Uranium Energy Corporation ("UEC") has entered into an agreement (the "Agreement") with URN Resources Inc, a wholly owned subsidiary of Uranium One Inc. ("Uranium One"), dated October 13, 2009. Pursuant to the provisions of the Agreement, UEC has agreed to acquire all of Uranium One's interest in the South Texas Mining Venture, including all historic mining, reclamation and exploration properties. UEC has also agreed to be responsible for all liabilities relating solely to these assets, including environmental, closure and reclamation liabilities.

The financial statements for "Operations to be acquired by Uranium Energy Corp" set out the actual assets, liabilities, revenues, expenses and cash flows of Uranium One's business that are to be acquired by UEC pursuant to the Agreement described above as at and for the period shown. These include the proportionate share of the Hobson facility and the La Palangana project (99%) and various exploration properties.

Operations to be acquired (collectively "Texas operations") by UEC are engaged in the acquisition, exploration and development of properties for the production of uranium in the United States.

The U.S. dollar is the principal currency of measure for the Texas operations. The Texas operations combined financial statements are prepared in United States ("U.S.") dollars and in accordance with Canadian generally accepted accounting principals ("GAAP"). Significant differences in the combined financial statements of net earnings between the U.S. and Canadian GAAP are described in note 9 of these financial statements.

The significant accounting policies used in these Canadian GAAP combined financial statements, which are consistent with the accounting policies of Uranium One, are as follows:

Mineral interests, plant and equipment are recorded at cost less accumulated depreciation and depletion.

Mineral interests, plant and equipment includes capitalized expenditures related to the development of mineral properties and related plant and equipment. Capitalized costs and plant and equipment are depreciated and depleted using either a unit-of-production method, over the estimated economic life of the mine to which they relate, or using the straight-line method over their estimated useful lives.

The costs associated with mineral interests are separately allocated to reserves, resources and exploration potential, and include acquired interests in production, development and exploration stage properties representing the fair value at the time they were acquired.

Costs related to property acquisitions are capitalized until the viability of the mineral property is determined. Resource value and exploration potential for development projects not in commercial production is noted as non-depletable mineral properties. When it is determined that a property is not economically viable the capitalized costs are written down. Exploration expenditures on properties not advanced enough to identify their development potential are charged to operations as incurred.

Mining expenditures incurred either to develop new ore bodies or to develop mine areas in advance of current production are capitalized. Commercial production is deemed to have commenced when management determines that the completion of operational commissioning of major mine and plant components is completed, operating results are being achieved consistently for a period of time and that there are indicators that these operating results will be continued. Mine development costs incurred to sustain current production are capitalized.

Upon sale or abandonment of any mineral interest, plant and equipment, the cost and related accumulated depreciation or accumulated depletion, are written off and any gains or losses thereon are included in the statement of operations.

The operation reviews the carrying values of its mineral interests, plant and equipment when changes in circumstances indicate that those carrying values may not be recoverable. Estimated future net cash flows are calculated using estimated recoverable reserves, estimated future commodity prices and the expected future operating and capital costs. An impairment loss is recognized when the carrying value of an asset held for use exceeds the sum of undiscounted future net cash flows. An impairment loss is measured as the amount by which the asset's carrying amount exceeds its fair value.

The operation recognizes liabilities for statutory, contractual or legal obligations associated with the retirement of mineral property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, the net present value of the liability for an asset retirement obligation is recognized in the period incurred. The net present value of the liability is added to the carrying amount of the associated asset and amortized over the asset's useful life. The liability is accreted over time through periodic charges to earnings and is reduced by actual costs of reclamation. Subsequent to the initial measurement, the asset retirement obligation is adjusted at the end of each year to reflect changes in the estimated future cash flows underlying the obligation.

The operation uses the liability method of accounting for income and mining taxes. Under the liability method, future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for tax losses and other deductions carried forward. For business acquisitions, the liability method results in a gross up of mining interests to reflect the recognition of the future tax liabilities for the tax effect of such differences.

Future tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled. A reduction in respect of the benefit of a future tax asset (a valuation allowance) is recorded against any future tax asset if it is not more likely than not to be realized. The effect on future tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period in which the change is substantively enacted.

The preparation of financial statements in conformity with Canadian GAAP requires the operation's management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and related notes to the consolidated financial statements. Actual results may differ from those estimates.

Significant estimates used in the preparation of these consolidated financial statements include, but are not limited to, the recoverability of accounts receivable and investments, impairment of mineral interests, plant and equipment, the provision for income taxes and composition of income tax assets and liabilities, and the anticipated costs of reclamation and closure cost obligations.

These combined financial statements have been prepared in accordance with Canadian generally accepted accounting principles for interim financial information, they follow the same accounting policies, and methods of application as the audited consolidated financial statements of the operation for the year ended December 31, 2008. Significant differences in the combined financial statements of net earnings between U.S. and Canadian GAAP are described in note 9 of these financial statements.