Mega Uranium Ltd. — Interim / Quarterly Report 2020

May 13, 2020

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

THREE AND SIX MONTHS ENDED MARCH 31, 2020

(EXPRESSED IN CANADIAN DOLLARS)

(UNAUDITED)

NOTICE TO READER

The accompanying unaudited condensed interim consolidated financial statements of Mega Uranium Ltd. (the "Company") have been prepared by and are the responsibility of management. The comparative financial information for the three and six months ended March 31, 2020 included in the unaudited condensed interim consolidated financial statements have not been reviewed by the Company's auditors.

MEGA URANIUM LTD.

Condensed Interim Consolidated Statements of Financial Position

(Unaudited - in thousands of Canadian dollars, except for securities and per share amounts)

		As at		As at
		March 31,	September 30,
		2020		2019
ASSETS
Current assets
Cash and cash equivalents (note 5)	$	215	$	723
Receivables and prepaid expenses (note 6)		215		186
Marketable securities (note 7)		2,808		4,771
Net investment in sublease(note 12)		46		-
Total current assets		3,284		5,680
Non-current assets
Restricted cash (note 8)		304		313
Equity investment (note 9)		1,767		5,652
Long-term investment (note 10)		19,671		33,133
Property, plant and equipment		40		50
Right-of-use asset (note 11)		190		-
Net investment in sublease(note 12)		16		-
Total non-current assets		21,988		39,148
Total assets	$	25,272	$	44,828
EQUITY AND LIABILITIES
Current liabilities
Amounts payable and other liabilities (notes 13 and 15)	$	670	$	636
Lease liabilities(note 14)		79		-
Total current liabilities		749		636
Non-current liabilities
Lease liabilities(note 14)		173		-
Total non-current liabilities		173		-
Total liabilities		922		636
Equity
Share capital (note 16)		276,192		276,192
Warrant reserve (note 18)		946		946
Share option reserve		66,491		66,394
Accumulated other comprehensive income		8,834		20,644
Deficit		(328,113)		(319,984)
Total equity		24,350		44,192
Total equity and liabilities	$	25,272	$	44,828

The notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

Going concern (note 2) Commitments and obligations (note 19) Subsequent events (note 26)

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MEGA URANIUM LTD.

Condensed Interim Consolidated Statements of Loss and Comprehensive Loss (Unaudited - in thousands of Canadian dollars, except for securities and per share amounts)

		Three	Months Ended	Months Ended		Six Months Ended	Six Months Ended	Six Months Ended
		March 31,				March 31,
		2020		2019		2020		2019
Operating expenses
General and administrative expenses (note 21)	$	465	$	620	$	892	$	1,110
Exploration and evaluation expenditures(note 22)		44		60		81		236
Operating loss		(509)		(680)		(973)		(1,346)
Loss from equity investment (note 9)		(294)		(100)		(406)		(418)
Loss on deemed disposition of equity investment (note 9)		(822)		-		(822)		(689)
Impairment of equity investment (note 9)		-		-		(2,657)		-
Unrealized (loss) gain on marketable securities		(1,017)		(14)		(1,710)		247
Realized gain on marketable securities		144		-		144		-
Royalty income (note 22)		-		16		-		391
Accretion (note 14)		(7)		-		(14)		-
Gain on net investment		-		-		6		-
Other income		46		65		92		112
Interest and finance income		2		1		5		2
Foreign exchange(loss) gain		(16)		(5)		(10)		4
Net loss before taxes		(2,473)		(717)		(6,345)		(1,697)
Deferred tax expense		(1,630)		(642)		(1,784)		(1,155)
Net loss for the period		(4,103)		(1,359)		(8,129)		(2,852)
Other comprehensive loss
Items that will be reclassified subsequently to the profit and		loss:
Exchange differences on translation of foreign operations		12		(2)		9		6
Change in fair value of long-term investment,
net of tax(note 10)		(10,811)		(4,202)		(11,819)		(7,564)
Other comprehensive loss		(10,799)		(4,204)		(11,810)		(7,558)
Total comprehensive loss for theperiod	$	(14,902)	$	(5,563)	$	(19,939)	$	(10,410)
Loss per common share - basic	$	(0.01)	$	(0.00)	$	(0.02)	$	(0.01)
Lossper common share - diluted	$	(0.01)	$	(0.00)	$	(0.02)	$	(0.01)
Weighted average number of common shares
outstanding - basic	326,391,094		326,391,094		326,391,094		318,921,813
Weighted average number of common shares
outstanding - diluted	326,391,094		326,391,094		326,391,094		318,921,813

The notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

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MEGA URANIUM LTD.

Condensed Interim Consolidated Statements of Cash Flows

(Unaudited - in thousands of Canadian dollars, except for securities and per share amounts)

		Six Months Ended	Six Months Ended	Six Months Ended
		March 31,
		2020		2019
Operating activities
Net loss for the period	$	(8,129)	$	(2,852)
Adjustment for:
Loss on equity investment		406		418
Loss on deemed disposition of equity investment		822		689
Impairment of equity investment		2,657		-
Unrealized loss (gain) on marketable securities		1,710		(247)
Realized gain marketable securities		(144)		-
Amortization		36		12
Stock-based compensation		97		271
Accretion		14		-
Royalty income		-		(375)
Finance income		(4)		-
Gain on net investment		(6)		-
Deferred tax expense		1,784		1,155
Non-cash working capital items:
Receivables and prepaid expenses		(29)		(16)
Amountspayable and other liabilities		34		(72)
Net cash used in operating activities		(752)		(1,017)
Financing activities
Proceeds from private placement, net of costs		-		1,669
Proceeds from exercise of stock options		-		110
Net leasepayments		(31)		-
Net cash(used in) provided by financing activities		(31)		1,779
Investing activities
Proceeds from sale of marketable securities		394		-
Purchase of long-term investment		(140)		-
Net cashprovided by investing activities		254		-
Effect of exchange rate changes on cash held in foreign currencies		21		-
Net change in cash and cash equivalents		(508)		762
Cash and cash equivalents, beginning ofperiod		723		1,508
Cash and cash equivalents, end ofperiod	$	215	$	2,270

The notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

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MEGA URANIUM LTD. Condensed Interim Consolidated Statements of Equity - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

									Accumulated
	Number of						Share		other				Total
	common		Share		Warrant		option	comprehensive				Shareholders'
	shares		capital		reserve		reserve		income(loss)		Deficit		equity
Balance, October 1, 2018	309,382,003	$	274,838	$	887	$	65,952	$	35,591	$	**(314,480) **	$	62,788
Private placement (note 16(b)(i))	15,909,091		1,750		-		-		-		-		1,750
Cost of issue (note 16(b)(i))	-		(81)		-		-		-		-		(81)
Warrants issued (note 16(b)(i))	-		(485)		485		-		-		-		-
Exercise of stock options	1,100,000		170		-		(60)		-		-		110
Stock-based compensation	-		-		-		271		-		-		271
Net loss for the period	-		-		-		-		-		(2,852)		(2,852)
Other comprehensive loss,net of tax	-		-		-		-		(7,558)		-		(7,558)
Balance, March 31, 2019	326,391,094	$	276,192	$	1,372	$	66,163	$	28,033	$	**(317,332) **	$	54,428
Balance, October 1, 2019	326,391,094	$	276,192	$	946	$	66,394	$	20,644	$	**(319,984) **	$	44,192
Stock-based compensation	-		-		-		97		-		-		97
Net loss for the period	-		-		-		-		-		(8,129)		(8,129)
Other comprehensive loss,net of tax	-		-		-		-		(11,810)		-		(11,810)
Balance, March 31, 2020	326,391,094	$	276,192	$	946	$	66,491	$	8,834	$	**(328,113) **	$	24,350

The notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

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Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

MEGA URANIUM LTD.

1. Nature of business

Mega Uranium Ltd. (“Mega” or the “Company”) was incorporated in 1990 under the laws of the Province of Ontario and its shares are publicly traded on the Toronto Stock Exchange (the “TSX”) under the symbol “MGA”. The Company is domiciled in the Province of Ontario, Canada and its registered office located at 217 Queen Street West, Suite 401, Toronto, Ontario, Canada, M5V 0R2.

Mega has exploration stage mineral resource properties in Australia and Canada as well as investments in uraniumfocused public and private companies.

Mega is in the process of exploring its mineral properties and has not yet determined whether these properties contain reserves that are economically recoverable. The recoverability of the amounts shown for mineral properties and related expenditures is dependent upon various factors, including: the future selling price of uranium; the existence of economically recoverable reserves; the ability of the Company to obtain the necessary financing to complete exploration and development; government permitting policies and regulations; and future profitable production or proceeds from disposition of such properties.

In addition to the Company’s own exploration activities, Mega participates indirectly in the uranium sector through its securities holdings in other companies, including its significant long-term investment in NexGen Energy Ltd. (“NexGen”) (NXE:TSX), its equity interest in Toro Energy Limited (“Toro”) (TOE:ASX), and marketable securities in other uraniumfocused issuers. NexGen is an exploration and development stage entity engaged in the acquisition, exploration and evaluation of uranium properties in Canada. NexGen is a public company incorporated pursuant to the provisions of the British Columbia Business Corporations Act and has its registered records office located on the 25[th] Floor, 700 West Georgia Street, Vancouver, British Columbia, V7Y 1B3. Toro’s principal activities include the development of the Wiluna Uranium Project and exploration and evaluation of its tenement holdings. Toro is a public company incorporated and domiciled in Australia. The address of its registered office and principal place of business is 60 Havelock Street West Perth WA 6005.

These condensed interim consolidated financial statements ("interim consolidated statements") were approved by the Company’s board of directors on May 12, 2020.

2. Going concern

These interim consolidated statements have been prepared using accounting policies applicable to a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business as they become due. The Company has an accumulated deficit of $328,113 (September 30, 2019 - $319,984). As a result of its activities and investments, the Company is subject to risks and challenges including, but not limited to, dependence on key individuals, successful exploration and the ability to secure adequate financing to meet the minimum capital required to successfully complete the projects, political risk relating to maintaining property licenses in good standing and continuing as a going concern.

The Company expects to incur further operating losses and that it will have to raise additional funds to continue operations. Although the Company is able to raise funds by selling equity investments and has been successful in raising funds to date, there can be no assurance that adequate funding will be available in the future, or available on terms acceptable to the Company. The Company’s ability to generate capital from external sources or dispositions of investments is dependent upon many factors outside of its control, including the market values of its investments which can fluctuate significantly at any time and have a material and unpredictable impact of the Company’s capital resources.

Failure to meet its funding commitments with its partners or its ongoing obligations in respect of governing bodies in the jurisdictions in which it operates may result in the loss of the Company’s exploration and evaluation interests.

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MEGA URANIUM LTD.

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

2. Going concern (continued)

The challenges of securing requisite funding beyond March 31, 2020 and the continued estimated operating losses indicate a material uncertainty that may cast a significant doubt on the Company’s ability to continue as a going concern.

The interim consolidated statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts or classification of liabilities that might be necessary should the Company not be able to continue as a going concern. Such adjustments could be material.

3. Basis of preparation

a) Statement of compliance:

These interim consolidated statements have been prepared on a condensed basis in accordance with International Accounting Standard (“IAS”) 34 - Interim Financial Reporting issued by IAS Board ("IASB") and interpretation of the International Financial Reporting Interpretations Committee using accounting policies consistent with International Financial Reporting Standards ("IFRS") and includes the accounts of Mega and its subsidiary entities.

The same significant accounting policies and methods of computation were followed in the preparation of these interim consolidated statements as were followed in the preparation and described in note 4 of the annual consolidated financial statements as at and for the year ended September 30, 2019, except for the new accounting standard adopted in note 4 below. Accordingly, these interim consolidated statements for the three and six months ended March 31, 2020 should be read together with the annual consolidated financial statements as at and for the year ended September 30, 2019. Significant accounting estimates, judgments and assumptions used or exercised by management in the preparation of these interim consolidated statements are presented below.

b) Basis of presentation:

These interim consolidated statements have been prepared using the historical cost convention except for some financial instruments which have been measured at fair value. All monetary references expressed in these notes are references to Canadian dollar amounts (“$”) except as otherwise noted.

c) Basis of consolidation:

These interim consolidated statements include the accounts of Mega and its wholly-owned subsidiaries: Maple Resources Inc.; Uranium Mineral Ventures Inc. (“UMVI”); Mega Georgetown Pty Ltd.; Mega Hindmarsh Holdings Pty Ltd. (“Hindmarsh”).; Mega Redport Holdings Pty Ltd.; Monster Copper Corporation (“Monster”).; Nu Energy Uranium Corporation. (“Nu Energy”); and Northern Lorena Resources Ltd. (“Lorena”). The Company has additional indirect subsidiaries that are wholly-owned investments of its subsidiaries.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Company obtains control, and continues to be consolidated until the date that such control ceases. Control is achieved when an investor has power over an investee to direct its activities, exposure to variable returns from an investee, and the ability to use the power to affect the investor's returns.

All inter-company transactions and balances have been eliminated upon consolidation.

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MEGA URANIUM LTD.

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

3. Basis of preparation (continued)

d) Critical accounting judgments, estimates and assumptions:

The preparation of the interim consolidated statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of income, expenses, assets, liabilities, and contingent liabilities and the accompanying note disclosures at the date of the interim consolidated statements. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

However, actual outcomes may differ from these estimates. The information about significant judgments, estimates and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses are discussed below:

Judgments

(i) Determination of functional currency:

IAS 21 “The Effects of Changes in Foreign Exchange Rates” ("IAS 21"), defines the functional currency as the currency of the primary economic environment in which an entity operates. The determination of functional currency, which is performed on an entity by entity basis, is based on various judgmental factors outlined in IAS 21. Based on an assessment of the factors in IAS 21, primarily those that influence labour, material and other costs of goods or services received by the Company’s subsidiaries, management determined that the functional currency for the parent is the Canadian Dollar and the functional currency for the Company's subsidiaries in Australia is the Australian Dollar.

(ii) Significant influence:

Management determines its ability to exercise significant influence over an investment in shares of other companies by looking at its percentage interest and other qualitative factors including but not limited to its voting rights, representation on the board of directors, participation in policy-making processes, material transactions between the Company and the associate, managerial personnel in common, provision of essential technical information and operating involvement.

(iii) Deferred tax assets and liabilities:

Deferred 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. The Company computes deferred tax assets and liabilities in respect of taxes that are based on taxable profit. Taxable profit is understood to be a net, rather than gross, taxable amount that gives effect to both revenues and expenses. Taxable profit will often differ from accounting profit and management may need to exercise judgment to determine whether some taxes are income taxes (subject to deferred tax accounting) or operating expenses.

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MEGA URANIUM LTD.

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

3. Basis of preparation (continued)

d) Critical accounting judgments, estimates and assumptions: (continued)

(iii) Deferred tax assets and liabilities: (continued)

Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply when the differences are expected to be recovered or settled. The determination of the ability of the Company to utilize tax loss carry forwards to offset deferred tax liabilities requires management to exercise judgment and make certain assumptions about the future performance of the Company. Management is required to assess whether it is “probable” that the Company will benefit from these prior losses and other deferred tax assets. Changes in economic conditions, commodity prices and other factors could result in revisions to the estimates of the benefits to be realized or the timing of utilizing the losses.

(iv) Going concern

The assessment of the Company’s ability to continue as a going concern involves judgment regarding future funding available for its operations and working capital requirements as discussed in note 2.

Estimates

(i) Share-based payments:

The Company uses the Black-Scholes option pricing model to calculate stock-based compensation expense. The Black-Scholes model requires six key inputs to determine a value for an option: risk-free interest rate, exercise price, market price at date of issue, expected dividend yield, expected life and expected volatility. Certain inputs are estimates which involve considerable judgment and are, or could be, affected by significant factors that are out of the Company’s control.

(ii) Impairment of equity investment

At the end of each financial reporting period, the Company's management assesses whether there are indications of impairment of the Company’s equity investment in Toro. The recoverable amount of the Company’s equity investment in Toro is estimated based on the applicable closing share price. In addition to the recoverable amount, the Company will take into account general market conditions when determining if an adjustment to the fair value of an investment is warranted at the end of each reporting period.

4. Significant accounting policies

New accounting standard adopted

Leases and right-of-use assets

In January 2016, the IASB issued IFRS 16 - Leases ("IFRS 16"), replacing IAS 17 - Leases. IFRS 16 provides a single lessee accounting model and requires the lessee to recognize assets and liabilities for all leases on its statement of financial position, providing the reader with greater transparency of an entity’s lease obligations.

The Company adopted IFRS 16, effective October 1, 2019, under the modified retrospective approach. Comparatives for 2019 were not restated. At transition, the Company elected to use the practical expedient available under the standard that allows lease assessments made under IAS 17 and IFRIC 4 to be used for existing contracts. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or modified after October 1, 2019. The Company determined that no transitional adjustment was required other than recognizing a right of use asset and lease liability of $85 at October 1, 2019.

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MEGA URANIUM LTD.

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020

- (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

4. Significant accounting policies (continued)

Leases (continued)

All leases are accounted for by recognizing a right-of-use asset and a lease liability except for:

• Leases of low value assets; and

• Leases with a duration of twelve months or less.

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by the incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.

On initial recognition, the carrying value of the lease liability also includes:

• Amounts expected to be payable under any residual value guarantee;

• The exercise price of any purchase option granted if it is reasonable certain to assess that option;

• Any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.

Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:

• Lease payments made at or before commencement of the lease;

• Initial direct costs incurred; and

• The amount of any provision recognised where the Company is contractually required to dismantle, remove or restore the leased asset.

Lease liabilities, on initial measurement, increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made.

Right-of-use assets are amortized on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if this is judged to be shorter than the lease term.

When the Company revises its estimate of the term of any lease, it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted at the same discount rate that applied on lease commencement. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.

Under IFRS 16, the Company is required to assess the classification of a sublease as a finance or operating lease, with reference to the right-of-use asset and not the underlying asset. For the six months ended March 31, 2020, the Company assessed and classified its sublease as a finance lease under IFRS 16, and therefore derecognized the rightof-use assets relating to the lease being sublet, and recognized lease receivables equal to the net investment in the sublease, recognized a loss in restructuring and other charges equal to the difference between the right of use asset and net investment in the sublease, retained the previously recognized lease obligations in its capacity as lessee, recognized the related interest expense thereafter, and recognized interest income on the sublease receivables in its capacity as finance lessor. Upon entering into a sublease, the Company derecognized the right-of-use asset relating to the head lease that it transfers to the sublessee and recognizes the net investment in the sublease. Any difference between the right-of-use asset and the net investment in the sublease is recognized in profit or loss.

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MEGA URANIUM LTD.

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020

- (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

5. Cash and cash equivalents

		As at		As at
		March 31,		September 30,
		2020		2019
Cash	$	205	$	713
Short-term deposits in bank		10		10
Cash and cash equivalents	$	215	$	723

6. Receivables and prepaid expenses

		As at		As at
		March 31,		September 30,
		2020		2019
Sundry receivables	$	82	$	82
Sales tax receivables		68		67
Prepaid expenses		65		37
	$	215	$	186

As at March 31, 2020, no receivables are past due.

7. Marketable securities

Marketable securities consist of equity investments in junior or small cap mining companies for the following periods indicated:

		As at		As at
		March 31,		September 30,
		2020		2019
Investments at fair value	$	2,808	$	4,771
Cost	$	5,975	$	6,225

The Company has classified its investments in marketable securities as financial assets at fair value through profit and loss and unrealized gains and losses or changes in fair value are recorded fair value through profit and loss.

8. Restricted cash

As at March 31, 2020, the Company pledged AUD$350 (CAD$304) (September 30, 2019 – CAD$313) of cash held in a Guaranteed Investment Certificate (“GIC”) as collateral for a letter of guarantee issued to the State of Queensland, Australia, related to the mining leases for the Ben Lomond Property. The letter of guarantee is automatically renewable annually for an indefinite period of time and, accordingly, the pledged GIC is expected to continue to be renewed annually.

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Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

MEGA URANIUM LTD.

9. Equity investment

An associate is an entity over which the Company has significant influence, and is not a subsidiary or joint venture. Significant influence is presumed to exist when the Company has the power to be actively involved and influential in financial and operating policy decisions of the associate.

The Company accounts for its investment in an associate using the equity method. Under the equity method, the Company's investment in an associate is initially recognized at cost and subsequently increased or decreased to recognize the Company's share of profit and loss of the associate and for impairment losses after the initial recognition date. The Company's share of comprehensive earnings or losses of associates are recognized in comprehensive loss during the period. Distributions received from an associate are accounted for as a reduction in the carrying amount of the Company's investment.

In November 2013, Mega acquired 415 million ordinary shares of Toro, representing approximately 28.00% of Toro’s outstanding shares at the date of acquisition. The shares were received as consideration for the sale of the Lake Maitland properties and certain associated rights and assets valued at $34,337.

The Company is considered to have significant influence over Toro due to the percentage of its equity interest in Toro and its representation on Toro’s board of directors. Accordingly, Mega accounts for its investment in Toro using the equity method.

During the six months ended March 31, 2020, Mega's holdings in Toro (395,095,387 shares) were diluted from 18.19% to 15.13% as a result of the issuance of additional ordinary shares of Toro, resulting in a dilution loss of $822.

The following is a summary of the Company’s investment in Toro:

The following is a summary of the Company’s investment in Toro:
		Toro
Investment as at September 30, 2018	$	9,720
Mega's share of loss		(795)
Loss on deemed disposition of equity investment in Toro		(733)
Impairment of equityinvestment in Toro		(2,540)
Investment as at September 30, 2019		5,652
Mega's share of the loss		(406)
Loss on deemed disposition of equity investment in Toro		(822)
Impairment of equityinvestment in Toro		(2,657)
Investment as at March 31, 2020	$	1,767

The fair value of the equity investment in Toro is $1,714 as at March 31, 2020 (September 30, 2019 - $5,652) based on the applicable closing share price. Such fair value is categorized as level 1 within the fair value hierarchy.

The Company has recorded an impairment on the equity investment in Toro of $2,657 during the six months ended March 31, 2020 (September 30, 2019 - $2,540). Indicators of impairment were identified by the Company as the carrying amount of the net assets of Toro were determined to be more than its market value. Market value was determined based on Toro’s market capitalization as of the date of assessment, prorated for the proportion of shares owned by the Company.

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MEGA URANIUM LTD.

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

10. Long-term investment

Mega holds 19,476,265 shares of NexGen as at March 31, 2020 (September 30, 2019 - 19,376,265). The change in the investment in NexGen is detailed as follows:

		Six Months		Year Ended
	Ended March 31,			September 30,
		2020		2019
Opening balance	$	33,133	$	50,378
Purchase of additional NexGen shares		140		-
Unrealized loss for theperiod end recorded in other comprehensive loss		(13,602)		(17,245)
Closingbalance	$	19,671	$	33,133

11. Right-of-use assets

	Six	Months		Year Ended
	Ended March 31,			September 30,
		2020		2019
Balance, beginning of period	$	85	$	-
Additions		217		-
Depreciation		(27)		-
Transfer to net investment in sublease		(85)		-
Balance,end ofperiod	$	190	$	-

Rights-of-use asset is depreciated over a 4 year term. Refer to note 14 for further details.

12. Net investment in sublease

During the six months ended March 31, 2020, the Company entered into an agreement to sublease its former office space to an arm's length party. The term of the sublease is one year and six months and expires on March 31, 2021.

The continuity of the net investment in sublease is presented in the table below:

	Six	Months		Year Ended
	Ended March 31,			September 30,
		2020		2019
Balance, beginning of period	$	-	$	-
Additions		92		-
Finance income on investment in sublease		3		-
Leasepayments		(33)		-
Balance,end ofperiod	$	62	$	-

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• 12 -

MEGA URANIUM LTD.

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

12. Net investment in sublease (continued)

The net investment in sublease is classified as follows:

The net investment in sublease is classified as follows:
		As at		As at
		March 31,		September 30,
		2020		2019
Current portion	$	46	$	-
Non-currentportion		16		-
Total net investment in sublease	$	62	$	-

13. Amounts payable and other liabilities

		As at		As at
		March 31,		September 30,
		2020		2019
Trade payables	$	42	$	86
Due to related parties (note 15)		562		479
Accrued liabilities		66		71
	$	670	$	636

14. Lease liabilities

On October 1, 2019, the Company entered into a 4 year lease agreement to lease its current office space with lease payments of $5,500 per month. The Company is also party to an office lease agreement for its former location which expires on March 31, 2021. The former office space was subleased to an arm's length party (note 12).

The Company has recorded the current office lease as a right-of-use asset (note 11) and lease liability in the statement of financial position as at March 31, 2020. At the commencement date of the lease, the lease liability was measured at the present value of the lease payments that were not paid at that date. The lease payments are discounted using an interest rate of 10%, which is the lease specific incremental borrowing rate.

The Company has recorded the former office lease as a net investment in sublease (note 12) and lease liability in the statement of financial position as at March 31, 2020. At the commencement date of the lease, the lease liability was measured at the present value of the lease payments that were not paid at that date. The lease payments are discounted using an interest rate of 10%, which is the lease specific incremental borrowing rate.

The continuity of the lease liabilities are presented in the table below:

	Six	Months		Year Ended
	Ended March 31,			September 30,
		2020		2019
Balance, beginning of period	$	85	$	-
Additions		217		-
Interest expense		14		-
Leasepayments		(64)		-
Balance, end ofperiod	$	252	$	-

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MEGA URANIUM LTD.

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

14. Lease liabilities (continued)

The lease liabilities are classified as follows:

The lease liabilities are classified as follows:
		As at		As at
		March 31,		September 30,
		2020		2019
Current portion	$	79	$	-
Non-currentportion		173		-
Total lease liabilities	$	252	$	-
Maturity analysis - contractual undiscounted cash flows
As at March 31, 2020
Less than one year			$	64
One to fiveyears				229
Total undiscounted lease obligations			$	293

15. Related party transactions

All transactions with related parties have occurred in the normal course of operations and are recorded at the exchange amount, which is the amount of consideration established and agreed to by the related parties. Related party transactions were as follows for the three and six months ended March 31, 2020 and 2019.

			Three Months Ended	Three Months Ended	Three Months Ended
			March 31,
Type of service	Nature of relationship		2020		2019
Short-term compensation benefits(a)	Directors	$	40	$	40
Short-term compensation benefits(b)	Officers	$	133	$	136
Stock-based compensation benefits(c)	Directors and officers	$	28	$	118
Administrative services(d)	Officers	$	6	$	6
			Six Months Ended
			March 31,
Type of service	Nature of relationship		2020		2019
Short-term compensation benefits(a)	Directors	$	79	$	79
Short-term compensation benefits(b)	Officers	$	266	$	272
Stock-based compensation benefits(c)	Directors and officers	$	79	$	223
Administrative services(d)	Officers	$	12	$	12

(a) Represents the portion of annual retainers for board and committee service paid to all of the directors during the period.

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• 14 -

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020

MEGA URANIUM LTD.

- (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

15. Related party transactions (continued)

• (b) Represents fees paid as compensation to the Company’s Chief Executive Officer, Executive Vice PresidentAustralia and Chief Financial Officer for services rendered in their executive capacities.

For the three and six months ended March 31, 2020, $80 and $159, respectively of the costs relating to these agreements (three and six months ended March 31, 2019 - $79 and $158, respectively) are included in general and administrative expenses and $53 and $107, respectively (three and six months ended March 31, 2019 - $57 and $114, respectively) are included in exploration and evaluation.

• (c) Reflects costs associated with stock options granted as part of executive and director compensation.

• (d) Represents accounting services provided to the Company by Marrelli Support Services Inc., a corporation controlled by Mega’s Chief Financial Officer, pursuant to an ongoing contractual arrangement.

During three and six months ended March 31, 2020, the Company provided office space and other occupancy services to Toro and earned $45 and $91 (three and six months ended March 31, 2019 - $65 and $112) of income from Toro.

Included in amounts payable and other liabilities are fees owing to officers and directors of $562 as at March 31, 2020 (September 30, 2019 - $479).

During the six months ended March 31, 2019, officers and directors of Mega exercised 1,100,000 stock options.

16. Share capital

a) Authorized share capital

At March 31, 2020, the authorized share capital consisted of an unlimited number of common shares.

The common shares do not have a par value. All issued shares are fully paid.

b) Common shares issued

At March 31, 2020, the issued share capital amounted to $276,192. The changes in issued share capital for the periods were as follows:

	Number of
	common
	shares		Amount
Balance, September 30, 2018	309,382,003	$	274,838
Private placement (i)	15,909,091		1,750
Cost of issue - cash (i)	-		(81)
Warrants issued (i)	-		(485)
Exercise of stock options	1,100,000		170
Balance, March 31, 2019	326,391,094	$	276,192
Balance, September 30, 2019 and March 31, 2020	326,391,094	$	276,192

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Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

MEGA URANIUM LTD.

16. Share capital (continued)

(i) On December 17 and 24, 2018, the Company completed the first and final tranches of a non-brokered private placement (the “Financing”), pursuant to which the Company raised aggregate gross proceeds of $1,750 from the issuance and sale of 11,909,091 and 4,000,000 units respectively, at a price of $0.11 per unit. Each unit was comprised of one common share and one common share purchase warrant of Mega. Each warrant entitles the holder to purchase one common share of the Company, at a price of $0.15 per share, until expiry on December 17 and 24, 2020 respectively. The fair value assigned to these warrants at the date of issue was $469 using the Black-Scholes valuation model with the following assumptions: an expected life of 2 years; a 85% volatility based on historical trends; risk free interest rate ranging from 1.91% and 1.96%; share prices at the date of grant of $0.115 and $0.105; and an expected dividend yield of 0%.

Mega paid aggregate finders’ fees to third parties who assisted the Company in the Financing in the form of $62 in cash and 564,545 common share purchase warrants. The warrants have the same terms as the warrants forming part of the units sold in the Financing and were valued at $16.

17. Stock options

The Company grants options to directors, officers, employees and consultants under its 2007 Stock Option Plan. Under the plan, the Company is authorized to issue up to the number of common shares of Mega equal to 10% of the number of common shares outstanding from time to time. The term of an option granted under the plan may not exceed 10 years.

Each of the stock options granted and currently outstanding vest in three-month intervals over an 18-month period from the date of grant and have various terms.

The following table reflects the continuity of stock options for the periods ended March 31, 2020 and 2019:

	Number of	Weighted average
	stock options	exerciseprice($)
Balance, September 30, 2018	29,445,000	0.13
Granted (i)(ii)	3,400,000	0.11
Exercised	(1,100,000)	0.10
Expired	(595,000)	0.10
Balance, March 31, 2019	31,150,000	0.13
Exercisable, March 31, 2019	25,199,998	0.13
	Number of	Weighted average
	stock options	exerciseprice($)
Balance, September 30, 2019	32,490,000	0.13
Cancelled / forfeited	(275,000)	0.15
Balance, March 31, 2020	32,215,000	0.13
Exercisable, March 31, 2020	30,440,813	0.13

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• 16 -

MEGA URANIUM LTD.

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

17. Stock options (continued)

(i) On January 2, 2019, the Company granted 1,700,000 stock options to employees, directors, officers and consultants of the Company at an exercise price of $0.12 per share. These stock options vest in three-month intervals over an 18month period from the date of grant and have a term of five years. The fair value of these options at the date of grant of $0.081 was estimated using the Black-Scholes valuation model with the following assumptions: a 5 year expected life; a 85% expected volatility based on historical trends; risk free interest rate of 1.85%; share price at the date of grant of $0.12; and an expected dividend yield of 0%. The grant date fair value assigned to these options was $138.

(ii) On March 1, 2019, the Company granted 1,700,000 stock options to employees, directors, officers and consultants of the Company at an exercise price of $0.105 per share. These stock options vest in three-month intervals over an 18month period from the date of grant and have a term of five years. The fair value of these options at the date of grant of $0.071 was estimated using the Black-Scholes valuation model with the following assumptions: a 5 year expected life; a 85% expected volatility based on historical trends; risk free interest rate of 1.81%; share price at the date of grant of $0.105; and an expected dividend yield of 0%. The grant date fair value assigned to these options was $121.

The following table summarizes information about stock options outstanding and exercisable as at March 31, 2020:

		Weighted average		Number of
		remaining	Number of	options	Number of
	Exercise	contractual	options	vested	options
Expiry date	price($)	life(years)	outstanding	(exercisable)	unvested
May 29, 2020	0.090	0.16	7,150,000	7,150,000	-
February 28, 2021	0.085	0.92	1,525,000	1,525,000	-
May 31, 2021	0.140	1.17	2,725,000	2,725,000	-
December 31, 2021	0.070	1.75	1,775,000	1,775,000	-
January 1, 2022	0.140	1.76	6,000,000	6,000,000	-
May 31, 2022	0.175	2.17	1,675,000	1,675,000	-
August 31, 2022	0.200	2.42	1,675,000	1,675,000	-
December 31, 2022	0.210	2.75	1,675,000	1,675,000	-
May 31, 2023	0.140	3.17	1,675,000	1,675,000	-
September 4, 2023	0.125	3.43	1,675,000	1,675,000	-
January 1, 2024	0.120	3.76	1,675,000	1,116,668	558,332
February 28, 2024	0.105	3.92	1,675,000	1,116,668	558,332
June 2,2024	0.100	4.18	1,315,000	657,501	657,499
		1.90	32,215,000	30,440,837	1,774,163

These stock options are expensed over the option’s vesting periods in the consolidated financial statements of loss and comprehensive income and credited to share option reserve.

For the three and six months ended March 31, 2020, included in the interim consolidated statements of loss and comprehensive loss was stock-based compensation expense of $31 and $86, respectively (three and six months ended March 31, 2019 - $126 and $239, respectively) relating to the fair value of stock options granted and $4 and $11, respectively (three and six months ended March 31, 2019 - $17 and $32, respectively) was expensed as exploration and evaluation.

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MEGA URANIUM LTD.

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020

- (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

18. Warrants

18. Warrants
	Number of		Grant date
	warrants		fair value
Balance, September 30, 2018	21,197,009	$	887
Issued(note 16(i))	16,473,636		485
Balance, March 31, 2019	37,670,645	$	1,372
Balance, September 30, 2019 and March 31, 2020	30,566,000	$	946

The following table reflects the warrants issued and outstanding as of March 31, 2020:

	Exercise	Warrants
Expiry date	price($)	outstanding
August 31, 2020	0.15	14,092,364
December 17, 2020	0.15	12,233,636
December 24,2020	0.15	4,240,000
	0.15	30,566,000

19. Commitments and obligations

The Company has the following commitments and obligations as at March 31, 2020:

(i) The Ben Lomond property (Queensland) has a yearly commitment of $260 (AUD$300) for care and maintenance costs and environmental obligations for the next five years. The Georgetown property (Queensland) has a yearly commitment of $9 (AUD$10) for care and maintenance costs for the next five years. The Redport gold property (Western Australia) has a yearly commitment of $130 (AUD$150) for care and maintenance costs for the next five years.

(ii) The Company is subject to management contracts with certain executive officers that provide for payments under circumstances involving a change of control of Mega or termination of the officer's services. As at March 31, 2020, these contracts require that additional payments of approximately $2,066 be made upon the occurrence of a change of control. The minimum commitment upon termination of these contracts is approximately $966. As a triggering event has not taken place, the contingent payments have not been reflected in these interim consolidated statements.

(iii) The Company’s Chief Executive Officer's compensation package includes a discretionary bonus that is dependent upon the excess of cash proceeds on disposition of the original NexGen investment net of acquisition and disposition costs. The entitlement is payable at the discretion of the board of directors up to a maximum amount equal to 5% of the net cash proceeds. Fifty percent of the bonus may be settled in common shares of the Company (also at the discretion of the board and subject to regulatory approval).

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MEGA URANIUM LTD.

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

20. Segmented information

The Company’s operations are segmented on a regional basis and are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker who is responsible for allocating resources and assessing performance of the operating segments is Mega's Chief Executive Officer.

The Company’s significant segments are divided into two distinct geographic areas. The Canadian operations, which are mainly in Ontario and Newfoundland and Labrador, are managed from the Company’s head office in Toronto. The Australian operations are managed from Perth.

The following is segmented information of operations for the three and six months ended March 31, 2020 and 2019 and as at March 31, 2020 and September 30, 2019:

					Three Months Ended	Three Months Ended	Three Months Ended	Three Months Ended		Six Months Ended	Six Months Ended	Six Months Ended
					March 31,					March 31,
					2020		2019			2020		2019
Country/Region					Net loss					Net loss
Canada				$	(3,982)	$	(1,230)		$	(7,920)	$	(2,538)
Australia					(121)			(129)		(209)		(314)
				$	**(4,103) **	$	(1,359)		$	(8,129)	$	(2,852)
		As at March	**31, **	2020
		Capital	Cash and cash				Other			Total
Country/Region		assets	equivalents			assets			assets
Canada	$	17	$		142 $		24,894	$		25,053
Australia		23			73		123			219
	$	40	$		215 $		25,017	$		25,272
		**As at September 30, **			2019
	Property and		Cash and cash				Other			Total
Country/Region		Equipment	equivalents			assets				assets
Canada	$	19	$		576 $		43,900	$		44,495
Australia		31			147		155			333
	$	50	$		723 $		44,055	$		44,828

The Company has no inter-segment revenues.

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MEGA URANIUM LTD.

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

21. General and administrative expenses

The following table summarizes the general and administrative expenses incurred by the Company:

		Three	Months Ended	Months Ended		Six Months Ended	Six Months Ended	Six Months Ended
		March 31,				March 31,
		2020		2019		2020		2019
Professional fees	$	36	$	24	$	31	$	42
Consulting and directors' fees		163		162		326		325
Shareholder relations and communications		-		-		1		9
Transfer agent and filing fees		51		81		73		99
Travel and promotion		8		10		25		29
Salaries and office administration		158		211		314		355
Stock-based compensation		31		126		86		239
Amortization		18		6		36		12
	$	465	$	620	$	892	$	1,110

22. Exploration and evaluation expenditures

The Company enters into exploration agreements with other companies pursuant to which it may earn interests in mineral properties by issuing common shares and/or making option payments and/or incurring expenditures in varying amounts by varying dates. Failure by Mega to meet such requirements can result in a reduction or loss of the Company’s ownership interests or entitlements under the agreements.

The Company's key exploration properties are located in Western Australia and Queensland Australia. The Company incurred $44 and $81, respectively in exploration expenditures during the three and six months ended March 31, 2020 (three and six months ended March 31, 2019 - $60 and $236, respectively).

On November 23, 2018, the Company granted an option (the “Option”) to purchase its royalty on the Langer Heinrich uranium project in Namibia (the “Royalty”) to Uranium Royalty Corporation (“URC”). URC issued 750,000 common shares to Mega in payment of the $375 purchase price of the Option.

On June 26, 2019, URC exercised the Option and acquired the Royalty for a price of $1,625, satisfied by the issue of 1,354,167 special warrants of URC. In addition, the Company purchased 500,000 special warrants of URC for $765. During the six months ended March 31, 2020 each special warrant was exercised for one common share of URC.

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MEGA URANIUM LTD.

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

23. Management of capital

The Company includes the following items in its managed capital:

		As at		As at
		March 31,		September 30,
		2020		2019
Shareholders' equity comprises of:
Share capital	$	276,192	$	276,192
Warrants		946		946
Share option reserve		66,491		66,394
Accumulated other comprehensive income		8,834		20,644
Deficit		(328,113)		(319,984)
	$	24,350	$	44,192

The Company’s objectives when managing capital are:

• (a) To maintain the necessary financing to complete exploration and development of its properties;

• (b) To realize proceeds from sales of one or more of its properties;

• (c) To maximize the income it receives from cash and cash equivalents without significantly increasing the principal at risk by making investments in high credit quality issuers; and

• (d) To maintain a flexible capital structure that optimizes the cost of capital at an acceptable level of risk.

The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its underlying assets. The Company maintains or adjusts its capital level to enable it to meet its objectives by:

• realizing proceeds from the disposition of its investments;

• raising capital through equity financings;

• reviewing and reducing capital spending on mineral properties when necessary.

The Company is not subject to any capital requirements imposed by a regulator. To date, the Company has not declared any cash dividends to its shareholders. The Company’s management is responsible for the management of capital and reviews its capital management approach on an ongoing basis through the preparation of annual expenditure budgets, which are updated regularly to take into account factors such as successful financings to fund activities, changes in property holdings and related obligations and exploration activities and believes that this approach, given the relative size of the Company, is reasonable. The properties in which the Company currently has an interest are in the exploration stage; as such the Company is dependent on external financing to fund its activities. In order to carry out the planned exploration, the Company will be required to raise additional funding.

There were no changes in the Company's approach to capital management during the six months ended March 31, 2020 and the Company is not subject to any externally imposed capital requirements.

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Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

MEGA URANIUM LTD.

24. Financial instruments

Part of Mega’s business includes the acquisition of short-term investments in marketable securities and in some cases, long-term equity investments in public companies. The use of financial instruments can expose the Company to several risks, including interest rate, foreign exchange and market risks. A discussion of the Company’s use of financial instruments and their associated risks is provided below:

(a) Liquidity risk

Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due. The Company’s liquidity and operating results may be adversely affected if the Company’s access to the capital market is hindered, whether as a result of downturn in stock market conditions generally or related to matters specific to the Company, or if the value of the Company’s investment declines, resulting in lower proceeds on disposition and losses upon disposition. The Company generates cash flow primarily from its financing activities and proceeds from disposition of its marketable securities and long-term investments in addition to interest income earned on its investment. The Company has cash and cash equivalents of approximately $215. The cash equivalents consist of highly liquid short-term deposits with the bank (see note 5). The Company has working capital surplus as at March 31, 2020 of $2,535. The funds are available as needed to fund the Company’s ongoing expenditures. The Company regularly evaluates these holdings to ensure preservation and security of capital as well as maintenance of liquidity. Refer to note 2 for the Company's going concern assessment. There can be no assurance that the Company will be successful in its efforts to arrange additional financing on terms satisfactory to the Company. If additional financing is raised through the issuance of shares from the treasury of the Company, control of the Company may change and shareholders may suffer additional dilution. If adequate financing is not available, the Company may be required to delay, reduce the scope of, or eliminate one or more exploration activities or relinquish rights to certain of its interests. All of the Company's liabilities are due within the next 12 months.

(b) Market risk

Market risk is the risk that the fair value of or future cash flows from the Company’s financial instruments will significantly fluctuate due to changes in market prices. The value of the financial instruments can be affected by changes in interest rates, foreign exchange rates, and equity and commodity prices. In the normal course of business, the Company is exposed to market risk as a result of its investments in publicly traded companies and marketable securities. During periods of significant broader market volatility or volatility experienced by the resource/commodity markets, the value of the Company’s investment portfolio can benefit or be vulnerable to market fluctuations.

The following table shows the estimated sensitivity of the Company’s after-tax net income (loss) for the period ended March 31, 2020 from a change in the closing bid price of the Company’s investments in marketable securities with all other variables held constant as at March 31, 2020:

	Change in	net after-tax	Change	in net after-tax
Percentage of change in closing	income (loss)	from % increase	income (loss) from % decrease
bidprice	in closing bidprice		in closing bidprice
2%	$	41	$	(41)
4%		83		(83)
6%		124		(124)
8%		165		(165)
10%		206		(206)

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MEGA URANIUM LTD.

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

24. Financial instruments (continued)

(c) Interest rate risk:

Interest rate risk is the impact that changes in interest rates could have on the Company’s income and liabilities. In the normal course of business, the Company is exposed to interest rate fluctuations as a result of the significant portion of cash equivalents being invested in interest bearing instruments.

The Company’s sensitivity analysis suggests that a 1% change in interest rate would change net loss and comprehensive loss by approximately $3.

(d) Currency risk:

Currency risk is the risk that the fair value of future cash flows from, the Company’s financial instruments will fluctuate because of changes in foreign exchange rates. The Company is exposed to currency fluctuations as it presently holds funds in Canadian and Australian dollars and a significant amount of its costs and liabilities are denominated in Australian and other currencies. The Company has not entered into any foreign currency contracts to hedge this exposure.

The following table shows the estimated sensitivity of the Company’s net after-tax income (loss) for the period ended March 31, 2020 from a change in all foreign currencies (Australian dollars, and U.S. dollars) with all other variables held constant as at March 31, 2020:

	Change in	net after-tax	Change in net after-tax
Percentage of change in closing	income (loss)	from % increase	income (loss) from % decrease
exchange rate	in exchange rate		in exchange rate
2%	$	1	$ (1)
4%		3	(3)
6%		4	(4)
8%		6	(6)
10%		7	(7)

(e) Credit risk:

Credit risk is the risk of loss associated with a counter party’s inability to fulfill its payment obligations. The Company has its cash and cash equivalents deposited with highly rated financial institutions. Other credit risk is limited to cash, restricted cash and trade receivables in the ordinary course of business. The balance of trade receivables owed to the Company in the ordinary course of business is not significant.

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MEGA URANIUM LTD.

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

24. Financial instruments (continued)

(f) Concentration risks:

The Company is exposed to concentration risks as its investment portfolio is concentrated primarily in NexGen and Toro, two uranium companies which have total asset carrying values in aggregate of $21,438 as at March 31, 2020 and $38,785 as at September 30, 2019, and poses the risk that its fair value can decrease significantly enough so as to threaten the ability of the Company to continue operating as a going concern.

The following table shows the estimated sensitivity of the Company’s after-tax net income (loss) for the period ended March 31, 2020 from a change in the closing bid price of the Company’s investment in NexGen with all other variables held constant as at March 31, 2020:

	Change in net after-tax	Change in net after-tax
Percentage of change in closing	income (loss) from % increase	income (loss) from % decrease
bidprice	in closing bidprice of NexGen	in closing bidprice of NexGen
2%	$ 289	$ (289)
4%	578	(578)
6%	867	(867)
8%	1,157	(1,157)
10%	1,446	(1,446)

(g) Fair value:

Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

The consolidated statement of financial position carrying amounts for cash and cash equivalents, receivables and amounts payable and other liabilities approximate to fair value due to their short-term nature. Marketable securities and long term investments in public companies are fair valued using the bid price on the closing date for the underlying investment. The fair value of marketable securities in private companies is determined from recently completed equity financings.

The Company does not fair value its investment in Toro as it is held as an equity investment (see note 9).

Fair Value Analysis

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into levels 1 to 3 based on the degree to which fair value is observable:

Level 1 - fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 - fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); and

Level 3 - fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

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MEGA URANIUM LTD.

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

24. Financial instruments (continued)

Fair Value Analysis (continued)

The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement.

The Company’s financial assets measured at fair value through profit or loss have used Level 1 and Level 2 valuation techniques during the six months ended March 31, 2020. The carrying values of the Company’s financial assets and liabilities approximate their fair values as at March 31, 2020. During the six months ended March 31, 2020, the Company transferred $3,857 of URC shares included in marketable securities from Level 2 to Level 1.

As at March 31, 2020 and September 30, 2019, the fair values of cash and cash equivalents, restricted cash, receivables and amounts payable and other liabilities approximate their carrying values because of the short-term nature of these instruments. Financial assets and financial liabilities measured at fair value on a recurring basis include:

As at March 31, 2020

As at March 31, 2020
								Total
		Level 1		Level 2		Level 3		Fair Value
Marketable securities	$	2,808	$	-	$	-	$	2,808
Long-term investments		19,671		-		-		19,671
	$	22,479	$	-	$	-	$	22,479
As at September 30, 2019
								Total
		Level 1		Level 2		Level 3		Fair Value
Marketable securities	$	276	$	4,495	$	-	$	4,771
Long-term investments		33,133		-		-		33,133
	$	33,409	$	4,495	$	-	$	37,904

25. Proposed transaction

On December 1, 2019, Mega and NxGold Ltd. ("NxGold") executed a term sheet for the proposed acquisition by NxGold of a portfolio of securities from Mega for approximately $10,865, payable in shares of NxGold, in connection with a change of business by NXGold to a uranium-focused investment issuer.

On March 16, 2020, Mega and NXGold agreed not to proceed with the transaction due to adverse market conditions associated with the COVID-19 pandemic.

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MEGA URANIUM LTD.

Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended March 31, 2020 - (Unaudited in thousands of Canadian dollars, except for securities and per share amounts)

26. Subsequent events

Commencing in March 2020 and continuing after the period ended March 31, 2020, the outbreak of the novel strain of coronavirus known as “COVID19” has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID19 pandemic is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company and its operating subsidiaries in future periods.

Subsequent to the end of the reporting period, the Company issued 250,000 common shares for cash proceeds of $22.5 upon the exercise of stock options by an option holder.

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