,814			1,211			6,766			8,226,916
Land retention and permitting		3,147			2,084			27,704			2,272			19,819			1,577			46,015			11,333			58,112			172,063
Reporting		—			1,166			36,274			404			6,436			1,069			22,427			11,684			386			79,846
Environmental		—			1,294			886			—			—			—			—			1,519			16,782			20,481
Safety		—			59			44,990			59			56			—			3,481			118			—			48,763
Community Relations		—			—			—			—			—			—			—			—			42,824			42,824
General		—			114			35,440			187			129,152			51			3,073			988			99,208			268,213
Share-based compensation		560			1,429			197,937			1,710			34,827			758			39,618			20,683			5,652			303,174

Additions		4,035			14,641			6,429,826			19,949			2,294,593			6,230			1,837,634			789,003			288,710			11,684,621
Write-down		(4,672,218	)		—			—			—			(12,162	)		—			—			(288	)		(288,710	)		(4,973,378	)

Balance, end of year		—			1,255,447			26,147,439			3,636,059			2,423,211			3,717,726			4,740,900			1,352,684			—			43,273,466

Cumulative cost recoveries
Balance, beginning of year		(1,538,127	)		(1,038,107	)		(12,321,827	)		(65,665	)		(25,395	)		(47,047	)		(179,948	)		(164,354	)		—			(15,380,470	)
Additions		—			—			—			—			(941,982	)		—			(79,297	)		(133,850	)		—			(1,155,129	)
Write-down		1,538,127			—			—			—			—			—			—			—			—			1,538,127

Balance, end of year		—			(1,038,107	)		(12,321,827	)		(65,665	)		(967,377	)		(47,047	)		(259,245	)		(298,204	)		—			(14,997,472	)

Total costs		—			599,585			20,416,162			3,748,096			1,525,630			3,697,649			5,146,415			1,431,135			—			36,564,672

Page 13

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

7.	Exploration and Evaluation Assets (continued)

(a)

Duddridge Lake Property, Canada

The Company acquired a 100% interest in certain claims located in north-central Saskatchewan in fiscal 2008.

(b)

Waterbury Lake Property, Canada

The Company had 12 months from the completion of the earn-in agreement during which time it could acquire an additional 10% interest in WLULP for $6,000,000. On April 12, 2011, the Company exercised its back-in option by paying KWULP $6,000,000 and now holds a 60% interest in WLULP. The WLULP agreement also requires that the Company and its partners spend a total of $30,000,000 for exploration and evaluation costs over a three year period in proportion to their interest in WLULP. The partners have fully funded the $30,000,000 contract commitment of which $24,577,432 in expenditures have been incurred by WLULP as of December 31, 2012. The Company was appointed operator for WLULP and is entitled to a management fee equal to 10% of expenditures for operator services.

(c)

Patterson Lake Properties, Canada

The Patterson Lake Properties, located in Saskatchewan, comprise both Patterson Lake and Patterson Lake South properties.

(i)

Patterson Lake

The Company acquired a 100% interest in various claims in fiscal 2008. In January 2012 the Company staked one additional claim.

Page 14

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

7.	Exploration and Evaluation Assets (continued)

(c)

Patterson Lake Properties, Canada (continued)

(ii)

Patterson Lake South

The Company acquired a 100% interest in various claims in fiscal 2008 and, on January 21, 2008, entered into an exploration agreement with Alpha Minerals Inc. (“Alpha” formerly ESO Uranium Corporation) to include jointly staked claims on the southern extension of Fission’s 100% owned Patterson Lake claims and Alpha’s Hook Lake Property. The joint venture participants share costs in proportion to their interest in the joint venture. This is presently a 50%—50% basis. In November 2011 one additional claim was staked and in December 2011 six claims were staked. In fiscal 2012 two claims were allowed to lapse and as a result the Company recorded a $1,976 write-down of acquisition costs and $12,162 write-down of exploration costs at June 30, 2012.

(d)

Davy Lake Property, Canada

The Company acquired a 100% interest in certain claims located in Saskatchewan in fiscal 2008.

(e)

Dieter Lake Property, Canada

(f)

Other Fission Canadian Properties

(i)

North Shore Property

The Government of Alberta drafted the Lower Athabasca Regional Plan (“LARP”) to conserve land, which has resulted in some of metallic and industrial mineral claims to be under temporary restricted status, which includes some claims held by Fission. On August 22, 2012 the Government of Alberta approved the LARP, and the Company will not be permitted to continue exploration on claims within the zoned land. Accordingly, in fiscal 2012, the Company recorded a write-down of $3,594,513 to the property at June 30, 2012. The Company is currently evaluating its options including approaching the Government of Alberta for compensation of all expenditures incurred plus loss of future opportunities.

(ii)

Fort McLeod Property

The Company staked certain claims in Saskatchewan in fiscal 2010, however all claims lapsed in fiscal 2012 and the Company abandoned the property and recorded a write-down of $251 at June 30, 2012.

Page 15

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

7.	Exploration and Evaluation Assets (continued)

(f)

Other Fission Canadian Properties (continued)

(iii)

Caribou Mountains and Zoo Bay Properties

(iv)

Clearwater West Property

In December 2012 the Company staked three claims in Saskatchewan at this property.

(v)

Minor Bay Property

The Company acquired a 100% interest in the Minor Bay property located in Saskatchewan in fiscal 2008. In May 2012, the Company staked two additional claims.

(vi)

Torwalt Lake Property

The Company acquired a 100% interest in the Torwalt Lake property located in Saskatchewan in fiscal 2008.

(vii)

Waterbury Lake North Property

In July 2009, the Company staked three claims in Saskatchewan immediately adjacent to the Waterbury Lake property.

(viii)

Waterbury Lake West Property

In January 2012, the Company staked two claims in Saskatchewan at this property.

(ix)

Riou Lake Property

In February 2012, the Company staked 2 claims in Saskatchewan at this property.

(g)

Pitchstone Properties Acquired Through Plan of Arrangement

On July 5, 2012 the Company acquired certain claims in the Athabasca Basin, Saskatchewan, Hornby Basin, Nunavut and Namibia, Africa (Disclosed in Note 6). The following is a list of the properties acquired;

Athabasca Basin Properties, Saskatchewan, Canada, 100% owned

(i)

Black Bear Property

(ii)

Fireweed Property

(iii)

Fisher Property

(iv)

Gumboot Property

(v)

Packrat Property

Page 16

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

7.	Exploration and Evaluation Assets (continued)

(g)

Pitchstone Properties Acquired Through Plan of Arrangement (continued)

Athabasca Basin Properties, Saskatchewan, Canada, Denison Option

(i)

Johnston Lake Property

The Company holds a 49% interest in property licenses owned by Denison Mines Corp. (“Denison”). The Company has an option to acquire an additional 29% interest, for a total interest of 75%, by spending $500,000 on exploration by February 28, 2013 and an additional $500,000, for a total of $1,000,000 by February 28, 2014. The property is subject to a 1% net smelter return royalty.

The Company obtained a waiver from Denison of the milestone requirement to spend $500,000 on the Johnston Lake property by February 28, 2013 as part of the Company’s option to earn in an additional 29% interest. This waiver does not affect the total expenditure requirement of $1,000,000 by February 28, 2014.

Athabasca Basin Properties, Saskatchewan, Canada, JOGMEC Joint Venture

The Company has a 50:50 joint venture with Japan Oil, Gas and Metals National Corporation (“JOGMEC”) in the following properties;

(i)

Marten Property

(ii)

Wolverine Property

Athabasca Basin Properties, Saskatchewan, Canada, Uranium One Joint Venture

The Company has a 50:50 joint venture with Uranium One Inc. (“UOI”). UOI stopped contributing to the joint venture in 2008 and their participating interest is being diluted. The participating interests for the Company and UOI are 55% and 45% respectively for the following properties;

(i)

Darby Property

(ii)

Lynx Lake Property

(iii)

Moon Lake Property

(iv)

Waterfound Property

Athabasca Basin Properties, Saskatchewan, Canada, UOI and JCU Joint Venture

(i)

Candle Property

The Company has a joint venture with JCU (Canada) Exploration Company, Limited (“JCU”) for a 75% interest in the property. The Company’s interests are subject to the pre-existing joint venture with UOI. The participating interests for the Company, UOI and JCU are 41%, 34% and 25% respectively.

Hornby Bay Basin Properties, Nunavut, Canada, Canterra Joint Venture

The Company has a 50:50 joint venture with Canterra Minerals Corporation (“Canterra”) on the following properties:

(i)

Dismal Lake and Mountain Lake Properties

Certain claims are subject to a 5% net smelter return royalty. The Company and Canterra have the right to purchase one half of the retained royalty for $5,000,000 for each property.

Page 17

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

7.	Exploration and Evaluation Assets (continued)

(g)

Pitchstone Properties Acquired Through Plan of Arrangement (continued)

Hornby Bay Basin Properties, Nunavut, Canada, Canterra Joint Venture (continued)

(ii)

Kendall River Property

The property is subject to a 5% net smelter return royalty. The Company and Canterra have the right to purchase one half of the retained royalty for $2,500,000.

Namibia, Africa Properties, Manica and Rio Joint Venture

(i)

Dome Property

The Company has a joint venture with Manica Minerals Limited (“Manica”) and Rio Tinto Mining and Exploration Limited (“Rio”). The participating interests are currently 74% for the Company and 26% for Manica. The Company entered into an Investment and Earn-in agreement on its share of the Dome property with Rio. The agreement allows Rio to earn an interest in bedrock uranium at Dome as follows:

•

An initial 49% in Pitchstone’s interest (“First Stage Earn-in”), by making expenditures of US $5 million by December 31, 2016 subject to minimum spend requirements as follows:

US$ 1.5 million on or before December 31, 2013; US$ 1.0 million (cumulative US$ 2.5 million) on or before December 31, 2014;

US$ 1.0 million (cumulative US$ 3.5 million) on or before December 31, 2015;

•

An additional 15% in Pitchstone’s interest (“Second Stage Earn-in”) by spending an additional US$ 5.0 million within two years of the First Stage Earn-in Completion Date;

•

An additional 11% in Pitchstone’s interest (“Third Stage Earn-in”) by funding and completing a Bankable Feasibility Study within five years of the Second Stage Earn-in Completion Date.

(ii)

Kaoko Property

The Company has a joint venture with Manica. The participating interests are currently 74% for the Company and 26% for Manica.

(h)

Pitchstone Properties acquired through staking

Richmond Lake Property, Saskatchewan, Canada

In September 2012, the Company staked 2 claims at Richmond Lake, Saskatchewan. These claims are contiguous to the Wolverine property and under the terms of the JOGMEC joint venture, JOGMEC has the option to have the claims added to the joint venture by reimbursing the Company 50% of the costs of obtaining and registering the claims.

(i)

Macusani Properties, Peru

In 2008, the Company acquired a 100% interest in certain properties located in Peru. Ongoing administrative and claim maintenance costs for these properties are expensed during the period in which they are incurred which resulted in a write-down of $121,043 for the six month period ended December 31, 2012 (June 30, 2012—$288,710).

Page 18

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

8.	Accounts payable and accrued liabilities


Maturity dates < 6 months	December 31 2012		June 30 2012
	$		$
Trade payables		966,242		1,002,650
Accrued liabilities		97,418		79,726
Flow-through share liability		700,070		—
Payroll and other payables		182,384		143,292

		1,946,114		1,225,668

9.	Share capital and other capital reserves

The Company is authorized to issue an unlimited number of common shares, without par value. All issued shares are fully paid.

(a)

Private placements

November 17, 2011

The Company completed a private placement of 11,800,000 flow-through common shares at $0.85 per share for aggregate gross proceeds of $10,030,000. The Company paid agents’ commissions of $637,915 plus $77,771 of expenses and issued 623,701 non-transferable broker warrants with an attributed value of $364,064 based on the Black-Scholes pricing model which was included in other capital reserves. Each broker warrant is exercisable into one common share of the Company for a period of 2 years at a price of $0.85 per share with an expiry date of November 17, 2013. The assumptions used in the Black-Scholes pricing model include a volatility of 107%, risk free interest rate of 0.90%, expected life of 2 years, and a dividend rate of 0%. All warrants vested immediately on the date of grant. Since the Company’s share price increased between the date the consideration to be received for the flow-through shares was set and the closing date, which was used for the transaction allocation under the residual method, no value was ascribed to the flow-through liability.

December 21, 2012

The Company completed a private placement of 10,001,001 flow-through common shares at $0.60 per share for aggregate gross proceeds of $6,000,601. The Company paid agents’ commissions of $410,036 plus $74,353 of expenses and issued 600,060 Broker Warrants with an attributed value of $127,083 based on the Black Scholes pricing model which was included in other capital reserves. Each Broker Warrant is exercisable into one common share of the Company for a period of 2 years at a price of $0.60 per share with an expiry of December 21, 2014. The assumptions used in the Black-Scholes pricing model include a volatility of 80%, risk free interest rate of 1.14%, expected life of 2 years and a dividend rate of 0%. All warrants vested immediately on the date of the grant. A flow-through liability of $700,070 was recognized and was reported as a reduction to share capital and will be taken into income when the renunciation documents are filed.

(b)

Acquisition of Pitchstone Exploration Ltd.

July 5, 2012

The Company completed the acquisition of all of the outstanding shares of Pitchstone. As part of the consideration the Company issued 9,697,159 common shares with a fair value of $4,315,235. See Note 6.

Page 19

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

9.	Share capital and other capital reserves (continued)

(c)

Stock options and warrants

Stock options and share purchase warrants transactions are summarized as follows:


	Stock options					Warrants
	Number outstanding			Weighted average exercise price		Number outstanding			Weighted average exercise price
				$					$
Balance July 1, 2011		8,288,500			0.61		18,491,263			0.90
Granted		1,480,000			0.80		623,701			0.85
Exercised		(276,000	)		0.31		(3,185,855	)		0.42
Expired		(198,334	)		0.79		(4,783,190	)		0.99
Forfeited		(226,916	)		0.79		—			—

Outstanding, June 30, 2012		9,067,250			0.64		11,145,919			0.99

Issued through plan of arrangement (Note 6)		820,465			1.36		617,441			1.13
Granted		2,750,000			0.55		600,060			0.60
Exercised		(25,000	)		0.31		—			—
Expired		(558,701	)		0.76		(5,060,022	)		1.00
Forefeited		(66,667	)		0.80		—			—

Outstanding, December 31, 2012		11,987,347			0.67		7,303,398			0.97

Page 20

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

9.	Share capital and other capital reserves (continued)

(c)

Stock options and warrants (continued)

As at December 31, 2012, incentive stock options and share purchase warrants were outstanding as follows:


Stock Options
Number outstanding		Exercise price		Number of vested options		Expiry date
		$
	6,435		1.07		6,435	February 21, 2013 ⁽¹⁾
	150,000		0.85		150,000	March 7, 2013
	50,000		1.05		50,000	March 31, 2013
	21,450		1.07		21,450	June 24, 2013
	158,730		2.00		158,730	July 5, 2013
	178,035		0.70		178,035	July 5, 2013
	72,930		1.07		72,930	July 5, 2013
	3,218		1.96		3,218	July 5, 2013
	169,455		1.86		169,455	July 5, 2013
	21,450		1.40		21,450	July 5, 2013
	2,145		1.07		2,145	November 7, 2013
	430,000		0.20		430,000	November 28, 2013
	1,775,000		0.30		1,775,000	January 13, 2014
	85,000		0.80		70,834	April 18, 2014
	100,000		0.31		100,000	August 6, 2014
	82,500		0.80		55,000	August 6, 2014
	2,145		1.86		2,145	November 25, 2014
	82,500		0.80		41,250	January 12, 2015
	1,055,250		0.55		1,055,250	February 3, 2015
	150,000		0.80		150,000	March 24, 2015
	6,435		1.59		6,435	April 12, 2015
	12,871		2.00		12,871	December 1, 2015
	3,060,000		0.80		3,060,000	December 30, 2015
	450,000		1.00		450,000	January 27, 2016
	11,798		0.70		11,798	November 1, 2016
	1,100,000		0.80		575,000	January 12, 2017
	2,750,000		0.55		950,000	December 31, 2017

	11,987,347				9,579,431

(1) - Expired without exercise

Page 21

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

9.	Share capital and other capital reserves (continued)

(c)

Stock options and warrants (continued)


Warrants
Date issued	Number outstanding		Exercise price		Expiry date
			$
July 5, 2012		42,898		0.65	January 27, 2013 ⁽¹⁾
July 5, 2012		574,543		1.17	January 27, 2013 ⁽¹⁾
February 24, 2011		5,462,196		1.00	February 24, 2013 ^(2) (3)
November 17, 2011		623,701		0.85	November 17, 2013
December 21, 2012		600,060		0.60	December 21, 2014

		7,303,398

(1) - Expired without exercise

(2) - 516,463 warrants expired without exercise

(3) - 4,945,733 warrants were extended to April 1, 2013

(d)

Share-based compensation

During the six month period ended December 31, 2012, the Company granted 2,750,000 options (December 31, 2011 – 82,500). Pursuant to the granting and vesting of options issued, share-based compensation of $376,683 during the six month period ended December 31, 2012 (December 31, 2011—$454,368) was recognized in profit or loss and share-based compensation of $88,736 (December 31, 2011—$128,652) was recognized in exploration and evaluation assets. The total amount was also recorded as other capital reserves on the statement of financial position. All options are recorded at fair value using the Black-Scholes option pricing model.

The following weighted average assumptions were used for the valuation of stock options:


	December 31			June 30
	2012			2012
Risk Free Interest Rate		1.15	%		1.06	%
Expected Life — Years		2.35			3.04
Annualised Volatility		84.11	%		115.10	%
Dividend Rate		0	%		0	%

During the six month period ended December 31, 2012 the Company issued 820,465 (December 31, 2011 – NIL), options to former Pitchstone option holders as part of the acquisition consideration (Note 6). The options have a fair value of $22,360 which formed part of the acquisition consideration and was also recorded as other capital reserves on the statement of financial position.

Page 22

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

10.

Supplemental disclosure with respect to cash flows


	December 31		June 30
	2012		2012
	$		$
Cash and cash equivalents
Cash		10,360,367		3,919,759
Redeemable Term Deposits		4,031,000		11,021,000

		14,391,367		14,940,759

There were no cash payments for interest and income taxes during the six month period ended December 31, 2012 and December 31, 2011. During the six month period ended December 31, 2012 the Company received $91,067 (December 31, 2011 $179,000) in interest income on its redeemable term deposits.

Significant non-cash transactions for the six month period ended December 31, 2012 included:

(a)

Incurring exploration and evaluation related expenditures of $621,099 through accounts payable and accrued liabilities;

(b)

Recognizing $88,736 of share-based payments in exploration and evaluation assets;

(c)

Issuance of shares, stock options and share purchase warrants valued at $4,340,049 for the acquisition of Pitchstone;

(d)

Reclassifying $8,008 from other capital reserves to share capital on the exercise of stock options;

(e)

Reclassifying $127,083 from share capital to other capital reserves for warrants issued as finder’s fees

(f)

Reclassifying $700,070 from share capital to accrued liabilities for the flow through premium liability recognized.

Significant non-cash transactions for the six month period ended December 31, 2011 included:

(a)

Incurring exploration and evaluation related expenditures of $398,418 through accounts payable and accrued liabilities;

(b)

Reclassifying $672,933 from other capital reserves to share capital on the exercise of stock options and warrants;

(c)

Reclassifying $364,064 from share capital to other capital reserves for warrants issued as finder’s fees.

Page 23

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

11.

Related party transactions

The Company identified its directors and certain senior management as its key management personnel. The compensation costs for key management personnel are as follows:


	December 31		December 31
	2012		2011
	$		$
Compensation Costs
Wages and consulting fees paid to key management personnel		693,550		681,000
Share-based payments for options granted to key management personnel		193,068		275,965

		886,618		956,965

Other Income
Exploration management fee income from WLULP		86,299		93,940
Exploration rental income from WLULP		7,394		—

		93,693		93,940

Share-based payments represent the fair value calculations of options in accordance with IFRS 2 Share-based Payments granted to key management personnel.

Included in accounts payable at December 31, 2012 is $20,533 (June 30, 2012—$20,533) for consulting and directors fees owing to officers, and companies controlled by officers.

Included in amounts receivable at December 31, 2012 is $146,061 (June 30, 2012—$182,138) due from WLULP and $2,500 (June 30, 2012—$24,318) due from WLUC for funds advanced to vendors on behalf of WLULP and WLUC respectively.

These transactions were in the normal course of operations and were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties

12.

Segmented Information

The Company primarily operates in one reportable operating segment, being the exploration and development of exploration and evaluation assets. Long-lived assets by geographic area are as follows:


	December 31, 2012						June 30, 2012
	Canada		Peru		Namibia		Canada		Peru		Namibia
	$		$		$		$		$		$
Property and equipment		210,601		16,853		—		208,873		18,194		—
Exploration & evaluation assets		44,407,825		—		435,656		36,564,672		—		—

		44,618,426		16,853		435,656		36,773,545		18,194		—

Page 24

Fission Energy Corp.

Notes to the condensed consolidated interim financial statements

For the six month period ended December 31, 2012

(Expressed in Canadian dollars)

13.

Contingency

14.

Subsequent Events

Subsequent to December 31, 2012 the Company:

(a)

Completed a non-brokered private placement financing of 4,000,000 common share units at a price of $0.50 per unit for gross proceeds of $2,000,000. Each common share unit consists of one common share plus one common share purchase warrant. Each whole warrant is exercisable at $0.65 for a period of 2 years. The company paid $60,300 in finder’s fees in connection with this private placement;

(b)

Entered into a binding letter agreement with Denison Mines Corp. (“Denison”) dated January 16, 2013, pursuant to which Denison and Fission will seek shareholder approval for Denison’s acquisition of all of the outstanding shares of Fission after Fission has transferred certain of its assets to a new company (“Spinco”). The transaction is expected to be structured as a plan of arrangement under which the shareholders of Fission will receive 0.355 of a common share of Denison and one common share of Spinco for each Fission common share held. The assets being transferred to Spinco will include the Patterson Lake and Patterson Lake South (“PLS”) properties, North Shore property, Clearwater West property, Peru properties and the ending working capital of Fission. The transaction will be subject to regulatory and Fission shareholder approvals. In certain circumstances, a $3.5 million break fee may be payable;

(c)

61,435 stock options expired and 10,000 stock options were forfeited;

(d)

Issued 4,000,000 share purchase warrants in connection with the non-brokered private placement;

(e)

617,441 warrants granted on July 5, 2012 expired without exercise. The Company applied to the TSX Venture Exchange to extend the expiry date of 4,945,733 warrants issued as part of the Company’s unit private placement completed on February 24, 2011 from February 24, 2013 to April 1, 2013. The remaining 516,462 warrants issued as part of the February 24, 2011 private placement expired without exercise;

(f)

Obtained a waiver from Denison of the milestone requirement to spend $500,000 on the Johnston Lake property by February 28, 2013 as part of the Company’s option to earn in an additional 29% interest. This waiver does not affect the total expenditure requirement of $1,000,000 by February 28, 2014.

Page 25

SCHEDULE “C”

PROFORMA FINANCIAL STATEMENTS OF DENISON

(See attached)

DENISON MINES CORP.

Pro Forma Combined Balance Sheet

As at December 31, 2012

(Unaudited – Expressed in U.S dollars)


	A			B						C			A+B+C
(in thousands)	Denison			Fission			Pro- Forma Notes			Pro- Forma Adjust			Pro- Forma Denison
ASSETS
Current
Cash and cash equivalents		38,188			12,225			3	(b)		(10,878	)
								3	(a)		(6,346	)		33,189
Trade and other receivables		2,638			888			3	(b)		(737	)		2,789
Inventories		1,792			—						—			1,792
Prepaid expenses and other		683			164			3	(b)		(140	)		707

		43,301			13,277						(18,101	)		38,477
Non-Current
Inventories – ore in stockpiles		2,062			—						—			2,062
Investments		2,843			27			3	(b)		(27	)		2,843
Restricted cash and investments		2,254			—						—			2,254
Plant and equipment		87,204			236			3	(b)		(198	)		87,242
Mineral properties		160,684			43,308			3	(b)		(6,099	)
								3	(b)		34,932			232,825
Intangibles		2,008			—						—			2,008

Total assets		300,356			56,848						10,507			367,711

LIABILITIES
Current
Accounts payable and accrued liabilities		6,628			1,958			3	(b)		(667	)		7,919
Current portion of long-term liabilities		1,375			—						—			1,375

		8,003			1,958						(667	)		9,294
Non-Current
Post-employment benefits		3,450			—						—			3,450
Reclamation obligations		14,816			—						—			14,816
Debt obligations		104			—						—			104
Other liabilities		1,005			—						—			1,005
Deferred income taxes		9,449			—						—			9,449

Total liabilities		36,827			1,958						(667	)		38,118

EQUITY
Share capital		979,124			72,514			3	(b)		(72,514	)
								3	(a)		62,458			1,041,582
Warrants		—			—			3	(a)		871			871
Contributed surplus		50,671			11,021			3	(b)		(11,021	)
								3	(a)		2,735			53,406
Retained earnings (deficit)		(777,039	)		(28,625	)		3	(b)		28,625			(777,039	)
Accumulated other comprehensive income		10,773			(20	)		3	(b)		20			10,773

Total equity		263,529			54,890						11,174			329,593

Total liabilities and equity		300,356			56,848						10,507			367,711

See accompanying notes to the pro forma combined financial statements

- 75 -

DENISON MINES CORP.

Pro Forma Combined Statement of Operations

For the Twelve Months Ended December 31, 2012

(Unaudited – Expressed U.S dollars)


	A			B						C			A+B+C
(in thousands except per share amounts)	Denison			Fission			Pro- Forma Notes			Pro- Forma Adjust			Pro- Forma Denison
REVENUES		11,127			—						—			11,127

EXPENSES
Operating		(14,362	)		—						—			(14,362	)
Mineral property exploration		(12,508	)		535			3	(c)		(187	)
								3	(d)		(7,697	)		(19,857	)
General and administrative		(10,475	)		(5,401	)		3	(c)		5,295			(10,581	)
Impairment of mineral properties		—			(3,872	)		3	(c)		3,872			—
Other income (expense)		(2,676	)		(111	)		3	(c)		72			(2,715	)

		(40,021	)		(8,849	)					1,355			(47,515	)

Income (loss) before finance charges		(28,894	)		(8,849	)					1,355			(36,388	)
Finance income (expense)		(450	)		172			3	(c)		(172	)		(450	)

Income (loss) before taxes		(29,344	)		(8,677	)					1,183			(36,838	)
Income tax recovery (expense)
Current		318			—						—			318
Deferred		3,571			(179	)		3	(c)		179			3,571

Net income (loss) - continuing operations		(25,455	)		(8,856	)					1,362			(33,065	)
Net income (loss) - discontinued operations		(92,493	)		—						—			(92,493	)

Net income (loss)		(117,948	)		(8,856	)					1,362			(125,442	)

Net income (loss) per share – continuing operations:
Basic and diluted		(0.07	)		(0.01	)								(0.08	)
Net income (loss) per share – discontinued operations:
Basic and diluted		(0.24	)		—									(0.21	)
Net income (loss) per share
Basic and diluted		(0.31	)		(0.01	)								(0.29	)

Weighted-average number of shares outstanding (in thousands):
Basic and diluted		385,352			123,982									434,532

See accompanying notes to the pro forma combined financial statements

Fission consolidated results from operations have been constructed for the purpose of this pro forma disclosure for the 12 month period ending September 30, 2012 – please refer to note 5 for additional details

- 76 -

DENISON MINES CORP.

Notes to the Pro Forma Combined Financial Statements

(Unaudited, expressed U.S. dollars unless otherwise noted)

1.	BASIS OF PRESENTATION

These unaudited pro forma combined financial statements have been compiled for the purposes of inclusion in the information circular of Fission Energy Corp (“Fission”) dated March 22, 2013. These pro forma financial statements have been prepared by the management of Denison Mines Corp (“Denison”) in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), and give effect to a proposed plan of arrangement under which all of the issued and outstanding shares of Fission are acquired by Denison as described in Note 2 (the “Arrangement”). These pro forma financial statements include:

a pro forma combined balance sheet as at December 31, 2012 prepared from information derived from Denison’s audited consolidated balance sheet at December 31, 2012 and Fission’s unaudited consolidated balance sheet at September 30, 2012, converted to U.S dollars at par, as if the Arrangement was completed on December 31, 2012 and giving effect to the assumptions as described in Note 3; and

a pro forma combined statement of operations for the 12 months ended December 31, 2012 prepared from information derived from Denison’s audited statement of operations for the year ended December 31, 2012 and Fission’s unaudited statement of operations for the year ended September 30, 2012 prepared as described in Note 5.

These pro forma financial statements are provided for illustrative purposes only, and do not purport to represent the financial position that would have resulted had the Arrangement actually occurred on December 31, 2012 or the results of operations that would have resulted had the Arrangement actually occurred on January 1, 2012. Further, these pro forma financial statements are not necessarily indicative of the future financial position or results of operations of Denison as a result of the Arrangement and should be read in conjunction with the following interim and year-end consolidated financial statements prepared in accordance with IFRS:

Denison’s audited consolidated financial statements for the twelve months ended December 31, 2012 incorporated by reference in Fission’s circular dated March 22, 2013; and

Fission’s unaudited interim consolidated financial statements for the three months ended September 30, 2012 and the audited consolidated financial statements for the year ended June 30, 2012 incorporated by reference into Fission’s circular dated March 22, 2013.

2.	PLAN OF ARRANGEMENT

Pursuant to an arrangement agreement dated March 7, 2013, Denison and Fission propose to carry out a plan of arrangement, subject to approval by the security holders of Fission, applicable regulatory authorities and the Supreme Court of British Columbia. Conditional upon, among other things, certain assets of Fission being spun out to a new company (“Spin Co”), to be held pro rata by current Fission shareholders, Denison proposes to acquire all of the issued and outstanding shares of Fission in exchange for Denison shares at a ratio of 0.355 shares of Denison for each share of Fission. Upon completion, the pre-combination shareholders of Denison and Fission will own approximately 88.8% and 11.2%, respectively, of the combined company excluding the exercise of outstanding stock options and warrants.

For accounting purposes, Fission is not considered a business under IFRS 3 “Business Combinations” as it is currently not capable of generating outputs that can provide a return to Denison. As a result, transaction costs incurred by Denison relating to the combination will be capitalized as part of the purchase price and individual fair values will be assigned to the assets and liabilities being acquired – no goodwill will be recorded.

3.	PRO FORMA ADJUSTMENTS AND ASSUMPTIONS

The following pro forma adjustments and the allocation of the purchase price to the assets and liabilities acquired are preliminary and subject to change. Detailed plans for combining the operations of Denison and Fission, upon completion of the Arrangement, have yet to be finalized. Additional costs may be incurred due to these efforts and have not been reflected in these pro forma financial statements.

- 77 -

a)	Purchase Price

The total preliminary purchase price of $72,410,000 for the Arrangement was determined as follows:


(in thousands)
Fission common shares outstanding at March 1, 2013, in thousands		138,535
Exchange ratio		0.355

Common shares of Denison issued to Fission shareholders, in thousands		49,180
Fair value per Denison common share, in CAD$	$	1.27

Fair value of Denison common shares issued, in CAD$	$	62,458
Canadian dollar to U.S dollar exchange rate		1.0000

Fair value of Denison common shares issued	$	62,458
Fair value of outstanding Fission share purchase warrants assumed by Denison		871
Fair value of outstanding Fission stock options assumed by Denison		2,735
Cash costs associated with Arrangement:
Estimated amounts payable to Fission at closing by Denison		4,721
Estimated transaction costs related to Arrangement incurred by Denison (Note 2)		1,625

Preliminary purchase price	$	72,410

The fair value per Denison common share of CAD$1.27 per share is the closing price of Denison shares on the TSX on March 6, 2013, the day immediately prior to the March 7, 2013 announcement of the Arrangement. Pursuant to the Arrangement, and subject to certain adjustments to the exercise price, the holders of Fission stock options and warrants will ultimately receive the right to acquire common shares of both Denison and Spin Co. The calculation of the fair values of the Fission warrants and stock options, which will ultimately be satisfied by the issuance of Denison common shares, was prepared using the Black-Scholes option pricing model and using the March 6, 2013 fair value amount of CAD$1.27 per Denison common share as an input in the model.

The final purchase price for the Arrangement will depend on the market price of Denison common shares on the closing date. Each CAD$0.01 increase in the market value of the Denison common shares increases the equity component of the purchase price by approximately $537,000.

b)	Preliminary Purchase Price Allocation

The following table uses Fission’s September 30, 2012 published unaudited balance sheet converted to USD$ using a $CAD to USD$ foreign exchange rate of 1.0000 and allocates the preliminary purchase price based on Denison management’s estimate of the fair values after giving effect to the assets and liabilities being transferred to Spin Co as part of the Arrangement:


(in thousands)	Fission Book Value		Amounts Transferred To Spin Co			Fair Value Adjust		Fission Fair Value
ASSETS
Current
Cash and cash equivalents		12,225		(10,878	)		—		1,347
Trade and other receivables		888		(737	)		—		151
Prepaid expenses and other		164		(140	)		—		24

		13,277		(11,755	)		—		1,522
Non-Current
Investments		27		(27	)		—		—
Plant and equipment		236		(198	)		—		38
Mineral properties		43,308		(6,099	)		34,932		72,141

Total assets		56,848		(18,079	)		34,932		73,701

LIABILITIES
Current
Accounts payable and accrued liabilities		1,958		(667	)		—		1,291

Total liabilities		1,958		(667	)		—		1,291

Net assets purchased		54,890		(17,412	)		34,932		72,410

- 78 -

In arriving at the fair values of the assets and liabilities acquired, Denison’s management has made assumptions, estimates and assessments which are in part based on publicly available information at the time these pro forma financial statements were prepared and in part based on an interpretation of the provisions in the Arrangement agreement itself. The actual fair values of the assets and liabilities will be determined as of the closing date of the Arrangement and may differ materially from the amounts disclosed in the preliminary purchase price allocation set out in the table above.

c)	Impact of asset and liability spin-out to Spin Co on statement of operations

In arriving at the statement of operations acquired, Denison’s management has made assumptions which are consistent with those used to determine the assets and liabilities acquired and which are consistent with its internal expectations of incremental costs to be incurred as a result of the combination. These amounts may not be indicative of actual amounts incurred once more detailed operating plans are put into place.

d)	Accounting for exploration expenditures

Fission’s policy is to capitalize exploration expenditures while Denison’s policy is to expense them. An adjustment of $7,697,000 has been made to the combined pro forma statement of operations to expense the exploration expenditures capitalized by Fission on the mineral properties being acquired by Denison.

4.	SHARE CAPITAL

After giving effect to the pro forma adjustments described in Note 3, the issued and outstanding share capital of Denison will be as follows:


(in thousands, including share amounts)	Number of Common Shares
Balance at December 31, 2012		388,806	$	979,124
Issued by Denison to acquire Fission under the proposed
Arrangement agreement (see Note 3 (a))		49,180		62,458

Pro forma balance at December 31, 2012		437,986	$	1,041,582

5.	CONSOLIDATED STATEMENT OF OPERATIONS OF FISSION

The unaudited consolidated statement of operations of Fission for the twelve months ended September 30, 2012 was prepared by adjusting the unaudited consolidated statement of operations of Fission for the three months ended September 30, 2012 by the following:

adding the audited consolidated statement of operations of Fission for the twelve months ended June 30, 2012 and subtracting the unaudited consolidated statement of operations of Fission for the three months ending September 30, 2011; and

translating the results to U.S dollars based on a Canadian / U.S dollar exchange rate of 1.0000.

- 79 -

The adjustments as outlined above are summarized in the following table:


(in thousands)	A Three Months Ended Sep’2012			B Twelve Months Ended Jun’2012			C Three Months Ended Sep’2011			A+B-C Twelve Months Ended Sep’2012
	CAD$			CAD$			CAD$			CAD$
EXPENSES
Mineral property exploration		98			503			66			535
General and administrative		(1,125	)		(5,280	)		(1,004	)		(5,401	)
Impairment of mineral properties		(66	)		(3,898	)		(92	)		(3,872	)
Other income (expense)		(22	)		(145	)		(56	)		(111	)

Income (loss) before finance charges		(1,115	)		(8,820	)		(1,086	)		(8,849	)
Finance income (expense)		45			176			49			172

Income (loss) before taxes		(1,070	)		(8,644	)		(1,037	)		(8,677	)
Income tax recovery (expense)
Deferred		—			(179	)		—			(179	)

Net income (loss)		(1,070	)		(8,823	)		(1,037	)		(8,856	)

6.	PRO FORMA EARNINGS PER SHARE

The calculation of pro forma earnings per share in the pro forma combined statement of operations for the twelve months ended December 31, 2012 is based on the weighted average number of common shares outstanding of Denison for the twelve months ended December 31, 2012 plus the additional 49,180,000 common shares of Denison that would have been outstanding as if the Arrangement were completed on January 1, 2012.

- 80 -