U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2005
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _______
Commission file number 0-25455
URANIUM ENERGY CORP.
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(Exact name of small business issuer as specified in its charter)
NEVADA 98-0399476
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(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
Austin Centre
701 Brazos, Suite 500 PMB#
Austin, Texas 78701
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(Address of Principal Executive Offices)
(512) 721-1022
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(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
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(Title of class)
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, Par Value $0.001
(Title of class)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the issuer
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
1
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of issuer's knowledge, in definitive
proxy of information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [ X ]
Indicate by checkmark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
State issuer's revenues for its most recent fiscal year (ending December
31, 2005): $-0-.
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common equity,
as of the last business day of the registrant's most recently completed fiscal
quarter: December 31, 2005: $11,376,169
Applicable Only to issuers Involved in Bankruptcy Proceedings
During the Preceding Five Years.
N/A
Indicate by check mark whether the issuer has filed all documents and
reports required to be filed by Section 12, 13 and 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [ ] No [ ]
Applicable Only to Corporate Registrants
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Outstanding as of March 27, 2006
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Common Stock, $.001 par value 22,752,338
Documents Incorporated By Reference
List hereunder the following documents if incorporated by reference and the
Part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which the document in
incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).
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ITEM 1. DESCRIPTION OF BUSINESS ............................................ 5
ITEM 2. DESCRIPTION OF PROPERTIES ......................................... 21
ITEM 3. LEGAL PROCEEDINGS ................................................. 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ............... 22
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ................ 22
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION ................................ 27
ITEM 7. FINANCIAL STATEMENTS .............................................. 33
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE ............................... 52
ITEM 8A. CONTROLS AND PROCEDURES .......................................... 52
ITEM 8B. OTHER INFORMATION ................................................ 52
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE ACT ...................................................... 53
ITEM 10.EXECUTIVE COMPENSATION ............................................ 56
ITEM 11.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT .................................................... 58
ITEM 12.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .................... 60
ITEM 13.EXHIBITS .......................................................... 61
ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES ............................ 62
SIGNATURES ................................................................ 62
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FORWARD LOOKING STATEMENTS
Statements made in this Form 10-KSB that are not historical or current
facts are "forward-looking statements" made pursuant to the safe harbor
provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section
21E of the Securities Exchange Act of 1934. These statements often can be
identified by the use of terms such as "may," "will," "expect," "believe,"
"anticipate," "estimate," "approximate" or "continue," or the negative thereof.
We intend that such forward-looking statements be subject to the safe harbors
for such statements. We wish to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. Any
forward-looking statements represent management's best judgment as to what may
occur in the future. However, forward-looking statements are subject to risks,
uncertainties and important factors beyond our control that could cause actual
results and events to differ materially from historical results of operations
and events and those presently anticipated or projected. We disclaim any
obligation subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statement or to reflect the
occurrence of anticipated or unanticipated events.
Available Information
Uranium Energy Corp. files annual, quarterly, current reports, proxy
statements, and other information with the Securities and Exchange Commission
(the "Commission"). You may read and copy documents referred to in this Annual
Report on Form SB-2 that have been filed with the Commission at the Commission's
Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. You may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. You can also obtain copies of our Commission
filings by going to the Commission's website at http://www.sec.gov
4
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
Uranium Energy Corp. was incorporated under the laws of the State of Nevada
on May 16, 2003 under the name "Carlin Gold Inc." During 2004, we changed our
business operations and focus from precious metals exploration in the State of
Nevada to the exploration for economic reserves of uranium throughout the United
States. Therefore, on January 24, 2005, we filed an amendment to our articles of
incorporation changing our name to "Uranium Energy Corp."
Please note that throughout this Annual Report, and unless otherwise noted,
the words "we," "our," "us," the "Company," or "Uranium Energy," refers to
Uranium Energy Corp.
Recent Developments
Effective January 2006, we commenced trading on the over-the-Counter
Bulletin Board under the symbol "URME". We commenced trading following the
effective date of our registration statement (December 5, 2005) filed with the
Securities and Exchange Commission.
Effective February 28, 2006, we filed an amendment to our articles of
incorporation with the Nevada Secretary of State. The amendment revised Section
3 of the articles of incorporation increasing the authorized capital stock from
75,000,000 shares of common stock at $0.001 par value to 750,000,000 shares of
common stock par value $0.001.
CURRENT BUSINESS OPERATIONS
We are a natural resource exploration and development company engaged in
the exploration and development of properties that may contain uranium minerals
in the United States. Our strategy is to acquire properties that are thought to
contain economic quantities of uranium ore and have undergone some degree of
uranium exploration but have not yet been mined. We plan an aggressive
acquisition strategy for the next 12 to 24 months to build uranium resources of
50 million pounds. To date, we have acquired interests in 8,953 gross acres of
leased or staked mineral properties, consisting of claim blocks located in the
States of Arizona, Colorado, Utah, Wyoming, and Texas. By fiscal year 2006, we
have plans to acquire approximately 12,500 further acres of mineral properties
subject to adequate funding being acquired consisting of further claim blocks
located in the State of Texas. Other mineral property acquisitions are
contemplated in the States of interest that include Arizona, Utah, Colorado,
Texas, and Wyoming. These potential acquisition properties have not yet been
specifically identified. As of the date of this Annual Report, we do not have
proven reserves of any kind.
During fiscal year 2005, interests in 21 additional uranium exploration
mineral properties totaling 7,413 gross acres were acquired in the States of
Arizona, Colorado, Texas, Wyoming and Utah for aggregate consideration of
$174,476. As of the date of this Annual Report, we have interests in an
aggregate of 8,953 gross acres (8,803.82 net mineral acres) of properties that
have been either leased or staked, which we intend to explore for economic
deposits of uranium. These leases are also subject to 5.0% to 8.25% net royalty
interests. These properties consist of claim blocks located in the States of
Arizona, Colorado, Wyoming, Utah, and Texas. Each of these properties has been
the subject of historical exploration by other mining companies, and provides
indications that uranium may exist in economic concentrations. We have access to
historical exploration data that may provide indications of locations that may
contain unknown quantities of uranium. These data consist chiefly of drill hole
5
ITEM 1. DESCRIPTION OF BUSINESS - continued
assay results, drill hole logs, studies, publicly published works, our own
created work product, and maps, that help guide our property acquisition
strategy. The basis for management's belief that there may be indications that
uranium may exist in economic concentrations on our leased and claimed
properties are based as follows with specific reference to each state where we
have leased or claimed exploration property interests. The basis of information
in each state pertains to prior exploration conducted by other companies, or
management information and work product derived from various reports, maps,
radioactive rock samples, exploratory drill logs, state organization reports,
consultants, geological study, and other exploratory information.
MINERALS EXPLORATION PROPERTIES
We are participating in our mineral properties in the States of Arizona and
Colorado by way of quitclaim deed. The properties were staked and claimed by us
and registered with the United States Bureau of Land Management ("BLM"). There
are claim blocks deeded to us in this manner in Arizona, and further claim
blocks in Colorado. We have unfettered surface access, and complete mineral
rights to an unlimited depth below surface. The deeds are in effect for five
years, and carry renewable five-year terms for an indefinite period, provided
that the annual processing fees are in good standing with the BLM. The claims
were entered into between November 4, 2004 and May 25, 2005, corresponding to
initial terms of expiry between November 4, 2009 and April 21, 2010. Annual
processing fees to be paid to the BLM vary from county to county but are
relatively nominal. We will also be required to remediate the land upon
termination of the deed - bringing the land back into the state it was
originally in prior to the commencement of our exploration activities. These
costs are not determinable at this time.
In the States of Utah and Texas, we are participating in our mineral
properties by way of property lease directly from the owners of the land/mineral
rights. As of the date of this Annual Report, we have executed one lease in
Utah, and further leases in Texas. These leases give us similar access and
privileges as described above, however with some important differences. Although
we will have access to the surface, the mineral rights below surface are
restricted to uranium only, with any other minerals, including, for example,
petroleum, reverting to the lessor. The lease terms are for five years, and
include five-year renewal periods. After the expiration of the second five-year
term, we must renegotiate the terms of a new lease. Royalty payments must be
made to the lessor in event that we extract uranium ore from the properties in
the amount of 5.0% to 8.25% of the gross revenue so generated.
We have the following gross and net acre mineral property interests in states
indicated below under lease:
Gross Acres Net Acres
Arizona 2,160.00 2,160.00
Colorado 1,040.00 1,040.00
Utah 640.00 640.00
Wyoming 3,187.00 3,187.00
Texas 1,926.32 1,776.82
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8,953.32 8,803.82
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6
ITEM 1. DESCRIPTION OF BUSINESS - continued
These properties do not have any indicated or inferred minerals or
reserves. We plan to conduct exploration programs on these properties with the
intent to prove or disprove the existence of economic concentrations of uranium.
Since inception, we have not established any proven or probable reserves on
its mineral property interests.
On October 11, 2005, we entered into a Mineral Asset Option Agreement (the
"Option") with Brad A. Moore giving us the option to acquire certain uranium
leases from Mr. Moore in the State of Texas. In consideration for the Option, we
have paid Mr. Moore a cash payment of $50,000 and issued 750,000 shares of our
restricted common stock. The Option, if exercised, will require the further
issuance of 1,500,000 restricted common shares in 500,000 share installments
over the three, six month intervals following the effective date of the Option
(October 11, 2005). A further payment of $150,000 has been paid under the Option
on February 1, 2006. Title to the properties to be acquired will transfer upon
payment of all remaining stock required under the Option, the timing of which
may be accelerated at our discretion. During the Option term, we have the right
as operator to conduct or otherwise direct the all exploration on the properties
to be acquired.
A detailed description of our properties is as follows.
Colorado
Claims acquired by us in Colorado have historical production tonnages and
grades published in the Colorado Geological Survey, Bulletin 40 - "Radioactive
Mineral Occurrences of Colorado". Additionally, a third party consulting
miner/engineer was utilized by us for his first hand knowledge of the Colorado
properties acquired. Also, our Chief Geologist previously evaluated and acquired
a portion of the claims currently owned by us (the Carnotite Mine) while
consulting for another company, International Texas Industries, Inc. We confirm
that at the current date, our Colorado located claims contain no uranium
reserves and require extensive exploration by us.
Utah
Our Utah property (Crain Lease) was the subject of prior exploration
drilling conducted by Pioneer-Uravan, Inc. and Truchas Limited in the 1970's to
search for uranium indications. We have acquired gamma drill log interpretation
worksheets from work previously conducted by Pioneer-Uravan, Inc. In addition,
drill hole location maps have been obtained from work conducted for
Pioneer-Uravan, Inc. and Truchas Limited. Further assay reports on core samples
from exploration drilling previously conducted by Pioneer-Uravan, Inc. as
verified by that company's commissioned assay report have also been obtained, as
well as certain drill indicated uranium findings that provide the basis for
preliminary reserve information as previously conducted and defined in a Truchas
Limited summary and report (1979). We confirm that at the date of this Annual
Report, our Utah located claims contain no uranium reserves that we have
independently verified, and require extensive exploration by us.
A gamma drill log interpretation worksheet is work product created from a
listing of sensory information created at routine intervals that forms the
output or log of a uranium testing technique used when exploring depths of the
earth beneath the surface through exploratory drilling.
7
ITEM 1. DESCRIPTION OF BUSINESS - continued
Arizona
All of our Arizona claims were previously the subject of exploration
drilling for the incidence of Uranium by companies such as Noranda, Inc.,
Uranerz Energy Corp., Homestake Mining Co., and Oklahoma Public Services. We
have acquired a 1979 Oklahoma Public Services ("OPS") geologic report contiguous
to our claims (Artillery Peak) that indicates the possibility of incidence of
uranium. OPS drilling continued on to our claims as evidenced by drill holes
verified on the ground, and such drill cuttings were found to be radioactive.
Close spaced developmental drilling is indicated on our claims located at
Artillery Peak. Uranium mineralization is well documented in this area by a
number of publications including, "Artillery Peak Orientation Study", Mohave
County, AZ, U.S. Dept. of Energy contract No. W-7405-ENG-48, "Geology of
Uraniferous Tertiary Rocks in the Artillery Peak-Date Creek Basin", West-Central
Arizona, USGS, Denver, Colorado, "Reported Occurrences of Uranium in
Miscellaneous Sedimentary Formations, Diatremes and Pipes and Veins", State of
Arizona publication, and "Major Uranium Discovery in Volcaniclastic Sedimentary,
Basin and Range Province", Yavapai County, Arizona, J.E. Sherborne, Jr.
(AAPG-1979).
Other claims staked by us (Ester Basin, Crow Canyon and Dry Mountain) in
Arizona were staked on known uranium occurrences as shown on Arizona State
publication, "Occurrences of Uranium in Miscellaneous Sedimentary Formations,
Diatremes and Pipes and Veins". Additionally, these claims were previously
drilled by companies including Homestake Mining Co., Uranerz Energy Corp., and
Noranda, Inc. in the 1970's uranium boom. Our management has confirmed prior
claim ownership as verified with the United States Department of Interior -
Bureau of Land Management. In addition, ground surveys completed by us have
located various previous drill locations and radioactive anomalies as evidenced
in ground and drill cuttings. We confirm that as of the date of this Annual
Report, our Arizona located claims contain no uranium reserves, and require
extensive exploration by us.
Texas
We currently own two (2) leases located in a South Texas uranium trend that
have been the subject of substantial historical exploration by Wold Nuclear
Corporation in the 1970's and 1980's, and constitute some of our most
prospective exploration targets. Wold Nuclear was a private uranium exploration
company based in Casper, Wyoming and owned by former Wyoming U.S. Congressman,
John S. Wold. Wold Nuclear, discovered a number of large uranium deposits in
Wyoming which were later acquired and put into production by major uranium
production companies. Wold Nuclear's Texas operations were a joint exploration
venture with Cotter Corporation. Our Chief Geologist was employed by Wold
Nuclear as district and chief geologist of its Texas based operations.
Wold Nuclear's previous work conducted on and around the Uranium Energy
Corp. exploration targets located in South Texas (Zavala County) is in a certain
formation that was not the focus of uranium exploration in previous uranium
booms (the "New Formation") (formation is not provided for competitive reasons).
The New Formation represents a new "out of traditional trend" host rock for
possible uranium mineralization. We have acquired a number of drill hole gamma
logs, as well as one drill core whose chemical analysis supports the indication
of uranium, along with lease and drill hole location maps. Insufficient drilling
in past exploration programs did not quantify any reserves for Wold Nuclear.
However, a portion of rock within the New Formation has been identified with
grades to 0.11% chemical U308.
8
ITEM 1. DESCRIPTION OF BUSINESS - continued
The expected mineralized area comprising the New Formation has been defined
in geological area by our own work product. The New Formation host rock is up to
250' thick and has the potential for uranium deposits similar to Wyoming's
Powder River Basin. As of the date of this Annual Report, we have acquired two
leases (473.06 gross acres) in an area where previous drilling and coring
indicated ore grade uranium mineralization.
EXPLORATION WORK PROGRAMS - ARIZONA AND COLORADO
Our Chief Exploration Officer, Randall Reneau, a Certified Professional
Geologist, based on historical data previously outlined and our own work
product, has developed exploration programs unique to each state and claim block
with the intent of proving or disproving the existence of uranium on these
prospects. In order to carry out these exploration programs, $204,500 and
approximately twelve months will be required, according to the exploration
budget and schedule recommended by our Chief Exploration Officer. As of the date
of this Annual Report, we believe we currently have sufficient capital required
to complete Phase I exploration costs. Our ability to pay for Phase I
exploration costs is not expected to be impacted by possible further property
acquisitions. Additional capital for possible future uranium exploration
property related acquisitions will be funded through additional offerings of
debt and equity on an as required basis.
The total cost of expected Phase II exploration on all mineral properties
contemplated at this time is equal to $125,000 including contingency cost
allowance. Additional costs for Phase II exploration work and for further lease
and land acquisitions are expected to be funded by future financings from debt
and equity sources. See "Part II. Item 7. Management's Analysis or Plan of
Operation."
Phase I Work Programs - Arizona and Colorado
The work program that has been recommended for the mineral properties is
dependent on the nature of the exploration conducted prior to our acquisition.
The intended Phase I work programs will be on the claims located in both Arizona
and Colorado.
During Phase I work programs on these particular mineral claims, we plan to
review and analyze all historical exploration data available to us in our
current possession, and to probe existing drill holes with gamma probes, with a
strategy that attempts to confirm historical drill results and plan for future
development. Costs have been estimated at $14,500 per claim block.
Phase I Work Programs - South Texas Leases
We currently own two (2) leases located in a known and established South
Texas uranium trend that have been the subject of substantial historical
exploration by Wold Nuclear in the 1970's and 1980's, and constitute the
Company's most prospective exploration targets. We plan to review all historical
exploration data and to probe historical drill holes, at an estimated cost of
$30,000. Included in Phase I for these particular leases will also include 9,450
feet of new drilling, at an estimated cost of $94,500. A further $5,000 cost has
been estimated for mobilization and demobilization, as well as $2,500 for
surface remediation. The total cost of Phase I exploration on all mineral
properties contemplated at this time is equal to $204,500.
9
ITEM 1. DESCRIPTION OF BUSINESS - continued
Phase II Work Programs
The purpose of Phase I exploration work on the Artillery Peak, Ester Basin,
and Dry Mountain claims in Arizona is chiefly to determine which areas require
new drilling. Once the drill targets have been established, an estimated 7,500
feet of drilling is planned for all three properties, at an estimated cost of
$75,000. The drill program will be allocated as follows: 3,000 feet at Artillery
Peak; 1,500 feet at Ester Basin; 3,000 feet at Dry Mountain. These drill cores
must then be logged at an estimated cost of $15,000. A further $2,500 per
property has been estimated for mobilization of drill equipment and again for
demobilization, as well as $2,500 per property for surface remediation.
The total cost of Phase II exploration on all mineral properties
contemplated at this time is equal to $125,000 including contingency cost
allowance. Additional costs for Phase II exploration work and for further lease
and land acquisitions are expected to be funded by future financings from debt
and equity sources. We expect minimal effect on our ability to proceed with
Phase II exploration should they be required in conjunction with further lease
and land acquisitions as the amounts projected for Phase II exploration costs
are not substantial in relation to budgeted total annual capital and operating
expense expenditures. If however, additional land and lease expenditures during
the next twelve months create a lack of capital for Phase II exploration costs
beyond that anticipated in relation to available capital, we may not be in a
financial position to conduct Phase II exploration if required.
In all cases, results from Phase I of exploration on our properties will
determine whether we proceed to Phase II of the exploration program, or
discontinues exploration on the property. Phase II costs, if any, will be
incurred in the subsequent 12-month period, and would require additional
financing.
We do not expect to purchase any significant equipment or increase
significantly the number of our employees during the next 12 months. Our current
business strategy is to obtain resources under contract where possible because
management believes that this strategy, at its current level of development,
provides the best services available in the circumstances, leads to lower
overall costs, and provides the best flexibility for our business operations.
Our operational business plan calls for the acquisition of further uranium
exploration properties in Texas, Arizona, Utah, Colorado and Wyoming. We have
developed detailed exploration programs for each claim block area of interest
based on historical data derived from past uranium exploration by other
companies with a mandate to prove or disprove the existence of uranium
resources.
MATERIAL CONTRACTS
Brad Moore Mineral Asset Option Agreement
On October 11, 2005, we entered into a Mineral Asset Option Agreement (the
"Option") with Brad A. Moore giving us the option to acquire certain uranium
leases from Mr. Moore in the State of Texas. In consideration for the Option, we
paid Mr. Moore a cash payment of $50,000 and issued 750,000 shares of our
restricted common stock. The Option, if exercised will require the further
issuance of 1,500,000 restricted common shares in 500,000 share installments
over the three, six month intervals following the effective date of the Option
(October 11, 2005). A further payment of $150,000 has been paid under the Option
on February 1, 2006. Title to the properties to be acquired will transfer upon
10
ITEM 1. DESCRIPTION OF BUSINESS - continued
payment of all remaining stock required under the Option, the timing of which
may be accelerated at our discretion. During the Option term, we have the right
as operator to conduct or otherwise direct the all exploration on the properties
to be acquired.
Harry A. Moore Trust Agreement
On December 12, 2005, our Board of Directors authorized and approved the
execution of an agreement (the "Moore Trust Agreement") with Harry A. Moore
Trust (the "Moore Trust"). Pursuant to the terms and provisions of the Moore
Trust Agreement, we acquired an undivided 100% legal, beneficial and
registerable interest in and to certain assets consisting of certain drill and
assay data regarding prospective tracts located in Goliad, Waller, Duval and
McMullen Counties in the State of Texas. Pursuant to further terms and
provisions of the Moore Trust Agreement, we paid to the Moore Trust certain
payments aggregating $50,000.00 and issued an aggregate of 75,000 shares). See
"Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities - Recent Sales of Unregistered
Securities."
Eurotrade Management Group Ltd. Agreement
On February 1, 2006, our Board of Directors, pursuant to unanimous written
consent, authorized and approved the execution of a corporate finance consulting
services agreement (the "Consulting Services Agreement") with Eurotrade
Management Group Ltd. ("Eurotrade"). Pursuant to the terms and provisions of the
Consulting Services Agreement, we agreed: (i) to retain Eurotrade as a
consultant for a one-year period effective February 1, 2006 (the "Effective
Date"); (ii) within ten calendar days from the Effective Date, to issue to
Eurotrade an aggregate 515,000 pre-forward stock split shares of our restricted
common stock (772,500 post-forward stock split); and (iii) to reimburse
Eurotrade for all pre-approved, direct and reasonable expenses actually and
properly incurred by Eurotrade for our benefit in connection with its
performance of consulting services.
Pursuant to further terms and provisions of the Consulting Services
Agreement, Eurotrade agrees to perform certain corporate finance consulting
services to us including, but not limited to, the following: (i) assist in the
initiation, coordination, implementation and management of all aspects of any
program or project in connection with the corporate finance development and
maintenance of our various business interests; (ii) assist in the organization
and preparation of any and all business plans, technical reports, news releases
and special shareholder or investment reports; (iii) assist in the liaison with
and the setting up of all corporate alliances and regulatory associations; (iv)
assist in the negotiation and structuring of any proposed transaction which will
maximize our interests in each subject transaction together with the
presentation of a written summary of said structure; and (v) assist in all other
matters and services in connection with the corporate finance development and
maintenance of our various business interests as may be determined by the Board
of Directors. See "Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters - Recent Sales of Unregistered Securities."
11
ITEM 1. DESCRIPTION OF BUSINESS - continued
Drilling Database Information Agreement
On approximately January 15, 2006, we entered into a drilling database
information agreement (the "Drilling Database Agreement") with Jim Knupke. In
accordance with the terms and provisions of the Drilling Database Agreement: (i)
we are required to make cash payments to Mr. Knupke of $2,000 per month payable
quarterly; (ii) issue an aggregate of 12,500 pre-forward stock split shares of
our restricted common stock (18,750 post-forward stock split); and (iii) issue a
further 12,500 restricted common shares quarterly for the next three quarters
following the effective date of the Drilling Database Agreement. See "Item 5.
Market for Registrant's Common Equity and Related Stockholder Matters -Recent
Sales of Unregistered Securities."
Corporate Relations Consulting Services Agreement
On approximately March 1, 2006, we entered into a corporate relations
consulting services agreement (the "Corporate Relations Consulting Agreement")
with Michael Bayback and Company Inc., which is related to one of our
shareholders ("Michael Bayback"). In accordance with the terms and provisions of
the Corporate Relations Consulting Agreement: (i) the term is for an initial
six-month period; (ii) we agreed to pay up to $5,000 per month during the
initial six-month period for services rendered; and (iii) we issued an aggregate
of 500,000 warrants exercisable at $1.00 per share for a ten-year term. The
shares of common stock underlying the warrants have piggyback registration
rights.
COMPETITION
We operate in a highly competitive industry, competing with other mining
and exploration companies, and institutional and individual investors, which are
actively seeking uranium minerals exploration properties throughout the world
together with the equipment, labor and materials required to exploit such
properties. Many of our competitors have financial resources, staff and
facilities substantially greater than ours. The principal area of competition is
encountered in the financial ability to cost effectively acquire prime minerals
exploration prospects and then exploit such prospects. Competition for the
acquisition of uranium minerals exploration properties is intense, with many
properties available in a competitive bidding process in which we may lack
technological information or expertise available to other bidders. Therefore, we
may not be successful in acquiring and developing profitable properties in the
face of this competition. No assurance can be given that a sufficient number of
suitable uranium minerals exploration properties will be available for
acquisition and development.
MINERALS EXPLORATION REGULATION
Our minerals exploration activities are, or will be, subject to extensive
laws and regulations governing prospecting, development, production, exports,
taxes, labor standards, occupational health, waste disposal, protection and
remediation of the environment, protection of endangered and protected species,
mine safety, toxic substances and other matters. minerals exploration is also
subject to risks and liabilities associated with pollution of the environment
and disposal of waste products occurring as a result of mineral exploration and
production. Compliance with these laws and regulations may impose substantial
costs on us and will subject us to significant potential liabilities. Changes in
these regulations could require us to expend significant resources to comply
with new laws or regulations or changes to current requirements and could have a
material adverse effect on our business operations.
12
ITEM 1. DESCRIPTION OF BUSINESS - continued
Exploration and production activities are subject to certain environmental
regulations which may prevent or delay the commencement or continuance of our
operations. In general, our exploration and production activities are subject to
certain federal, state and local laws and regulations relating to environmental
quality and pollution control. Such laws and regulations increase the costs of
these activities and may prevent or delay the commencement or continuance of a
given operation. Compliance with these laws and regulations has not had a
material effect on our operations or financial condition to date. Specifically,
we are subject to legislation regarding emissions into the environment, water
discharges and storage and disposition of hazardous wastes. In addition,
legislation has been enacted which requires well and facility sites to be
abandoned and reclaimed to the satisfaction of state authorities. However, such
laws and regulations are frequently changed and we are unable to predict the
ultimate cost of compliance. Generally, environmental requirements do not appear
to affect us any differently or to any greater or lesser extent than other
companies in the industry and our current operations have not expanded to a
point where either compliance or cost of compliance with environmental
regulation is a significant issue for us. Nil costs have been incurred to date
with respect to compliance with environmental laws, and costs are only expected
to increase with the increasing scale and scope of exploration operations,
especially with the advent of Phase II exploration costs.
Minerals exploration operations are subject to comprehensive regulation
which may cause substantial delays or require capital outlays in excess of those
anticipated causing an adverse effect on our business operations. Minerals
exploration operations are subject to federal, state, and local laws relating to
the protection of the environment, including laws regulating removal of natural
resources from the ground and the discharge of materials into the environment.
Minerals exploration operations are also subject to federal, state, and local
laws and regulations which seek to maintain health and safety standards by
regulating the design and use of drilling methods and equipment. Various permits
from government bodies are required for drilling operations to be conducted; no
assurance can be given that such permits will be received. Environmental
standards imposed by federal, state, or local authorities may be changed and any
such changes may have material adverse effects on our activities. Moreover,
compliance with such laws may cause substantial delays or require capital
outlays in excess of those anticipated, thus causing an adverse effect on us.
Additionally, we may be subject to liability for pollution or other
environmental damages which we may elect not to insure against due to
prohibitive premium costs and other reasons. As of the date of this Annual
Report, we have not been required to spend material amounts on compliance with
environmental regulations. However, we may be required to do so in future and
this may affect our ability to expand or maintain our operations. Environmental
regulation is discussed in further detail in the following section.
ENVIRONMENTAL REGULATION
Our activities will be subject to existing federal, state and local laws
and regulations governing environmental quality and pollution control. Our
operations will be subject to stringent environmental regulation by state and
federal authorities including the Environmental Protection Agency ("EPA"). Such
regulation can increase the cost of such activities. In most instances, the
regulatory requirements relate to water and air pollution control measures.
13
ITEM 1. DESCRIPTION OF BUSINESS - continued
WASTE DISPOSAL
The Resource Conservation and Recovery Act ("RCRA"), and comparable state
statutes, affect minerals exploration and production activities by imposing
regulations on the generation, transportation, treatment, storage, disposal and
cleanup of "hazardous wastes" and on the disposal of non-hazardous wastes. Under
the auspices of the EPA, the individual states administer some or all of the
provisions of RCRA, sometimes in conjunction with their own, more stringent
requirements.
CERCLA
The federal Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") imposes joint and several liability for costs of
investigation and remediation and for natural resource damages, without regard
to fault or the legality of the original conduct, on certain classes of persons
with respect to the release into the environment of substances designated under
CERCLA as hazardous substances ("Hazardous Substances"). These classes of
persons or potentially responsible parties include the current and certain past
owners and operators of a facility or property where there is or has been a
release or threat of release of a Hazardous Substance and persons who disposed
of or arranged for the disposal of the Hazardous Substances found at such a
facility. CERCLA also authorizes the EPA and, in some cases, third parties to
take actions in response to threats to the public health or the environment and
to seek to recover the costs of such action. We may also in the future become an
owner of facilities on which Hazardous Substances have been released by previous
owners or operators. We may in the future be responsible under CERCLA for all or
part of the costs to clean up facilities or property at which such substances
have been released and for natural resource damages.
AIR EMISSIONS
Our operations are subject to local, state and federal regulations for the
control of emissions of air pollution. Major sources of air pollutants are
subject to more stringent, federally imposed permitting requirements.
Administrative enforcement actions for failure to comply strictly with air
pollution regulations or permits are generally resolved by payment of monetary
fines and correction of any identified deficiencies. Alternatively, regulatory
agencies could require us to forego construction, modification or operation of
certain air emission sources.
CLEAN WATER ACT
The Clean Water Act ("CWA") imposes restrictions and strict controls
regarding the discharge of wastes, including mineral processing wastes, into
waters of the United States, a term broadly defined. Permits must be obtained to
discharge pollutants into federal waters. The CWA provides for civil, criminal
and administrative penalties for unauthorized discharges of hazardous substances
and other pollutants. It imposes substantial potential liability for the costs
of removal or remediation associated with discharges of oil or hazardous
substances. State laws governing discharges to water also provide varying civil,
criminal and administrative penalties and impose liabilities in the case of a
discharge of petroleum or it derivatives, or other hazardous substances, into
state waters. In addition, the EPA has promulgated regulations that may require
us to obtain permits to discharge storm water runoff. In the event of an
unauthorized discharge of wastes, we may be liable for penalties and costs.
Management believes that we are in substantial compliance with current
applicable environmental laws and regulations.
14
ITEM 1. DESCRIPTION OF BUSINESS - continued
MINERAL EXPLORATION COSTS
Mineral property acquisition, exploration and development costs are
expensed as incurred until such time as economic reserves are quantified. To
date we have not established any proven or probable reserves on its mineral
property interests. Estimated future removal and site restoration costs are
provided over the life of proven reserves on a units-of-production basis. Costs,
which include production equipment removal and environmental remediation, are
estimated each period by management based on current regulations, actual
expenses incurred, and technology and industry standards. The charge is included
in exploration expense or the provision for depletion and depreciation during
the period and the actual restoration expenditures are charged to the
accumulated provision amounts as incurred.
RESEARCH AND DEVELOPMENT ACTIVITIES
No research and development expenditures have been incurred, either on our
account or sponsored by customers for the past three years.
EMPLOYEES
We do not employ any persons on a full-time or on a part-time basis. Amir
Adnani is our President and Chief Executive Officer, D. Bruce Horton is our
Chief Financial Officer, Randall Reneau is our Chief Exploration Officer, and
Harry Anthony is our Chief Operating Officer. These individuals are primarily
responsible for all our day-to-day operations. Other services are provided by
outsourcing and consultant and special purpose contracts. We contract with
approximately 7 individuals on a full time basis and 3 individuals on a part
time basis for ongoing services provided to the Company.
RISK FACTORS
An investment in our common stock involves a number of very significant
risks. You should carefully consider the following risks and uncertainties in
addition to other information in evaluating our company and its business before
purchasing shares of our common stock. Our business, operating results and
financial condition could be seriously harmed due to any of the following risks.
The risks described below are all of the material risks that we are currently
aware of that are facing our company. Additional risks not presently known to us
may also impair our business operations. You could lose all or part of your
investment due to any of these risks.
Risks Related to Our Business
Our business is difficult to evaluate because we have a limited operating
history. In considering whether to invest in our common stock, you should
consider that our inception was May 16, 2003 and, as a result, there is only
limited historical financial and operating information available on which to
base your evaluation of our performance.
We have a history of operating losses and there can be no assurances we
will be profitable in the future. We have a history of operating losses, expect
to continue to incur losses, and may never be profitable, and we must be
considered to be in the development stage. Further, we have been dependent on
sales of our equity securities and debt financing to meet our cash requirements.
We have incurred losses totaling approximately ($2,151,461) from May 16, 2003
(inception) to December 31, 2005. As of December 31, 2005, we had an accumulated
deficit of ($2,151,461). We have incurred net losses totaling approximately
($1,998,805) during fiscal year ended December 31, 2005. Further, we do not
15
ITEM 1. DESCRIPTION OF BUSINESS - continued
expect positive cash flow from operations in the near term. There is no
assurance that actual cash requirements will not exceed our estimates. In
particular, additional capital may be required in the event that: (i) the costs
to acquire additional uranium exploration claims are more than we currently
anticipate; (ii) exploration and or future potential mining costs for additional
claims increase beyond our expectations; or (iii) we encounter greater costs
associated with general and administrative expenses or offering costs.
Our development of and participation in an increasingly larger number of
uranium minerals exploration prospects has required and will continue to require
substantial capital expenditures. The uncertainty and factors described
throughout this section may impede our ability to economically discover,
acquire, develop and/or exploit uranium prospects. As a result, we may not be
able to achieve or sustain profitability or positive cash flows from operating
activities in the future.
We have received a going concern opinion from our independent auditors on
their report accompanying our December 31, 2005 and 2004 financial statements.
The independent auditor's report accompanying our December 31, 2005 and 2004
financial statements contains an explanatory paragraph expressing substantial
doubt about our ability to continue as a going concern. The financial statements
have been prepared "assuming that the Company will continue as a going concern,"
which contemplates that we will realize our assets and satisfy our liabilities
and commitments in the ordinary course of business. Our ability to continue as a
going concern is dependent on raising additional capital to fund our operations
and ultimately on generating future profitable operations. There can be no
assurance that we will be able to raise sufficient additional capital or
eventually have positive cash flow from operations to address all of our cash
flow needs. If we are not able to find alternative sources of cash or generate
positive cash flow from operations, our business and shareholders will be
materially and adversely affected.
We will require additional funding in the future. Based upon our historical
losses from operations, we will require additional funding in the future. If we
cannot obtain capital through financings or otherwise, our ability to execute
our development plans and achieve production levels will be greatly limited. Our
current development plans require us to make capital expenditures for the
exploration and development of our minerals exploration properties.
Historically, we have funded our operations through the issuance of equity and
short-term debt financing arrangements. We may not be able to obtain additional
financing on favorable terms, if at all. Our future cash flows and the
availability of financing will be subject to a number of variables, including
potential production and the market prices of uranium. Further, debt financing
could lead to a diversion of cash flow to satisfy debt-servicing obligations and
create restrictions on business operations. If we are unable to raise additional
funds, it would have a material adverse effect upon our operations.
As part of our growth strategy, we intend to acquire additional minerals
exploration properties. Such acquisitions may pose substantial risks to our
business, financial condition, and results of operations. In pursuing
acquisitions, we will compete with other companies, many of which have greater
financial and other resources to acquire attractive properties. Even if we are
successful in acquiring additional properties, some of the properties may not
produce revenues at anticipated levels, or failure to develop such prospects
within specified time periods may cause the forfeiture of the lease in that
prospect. There can be no assurance that we will be able to successfully
integrate acquired properties, which could result in substantial costs and
delays or other operational, technical, or financial problems. Further,
16
ITEM 1. DESCRIPTION OF BUSINESS - continued
acquisitions could disrupt ongoing business operations. If any of these events
occur, it would have a material adverse effect upon our operations and results
from operations.
We are a new entrant into the uranium minerals exploration and development
industry without profitable operating history. Since inception, our activities
have been limited to organizational efforts, obtaining working capital and
acquiring and developing a very limited number of properties. As a result, there
is limited information regarding production or revenue generation. As a result,
our future revenues may be limited.
The business of minerals exploration and development is subject to many
risks and if uranium is found in economic production quantities, the potential
profitability of future possible uranium mining ventures depends upon factors
beyond our control. The potential profitability of mining uranium properties if
economic quantities of Uranium are found is dependent upon many factors and
risks beyond our control, including, but not limited to: (i) unanticipated
ground and water conditions and adverse claims to water rights; (ii) geological
problems; (iii) metallurgical and other processing problems; (iv) the occurrence
of unusual weather or operating conditions and other force majeure events; (v)
lower than expected ore grades; (vi) accidents; (vii) delays in the receipt of
or failure to receive necessary government permits; (viii) delays in
transportation; (ix) labor disputes; (x) government permit restrictions and
regulation restrictions; (xi) unavailability of materials and equipment; and
(xii) the failure of equipment or processes to operate in accordance with
specifications or expectations.
The risks associated with exploration and development and if applicable,
mining as described above could cause personal injury or death, environmental
damage, delays in mining, monetary losses and possible legal liability. We are
not currently engaged in mining operations because we are in the exploration
phase and have not yet any proved uranium reserves. We do not presently carry
property and liability insurance. Cost effective insurance contains exclusions
and limitations on coverage and may be unavailable in some circumstances.
The uranium exploration and mining industry is highly competitive and there
is no assurance that we will be successful in acquiring the leases. The uranium
exploration and mining industry is intensely competitive, and we compete with
other companies that have greater resources. Many of these companies not only
explore for and produce uranium, but also market uranium and other products on a
regional, national or worldwide basis. These companies may be able to pay more
for productive uranium properties and exploratory prospects or define, evaluate,
bid for and purchase a greater number of properties and prospects than our
financial or human resources permit. In addition, these companies may have a
greater ability to continue exploration activities during periods of low uranium
market prices. Our larger competitors may be able to absorb the burden of
present and future federal, state, local and other laws and regulations more
easily than we can, which would adversely affect our competitive position. Our
ability to acquire additional properties and to discover productive prospects in
the future will be dependent upon our ability to evaluate and select suitable
properties and to consummate transactions in a highly competitive environment.
In addition, because we have fewer financial and human resources than many
companies in our industry, we may be at a disadvantage in bidding for
exploratory prospects and producing uranium properties.
17
ITEM 1. DESCRIPTION OF BUSINESS - continued
The marketability of natural resources will be affect by numerous factors
beyond our control which may result in us not receiving an adequate return on
invested capital to be profitable or viable. The marketability of natural
resources which may be acquired or discovered by us will be affected by numerous
factors beyond our control. These factors include macroeconomic factors, market
fluctuations in commodity pricing and demand, the proximity and capacity of
natural resource markets and processing equipment, governmental regulations,
land tenure, land use, regulation concerning the importing and exporting of
uranium and environmental protection regulations. The exact effect of these
factors cannot be accurately predicted, but the combination of these factors may
result in us not receiving an adequate return on invested capital to be
profitable or viable.
Uranium mining operations are subject to comprehensive regulation, which
may cause substantial delays or require capital outlays in excess of those
anticipated, causing an adverse effect on our business operations. If economic
quantities of uranium are found on any lease owned by us in sufficient
quantities to warrant uranium mining operations, such mining operations are
subject to federal, state, and local laws relating to the protection of the
environment, including laws regulating removal of natural resources from the
ground and the discharge of materials into the environment. Uranium mining
operations are also subject to federal, state, and local laws and regulations
which seek to maintain health and safety standards by regulating the design and
use of mining methods and equipment. Various permits from government bodies are
required for mining operations to be conducted; no assurance can be given that
such permits will be received. Environmental standards imposed by federal,
provincial, or local authorities may be changed and any such changes may have
material adverse effects on our activities. Moreover, compliance with such laws
may cause substantial delays or require capital outlays in excess of those
anticipated, thus resulting in an adverse effect on us. Additionally, we may be
subject to liability for pollution or other environmental damages which we may
elect not to insure against due to prohibitive premium costs and other reasons.
To date we have not been required to spend material amounts on compliance with
environmental regulations. However, we may be required to do so in future and
this may affect our ability to expand or maintain our operations.
Uranium minerals exploration and development and mining activities are
subject to certain environmental regulations, which may prevent or delay the
commencement or continuance of our operations. Uranium minerals exploration and
development and future potential uranium mining operations are or will be
subject to stringent federal, state, provincial, and local laws and regulations
relating to improving or maintaining environmental quality. Our global
operations are also subject to many environmental protection laws. Environmental
laws often require parties to pay for remedial action or to pay damages
regardless of fault. Environmental laws also often impose liability with respect
to divested or terminated operations, even if the operations were terminated or
divested of many years ago.
Future potential uranium mining operations and current exploration
activities are or will be subject to extensive laws and regulations governing
prospecting, development, production, exports, taxes, labor standards,
occupational health, waste disposal, protection and remediation of the
environment, protection of endangered and protected species, mine safety, toxic
substances and other matters. Uranium mining is also subject to risks and
liabilities associated with pollution of the environment and disposal of waste
products occurring as a result of mineral exploration and production. Compliance
with these laws and regulations will impose substantial costs on us and will
subject us to significant potential liabilities.
18
ITEM 1. DESCRIPTION OF BUSINESS - continued
Costs associated with environmental liabilities and compliance are expected
to increase with the increasing scale and scope of operations and we expect
these costs may increase in the future.
We believe that our operations comply, in all material respects, with all
applicable environmental regulations. However, we are not fully insured at the
current date against possible environmental risks.
Any change in government regulation/administrative practices may have a
negative impact on our ability to operate and our profitability. The laws,
regulations, policies or current administrative practices of any government
body, organization or regulatory agency in the United States or any other
applicable jurisdiction, may be changed, applied or interpreted in a manner
which will fundamentally alter our ability to carry on business. The actions,
policies or regulations, or changes thereto, of any government body or
regulatory agency, or other special interest groups, may have a detrimental
effect on us. Any or all of these situations may have a negative impact on our
ability to operate and/or our profitably.
We may be unable to retain key employees or consultants or recruit
additional qualified personnel. Our extremely limited personnel means that we
would be required to spend significant sums of money to locate and train new
employees in the event any of our employees resign or terminate their employment
with us for any reason. Due to our limited operating history and financial
resources, we are entirely dependent on the continued service of Amir Adnani,
Chief Executive Officer, D. Bruce Horton, Chief Financial Officer, Randall
Reneau, Chief Exploration Officer, and Harry Anthony, Chief Operating Officer.
Further, we do not have key man life insurance on any of these individuals. We
may not have the financial resources to hire a replacement if any of our
officers were to die. The loss of service of any of these employees could
therefore significantly and adversely affect our operations.
Our officers and directors may be subject to conflicts of interest. Our
officers and directors serve only part time and are subject to conflicts of
interest. Each of our executive officers and directors serves only on a part
time basis. Each devotes part of his working time to other business endeavors,
including consulting relationships with other corporate entities, and has
responsibilities to these other entities. Such conflicts include deciding how
much time to devote to our affairs, as well as what business opportunities
should be presented to us. Because of these relationships, our officers and
directors will be subject to conflicts of interest.
Nevada law and our articles of incorporation may protect our directors from
certain types of lawsuits. Nevada law provides that our officers and directors
will not be liable to us or our stockholders for monetary damages for all but
certain types of conduct as officers and directors. Our Bylaws permit us broad
indemnification powers to all persons against all damages incurred in connection
with our business to the fullest extent provided or allowed by law. The
exculpation provisions may have the effect of preventing stockholders from
recovering damages against our officers and directors caused by their
negligence, poor judgment or other circumstances. The indemnification provisions
may require us to use our limited assets to defend our officers and directors
against claims, including claims arising out of their negligence, poor judgment,
or other circumstances.
19
ITEM 1. DESCRIPTION OF BUSINESS - continued
Risks Related to Our Common Stock
Sales of a substantial number of shares of our common stock into the public
market by certain stockholders may result in significant downward pressure on
the price of our common stock and could affect your ability to realize the
current trading price of our common stock. Sales of a substantial number of
shares of our common stock in the public market by certain stockholders could
cause a reduction in the market price of our common stock. As of the date of
this Annual Report, we have 22,752,338 shares of common stock issued and
outstanding. Of the total number of issued and outstanding shares of common
stock, certain stockholders are able to resell up to 3,653,583 post-forward
stock split shares of our common stock (2,435,722 pre-forward stock split
shares) pursuant to a registration statement declared effective on December 5,
2005. As a result of the registration statement, 3,653,583 post-forward stock
split shares of our common stock were issued and are available for immediate
resale which could have an adverse effect on the price of our common stock.
As of the date of this Annual Report, there are 11,732,500 outstanding
shares of our common stock that are restricted securities as that term is
defined in Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). Although the Securities Act and Rule 144 place certain
prohibitions on the sale of restricted securities, restricted securities may be
sold into the public market under certain conditions. Further, as of the date of
this Annual Report, there are an aggregate of 3,510,000 Stock Options
outstanding.
Any significant downward pressure on the price of our common stock as the
selling stockholders sell their shares of our common stock could encourage short
sales by the selling stockholders or others. Any such short sales could place
further downward pressure on the price of our common stock.
The trading price of our common stock on the OTC Bulletin Board has been
and may continue to fluctuate significantly and stockholders may have difficulty
reselling their shares. Our common stock commenced trading on approximately
December 5, 2005 and has since traded in the $2-3 range with limited trading
volume. In addition to volatility associated with Bulletin Board securities in
general, the value of your investment could decline due to the impact of any of
the following factors upon the market price of our common stock: (i)
disappointing results from our discovery or development efforts; (ii) failure to
meet our revenue or profit goals or operating budget; (iii) decline in demand
for our common stock; (iv) downward revisions in securities analysts' estimates
or changes in general market conditions; (v) technological innovations by
competitors or in competing technologies; (vi) lack of funding generated for
operations; (vii) investor perception of our industry or our prospects; and
(viii) general economic trends.
In addition, stock markets have experienced price and volume fluctuations
and the market prices of securities have been highly volatile. These
fluctuations are often unrelated to operating performance and may adversely
affect the market price of our common stock. As a result, investors may be
unable to sell their shares at a fair price and you may lose all or part of your
investment.
One of our shareholders may exercise voting power of more than 30% of our
common stock. As of the date of this Annual Report, Golden West Investments Ltd.
("Golden West") owns 4,875,000 post-forward stock split shares of our common
stock, or 21.43% of our outstanding common stock as of the date of this Annual
Report, and is one of our largest shareholders. Due to its stock ownership,
20
ITEM 1. DESCRIPTION OF BUSINESS - continued
Golden West may be in a viable position to affect the election of the Board of
Directors and, therefore, to affect the control our business and affairs
including certain significant corporate actions such as acquisitions, the sale
or purchase of assets, and the issuance and sale of our securities. Further,
Golden West may be able to affect the prevention of or cause a change in
control. We also may be prevented from entering into transactions that could be
beneficial to us without Golden West's consent. The interest of one of our
largest shareholders may differ from the interests of other shareholders.
Additional issuances of equity securities may result in dilution to our
existing stockholders. Our Articles of Incorporation authorize the issuance of
750,000,000 shares of common stock. The Board of Directors has the authority to
issue additional shares of our capital stock to provide additional financing in
the future and the issuance of any such shares may result in a reduction of the
book value or market price of the outstanding shares of our common stock. If we
do issue any such additional shares, such issuance also will cause a reduction
in the proportionate ownership and voting power of all other stockholders. As a
result of such dilution, if you acquire shares of our common stock, your
proportionate ownership interest and voting power could be decreased. Further,
any such issuances could result in a change of control.
Our common stock is classified as a "penny stock" under SEC rules which
limits the market for our common stock. Because our stock is not traded on a
stock exchange or on the NASDAQ National Market or the NASDAQ Small Cap Market,
and because the market price of the common stock is less than $5 per share, the
common stock is classified as a "penny stock." Our stock has not traded above $5
per share. SEC Rule 15g-9 under the Exchange Act imposes additional sales
practice requirements on broker-dealers that recommend the purchase or sale of
penny stocks to persons other than those who qualify as an "established
customer" or an "accredited investor." This includes the requirement that a
broker-dealer must make a determination that investments in penny stocks are
suitable for the customer and must make special disclosures to the customers
concerning the risk of penny stocks. Many broker-dealers decline to participate
in penny stock transactions because of the extra requirements imposed on penny
stock transactions. Application of the penny stock rules to our common stock
reduces the market liquidity of our shares, which in turn affects the ability of
holders of our common stock to resell the shares they purchase, and they may not
be able to resell at prices at or above the prices they paid.
ITEM 2. DESCRIPTION OF PROPERTIES
We lease our principal office space located at Austin Centre, 701 Brazos,
Suite 500 PMB#, Austin, Texas 78701 on a month to month basis. The office space
costs approximately $183 per month. We also have a one year lease ending on
April 30, 2006 for field offices located at Pioneer Business Center, 341 East
"E" Street, Suite 135b, Casper, Wyoming 82601. The office space costs
approximately $350 per month.
ITEM 3. LEGAL PROCEEDINGS
Management is not aware of any legal proceedings contemplated by any
governmental authority or any other party involving us or our properties. As of
the date of this Annual Report, no director, officer or affiliate is (i) a party
adverse to us in any legal proceeding, or (ii) has an adverse interest to us in
any legal proceedings. Management is not aware of any other legal proceedings
pending or that have been threatened against us or our properties.
21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During fiscal year ended December 31, 2005, no matters were submitted to
our stockholders for approval.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
MARKET FOR COMMON EQUITY
Shares of our common stock commenced trading on the OTC Bulletin Board
under the symbol "URME" on approximately December 5, 2005. The market for our
common stock is limited, and can be volatile. The following table sets forth the
high and low sales prices relating to our common stock on a quarterly basis for
the last three months as quoted by the NASDAQ. These quotations reflect
inter-dealer prices without retail mark-up, mark-down, or commissions, and may
not reflect actual transactions.
Month Ended High Bid Low Bid
----------------------- ------------- -------------
February 28, 2006 $5.84 $3.61
March 31, 2005 $2.67 $2.37
As of March 15, 2006, we had 56 shareholders of record, which does not
include shareholders whose shares are held in street or nominee names.
DIVIDEND POLICY
No dividends have ever been declared by the Board of Directors on our
common stock. Our losses do not currently indicate the ability to pay any cash
dividends, and we do not indicate the intention of paying cash dividends either
on our common stock in the foreseeable future.
FORWARD STOCK SPLIT
On February 14, 2006, our Board of Directors pursuant to minutes of written
consent in lieu of a special meeting authorized and approved a forward stock
split of 1.5-for-one of our total issued and outstanding shares of common stock
(the "Forward Stock Split").
The Forward Stock Split was effectuated based on market conditions and upon
a determination by our Board of Directors that the Forward Stock Split was in
our best interests and of the shareholders. In our judgment the Forward Stock
Split would result in an increase in our trading float of shares of common stock
available for sale resulting in facilitation of investor liquidity and trading
volume potential. The intent of the Forward Stock Split was to increase the
marketability of our common stock.
The Forward Stock Split was effectuated with a record date of February 28,
2006 upon filing the appropriate documentation with NASDAQ. The Forward Stock
Split increased our issued and outstanding shares of common stock from
14,968,222 to approximately 22,452,338 shares of common stock. The common stock
will continue to be $0.001 par value.
Unless otherwise notated, shares of stock referred to in this Annual Report
are in post forward stock split denominations.
22
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES - continued
SECURITIES AUTHORIZED FOR ISSUANCE UNDER COMPENSATION PLANS
We have one equity compensation plan, the Uranium Energy Corp. 2005 Stock
Option Plan. The table set forth below presents the securities authorized for
issuance with respect to the Stock Option Plan under which equity securities are
authorized for issuance as of the date of this Annual Report:
Equity Compensation Plan Information
------------------------------------------------------------------------------------------------------
Number of Securities Weighted-Average Exercise Number of Securities
To be Issued Upon Price of Outstanding Remaining Available for
Plan Category Exercise of Outstanding Options, Warrants Future Issuance Under
Options, Warrants and Rights Equity Compensation Plans
and Rights (excluding column (a))
(a) (b) (c)
------------------------------------------------------------------------------------------------------
Equity Compensation n/a n/a n/a
Plans Approved by
Security Holders
Equity Compensation 3,510,000 $0.50 150,000
Plans Not Approved by
Security Holders -
Stock Option Plan
Warrants 500,000 $1.00 -0-
125,000 $1.50 -0-
Total 4,135,000 $0.50 150,000
------------------------------------------------------------------------------------------------------
2005 Stock Option Plan
On December 19, 2005, our Board of Directors authorized and approved the
adoption of the 2005 stock option plan effective December 19, 2005 (the "Stock
Option Plan").
The purpose of the Stock Option Plan is to enhance our long-term
stockholder value by offering opportunities to our directors, officers,
employees and eligible consultants to acquire and maintain stock ownership in
order to give these persons the opportunity to participate in our growth and
success, and to encourage them to remain in our service.
The Stock Option Plan is to be administered by our Board of Directors or a
committee appointed by and consisting of two or more members of the Board of
Directors, which shall determine (i) the persons to be granted Stock Options
under the Stock Option Plan; (ii) the number of shares subject to each option,
the exercise price of each Stock Option; and (iii) whether the Stock Option
shall be exercisable at any time during the option period of ten (10) years or
whether the Stock Option shall be exercisable in installments or by vesting
only. The Stock Option Plan provides authorization to the Board of Directors to
23
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES - continued
grant Stock Options to purchase a total number of shares of Common Stock of the
Company, not to exceed 3,500,000 shares as at the date of adoption by the Board
of Directors of the Stock Option Plan. At the time a Stock Option is granted
under the Stock Option Plan, the Board of Directors shall fix and determine the
exercise price at which shares of our Common Stock may be acquired.
In the event an optionee ceases to be employed by or to provide services to
us for reasons other than cause, retirement, disability or death, any Stock
Option that is vested and held by such optionee generally may be exercisable
within up to ninety (90) calendar days after the effective date that his
position ceases, and after such 90-day period any unexercised Stock Option shall
expire. In the event an optionee ceases to be employed by or to provide services
to us for reasons of retirement, disability or death, any Stock Option that is
vested and held by such optionee generally may be exercisable within up to
one-year after the effective date that his position ceases, and after such
one-year period any unexercised Stock Option shall expire.
No Stock Options granted under the Stock Option Plan will be transferable
by the optionee, and each Stock Option will be exercisable during the lifetime
of the optionee subject to the option period of ten (10) years or limitations
described above. Any Stock Option held by an optionee at the time of his death
may be exercised by his estate within one (1) year of his death or such longer
period as the Board of Directors may determine.
The exercise price of a Stock Option granted pursuant to the Stock Option
Plan shall be paid in full to us by delivery of consideration equal to the
product of the Stock Option in accordance with the requirements of the Nevada
Revised Statutes. Any Stock Option settlement, including payment deferrals or
payments deemed made by way of settlement of pre-existing indebtedness from the
Company may be subject to such conditions, restrictions and contingencies as may
be determined.
Incentive Stock Options
The Stock Option Plan further provides that, subject to the provisions of
the Stock Option Plan and prior shareholder approval, the Board of Directors may
grant to any key individuals who are our employees eligible to receive options
one or more incentive stock options to purchase the number of shares of common
stock allotted by the Board of Directors (the "Incentive Stock Options"). The
option price per share of common stock deliverable upon the exercise of an
Incentive Stock Option shall be at least 100% of the fair market value of the
common shares of the Company, and in the case of an Incentive Stock Option
granted to an optionee who owns more than 10% of the total combined voting power
of all classes of our stock, shall not be less than 100% of the fair market
value of our common shares. The option term of each Incentive Stock Option shall
be determined by the Board of Directors, which shall not commence sooner than
from the date of grant and shall terminate no later than ten (10) years from the
date of grant of the Incentive Stock Option, subject to possible early
termination as described above.
On December 20, 2005, the Board of Directors authorized and approved the
grant of an aggregate 3,150,000 pre-forward stock split Stock Options to key
consultants, directors and officers under the Stock Option Plan. On February 1,
2006, the Board of Directors authorized and approved the grant of an additional
190,000 pre-forward stock split Stock Options to two individuals, one of which
is a newly appointed officer and the other is a consultant.
24
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES - continued
During February 2006, we registered 2,000,000 of those pre-forward stock
split Stock Options pursuant to an S-8 registration statement with the
Securities and Exchange Commission.
WARRANTS
As of the date of this Annual Report, we have an aggregate of 500,000
warrants issued and outstanding exercisable at $1.00 per share expiring on
February 28, 2015 and an aggregate of 125,000 common share purchase warrants
exercisable at $1.50 per share expiring on the earlier of twelve months from the
date of issuance or six months from the effective date of registration of the
warrants under a registration statement.
RECENT SALES OF UNREGISTERED SECURITIES
As of the date of this Annual Report, and during fiscal year ended December
31, 2005, to provide capital, we sold stock in private placement offerings,
issued stock in exchange for our debts or pursuant to contractual agreements as
set forth below.
Harry A Moore Trust Agreement
On December 12, 2005, our Board of Directors authorized and approved the
execution of the Moore Trust Agreement with the Moore Trust. Pursuant to the
terms and provisions of the Moore Trust Agreement, we acquired an undivided 100%
legal, beneficial and registerable interest in and to certain assets consisting
of certain drill and assay data regarding prospective tracts located in Goliad,
Waller, Duval and McMullen Counties in the State of Texas. Pursuant to further
terms and provisions of the Moore Trust Agreement, we paid to the Moore Trust
certain payments aggregating $150,000.00 and issued an aggregate of 50,000
pre-forward stock split shares of our restricted common stock (75,000
post-forward stock split shares).
Management and Consulting Services
On December 16, 2005, our Board of Directors authorized and approved the
issuance of an aggregate of 1,300,000 pre-forward stock split shares of
restricted common stock as follows (1,950,000 post-forward stock split shares):
(i) 500,000 pre-forward stock split shares (750,000 post-forward stock split
shares) to Amir Adnani, one of our directors and our President and Chief
Executive Officer, as compensation for management and consulting services
provided to us; (ii) 500,000 pre-forward stock split shares (750,000
post-forward stock split shares) to Randall Reneau, one of our directors and our
Chief Exploration Officer, as compensation for management and consulting
services provided to us; and (iii) 300,000 pre-forward stock split shares
(450,000 post-forward stock split shares) to an unaffiliated third party for
consulting services provided to us.
Eurotrade Management Group Ltd.
On February 1, 2006, our Board of Directors, pursuant to unanimous written
consent, authorized and approved the execution of the Consulting Services
Agreement with Eurotrade Management Group Ltd. ("Eurotrade"). Pursuant to the
terms and provisions of the Consulting Services Agreement, we agreed: (i) to
retain Eurotrade as a consultant for a one-year period effective February 1,
2006 (the "Effective Date"); (ii) within ten calendar days from the Effective
Date, to issue to Eurotrade an aggregate 515,000 pre-forward stock split shares
of our restricted common stock (772,500 post-forward stock split shares); and
25
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES - continued
(iii) to reimburse Eurotrade for all pre-approved, direct and reasonable
expenses actually and properly incurred by Eurotrade for our benefit in
connection with its performance of consulting services.
On February 1, 2006, our Board of Directors subsequently authorized and
approved the issuance to Eurotrade of an aggregate 515,000 pre-forward stock
split shares (772,500 post-forward stock split shares) of our restricted common
stock at $0.50 per share in accordance with the terms and provisions of the
Consulting Services Agreement.
Drilling Database Information Agreement
On January 15, 2006, we issued an aggregate of 18,750 pre-forward stock
split shares of our restricted common stock (28,125 post-forward stock split
shares) in accordance with the terms and provisions of a drilling database
information agreement (the "Drilling Database Agreement").
Private Placement Offering of Shares of Common Stock
During fiscal year ended December 31, 2005, we engaged in a private
placement offering under Regulation S and Rule 506 of Regulation D of the 1933
Securities Act. Pursuant to the terms of the private placement, we issued
905,000 pre-forward stock split shares of our restricted common stock at a
subscription price of $0.50 per share for aggregate gross proceeds of $452,500.
The per share price of the offering was arbitrarily determined by our Board of
Directors based upon analysis of certain factors including, but not limited to,
stage of development, industry status, investment climate, perceived investment
risks, assets and net estimated worth of the Company. We issued shares of
restricted common stock to investors who were either deemed an accredited
investor as that term is defined under Regulation D or sophisticated. The
investors executed subscription agreements and acknowledged that the securities
to be issued have not been registered under the Securities Act of 1933, as
amended, that they understood the economic risk of an investment in the
securities, and that they had the opportunity to ask questions of and receive
answers from our management concerning any and all matters related to
acquisition of the securities. 750,000 pre-forward stock split shares were
registered on the Company's registration statement on Form SB-2. 155,000
pre-forward stock split shares have piggy back registration rights to be
registered on subsequent offerings.
Units
On March 10, 2006, we issued an aggregate of 250,000 units to a
shareholder/consultant for aggregate consideration of $250,000. The 250,000
units are comprised of 250,000 shares of restricted common stock and 125,000
common share purchase warrants (the "Units"). The warrants underlying the Units
are exercisable at $1.50 per share for a term which is the earlier of twelve
months from the date of issuance or six months from the effective date of a
registration statement. The shares carry piggy back registration rights.
Exercise of Stock Options
On February 14, 2006 and March 1, 2006, we issued an aggregate of 1,200,000
and 300,000 shares of our common stock, respectively, in accordance with the
exercise of 1,500,000 Stock Options for aggregate proceeds of $500,000. The
shares were registered under the S-8 Registration Statement.
26
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES - continued
Shares Eligible for Future Sale
During fiscal year ended December 31, 2005, we filed a registration
statement on Form SB-2 under the Securities Act of 1933, as amended, with the
Securities and Exchange Commission (the "Registration Statement"). The
Securities and Exchange Commission declared the Registration Statement effective
on December 5, 2005, pursuant to which certain purchasers of shares, other than
affiliates, may resell their shares of common stock aggregating 2,435,722
pre-forward stock split shares immediately. Upon completion of the Registration
Statement, we had 12,135,722 pre forward stock split shares of common stock
issued and outstanding. A current shareholder who is an "affiliate" of us,
defined in Rule 144 as a person who directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
us, will be required to comply with the resale limitations of Rule 144. Sales by
affiliates will be subject to the volume and other limitations of Rule 144,
including certain restrictions regarding the manner of sale, notice
requirements, and the availability of current public information about us. The
volume limitations generally permit an affiliate to sell, within any three month
period, a number of shares that does not exceed the greater of one percent of
the outstanding shares of common stock or the average weekly trading volume
during the four calendar weeks preceding his sale. A person who ceases to be an
affiliate at least three months before the sale of restricted securities
beneficially owned for at least two years may sell the restricted securities
under Rule 144 without regard to any of the Rule 144 limitations.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The summarized financial data set forth in the table below is derived from
and should be read in conjunction with our audited financial statements for the
period from inception (May 16, 2003) to year ended December 31, 2005, including
the notes to those financial statements which are included in this Annual
Report. The following discussion should be read in conjunction with our audited
financial statements and the related notes that appear elsewhere in this Annual
Report. The following discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward looking statements. Factors that
could cause or contribute to such differences include, but are not limited to
those discussed below and elsewhere in this Annual Report, particularly in the
section entitled "Risk Factors". Our audited financial statements are stated in
United States Dollars and are prepared in accordance with United States
Generally Accepted Accounting Principles.
27
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued
---------------------------------------- ------------------------------
For the Period from Inception
(May 16, 2003) to
December 31, 2005
---------------------------------------- ------------------------------
Revenues $0
---------------------------------------- ------------------------------
Net Loss $2,151,461
---------------------------------------- ------------------------------
For the Year Ended
December 31, 2005 (audited)
---------------------------------------- ------------------------------
Exploration Costs, net of recoveries $975,514
---------------------------------------- ------------------------------
General and administrative 136,739
---------------------------------------- ------------------------------
Management fees 128,860
---------------------------------------- ------------------------------
Professional fees 73,684
---------------------------------------- ------------------------------
Stock Based Compensation 684,008
---------------------------------------- ------------------------------
---------------------------------------- ------------------------------
Net Loss for the Year $(1,998,805)
---------------------------------------- ------------------------------
As of December 31, 2005
(audited)
---------------------------------------- ------------------------------
Working Capital $(215,828)
---------------------------------------- ------------------------------
Total Assets 107,828
---------------------------------------- ------------------------------
Total Number of Shares of Common
Stock Outstanding 20,461,083
---------------------------------------- ------------------------------
Deficit ($2,151,461)
---------------------------------------- ------------------------------
Total Stockholders Equity ($215,828)
---------------------------------------- ------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operation
For Fiscal Year Ended December 31, 2005 Compared to Fiscal Year Ended
December 31, 2004
Our net losses during fiscal year ended December 31, 2005 were
approximately ($1,998,805) compared to a net loss of ($128,170) for fiscal year
ended December 31, 2004 (an increase of $1,870,635). During fiscal years ended
December 31, 2005 and 2004, we did not generate any revenue from operations.
28
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued
During fiscal year ended December 31, 2005, we incurred expenses of
approximately $1,998,805 compared to expenses of $128,170 during fiscal year
ended December 31, 2004. These operating expenses consisted of: (i)$975,514
(2004: $57,112) in exploration costs, net of recoveries; (ii) $136,739 (2004:
$12,009) as general and administrative expenses; (iii) $128,860 (2004: $31,943)
in management fees; (iv) $73,684 (2004: 27,106) in professional fees; and (v)
$684,008 (2004" $-0-) in stock-based compensation relating to the valuation of
Stock Options granted to our officers, directors and consultants. General and
administrative expenses generally include corporate overhead, financial and
administrative contracted services, marketing, and consulting costs.
Operating expenses incurred during fiscal year ended December 31, 2005
increased primarily due to the increase in exploration costs associated with the
increased acquisition and development of our uranium properties. General and
administrative expenses increased during fiscal year ended December 31, 2005
increased primarily relating to corporate marketing. Stock based compensation
increased due to the recording of the non-cash expense of $684,008 in connection
with the grant of the Stock Options.
On December 1, 2005, we entered into a financial consulting agreement with
IMT (the "Consulting Agreement"). The term of the Consulting Agreement is for
twelve months, effective January 1, 2006. In accordance with the terms and
provisions of the Consulting Agreement: (i) we will pay to IMT $10,000 monthly
for services rendered by IMT; and (ii) we granted to IMT and/or its designates
1,300,000 Stock Options exercisable at $0.50 per share.
Our net loss during fiscal year ended December 31, 2005 was ($1,998,805) or
($0.12) per share compared to a net loss of ($128,170) or ($0.08) per share for
fiscal year ended December 31, 2004. The weighted average number of shares
outstanding was 17,298,582 at December 31, 2005 compared to 1,605,894 at
December 31, 2004.
LIQUIDITY AND CAPITAL RESOURCES
As at fiscal year ended December 31, 2005, our current assets were $107,460
and our current liabilities were $323,288, resulting in a working capital
deficit of $215,828. As at fiscal year ended December 31, 2005, current assets
were comprised of: (i) $107,160 in cash; and (ii) $300 in other current assets.
As at fiscal year ended December 31, 2005, current liabilities were comprised
of: (i) $114,456 in accounts payable and accrued liabilities; and (ii) $208,832
due to related parties.
As at fiscal year ended December 31, 2005, our total assets were $107,460
comprised of current assets. The decrease in assets during fiscal year ended
December 31, 2005 from fiscal year ended December 31, 2004 was primarily due to
the decrease in cash and cash equivalents.
As at fiscal year ended December 31, 2005, our total liabilities were
$323,288 comprised of current liabilities. The increase in liabilities during
fiscal year ended December 31, 2005 from fiscal year ended December 31, 2004 was
primarily due to the increase in amounts due to related parties.
Stockholders' equity (deficit) decreased from $371,469 for December 31,
2004 to ($215,828) for December 31, 2005.
29
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued
We have not generated positive cash flows from operating activities. For
fiscal year ended December 31, 2005, net cash flow used in operating activities
was ($952,883), consisting primarily of a net loss of ($1,998,805). Net cash
flows used in operating activities was adjusted by $684,008 to reconcile the
non-cash expense of $684,008 for the grant of the Stock Options and by $275,000
to reconcile the non-cash compensation.
During fiscal year ended December 31, 2005, net cash flow from financing
activities was $653,773 pertaining primarily to $452,500 received from proceeds
on the sale of our common stock and $201,273 received as advances from related
parties.
We expect that working capital requirements will continue to be funded
through a combination of our existing funds, cash flow from operations and
further issuances of securities. Our working capital requirements are expected
to increase in line with the growth of our business.
Plan of Operation and Funding
Existing working capital and further debt and equity financing are expected
to be adequate to fund our operations over the next twelve months. We have no
lines of credit or other bank financing arrangements. Generally, we have
financed operations to date through the proceeds of the private placement of
equity and debt instruments. In connection with our business plan, management
anticipates additional increases in operating expenses and capital expenditures
relating to: (i) uranium exploration operating activities; (ii) possible future
reserve definition; (iii) possible future mining initiatives on current and
future properties; and (iv) future possible property acquisitions. We intend to
finance these expenses with further issuances of securities, and debt issuances.
We expect we will need to raise additional capital to meet long-term operating
requirements. Additional issuances of equity or convertible debt securities will
result in dilution to our current shareholders. Further, such securities might
have rights, preferences or privileges senior to our common stock. Additional
financing may not be available upon acceptable terms, or at all. If adequate
funds are not available or are not available on acceptable terms, we may not be
able to take advantage of prospective new business endeavors or opportunities,
which could significantly and materially restrict our business operations.
The independent auditors' report accompanying our December 31, 2005 and
December 31, 2004 financial statements contains an explanatory paragraph
expressing substantial doubt about our ability to continue as a going concern.
The financial statements have been prepared "assuming that we will continue as a
going concern," which contemplates that we will realize our assets and satisfy
our liabilities and commitments in the ordinary course of business.
MATERIAL COMMITMENTS
As of the date of this Annual Report, we do not have any material
commitments for fiscal year ended December 31, 2005.
PURCHASE OF SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment during the next
twelve months.
30
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment, which
establishes standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services. A key provision of this
statement is the requirement of a public entity to measure the cost of employee
services received in exchange for an award of equity instruments (including
stock options) based on the grant date fair value of the award. That cost will
be recognized over the period during which an employee is required to provide
service in exchange for the award (i.e., the requisite service period or vesting
period). The Statement eliminates the ability to account for share-based
compensation transactions under the intrinsic-value method utilizing APB Opinion
No. 25, Accounting for Stock Issued to Employees, and generally requires that
such transactions are accounted for using the fair-value method. This standard
becomes effective for us for our first annual or interim period that begins
after December 15, 2005. We will adopt SFAS 123R no later than the beginning of
January 1, 2006. Management is currently evaluating the potential impact that
the adoption of SFAS 123R will have on the Company's financial position and
results of operations.
In March 2005, the SEC staff issued Staff Accounting Bulletin No. 107 ("SAB
107") to give guidance on the implementation of SFAS 123R. The Company will
consider SAB 107 during implementation of SFAS 123R.
In March 2005, the FASB issued FASB Interpretation ("FIN") No. 47,
"Accounting for Conditional Asset Retirement Obligations, an interpretation of
FASB Statement No. 143". Asset retirement obligations (AROs) are legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and/or normal operation of a
long-lived asset, except for certain obligations of lessees. FIN 47 clarifies
that liabilities associated with asset retirement obligations whose timing or
settlement method are conditional on future events should be recorded at fair
value as soon as fair value is reasonably estimable. FIN 47 also provides
guidance on the information required to reasonably estimate the fair value of
the liability. FIN 47 is intended to result in more consistent recognition of
liabilities relating to AROs among companies, more information about expected
future cash outflows associated with those obligations stemming from the
retirement of the asset(s) and more information about investments in long-lived
assets because additional asset retirement costs will be recognized by
increasing the carrying amounts of the assets identified to be retired. FIN 47
is effective for fiscal years ending after December 15, 2005. Management is
currently evaluating the impact, which the adoption of this standard will have
on the Company's financial statements.
In July 2005, the Financial Accounting Standards Board issued SFAS No. 154,
Accounting for Changes and Error Corrections - A Replacement of APB Opinion No.
20 and FASB Statement No. 3. Under the provisions of SFAS No. 154, a voluntary
change in accounting principle requires retrospective application to prior
period financial statements, unless it is impracticable to determine either the
period-specific effects or the cumulative effect of the change. A change in
depreciation, amortization, or depletion method for long-lived, non-financial
assets must be accounted for as a change in accounting estimate effected by a
change in accounting principle. The guidance contained in Opinion 20 for
reporting the correction of an error in previously issued financial statements
and a change in accounting estimate was not changed. We will implement this new
standard beginning January 1, 2006. This standard is not expected to have a
significant effect on our reported financial position or earnings.
31
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - continued
In November 2005, the FASB issued Staff Position ("FSP") FAS115-1/124-1,
The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments, which addresses the determination as to when an investment is
considered impaired, whether that impairment is other than temporary, and the
measurement of an impairment loss. This FSP also includes accounting
considerations subsequent to the recognition of an other-than-temporary
impairment and requires certain disclosures about unrealized losses that have
not been recognized as other-than-temporary impairments. The guidance in this
FSP amends FASB Statements No. 115, Accounting for Certain Investments in Debt
and Equity Securities, and No. 124, Accounting for Certain Investments Held by
Not-for-Profit Organizations, and APB Opinion No. 18, The Equity Method of
Accounting for Investments in Common Stock. This FSP is effective for reporting
periods beginning after December 15, 2005. We do not believe the adoption of
this FSP will have a material impact on our financial statements.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our financial
statements.
Mineral Property Costs
Mineral property acquisition, exploration and development costs are expensed as
incurred until such time as economic reserves are quantified. To date the
Company has not established any proven or probable reserves on its mineral
property interests. Estimated future removal and site restoration costs are
provided over the life of proven reserves on a units-of-production basis. Costs,
which include production equipment removal and environmental remediation, are
estimated each period by management based on current regulations, actual
expenses incurred, and technology and industry standards. Any charge is included
in exploration expense or the provision for depletion and depreciation during
the period and the actual restoration expenditures are charged to the
accumulated provision amounts as incurred.
32
ITEM 7. FINANCIAL STATEMENTS
URANIUM ENERGY CORP.
(formerly Carlin Gold Inc.)
(an exploration stage company)
FINANCIAL STATEMENTS
DECEMBER 31, 2005
Report of Independent Registered Public Accounting Firm
Dated March 27, 2006 ................................................... 34
Balance Sheets as at December 31, 2005 and December 31,
2004 ................................................................... 35
Statements of Operations for Fiscal Year Ended December 31,
2005 and for the Period from May 16, 2003 (Inception) to
December 31, 2005 ...................................................... 36
Statement of Stockholders' Equity for the Period from May
16, 2003 (Inception) to December 31, 2005 .............................. 37
Statements of Cash Flows for the Year Ended December 31,
2005 and for the Period from May 16, 2003 (Inception) to
December 31, 2005 ...................................................... 38
Notes to Financial Statements ..................................... 39 - 51
33
DALE MATHESON
CARR-HILTON LABONTE
___________________________________
CHARTERED ACCOUNTANTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Uranium Energy Corp. (formerly Carlin Gold
Inc.).
We have audited the balance sheets of Uranium Energy Corp. (formerly Carlin Gold
Inc.), an exploration stage company, as at December 31, 2005 and 2004 and the
statement of operations, stockholders' equity and cash flows for the years ended
December 31, 2005 and 2004 and for the period May 16, 2003 (inception) to
December 31, 2005. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 2005 and 2004
and the results of its operations and its cash flows and the changes in
stockholders' equity for the years then ended, and for the period May 16, 2003
(inception) to December 31, 2005, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, to date the Company has reported significant losses since
inception from operations and requires additional funds to meet its obligations
and fund the costs of its operations. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in this regard are described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
DALE MATHESON CARR-HILTON LABONTE
---------------------------------
CHARTERED ACCOUNTANTS
Vancouver, Canada
March 27, 2006
34
URANIUM ENERGY, CORP.
(formerly Carlin Gold Inc.)
(an exploration stage company)
BALANCE SHEETS
------------------------------------------------------------------------------------
December 31, December 31,
2005 2004
------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents $ 107,160 $ 406,270
Other current assets 300 1,613
------------------------------------------------------------------------------------
$ 107,460 $ 407,883
====================================================================================
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 114,456 $ 28,855
Due to related parties (Note 8) 208,832 7,559
------------------------------------------------------------------------------------
323,288 36,414
------------------------------------------------------------------------------------
CONTINGENCIES AND COMMITMENTS (Notes 1, 3 & 5)
STOCKHOLDERS' EQUITY (DEFICIENCY)
Capital Stock (Note 5)
Common stock $0.001 par value: 75,000,000
shares authorized 20,461,083 shares
issued and outstanding (2004 - 16,328,583) 20,461 10,886
Additional paid-in capital 2,565,172 513,239
Deferred compensation (Note 5) (650,000) --
Deficit accumulated during the exploration stage (2,151,461) (152,656)
------------------------------------------------------------------------------------
(215,828) 371,469
------------------------------------------------------------------------------------
$ 107,460 $ 407,883
====================================================================================
The accompanying notes are an integral part of these financial statements.
35
URANIUM ENERGY, CORP.
(formerly Carlin Gold Inc.)
(an exploration stage company)
STATEMENTS OF OPERATIONS
For the Year For the Year For the Period from May
Ended Ended 16, 2003 (inception) to
December 31, 2005 December 31, 2004 December 31, 2005
------------------------------------------------------------------------------------------------------------------------
EXPENSES
Exploration costs, net of recoveries 975,514 57,112 1,033,680
General and administrative 136,739 12,009 150,272
Management fees 128,860 31,943 173,461
Professional fees 73,684 27,106 110,040
Stock-based compensation (Note 6) 684,008 - 684,008
------------------------------------------------------------------------------------------------------------------------
1,998,805 128,170 2,151,461
------------------------------------------------------------------------------------------------------------------------
NET LOSS FOR THE YEAR (1,998,805) $ (128,170) $ (2,151,461)
========================================================================================================================
BASIC AND FULLY DILUTED NET LOSS PER SHARE $ (0.12) $ (0.08)
================================================================================================
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 17,298,582 1,605,894
================================================================================================
The accompanying notes are an integral part of these financial statements.
36
URANIUM ENERGY, CORP.
(formerly Carlin Gold Inc.)
(an exploration stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM MAY 16, 2003 (inception) TO DECEMBER 31, 2005
Deficit
Accumulated
Additional During Total
Common stock Paid-in Deferred Exploration Stockholders'
Date Shares Amount Capital Compensation Stage Equity
------------------------------------------------------------------------------------------------------------------------------------
Balance, May 16, 2003 -- $ -- $ -- $ -- $ -- $ --
Net loss for the period -- -- -- -- (24,486) (24,486)
------------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 2003 -- -- -- -- (24,486) (24,486)
Shares issued for cash at
$0.0013 per share Jul 27, 2004 1,575,000 1,050 1,050 -- -- 2,100
Shares issued for cash at
$0.20 per share Aug 23, 2004 235,173 157 46,881 -- -- 47,038
Shares issued on Conversion of
debenture at $0.20 per share (Note 4) Aug 23, 2004 35,000 23 6,977 -- -- 7,000
Shares issued on settlement of debts
at $0.20 per share (Note 8) Aug 23, 2004 79,647 53 15,876 -- -- 15,929
Shares issued for cash at $0.0013
per share Oct 7, 2004 to
Dec 7, 2004 9,975,000 6,650 6,650 -- -- 13,300
Shares issued on Conversion of debenture
at $0.0013 per share (Note 4) Dec 7, 2004 2,250,000 1,500 1,500 -- -- 3,000
Shares issued for cash at $0.20 per share Dec 31, 2004 2,178,763 1,453 434,305 -- -- 435,758
Net loss for the year -- -- -- -- -- (128,170) (128,170)
------------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 2004 16,328,583 10,886 513,239 -- (152,656) 371,469
Shares issued for cash at $0.333 per share Mar 31, 2005 435,000 290 144,710 -- -- 145,000
Shares issued for cash at $0.333 per share Apr 28, 2005 330,000 220 109,780 -- -- 110,000
Shares issued for cash at $0.333 per share May 18, 2005 60,000 40 19,960 -- -- 20,000
Shares issued for cash at $0.333 per share Sept 16,2005 300,000 200 99,800 -- -- 100,000
Shares issued for property option
agreement at $0.333 per share (Note 3) Oct 11, 2005 750,000 500 249,500 -- -- 250,000
Shares issued for cash at $0.333 per share Nov 30, 2005 232,500 155 77,345 -- -- 77,500
Shares issued for drill data at $0.333 per
share (Note 5) Dec 12, 2005 75,000 50 24,950 -- -- 25,000
Stock based compensation - management
agreement bonus at $0.333 per share Dec 16, 2005 1,950,000 1,300 648,700 (650,000) -- --
Stock based compensation - options issued Dec 20, 3005 -- -- 684,008 -- -- 684,008
Reclassification for stock split -- -- 6,820 (6,820) -- -- --
Net loss for the year -- -- -- -- -- (1,998,805) (1,998,805)
------------ ----------- ----------- ----------- ----------- ----------- -----------
Balance - December 31, 2005 -- 20,461,083 $ 20,461 $ 2,565,172 $ (650,000) $(2,151,461) $ (215,828)
====================================================================================================================================
All share amounts have been restated to reflect the 2:1 reverse share
consolidation in January 2005 and the 1.5:1 forward share split as of the date
of record, February 28, 2006. (refer to Note 5)
The accompanying notes are an integral part of these financial statements.
37
URANIUM ENERGY, CORP.
(formerly Carlin Gold Inc.)
(an exploration stage company)
STATEMENTS OF CASH FLOWS
For the Period
from
For the Year For the Year May 16, 2003
Ended Ended (inception) to
December 31, December 31, December 31,
2005 2004 2005
------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the year $(1,998,805) $ (128,170) $(2,151,461)
Adjustments to reconcile net loss to net cash
from operating activities:
Stock based compensation 684,008 -- 684,008
Non-cash property and drill data costs 275,000 -- 275,000
Non-cash exploration expenses -- -- 10,000
Non-cash exploration recoveries -- -- (20,000)
Other current assets 1,313 (1,581) (300)
Accounts payable and accrued liabilities 85,601 28,855 114,456
------------------------------------------------------------------------------------------------------
NET CASH FLOWS USED IN
OPERATING ACTIVITIES (952,883) (100,896) (1,088,297)
------------------------------------------------------------------------------------------------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Issuance of shares for cash 452,500 498,196 950,696
Convertible debenture proceeds -- -- 20,000
Advances from related parties 201,273 8,624 224,761
------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM
FINANCING ACTIVITIES 653,773 506,820 1,195,457
------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (299,110) 405,924 107,160
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 406,270 346 --
------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 107,160 $ 406,270 $ 107,160
======================================================================================================
CASH AND CASH EQUIVALENTS CONSIST OF:
Cash in bank $ 107,160 $ 276,104 $ 107,160
Short term investments -- 130,166 --
------------------------------------------------------------------------------------------------------
$ 107,160 $ 406,270 $ 107,160
======================================================================================================
SUPPLEMENTAL DISCLOSURES:
Interest paid $ -- $ -- $ --
======================================================================================================
Taxes paid $ -- $ -- $ --
======================================================================================================
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (Note 10)
The accompanying notes are an integral part of these financial statements.
38
________________________________________________________________________________
URANIUM ENERGY CORP.
(formerly Carlin Gold Inc.)
(an exploration stage company)
Notes to Financial Statements
December 31, 2005
________________________________________________________________________________
NOTE 1: NATURE OF OPERATIONS AND BASIS OF PRESENTATION
________________________________________________________________________________
Uranium Energy Corp. (the "Company") was incorporated on May 16, 2003 in the
State of Nevada as Carlin Gold, Inc. The Company is an exploration stage company
that was originally organized to explore and develop precious metals in the
United States.
During 2004, the Company changed its business direction from the exploration of
precious metals to the exclusive focus on the exploration and development of
uranium deposits in the United States and internationally. Due to the change in
the Company's core business direction, the Company disposed of its 18 mineral
property claims in the State of Nevada. In addition, the Company commenced
reorganization, including a reverse stock split by the issuance of 1 new share
for each 2 outstanding shares of the Company's common stock and the raising of
further capital for its new operating directives (refer to Notes 3 and 9). On
January 24, 2005, the Company approved a special resolution to change the name
of the Company from Carlin Gold, Inc. to Uranium Energy Corp. Subsequent to the
year end, on February 28, 2006; the Company completed a forward stock split by
the issuance of 1.5 new shares for each 1 outstanding shares of the Company's
common stock.
Since November 1, 2004, the Company has acquired mineral leases, directly and
under options, for the purposes of exploring for economic deposits of uranium in
the States of Arizona, Texas, Colorado, and Utah. To December 31, 2005,
interests in approximately 8,292 net acres of mineral properties have been
staked or leased by the Company.
Going Concern
The Company commenced operations on May 16, 2003 and has not realized any
significant revenues since inception. As at December 31, 2005, the Company has a
working capital deficiency of $215,828 and an accumulated deficit of $2,151,461
(December 31, 2004 - $152,656). The Company is in the exploration stage of its
mineral property development and to date has not yet established any known
mineral reserves on any of its existing properties. The ability of the Company
to continue as a going concern is dependent on raising capital to fund its
planned mineral exploration work and ultimately to attain profitable operations.
Accordingly, these factors raise substantial doubt as to the Company's ability
to continue as a going concern. The Company intends to continue to fund its
initial operations by way of private placements and advances from related
parties as may be required. To date, the Company has completed private
placements for total proceeds of $950,696 from the issuance of shares of the
Company's common stock.
39
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
________________________________________________________________________________
Organization
The Company was incorporated on May 16, 2003 in the State of Nevada. The
Company's fiscal year end is December 31.
Basis of Presentation
These financial statements are presented in United States dollars and have been
prepared in accordance with United States generally accepted accounting
principles.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with an original maturity of
three months or less at the time of issuance to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates. Significant areas requiring management's
estimates and assumptions are determining the fair value of shares of common
stock and convertible debentures.
Mineral Property Costs
Mineral property acquisition, exploration and development costs are expensed as
incurred until such time as economic reserves are quantified. To date the
Company has not established any proven or probable reserves on its mineral
property interests. Estimated future removal and site restoration costs are
provided over the life of proven reserves on a units-of-production basis. Costs,
which include production equipment removal and environmental remediation, are
estimated each period by management based on current regulations, actual
expenses incurred, and technology and industry standards. Any charge is included
in exploration expense or the provision for depletion and depreciation during
the period and the actual restoration expenditures are charged to the
accumulated provision amounts as incurred.
Asset Retirement Obligations
The Company has adopted the provisions of SFAS No. 143 "Accounting for Asset
Retirement Obligations," which establishes standards for the initial measurement
and subsequent accounting for obligations associated with the sale, abandonment
or other disposal of long-lived tangible assets arising from the acquisition,
construction or development and for normal operations of such assets. The
adoption of this standard has had no effect on the Company's financial position
or results of operations. To December 31, 2005 any potential costs relating to
the ultimate disposition of the Company's mineral property interests have not
yet been determinable.
Financial Instruments
The fair values of cash and cash equivalents, other current assets, accounts
payable and accrued liabilities, convertible debentures and amounts due to
related parties were estimated to approximate their carrying values due to the
immediate or short-term maturity of these financial instruments. The Company's
operations and financing activities are conducted primarily in United States
dollars, and as a result the Company is not subject to significant exposure to
market risks from changes in foreign currency rates.
40
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
________________________________________________________________________________
Management has determined that the Company is exposed to significant credit
risk.
Loss per Common Share
Basic loss per share includes no dilution and is computed by dividing loss
attributable to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution of securities that could share in the earnings (loss) of the
Company. The common shares potentially issuable on conversion of outstanding
convertible debentures and exercise of stock options were not included in the
calculation of weighted average number of shares outstanding because the effect
would be anti-dilutive.
Foreign Currency Translation
The financial statements are presented in United States dollars. In accordance
with SFAS No. 52, "Foreign Currency Translation", foreign denominated monetary
assets and liabilities are translated to their United States dollar equivalents
using foreign exchange rates which prevailed at the balance sheet date. Revenue
and expenses are translated at average rates of exchange during the year.
Related translation adjustments are reported as a separate component of
stockholders' equity, whereas gains or losses resulting from foreign currency
transactions are included in results of operations.
Income Taxes
The Company follows the liability method of accounting for income taxes. Under
this method, 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
balances. Deferred tax assets and liabilities are measured using enacted or
substantially enacted tax rates expected to apply to the taxable income in the
years in which those differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the date of enactment or
substantive enactment. As at December 31, 2005, December 31, 2004 and 2003 the
Company had net operating loss carry forwards; however, due to the uncertainty
of realization, the Company has provided a full valuation allowance for the
potential deferred tax assets resulting from these losses carry forwards.
Stock-based Compensation
In December 2002, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standard No. 148, "Accounting for Stock-Based Compensation
- Transition and Disclosure" ("SFAS No. 148"), an amendment of Financial
Accounting Standard No. 123 "Accounting for Stock-Based Compensation" ("SFAS No.
123"). The purpose of SFAS No. 148 is to: (1) provide alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based employee compensation, (2) amend the disclosure
provisions to require prominent disclosure about the effects on reported net
income of an entity's accounting policy decisions with respect to stock-based
employee compensation, and (3) to require disclosure of those effects in interim
financial information.
The Company has elected to continue to account for stock options granted to
employees and officers in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees", and comply with the disclosure provisions of SFAS No. 123 as amended
by SFAS No. 148 as described above. Under APB No. 25, compensation expense is
recognized based on the difference, if any, on the date of grant between the
41
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
________________________________________________________________________________
estimated fair value of the Company's stock and the amount an employee must pay
to acquire the stock. Compensation expense is recognized immediately for past
services and pro-rata for future services over the option-vesting period. In
addition, with respect to stock options granted to employees, the Company
provides pro-forma information as required by SFAS No. 123 showing the results
of applying the fair value method using the Black-Scholes option pricing model.
In accordance with SFAS No. 123, the Company applies the fair value method using
the Black-Scholes option-pricing model in accounting for options granted to
consultants.
The following table illustrates the pro forma effect on net loss and net loss
per share as if the Company had accounted for its stock-based employee
compensation using the fair value provisions of SFAS No. 123 using the
assumptions as described in Note 5:
Year ended Year ended
December 31, 2005 December 31, 2004
--------------------------------------
Net loss for the year As reported $ (1,998,805) $ (128,170)
SFAS 123 compensation expense Pro-forma (458,084) -
--------------------------------------
Net loss for the year Pro-forma $ (2,456,889) $ (128,170)
======================================
Pro-forma basic net loss per share Pro-forma $ (0.14) $ (0.08)
======================================
Pro-forma diluted net loss per share Pro-forma $ (0.14) $ (0.08)
======================================
The Company accounts for equity instruments issued in exchange for the receipt
of goods or services from other than employees in accordance with SFAS No. 123
and the conclusions reached by the Emerging Issues Task Force in Issue No.
96-18. Costs are measured at the estimated fair market value of the
consideration received or the estimated fair value of the equity instruments
issued, whichever is more reliably measurable. The value of equity instruments
issued for consideration other than employee services is determined on the
earliest of a performance commitment or completion of performance by the
provider of goods or services as defined by EITF 96-18.
The Company has also adopted the provisions of the FASB Interpretation No.44,
Accounting for Certain Transactions Involving Stock Compensation - An
Interpretation of APB Opinion No. 25 ("FIN 44"), which provides guidance as to
certain applications of APB 25.
42
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
________________________________________________________________________________
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary
Assets, an amendment of APB Opinion No. 29, Accounting for Non-monetary
Transactions ("SFAS 153") SFAS 153 requires that exchanges of non-monetary
assets are to be measured based on fair value and eliminates the exception for
exchanges of non-monetary, similar productive assets, and adds an exemption for
non-monetary exchanges that do not have commercial substance. SFAS 153 will be
effective for fiscal periods beginning after June 15, 2005. Management does not
believe that the adoption of this standard will have a material impact on the
Company's financial condition or results of operations.
In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment, which
establishes standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services. A key provision of this
statement is the requirement of a public entity to measure the cost of employee
services received in exchange for an award of equity instruments (including
stock options) based on the grant date fair value of the award. That cost will
be recognized over the period during which an employee is required to provide
service in exchange for the award (i.e., the requisite service period or vesting
period). This standard becomes effective for the Company for its first annual or
interim period that begins after December 15, 2005. The Company will adopt SFAS
123R no later than the beginning of January 1, 2006. Management is currently
evaluating the potential impact that the adoption of SFAS 123R will have on the
Company's financial position and results of operations.
In March 2005, the SEC staff issued Staff Accounting Bulletin No. 107 ("SAB
107") to give guidance on the implementation of SFAS 123R. The Company will
consider SAB 107 during implementation of SFAS 123R.
In March 2005, the FASB issued FASB Interpretation ("FIN") No. 47, "Accounting
for Conditional Asset Retirement Obligations, an interpretation of FASB
Statement No. 143". Asset retirement obligations (AROs) are legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development and/or normal operation of a long-lived
asset, except for certain obligations of lessees. FIN 47 clarifies that
liabilities associated with asset retirement obligations whose timing or
settlement method are conditional on future events should be recorded at fair
value as soon as fair value is reasonably estimable. FIN 47 also provides
guidance on the information required to reasonably estimate the fair value of
the liability. FIN 47 is intended to result in more consistent recognition of
liabilities relating to AROs among companies, more information about expected
future cash outflows associated with those obligations stemming from the
retirement of the asset(s) and more information about investments in long-lived
assets because additional asset retirement costs will be recognized by
increasing the carrying amounts of the assets identified to be retired. FIN 47
is effective for fiscal years ending after December 15, 2005. Management is
currently evaluating the impact, which the adoption of this standard will have
on the Company's financial statements.
In July 2005, the Financial Accounting Standards Board issued SFAS No. 154,
Accounting for Changes and Error Corrections - A Replacement of APB Opinion No.
20 and FASB Statement No. 3. Under the provisions of SFAS No. 154, a voluntary
change in accounting principle requires retrospective application to prior
period financial statements, unless it is impracticable to determine either the
period-specific effects or the cumulative effect of the change. A change in
43
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
________________________________________________________________________________
depreciation, amortization, or depletion method for long-lived, non-financial
assets must be accounted for as a change in accounting estimate effected by a
change in accounting principle. The guidance contained in Opinion 20 for
reporting the correction of an error in previously issued financial statements
and a change in accounting estimate was not changed. We will implement this new
standard beginning January 1, 2006. This standard is not expected to have a
significant effect on our reported financial position or earnings.
In November 2005, the FASB issued Staff Position ("FSP") FAS115-1/124-1, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments, which addresses the determination as to when an investment is
considered impaired, whether that impairment is other than temporary, and the
measurement of an impairment loss. This FSP also includes accounting
considerations subsequent to the recognition of an other-than-temporary
impairment and requires certain disclosures about unrealized losses that have
not been recognized as other-than-temporary impairments. The guidance in this
FSP amends FASB Statements No. 115, Accounting for Certain Investments in Debt
and Equity Securities, and No. 124, Accounting for Certain Investments Held by
Not-for-Profit Organizations, and APB Opinion No. 18, The Equity Method of
Accounting for Investments in Common Stock. This FSP is effective for reporting
periods beginning after December 15, 2005. We do not believe the adoption of
this FSP will have a material impact on our financial statements.
NOTE 3: MINERAL EXPLORATION PROPERTIES
________________________________________________________________________________
Precious Metals Exploration
During 2003, the Company acquired 50 mineral claims in Elko County, Nevada, for
consideration of $10,000 which was paid by a shareholder on behalf of the
Company and formed part of the consideration received by the Company in
connection with the Convertible Debenture (refer to Note 4). In connection with
this acquisition, the Company granted a gold and silver production royalty to
this shareholder in the amount of $36,000 for the first three years of
production, $50,000 for subsequent years of production, plus a 4% net smelter
royalty. No amount was recorded in connection with the granting of these
royalties as the fair value was not readily determinable nor considered material
given the preliminary exploration stage of the property. These mineral claims
were acquired for the purpose of exploring for mineable reserves of precious
metals. A total of $5,006 was spent on initial exploration in 2004 ($10,354 in
2003) on these claims. The results of preliminary exploration were unfavorable
and accordingly during 2003, 32 of the mineral claims were sold to the
aforementioned shareholder in settlement of $20,000 of the Convertible Debenture
(refer to Note 4). The $20,000 settlement was recorded as reduction of
exploration expenses in 2003. During 2004, management determined that its 18
remaining mineral claims had nominal value, and a decision was made to abandon
or dispose of the remaining 18 mineral claims commensurate with the
reorganization initiatives pursued by the Company. During July, 2005, the
Company disposed of these remaining mineral claims to the same shareholder for
no further consideration and accordingly no gain or loss on disposal has been
recorded.
Uranium Exploration
During 2004, the Company changed its focus from precious metals exploration in
the state of Nevada to the exploration for economic reserves of uranium
throughout the United States and internationally. The Company changed its name
from Carlin Gold, Inc. to Uranium Energy Corp. on January 24, 2005.
44
NOTE 3: MINERAL EXPLORATION PROPERTIES - continued
________________________________________________________________________________
Since November 1, 2004, and further to the reorganization of the Company's
business direction, the Company has been acquiring mineral leases for the
purposes of exploring for economic deposits of uranium in the States of Arizona,
Colorado, Utah, Wyoming, and Texas. As of December 31, 2005, five claim blocks
in Arizona comprising 1,540 acres of mineral properties have been staked or
leased by the Company. A total of $11,649 was expended in the year ended
December 31, 2004 to acquire these mineral claims.
On October 11, 2005, the Company entered into a Mineral Asset Option Agreement
(the "Option") granting the Company the option to acquire certain uranium leases
in the State of Texas for total consideration of $200,000 and 2,000,000 common
shares at a deemed value of $0.50 per share. In consideration for the Option and
its partial exercise over the option term, the Company made a cash payment of
$50,000 and issued 500,000 shares of restricted common stock (750,000
post-split). Subsequent to year end, the Company paid a further cash payment of
$150,000 on February 1, 2006. The Option, if fully exercised will require the
further issuance of 1,500,000 shares of restricted common stock in 500,000 share
installments due six, twelve, and eighteen months from the effective date of the
Option. Title to the properties to be acquired will transfer upon payment of all
remaining shares of stock required under the Option, the timing of which may be
accelerated at the Company's discretion. During the Option term, the Company has
the right as operator to conduct or otherwise direct all exploration on the
properties to be acquired under the Option.
During 2005, the Company acquired lease interests in twenty-one further uranium
exploration mineral properties totaling 7,413 gross acres in the States of
Arizona, Colorado, Texas, Wyoming, and Utah, for five years with an option to
renew for five years, for aggregate costs of $174,476. To date, a total of 8,953
gross acres (8,804 net mineral acres) of mineral properties have been staked or
leased by the Company in the states of Arizona, Colorado, Wyoming, Texas and
Utah for the purposes of uranium exploration. Leased properties are subject to
5.0% to 8.25% net royalty interests.
The Company's work plan calls for the acquisition of further uranium exploration
properties in Texas, Arizona, Utah, Colorado, and Wyoming. The Company has
developed detailed exploration programs for each claim block area of interest
based on historical data derived from past uranium exploration by other
companies, with a mandate to prove or disprove the existence of uranium
resources.
NOTE 4: CONVERTIBLE DEBENTURE
________________________________________________________________________________
On October 22, 2003, a shareholder of the Company ("Lender"), was issued a
convertible debenture for $30,000 owing by the Company in connection with the
acquisition of precious metals exploration properties in Elko County, Nevada
(refer to Note 3) and other amounts advanced to the Company. The principal
amount was due and payable on June 1, 2004. The debenture bore interest at the
rate of 3% per annum and was secured by 50 mineral property claims located in
the State of Nevada, then deeded to the Company.
The Lender had the right to convert all or any portion of the indebtedness at
any time after April 1, 2004 into common stock of the Company at a price of
$0.066 per common share. The borrower had the option to adjust the conversion
price commensurate with any material change in the value or prospects of the
Company, including but not limited to, merger, acquisition, disposition of
assets, reclassification of conversion securities, or dilution.
45
NOTE 4: CONVERTIBLE DEBENTURE - continued
________________________________________________________________________________
On December 12, 2003, the terms of the convertible debenture were modified by an
Amended And Restated Convertible Debenture after the Lender, on December 9,
2003, purchased 32 of the 50 mineral claims previously acquired by the Company
for a $20,000 reduction in the original debenture which was recorded as a
reduction in exploration expenses in 2003 (refer to Note 3). The Amended and
Restated Convertible Debenture was in the principal amount of $10,000 and
carried similar terms to the original convertible debenture.
On August 23, 2004, the parties to the Amended And Restated Convertible
Debenture agreed to extend the debenture's term from June 1, 2004 to December
31, 2004, and waive interest accruing under the terms of the revised debenture
upon conversion. The parties also agreed to modify the terms of conversion
according to the prevailing private placement rate of $0.20 per share for 70% of
the debenture's stated amount and $0.0013 per share for 30% of the debenture's
stated amount. The Lender then elected to convert $7,000 of the principal amount
outstanding resulting in the issuance of 35,000 shares of the Company's common
stock.
On December 7, 2004, the Lender elected to convert the remaining amount
outstanding under the Amended and Restated Convertible Debenture in the amount
of $3,000, which was converted at the rate of $0.0013 per share resulting in the
issuance of 2,250,000 shares of the Company's common stock.
There was no intrinsic value to the original conversion feature of this
convertible debenture and accordingly, no beneficial conversion feature value
was recorded.
Further, at the time of the modification of the terms of the Convertible
Debenture, the Company had no material assets, was commencing a reorganization
of which the modification was a component and there was no market for trading in
shares of the Company's common stock. As a result, management determined that
any fair value resulting from the modification of the terms of the convertible
debenture was not material. Accordingly no amount was recorded in connection
with the modification of the terms of the convertible debenture.
NOTE 5: CAPITAL STOCK
________________________________________________________________________________
The Company's capitalization at December 31, 2005 was 75,000,000 authorized
common shares with a par value of $0.001 per share. On January 9, 2006, a
majority of shareholders voted to amend the Company's Articles of Incorporation
to increase the authorized capital from 75,000,000 shares of common stock to
750,000,000 shares of common stock. The increase in authorized capital was
effected on February 1, 2006.
On January 24, 2005, a majority of shareholders and the directors of the Company
approved a special resolution to undertake a reverse stock split of the common
stock of the Company on a 1 new share for 2 old shares basis. The par value and
the number of authorized but un-issued shares of the Company's common stock was
not changed as a result of the reverse stock split. Subsequent to year end on
February 14, 2006, the directors of the Company approved a special resolution to
undertake a forward stock split of the common stock of the Company on a 1.5 new
shares for 1 old share basis. The stock split became effective at the close of
business on February 28, 2006.
46
NOTE 5: CAPITAL STOCK - continued
________________________________________________________________________________
All references in these financial statements to number of common shares, price
per share and weighted average number of common shares outstanding prior to the
1:2 reverse stock split and the 1.5:1 forward stock split have been adjusted to
reflect these stock splits on a retroactive basis, unless otherwise noted.
Effective July 27, 2004 the Company issued 1,575,000 shares of common stock to
the original founders of the Company at a price of $0.0013 per share for total
proceeds of $2,100 and effective August 23, 2004, the Company issued 349,820
shares of common stock at $0.20 per share for total proceeds of $69,967 in
connection with the Company's original precious metal exploration program of
which 79,647 shares were issued on settlement of amounts owing to related
parties in the aggregate amount of $15,929, and 35,000 shares were issued on the
conversion of debentures in the aggregate amount of $7,000 as described in Note
4.
On December 7, 2004, the Company issued 12,225,000 shares of common stock to the
Company's new management team, consultants, and stakeholders in connection with
the reorganization and change of business direction of the Company as described
in Note 1 at a price of $0.0013 per share for total proceeds of $16,300 of which
2,250,000 shares were issued on the conversion of debentures in the aggregate
amount of $3,000 as described in Note 4.
On December 31, 2004, the Company issued 2,178,764 shares of common stock in
connection with private placements of common stock at a price of $0.20 per share
for total proceeds of $435,758 to fund the Company's intended uranium
exploration program.
On October 11, 2005, the Company entered into a Mineral Asset Option Agreement
(the "Option") granting the Company the option to acquire certain uranium leases
in the State of Texas. In consideration for the Option, the Company made cash
payment of $50,000 and issued 750,000 shares of restricted common stock at a
value of $0.333 per share for a total value of $250,000 which was recorded with
mineral property costs. Subsequent to year end, the Company paid a further cash
payment of $150,000 on February 1, 2006 under the terms of the Option. The
Option, if fully exercised will require the further issuance of an additional
1,500,000 shares of restricted common stock in 500,000 share installments due
six, twelve, and eighteen months from the effective date of the Option. (refer
to Note 3)
On December 12, 2005, the Company entered into an Agreement to acquire drill
data from a third party in consideration for a cash payment of $5,000 and issued
75,000 shares of restricted common stock at a price of $0.333 per share for a
total value of $25,000 which was included with mineral property costs.
On December 16, 2005 the Company issued 1,950,000 shares of restricted common
stock at a price of $0.333 per share for a value of $650,000 to three members of
management as per their management agreement with the Company which is for a one
year term commencing January 1, 2006. Accordingly this cost has been recorded as
deferred compensation in the statement of stockholders' equity as of December
31, 2005 and will be expensed in 2006.
During the year ended December 31, 2005, the Company issued 1,357,000 shares of
common stock in connection with private placements of common stock at a price of
$0.333 per share for total proceeds of $452,500.
47
NOTE 6: STOCK OPTION PLAN
________________________________________________________________________________
On December 19, 2005 the Board of Directors of the Company ratified, approved
and adopted a Stock Option Plan for the Company in the amount of 5,250,000
shares at $0.333 per share. The majority of shareholders of the Company ratified
and approved the Stock Option Plan effective February 1, 2006.
On December 20, 2005 2,970,000 stock options were granted to consultants at
$0.333 per share. The term of these options is ten years. The fair value of
these options at the date of grant of $684,008 was estimated using the
Black-Scholes option pricing model with an expected life of 10 years, a risk
free interest rate of 4.47%, a dividend yield of 0%, and an expected volatility
of 55.21% and has been recorded as a consulting expense in the period.
On December 20, 2005, 1,755,000 stock options were granted at $0.333 per share
to various officers and directors of the Company. The term of these options is
ten years. The fair value of these options at the date of grant of $458,084 was
estimated using the Black-Scholes option pricing model with an expected life of
10 years, a risk free interest rate of 4.47%, a dividend yield of 0%, and an
expected volatility of 55.21%, and in accordance with the provisions of SFAS
148, has been disclosed on a pro-forma basis in Note 2.
As of December 31, 2005, 4,725,000 options under the Company's current SOP had
been granted. No options had been exercised at year end.
A summary of the Company's stock options as of December 31, 2005 and 2004, and
changes during the years ended is presented below:
-------------------------------------------------------------------
Weighted average Weighted average
Number of exercise price remaining contractual
options per share life (in years)
-------------------------------------------------------------------
Outstanding at December 31, 2003 - - -
Exercised - - -
Granted - - -
-------------------------------------------------------------------
Outstanding at December 31, 2004 - - -
Granted 4,725,000 - -
Cancelled, - - -
Exercised - - -
-------------------------------------------------------------------
Outstanding at December 31, 2005 4,725,000 0.333 9.98
===================================================================
48
NOTE 7: INCOME TAXES
________________________________________________________________________________
The Company has adopted FASB No. 109 for reporting purposes. As of December 31,
2005, the Company had net operating loss carry forwards of approximately
$1,465,000 that may be available to reduce future years' taxable income. These
carry forwards will begin to expire, if not utilized, commencing in 2023. Future
tax benefits which may arise as a result of these losses have not been
recognized in these financial statements, as their realization is determined not
likely to occur and accordingly, the Company has recorded a valuation allowance
for the deferred tax asset relating to these tax loss carry forwards.
The Company reviews its valuation allowance requirements on an annual basis
based on projected future operations. When circumstances change and this causes
a change in management's judgment about the recoverability of future tax assets,
the impact of the change on the valuation allowance is generally reflected in
current income.
A reconciliation of income tax computed at the federal and state statutory tax
rates and the Company's effective tax rate is as follows
Year ended Year ended
December 31, December 31,
2005 2004
--------------------------------------------------------------------------------
Federal income tax provision at statutory rate (35.0)% (35.0)%
States income tax provision at statutory rates,
net of federal income tax effect (7.0) (7.0)
--------------------------------------------------------------------------------
Total income tax provision (42.0)% (4.0)%
================================================================================
The tax effects of temporary differences that give rise to the Company's future
tax asset (liability) are as follows:
2005 2004
--------------------
Loss carry forwards $ 615,000 $ 62,000
Valuation allowance (615,000) (62,000)
--------------------
$ -- $ --
====================
As the criteria for recognizing future income tax assets have not been met due
to the uncertainty of realization, a valuation allowance of 100% has been
recorded for the current and prior year.
49
NOTE 8: DUE TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS
________________________________________________________________________________
During the year ended December 31, 2005, the Company had transactions with
certain officers and directors of the Company as follows: the Company incurred
$168,154 in management fees, $118,154 was paid against outstanding management
fees, and $150,000 was advanced to the Company from a shareholder of the
Company. Also during the year ended December 31, 2005 a certain officer incurred
expenses on behalf of the Company totaling $8,832. As at December 31, 2005,
$208,832 is owing to these related parties in fees and expenses.
During the year ended December 31, 2004, the Company had transactions with
certain officers and directors of the Company as follows: management fees
incurred - $31,943; geological services incurred - $12,506; expenses paid on
behalf of the Company - $9,110; cash advances to the Company - $2,128;
settlement of amounts owing by the issuance of shares of common stock at $0.30
per share - $15,929; and amounts paid out by the Company - $46,136. As at
December 31, 2004, $8,486 was owing to these related parties of which $927 has
been included in accounts payable.
Amounts owing to related parties are unsecured, non-interest bearing and without
specific terms of repayment.
Other related party transactions are disclosed in notes 3, 4 and 5.
NOTE 9 - COMMITMENTS
________________________________________________________________________________
On December 1, 2005 the Company entered into a Financial Consulting Services
Agreement with International Market Trend, AG. The term of the Agreement is for
twelve months, effective January 1, 2006. In consideration for IMT entering into
this Agreement, the Company agrees to deliver to IMT or its nominees 1,300,000
in stock options of the Company's common stock at a price of $0.50 per share. In
addition, IMT will receive $10,000 per month. (see also Note 11)
NOTE 10 - SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
________________________________________________________________________________
On October 11, 2005, the Company entered into a Mineral Asset Option Agreement
(the "Option") granting the Company the option to acquire certain uranium leases
in the State of Texas. In consideration for the Option, the Company made a cash
payment of $50,000 and issued 750,000 shares of restricted common stock at a
value of $0.333 per share for a total value of $250,000 which was recorded with
mineral property costs. (refer to Notes 3 & 5)
On December 12, 2005, the Company entered into an Agreement to acquire drill
data in consideration for a cash payment of $5,000 and issued 75,000 shares of
restricted common stock at a price of $0.333 per share for a total value of
$25,000 which was included with mineral property costs. (refer to Notes 3 & 5)
50
NOTE 11: SUBSEQUENT EVENTS
________________________________________________________________________________
(a) The Company has completed a prospectus and registration statement with the
Securities and Exchange Commission in the United States that covers the resale
by certain selling shareholders of 3,653,583 shares of common stock which were
issued from August 23, 2004 through September 16, 2005 in connection with
private placements. As a result, the Company is fully reporting under the
Securities and Exchange Act of 1934 as amended.
(b) On January 15, 2006 the Company issued 18,750 restricted common shares in
connection with a drilling database information agreement. The agreement
requires cash payments of $2,000 per month payable quarterly and quarterly
issuances of 12,500 restricted common shares for three further quarters
following the effective date of the agreement.
(c) Effective February 1, 2006, the Company granted 285,000 common share options
in the capital of the Company exercisable over a 10 year term from the date of
issue at $0.333 per share to two individuals who are either employees or
officers of the Company.
(d) On February 1, 2006, the Company issued 772,500 restricted common shares to
a consultant in connection with a corporate finance consulting services
agreement of the same date. The consultant will provide among other things,
assistance in the initiation, coordination, implementation and management of all
aspects of any program or project in connection with the corporate finance
development and maintenance of the Company's various business interests over a
one year initial term.
(e) On February 14, 2006, the Company issued 1,200,000 registered common shares
in connection with the exercise of share options by consultants to the Company
for $400,000.
(f) Effective February 15, 2006 the Company executed an employment agreement
with its Chief Operating Officer and committed to pay him a monthly fee of
$10,000 and to grant him 375,000 stock options exercisable over a ten year term
at $0.333 per share.
(g) Effective February 28, 2006 the Company effected a forward stock split on a
1.5 new share for each old share basis whereby 7,484,116 common shares were
issued pro-rata to shareholders of the Company as of the record date on February
28, 2006.
(h) On March 1, 2006, the Company entered into a corporate relations consulting
services agreement with a shareholder of the Company for a six month initial
term. The agreement requires the Company to pay $5,000 per month during the
initial term and issue 500,000 warrants exercisable at $1.00 per share for a ten
year term. The shares underlying the warrants have piggy back registration
rights.
(i) On March 2, 2006, the Company issued 300,000 registered common shares in
connection with the exercise of share options by consultants to the Company for
$100,000.
(j) On March 10, 2006, the Company received a subscription for 250,000 units
from a shareholder and consultant to the Company for $250,000. The 250,000 units
were comprised of 250,000 restricted common shares and 125,000 common share
purchase warrants in the capital of the Company with piggyback registration
rights for all securities underlying the units issued. The warrants are
exercisable at $1.50 per share for a term which is the earlier of (i) 12 months
from the date of issuance or (ii) six months from the effective date of
registration.
51
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Our principal independent accountant from September 27, 2004 to current
date is Dale Matheson Carr-Hilton Labonte, Chartered Accountants, 1300-1140 West
Pender Street, Vancouver, British Columbia V6E 4G1.
ITEM 8A. CONTROLS AND PROCEDURES
FINANCIAL DISCLOSURE CONTROLS AND PROCEDURES
An evaluation was conducted under the supervision and with the
participation of our management, including Amir Adnani, our Chief Executive
Officer ("CEO") and D. Bruce Horton, our Chief Financial Officer ("CFO"), of the
effectiveness of the design and operation of our disclosure controls and
procedures as of December 31, 2005. Based on that evaluation, Messrs. Adnani and
Horton concluded that our disclosure controls and procedures were effective as
of such date to ensure that information required to be disclosed in the reports
that we file or submit under the Exchange Act, is recorded, processed,
summarized and reported within the time periods specified in SEC rules and
forms. Such officers also confirm that there was no change in our internal
control over financial reporting during the year ended December 31, 2005 that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
Audit Committee Report
Our Board of Directors has established an audit committee. The members of
the audit committee are Mr. Steven Jewett, Mr. Bruce Horton and Mr. Alan
Lindsay. Two of the three members of the audit committee are "independent"
within the meaning of Rule 10A-3 under the Exchange Act; two of three of the
audit committee members are financial experts. The audit committee was organized
in September, 2004 and operates under a written charter adopted by the Board of
Directors.
The audit committee has reviewed and discussed with management our audited
financial statements as of and for fiscal year ended December 31, 2005. The
audit committee has also discussed with Dale Matheson Carr-Hilton LaBonte the
matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended, by the Auditing Standards Board
of the American Institute of Certified Public Accountants. The audit committee
has received and reviewed the written disclosures and the letter from Dale
Matheson Carr-Hilton LaBonte required by Independence Standards Board Standard
No. 1, Independence Discussions with Audit Committees, as amended, and has
discussed with Dale Matheson Carr-Hilton LaBonte their independence.
Based on the reviews and discussions referred to above, the audit committee
has recommended to the Board of Directors that the audited financial statements
referred to above be included in our Annual Report on Form 10-KSB for fiscal
year ended December 31, 2005 filed with the Securities and Exchange Commission.
ITEM 8B. OTHER INFORMATION
Not applicable.
52
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
All of our directors hold office until the next annual general meeting of
the shareholders or until their successors are elected and qualified. Our
officers are appointed by our board of directors and hold office until their
earlier death, retirement, resignation or removal.
Our directors and executive officers, their ages, positions held are as
follows:
NAME AGE POSITION WITH THE COMPANY
------------------ --- ------------------------
Amir Adnani 28 President/Chief Executive
Officer and Director
Randall Reneau 57 Chief Exploration Officer,
and Director
Johnathan Lindsay 29 Secretary
Harry Anthony 58 Chief Operating Officer
and Director
D. Bruce Horton 61 Chief Financial Officer
and Director
Steve Jewett 67 Director
Alan Lindsay 55 Director
Business Experience
The following is a brief account of the education and business experience
of each director, executive officer and key employee during at least the past
five years, indicating each person's principal occupation during the period, and
the name and principal business of the organization by which he or she was
employed.
Amir Adnani. Mr. Amir Adnani has been our Chief Executive Officer,
President and Director since January 24, 2005. Mr. Adnani is an entrepreneur
with an extensive background in business development and marketing. He founded
and has been, for the last five years, president of Blender Media Inc., a
Vancouver based company that provides strategic marketing and financial
communications services to public companies and investors in mineral
exploration, mining, and energy sectors. He has many contacts throughout the
minerals exploration and financial communities. Mr. Adnani holds a Bachelor of
Science degree from the University of British Columbia.
Randall Reneau. Mr. Randall Reneau has been our Chief Exploration Officer
since January 24, 2005. Mr. Reneau is registered as a Certified Professional
Geologist with over 30 years of experience in mineral exploration and project
management in the United States, Mexico, Brazil and West Africa. Mr. Reneau has
significant experience exploring for uranium in the United States, specifically
in Texas, Arizona, New Mexico and Wyoming, the states known to hold the largest
uranium reserves. He extensively explored these states while employed in a
53
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT - continued
senior position for Conoco Uranium, a subsidiary of Conoco Ltd., and Wold
Nuclear, a privately-held company. For the past 10 years, he has been an
independent contractor, performing geology services for mining and exploration
companies internationally. He obtained his M.S. in Environmental Engineering
from Kennedy-Western University, Boise, Idaho, and a B.A. in Geology from
Central Washington University.
Johnathan Lindsay. Mr. Johnathan Lindsay has our Secretary since our
inception, where he was responsible for organizing initial financing for the
Company. In 1997, Mr. Lindsay worked with the Investor Relations Group and for
National Media, two North American public sector marketing firms. While there,
he developed relationships with key personnel in the resource and finance
sectors. Following his position with National Media, he studied marketing from
1998-99 at the British Columbia Institute of Technology. From 1999 to 2004, Mr.
Lindsay was employed by Alan Lindsay and Associates as VP Marketing and
Corporate Secretary. Since 2004, Mr. Lindsay is currently the president of Ocean
Tower Productions, a privately-held film production company. Ocean Tower
currently has films in various stages of production.
Harry Anthony. Mr. Harry Anthony has been our Chief Operating Officer and a
Director since February 2005. Mr. Anthony has over thirty years of experience in
the uranium mining industry. From approximately 1997 to present, Mr. Anthony has
been a consultant through Anthony Engineering Services for several major uranium
companies and international agencies, which duties generally include project
evaluation, operations "trouble shooter" and technical and financial expert.
From approximately 1990 through 1997, Mr. Anthony was a senior vice president of
Uranium Resources, Inc., where he managed all facets of operations and technical
support to achieve production goals, drilling, ion exchange, reverse osmosis,
software development and equipment design. His duties also included oversight of
construction, technical aspects, and daily operations of plants and wellfields,
budget planning and forecasting, property evaluations and reserve estimations.
Mr. Anthony also previously served as the vice-president of
engineering/engineering manager of Uranium Resources, Inc., and a project
superintendent and project engineer for Union Carbide Corp. Mr. Anthony was on
the board of directors of Uranium Resources, Inc. from 1984 through 1994. He is
the author of several publications and the recipient of the awards
"Distinguished Member of the South Texas Mineral Section of AIME -1987" and
"1999 Outstanding Citizen of the Year - Kingsville Chamber of Commerce". Mr.
Anthony received an M.S. in Engineering Mechanics in 1973 and a B.S. in
Engineering Mechanics in 1969 from Pennsylvania State University.
D. Bruce Horton. Mr. Bruce Horton has been our Chief Financial Officer
since February 2005 and a Director and member of our Audit Committee since
January 24, 2005. During the past five years, Mr. Horton has been active in the
financial arena in both the private and public sectors as an accountant and
financial management consultant with an emphasis on corporate financial
reporting, financing and tax planning. Mr. Horton has specialized in corporate
management, re-organization, merger and acquisition, international tax
structuring, and public and private financing for over thirty years. From 1972
through 1986, Mr. Horton was a partner in a public accounting firm. In 1986, Mr.
Horton co-founded the Clearly Canadian Beverage Corporation, of which he was a
director and chief financial officer until 1997.
54
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT - continued
Steve Jewett. Mr. Steve Jewett has been a Director and member of our Audit
Committee since January 24, 2005. Since 1978, Mr. Jewett has been the owner of
Stephen Jewett - Chartered Accountants. During his career, Mr. Jewett was
auditor of several public companies. Mr. Jewett received his degree as a
Chartered Accountant from the Institute of Chartered Accountants of British
Columbia and is the audit committee's financial expert.
Alan Lindsay. Mr. Alan Lindsay has been a director since May 16, 2003. Mr.
Lindsay has extensive experience and expertise in the mining and biomedical
fields. From 2000 to the present, he has been the chairman, president and chief
executive officer of MIV Therapeutics Inc., a publicly-listed biomedical company
focused on biocompatible coating technology for stents and medical devices, and
was also a co-founder of GeneMax Pharmaceuticals, a biotech company with a novel
cancer treatment technology discovered at the University of British Columbia.
Mr. Lindsay was the founder of AZCO Mining Inc. and served as Chairman,
President and CEO of AZCO from 1992 to 2000. During his term, AZCO obtained
listings on both the Toronto and American Stock Exchanges. AZCO developed the
Sanchez copper deposit and Piedras Verdes copper deposits with a combined SX-EW
oxide copper resource of 3.25 billion pounds of copper. Mr. Lindsay negotiated a
business transaction with Phelps Dodge Corporation that led to the sale of the
Sanchez deposit for $55 million and a joint venture on the Piedras Verdes
deposit.
Messrs. Adnani, A. Lindsay, J. Lindsay, Reneau, Golden West Investments,
and the Isaiah Capital Trust may be deemed to be organizers of the Company based
upon their activities in founding and organizing our business of the Company.
FAMILY RELATIONSHIPS
Our Secretary, Johnathan Lindsay, is the son of Alan Lindsay, one of our
directors; otherwise, there are no other family relationships among our
directors or officers.
Involvement in Certain Legal Proceedings
During the past five years, none of our directors, executive officers or
persons that may be deemed promoters is or have been involved in any legal
proceeding concerning (i) any bankruptcy petition filed by or against any
business of which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that time; (ii) any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses); (iii) being
subject to any order, judgment or decree, not subsequently reversed, suspended,
or vacated, of any court of competent jurisdiction permanently or temporarily
enjoining, barring, suspending or otherwise limiting involvement in any type of
business, securities or banking activity; or (iv) being found by a court, the
Securities and Exchange Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law (and the
judgment has not been reversed, suspended or vacated).
55
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT - continued
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee
As of the date of this Annual Report, Messrs. Jewett, Horton and A. Lindsay
have been appointed as members to our audit committee. Two of the three members
are "independent" within the meaning of Rule 10A-3 under the Exchange Act and
two of the three members are in addition financial experts. The audit committee
operates under a written charter adopted by the Board of Directors on September
27, 2004.
The audit committee's primary function is to provide advice with respect to
our financial matters and to assist the Board of Directors in fulfilling its
oversight responsibilities regarding finance, accounting, and legal compliance.
The audit committee's primary duties and responsibilities will be to: (i) serve
as an independent and objective party to monitor our financial reporting process
and internal control system; (ii) review and appraise the audit efforts of our
independent accountants; (iii) evaluate our quarterly financial performance as
well as our compliance with laws and regulations; (iv) oversee management's
establishment and enforcement of financial policies and business practices; and
(v) provide an open avenue of communication among the independent accountants,
management and the Board of Directors.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires our directors and officers, and
the persons who beneficially own more than ten percent of our common stock, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Copies of all filed reports are required to be furnished to
us pursuant to Rule 16a-3 promulgated under the Exchange Act. Based solely on
the reports received by us and on the representations of the reporting persons,
we believe that these persons have complied with all applicable filing
requirements during the fiscal year ended December 31, 2005.
ITEM 10. EXECUTIVE COMPENSATION
During fiscal years ended December 31, 2005 and 2004, none of our directors
were compensated for their roles as directors. Our directors may be reimbursed
for any out-of-pocket expenses incurred by them on our behalf. Certain officers
are paid for services provided to us as indicated below. We presently have no
pension, health, annuity, insurance, profit sharing or similar benefit plans.
Mr. Amir Adnani, our President and Chief Executive Officer, has accrued
compensation in the amount of $4,000 during fiscal year ended December 31, 2004
and $56,000 during fiscal year ended December 31, 2005. Mr. Johnathan Lindsay,
our Secretary, has accrued compensation in the amount of $25,171 for fiscal year
ended December 31, 2004 and $32,316 during fiscal year ended December 31, 2005.
We do not have formal employment agreements with Mr. Adnani nor Mr. Lindsay.
Executive compensation is subject to change concurrent with our compensation
policy.
56
ITEM 10. EXECUTIVE COMPENSATION - continued
Contractual Relationship with Randall Reneau
From June 30, 2004, and as formalized in a letter agreement dated December
1, 2004 between us and Randall Reneau (the "Reneau Services Agreement"), Mr.
Reneau has performed geological consulting services for us in exchange for $350
per diem plus expenses. During fiscal year ended December 31, 2004, Mr. Reneau
invoiced us, and has been compensated, in the amount of $12,506. During fiscal
year ended December 31, 2005, Mr. Reneau invoiced us, and has been compensated,
in the amount of $72,838.
Contractual Relationship with Harry Anthony
On February 15, 2006, our Board of Directors authorized and approved the
execution of an employment agreement dated February 15, 2006 between us and
Harry Anthony (the "Anthony Employment Agreement").
Pursuant to the terms and provisions of the Anthony Employment Agreement:
(i) Mr. Anthony shall provide duties to us commensurate with his executive
position as our Chief Operating Officer and he will also become a member of our
Board of Directors; (ii) we shall pay to Mr. Anthony a monthly fee of
$10,000.00; (iii) we granted an aggregate of 250,000 pre forward stock split
Stock Options to Mr. Anthony to purchase shares of our restricted common stock
at $0.50 per share for a ten-year term; and (iv) the Employment Agreement may be
terminated without cause by either us or Mr. Anthony by providing prior written
notice of the intention to terminate at least 120 days prior to the effective
date of such termination.
SUMMARY COMPENSATION TABLE
None of our executive officers received an annual salary and bonus that
exceeded $100,000 during the fiscal years ended December 31, 2005 and 2004. The
following table sets forth the compensation received by our officers and
directors fiscal years ended December 31, 2005 and 2004.
ANNUAL COMPENSATION LONG TERM
COMPENSATION
NAME AND FISCAL SALARY OTHER SECURITIES
PRINCIPAL POSITION YEAR UNDERLYING
OPTIONS
Amir Adnani 2005 $ 56,000
President and Chief 2004 $ -0- 4,000 202,500
Executive Officer
Randall Reneau 2005 $ -0- 79,838
Chief Exploration 2004 $ -0- 12,506 202,500
Officer
Johnathan Lindsay 2005 $ -0- 32,316
Secretary 2004 $ -0- 25,171 300,000
57
ITEM 10. EXECUTIVE COMPENSATION - continued
COMPENSATION OF DIRECTORS
Generally, our directors do not receive salaries or fees for serving as
directors, nor do they receive any compensation for attending meetings of the
board of directors. Directors are entitled to reimbursement of expenses incurred
in attending meetings. In addition, our directors are entitled to participate in
our stock option plan.
STOCK OPTIONS/SAW GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 2005 (Amounts and
exercise prices shown in pre forward stock split amounts)
--------------------------------------------------------------------------------
OPTION/SAR GRANTS IN LAST FISCAL YEAR
----------------- --------------------- ----------------- --------- -----------
Name Number of Securities Percent of Total Exercise Date of
Underlying Options Options Granted Price Expiration
----------------- --------------------- ----------------- --------- -----------
Amir Adnani 135,000 $0.50 12/20/15
----------------- --------------------- ----------------- --------- -----------
Randall Reneau 135,000 $0.50 12/20/15
----------------- --------------------- ----------------- --------- -----------
Alan Lindsay 400,000 $0.50 12/20/15
----------------- --------------------- ----------------- --------- -----------
John Lindsay 200,000 $0.50 12/20/15
----------------- --------------------- ----------------- --------- -----------
Bruce Horton 50,000 $0.50 12/20/15
Steve Jewett 50,000 $0.50 12/20/15
Grant Atkins 200,000 $0.50 12/20/15
Harry Anthony 250,000 $0.50 02/14/16
----------------- --------------------- ----------------- --------- -----------
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of the date of this Annual Report, the following table sets forth
certain information with respect to the beneficial ownership of our common stock
by each stockholder known by us to be the beneficial owner of more than 5% of
our common stock and by each of our current directors and executive officers.
Each person has sole voting and investment power with respect to the shares of
common stock, except as otherwise indicated. Beneficial ownership consists of a
direct interest in the shares of common stock, except as otherwise indicated. As
of the date of this Annual Report, there are 22,752,338 shares of common stock
issued and outstanding.
-------------------------------- ------------------------ ---------------------
Name and Address of Amount and Nature of Percent of Beneficial
Beneficial Owner Beneficial Ownership (1) Ownership
-------------------------------- ------------------------ ---------------------
Amir Adnani 1,905,500 (2) 8.37%
2303 - 930 Cambie Street
Vancouver, British Columbia
Canada V6B 5X6
-------------------------------- ------------------------ ---------------------
Randall Reneau 1,702,500 (3) 7.48%
9302 Mystic Oak Trail
Austin, Texas 78750
-------------------------------- ------------------------ ---------------------
58
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- continued
-------------------------------- ------------------------ ---------------------
Name and Address of Amount and Nature of Percent of Beneficial
Beneficial Owner Beneficial Ownership (1) Ownership
-------------------------------- ------------------------ ---------------------
D. Bruce Horton 125,001 (4) 0.55%
2443 Alder Street
Vancouver, British Columbia
Canada V6H 4A4
-------------------------------- ------------------------ ---------------------
Alan Lindsay 2,881,287 (5) 12.66%
2701 - 1500 Hornby Street
Vancouver, British Columbia
Canada V6Z 2R1
-------------------------------- ------------------------ ---------------------
Harry Anthony 1,125,000 (6) 4.94%
P.O. Box 1328
Kingsville, Texas 78364
-------------------------------- ------------------------ ---------------------
Johnathan Lindsay 698,361 (7) 3.07%
713 - 1501 Howe Street
Vancouver, British Columbia
Canada V6Z 2P8
-------------------------------- ------------------------ ---------------------
Ethny Lindsay 1,425,000 (8) 6.35%
201 Villa Pax, Ocean Way
Umhlanga Rocks, Republic of
South Africa 4320
-------------------------------- ------------------------ ---------------------
Isaiah Capital Trust 2,735,000 (9) 12.18%
28 - 30 The Parade
St. Heller, Jersey
Cannel Islands JE4 8XY
-------------------------------- ------------------------ ---------------------
Golden West Investments 21.71%
P.O. Box 97 4,875,000 (10)
Leeward Highway
Provenciales Turks & Caicos
Islands BWI
-------------------------------- ------------------------ ---------------------
All Officers and Directors
(7 total) 8,437,649 (11) 37.08%
-------------------------------- ------------------------ ---------------------
(1) These shares are restricted stock and reflect the Forward Stock Split
effective February 28, 2006.
(2) This figures includes: (i) 1,703,001 shares of common stock; and (ii)
the assumption of the exercise of 202,500 Stock Options to purchase 202,500
shares of our common stock at an exercise price of $0.33 per share expiring on
December 20, 2015.
(3) This figure includes: (i) 1,500,000 shares of common stock; and (ii)
the assumption of the exercise of 202,500 Stock Options to purchase 202,500
shares of our common stock at an exercise price of $0.33 per share expiring on
December 20, 2015.
59
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- continued
(4) This figure includes: (i) 50,001 shares of common stock; and (ii) the
assumption of the exercise of 75,000 Stock Options to purchase 75,000 shares of
our common stock at an exercise price of $0.33 per share expiring on December
20, 2015.
(5) This figure includes: (i) 2,093,787 shares of common stock; (ii)
187,500 shares of common stock held of record by Alan Lindsay's wife; and (iii)
the assumption of the exercise of 600,000 Stock Options to purchase 600,000
shares of our common stock at an exercise price of $0.33 per share expiring on
December 20, 2015.
(6) This figure includes: (i) 750,000 shares of common stock; and (ii) the
assumption of the exercise of 375,000 Stock Options to purchase 375,000 shares
of our common stock at an exercise price of $0.33 per share expiring on February
14, 2016.
(7) This figure includes: (i) 398,361 shares of common stock; and (ii) the
assumption of the exercise of 300,000 Stock Options to purchase 300,000 shares
of our common stock at an exercise price of $0.33 per share expiring on December
20, 2015.
(8) This figure includes 1,425,000 shares of common stock.
(9) This figure includes 2,735,000 shares of common stock. Isaiah Capital
Trust is a trust organized under the laws of Jersey, Channel Island. The trustee
of Isaiah Capital Trust is Equity Trust (Jersey) Limited.
(10) This figure includes 4,875,000 shares of common stock. Golden West
Investments Ltd. is a corporation organized under the laws of Belize. The sole
director of Golden West Investments Ltd. is Trustell Ltd.
(11) This figure includes: (i) 6,682,649 shares of common stock; and (ii)
the assumption of the exercise of 1,755,000 Stock Options to purchase 1,755,000
shares of our common stock at an exercise price of $0.33 per share.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Anthony Employment Agreement
On February 15, 2006, our Board of Directors authorized and approved the
execution of the Anthony Employment Agreement. Pursuant to the terms and
provisions of the Anthony Employment Agreement: (i) Mr. Anthony shall provide
duties to us commensurate with his executive position as our Chief Operating
Officer and he will also become a member of our Board of Directors; (ii) we
shall pay to Mr. Anthony a monthly fee of $10,000.00; (iii) we granted an
aggregate of 250,000 pre forward split Stock Options to Mr. Anthony to purchase
shares of our restricted common stock at $0.50 per share for a ten-year term;
and (iv) the Employment Agreement may be terminated without cause by either us
or Mr. Anthony by providing prior written notice of the intention to terminate
at least 120 days prior to the effective date of such termination.
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ITEM 13. EXHIBITS
The following exhibits are filed as part of this Annual Report.
3.1 Articles of Incorporation (1)
3.1.1 Amendment to Articles of Incorporation (2)
3.2 Bylaws of Uranium Energy Corp. (1)
3.3 Audit Committee Charter (1)
3.4 Ethics Charter (1)
4.1 Consulting Agreement between Uranium Energy Corp. and Randall Reneau
(3)
4.2 Mineral Asset Option Agreement (3)
4.3 Agreement and Addendum between Harry A. Moore Trust and Uranium Energy
Corp.(4)
4.4 Financial Consulting Services Agreement between Uranium Energy Corp.
and International Market Trend AG dated December 1, 2005 filed herein
as an exhibit.
4.5 Harry A. Moore Trust Agreement filed herein as an exhibit.
4.6 Employment Agreement between Uranium Energy Corp. and Harry Anthony
dated February 2006 filed herein as an exhibit.
4.7 Consulting Services and Right of First Refusal Agreement between
Uranium Energy Corp. and Jim Knupke dated December 1, 2005 filed
herein as an exhibit.
4.8 Corporate Relations Consulting Services Agreement between Uranium
Energy Corp. and Michael Baybak and Corp. Inc. dated March 1, 2006
filed herein as an exhibit.
4.9 Corporate Finance Consulting Services Agreement between Uranium Energy
Corp. and Eurotrade Management Group Ltd. dated February 1, 2006 filed
herein as an exhibit.
10.1 2005 Stock Option Plan of Uranium Energy Corp.(5)
31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or
15d-14(a) of the Securities Exchange Act.
31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or
15d-14(a) of the Securities Exchange Act.
32.1 Certification of Chief Executive Officer and Chief Financial Officer
Under Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act.
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ITEM 13. EXHIBITS - continued
(1) Incorporated by reference to exhibits filed with the Registration Statement
on Form SB-2 filed with the Commission on August 4, 2005.
(2) Incorporated by reference to exhibit filed with the Report on Form 8-K
filed with the Commission on February 9, 2006.
(3) Incorporated by reference to exhibits filed with the amendment to
Registration Statement on Form SB-2 filed with the Commission on November
9, 2005.
(4) Incorporated by reference to exhibit filed with the Report on Form 8-K
filed with the Commission on December 21, 2005.
(5) Incorporated by reference to exhibit filed with the Report on Form 8-K
filed with the Commission on December 21, 2005.
ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES
During fiscal year ended December 31, 2005, we incurred approximately
$30,000 in fees to our principal independent accountant for professional
services rendered in connection with the audit of our financial statements for
fiscal year ended December 31, 2005 and for the review of our financial
statements for the quarters ended March 31, 2005, June 30, 2005 and September
30, 2005.
During fiscal year ended December 31, 2004, we incurred approximately
$25,000 in fees to our principal independent accountant for professional
services rendered in connection with the audit of our financial statements for
fiscal year ended December 31, 2004 and for the review of our financial
statements for the quarters ended March 31, 2004, June 30, 2004 and September
30, 2004.
During fiscal year ended December 31, 2005, we did not incur any other fees
for professional services rendered by our principal independent accountant for
all other non-audit services which may include, but is not limited to,
tax-related services, actuarial services or valuation services.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
URANIUM ENERGY CORP.
Dated: March 29, 2006 By: /s/ AMIR ADNANI
----------------------------------
Amir Adnani, President/Chief
Executive Officer
Dated: March 29, 2006 By: /s/ D. BRUCE HORTON
----------------------------------
D. Bruce Horton, Treasurer/Chief
Financial Officer
62