UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the period ended March 31, 2007
[ ] 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 333-127185
URANIUM ENERGY CORP.
_________________________________________________________________
(Exact name of small business issuer as specified in its charter)
NEVADA 98-0399476
_______________________________ ___________________
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
9801 Anderson Mill Road
Suite 230
Austin, Texas 78750
________________________________________
(Address of Principal Executive Offices)
(512) 828-6980
___________________________
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
NONE
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, Par Value $0.001
______________________________
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by checkmark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years.
N/A
Check whether the Registrant filed all documents required to be filed by Section
12, 13 and 15(d) of the Exchange Act after the distribution of securities under
a plan confirmed by a court.
Yes [ ] No [X]
Applicable only to corporate issuers
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding as of May 10, 2007
Common Stock, $.001 par value 37,317,088
Transitional Small Business Disclosure Format (check one)
Yes [ ] No [X]
2
PART I. FINANCIAL INFORMATION 4
ITEM 1. FINANCIAL STATEMENTS 4
BALANCE SHEETS 5
STATEMENTS OF OPERATIONS 6
STATEMENTS OF CASH FLOWS 7
NOTES TO FINANCIAL STATEMENTS 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION OR PLAN OF OPERATION 21
ITEM 3. CONTROLS AND PROCEDURES 29
PART II. OTHER INFORMATION 30
ITEM 1. LEGAL PROCEEDINGS 30
ITEM 2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS 30
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 32
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 32
ITEM 5. OTHER INFORMATION 32
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 33
SIGNATURES 33
3
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
URANIUM ENERGY CORP.
(an exploration stage company)
FINANCIAL STATEMENTS
MARCH 31, 2007
(UNAUDITED)
BALANCE SHEETS
STATEMENTS OF OPERATIONS
STATEMENTS OF CASH FLOWS
NOTES TO FINANCIAL STATEMENTS
4
URANIUM ENERGY, CORP.
(an exploration stage company)
BALANCE SHEETS
=========================================================================================================
March 31, December 31,
2007 2006
(UNAUDITED)
CURRENT ASSETS
Cash and cash equivalents $ 13,933,754 $ 13,581,377
Restricted cash (Note 3) 137,667 136,458
Available-for-sale securities (Note 4) 641,930 -
Interest and accounts receivable 3,183 20,020
Agreement receivable - 235,040
Other current assets 176,104 19,796
_________________________________________________________________________________________________________
14,892,638 13,992,691
PROPERTY AND EQUIPMENT (Note 5) 282,518 205,004
_________________________________________________________________________________________________________
$ 15,175,156 $ 14,197,695
=========================================================================================================
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 521,687 $ 306,462
Due to related parties (Note 11) - 225,581
_________________________________________________________________________________________________________
521,687 532,043
_________________________________________________________________________________________________________
CONTINGENCIES AND COMMITMENTS (Notes 6, 12 & 14)
STOCKHOLDERS' EQUITY
Capital Stock (Note 7)
Common stock $0.001 par value: 750,000,000 shares authorized
35,764,838 shares issued and outstanding
(December 31, 2006 - 34,371,088) 35,765 34,371
Additional paid-in capital 35,336,753 29,604,624
Common stock purchase warrants - 992,894
Common share and warrant proceeds (Note 7) 615,000 250,000
Deferred compensation (Note 7) - (246,458)
Deficit accumulated during the exploration stage (21,740,939) (16,969,779)
Accumulated other comprehensive income 406,890 -
_________________________________________________________________________________________________________
14,653,469 13,665,652
_________________________________________________________________________________________________________
$ 15,175,156 $ 14,197,695
=========================================================================================================
The accompanying notes are an integral part of these financial statements.
5
URANIUM ENERGY, CORP.
(an exploration stage company)
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months Three months For the Period from
Ended Ended May 16, 2003 (inception)
March 31, 2007 March 31, 2006 to March 31, 2007
=================================================================================================================
EXPENSES
Consulting fees $ 128,242 $ - $ 836,797
Depreciation 15,224 - 34,961
General and administrative 551,490 158,195 3,198,662
Management fees 139,559 178,207 960,268
Mineral property expenditures (Note 6) 1,226,204 238,288 6,976,107
Professional fees 190,451 59,223 616,055
Stock based compensation (Note 9) 2,676,796 605,752 9,381,102
_________________________________________________________________________________________________________________
4,927,966 1,239,665 22,003,952
LOSS BEFORE OTHER ITEMS (4,927,966) (1,239,665) (22,003,952)
_________________________________________________________________________________________________________________
INTEREST INCOME 156,806 - 233,300
OTHER INCOME - - 29,713
_________________________________________________________________________________________________________________
156,806 - 263,013
_________________________________________________________________________________________________________________
NET LOSS FOR THE PERIOD $ (4,771,160) $ (1,239,665) $ (21,740,939)
_________________________________________________________________________________________________________________
BASIC AND FULLY DILUTED NET LOSS
PER SHARE $ (0.14) $( 0.06)
_________________________________________________________________________________
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING,
BASIC AND FULLY DILUTED 35,133,947 21,854,791
_________________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
6
URANIUM ENERGY, CORP.
(an exploration stage company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months Three months For the Period from
Ended Ended May 16, 2003 (inception)
March 31, 2007 March 31, 2006 to March 31, 2007
=================================================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (4,771,160) $ (1,239,665) $ (21,740,939)
Adjustments to reconcile net loss to net cash
from operating activities:
Stock based compensation (Note 9) 2,676,796 605,752 9,381,102
Non-cash mineral property expenditures 68,500 - 3,123,929
Depreciation 15,224 - 34,960
Changes in operating assets and liabilities:
Interest and accounts receivable 16,837 - (3,183)
Agreement receivable - - (235,040)
Other current assets (156,308) (20,527) (155,577)
Accounts payable and accrued liabilities 215,225 32,145 510,160
Due to related parties (225,581) 18,000 -
_________________________________________________________________________________________________________________
NET CASH FLOWS USED IN (2,160,467) (604,295) (9,084,588)
OPERATING ACTIVITIES
_________________________________________________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of shares for cash 2,241,791 350,000 23,168,187
Share subscriptions 365,000 250,000 615,000
Convertible debenture proceeds - - 20,000
Financing charges - - (329,700)
_________________________________________________________________________________________________________________
NET CASH FLOWS FROM 2,606,791 600,000 23,473,487
FINANCING ACTIVITIES
_________________________________________________________________________________________________________________
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (92,738) - (317,478)
Restricted cash deposits (1,209) - (137,667)
_________________________________________________________________________________________________________________
NET CASH FLOWS USED IN (93,947) - (455,145)
INVESTING ACTIVITIES
_________________________________________________________________________________________________________________
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 352,377 (4,295) 13,933,754
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 13,581,377 107,160 -
_________________________________________________________________________________________________________________
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 13,933,754 $ 102,865 $ 13,933,754
_________________________________________________________________________________________________________________
CASH AND CASH EQUIVALENTS CONSIST OF:
Cash in bank $ 1,574,489 $ 102,865 $ 1,574,489
Term deposits 12,359,265 - 12,359,265
_________________________________________________________________________________________________________________
$ 13,933,754 $ 102,865 $ 13,933,754
_________________________________________________________________________________________________________________
SUPPLEMENTAL CASH FLOW INFORMATION AND
NONCASH INVESTING AND FINANCING ACTIVITIES (Note 13)
The accompanying notes are an integral part of these financial statements.
7
URANIUM ENERGY CORP.
(an exploration stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2007
(UNAUDITED)
________________________________________________________________________________
NOTE 1: NATURE OF OPERATIONS
________________________________________________________________________________
Uranium Energy Corp. (the "Company") was incorporated on May 16, 2003 in the
State of Nevada. 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, Colorado, New Mexico, Texas, Utah,
and Wyoming. To March 31, 2007, interests in approximately 35,139 net acres of
mineral properties have been staked or leased by the Company.
These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States of America with the on-going
assumption applicable to a going concern which contemplates the realization of
assets and the satisfaction of liabilities and commitments in the normal course
of business.
The Company commenced operations on May 16, 2003 and has not realized any
significant revenues since inception. As at March 31, 2007, the Company has an
accumulated deficit of $21,740,939. The Company is in the exploration stage of
its mineral property development and to date has not yet established any proven
mineral reserves on its existing properties. The continued operations of the
Company and the recoverability of the carrying value of its assets is ultimately
dependent upon the ability of the Company to achieve profitable operations. The
Company intends to continue to fund its operations by way of private placements
of equity as may be required. To date, the Company has completed private
placements and received funding through the exercise of stock options and share
purchase warrants for total proceeds of $23,473,487 from the issuance of shares
of the Company's common stock.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB of Regulation
S-B. They do not include all information and footnotes required by United States
generally accepted accounting principles for complete financial statements.
However, except as disclosed herein, there have been no material changes in the
information disclosed in the notes to the financial statements for the year
ended December 31, 2006 included in the Company's Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission. The interim unaudited
financial statements should be read in conjunction with those financial
statements included in the Form 10-KSB. In the opinion of Management, all
adjustments considered necessary for a fair presentation, consisting solely of
normal recurring adjustments, have been made. Operating results for the three
months ended March 31, 2007 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2007.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
________________________________________________________________________________
BASIS OF PRESENTATION
These interim financial statements are presented in United States dollars and
have been prepared in accordance with accounting principles generally accepted
in the United States of America.
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 transactions
involving common stock, convertible debentures and financial instruments, Other
areas requiring estimates include deferred tax balances, valuation allowances,
allocations of expenditures to resource property interests and asset impairment
tests.
8
URANIUM ENERGY CORP.
(an exploration stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2007
(UNAUDITED)
________________________________________________________________________________
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
________________________________________________________________________________
MINERAL PROPERTY COSTS
The Company is primarily engaged in the acquisition, exploration and development
of mineral properties.
Mineral property acquisition costs are capitalized in accordance with EITF 04-2
when management has determined that probable future benefits consisting of a
contribution to future cash inflows have been identified and adequate financial
resources are available or are expected to be available as required to meet the
terms of property acquisition and budgeted exploration and development
expenditures. Mineral property acquisition costs are expensed as incurred if the
criteria for capitalization are not met. In the event that mineral property
acquisition costs are paid with Company shares, those shares are valued at
market at the time the shares are due.
Mineral property exploration costs are expensed as incurred.
When mineral properties are acquired under option agreements with future
acquisition payments to be made at the sole discretion of the Company, those
future payments, whether in cash or shares, are recorded only when the Company
has made or is obliged to make the payment or issue the shares. Because option
payments do not meet the definition of tangible property under EITF 04-2, all
option payments are expensed as incurred.
When it has been determined that a mineral property can be economically
developed as a result of establishing proven and probable reserves and pre
feasibility, the costs incurred to develop such property are capitalized.
Estimated future removal and site restoration costs, when determinable 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.
As of the date of these financial statements, the Company has incurred only
acquisition and exploration costs which have been expensed, and the Company has
not established any proven or probable reserves on its mineral properties.
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 March 31, 2007 any potential costs relating to the
ultimate disposition of the Company's mineral property interests have not yet
been determinable.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews property, plant, and equipment and certain identifiable
intangibles, excluding goodwill, for impairment in accordance with SFAS No. 144,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate the carrying amount of an asset may not be
recoverable. Recoverability of these assets is measured by comparison of its
carrying amount to future undiscounted cash flows the assets are expected to
generate. If property, plant, and equipment and certain identifiable intangibles
are considered to be impaired, the impairment to be recognized equals the amount
by which the carrying value of the assets exceeds its fair market value. For the
three months ended March 31, 2007, the Company had no material impairment of its
long-lived assets.
9
URANIUM ENERGY CORP.
(an exploration stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2007
(UNAUDITED)
________________________________________________________________________________
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
________________________________________________________________________________
FINANCIAL INSTRUMENTS
The fair values of cash and cash equivalents, restricted cash, other current
monetary assets, accounts payable and accrued liabilities 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 fair value
of the Company's net smelter royalty obligations (refer to Note 6) is not
determinable at the current stage of the Company's exploration program.
Accordingly, no value has been assigned by management. 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. Management has determined that the
Company is not 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 March 31, 2007, 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
On January 1, 2006, the Company adopted SFAS No. 123 (revised 2004) (SFAS No.
123R), Share-Based Payment, which addresses the accounting for stock-based
payment transactions in which an enterprise receives employee services in
exchange for (a) equity instruments of the enterprise or (b) liabilities that
are based on the fair value of the enterprise's equity instruments or that may
be settled by the issuance of such equity instruments. In January 2005, the
Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB)
No. 107, which provides supplemental implementation guidance for SFAS No. 123R.
SFAS No. 123R eliminates the ability to account for stock-based compensation
transactions using the intrinsic value method under Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees, and instead
generally requires that such transactions be accounted for using a
fair-value-based method. The Company uses the Black-Scholes-Merton ("BSM")
option-pricing model to determine the fair-value of stock-based awards under
SFAS No. 123R, consistent with that used for pro forma disclosures under SFAS
No. 123, Accounting for Stock-Based Compensation. The Company has elected the
modified prospective transition method as permitted by SFAS No. 123R and
accordingly prior periods have not been restated to reflect the impact of SFAS
No. 123R. The modified prospective transition method requires that stock-based
compensation expense be recorded for all new and unvested stock options,
restricted stock, restricted stock units, and employee stock purchase plan
shares that are ultimately expected to vest as the requisite service is rendered
beginning on January 1, 2006 the first day of the Company's fiscal year 2006.
Stock-based compensation expense for awards granted prior to January 1, 2006 is
based on the grant date fair-value as determined under the pro forma provisions
of SFAS No. 123.
10
URANIUM ENERGY CORP.
(an exploration stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2007
(UNAUDITED)
________________________________________________________________________________
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
________________________________________________________________________________
STOCK-BASED COMPENSATION (CONTINUED)
Prior to the adoption of SFAS No. 123R, the Company measured compensation
expense for its employee stock-based compensation plans using the intrinsic
value method prescribed by APB Opinion No. 25. The Company applied the
disclosure provisions of SFAS No. 123 as amended by SFAS No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure, as if the fair-value-based
method had been applied in measuring compensation expense. Under APB Opinion No.
25, when the exercise price of the Company's employee stock options was equal to
the market price of the underlying stock on the date of the grant, no
compensation expense was recognized.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated using the
straight-line method over their estimated useful lives at the following rates:
Computer Equipment 3 years
Furniture and Fixtures 5 years
Mining Equipment 5 years
Vehicles 5 years
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2006, the FASB issued FSP EITF 00-19-02, "ACCOUNTING FOR
REGISTRATION PAYMENT ARRANGEMENTS" ("FSP 00-19-2") which addresses accounting
for registration payment arrangements. FSP 00-19-2 specifies that the contingent
obligation to make future payments or otherwise transfer consideration under a
registration payment arrangement, whether issued as a separate agreement or
included as a provision of a financial instrument or other agreement, should be
separately recognized and measured in accordance with FASB Statement No. 5,
"ACCOUNTING FOR CONTINGENCIES". FSP 00-19-2 further clarifies that a financial
instrument subject to a registration payment arrangement should be accounted for
in accordance with other applicable generally accepted accounting principles
without regard to the contingent obligation to transfer consideration pursuant
to the registration payment arrangement. For registration payment arrangements
and financial instruments subject to those arrangements that were entered into
prior to the issuance of EITF 00-19-2, this guidance is effective for financial
statements issued for fiscal years beginning after December 15, 2006 and interim
periods within those fiscal years. The Company has determined the adoption of
FSP 00-19-2 will not have a significant impact upon its financial position,
results of operations or cash flows.
In February 2007, the FASB issued SFAS No. 159, "THE FAIR VALUE OPTION FOR
FINANCIAL ASSETS AND FINANCIAL LIABILITIES". This Statement permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007. The Company is currently assessing the impact
of SFAS No. 159 on its financial position and results of operations.
NOTE 3: RESTRICTED CASH
________________________________________________________________________________
Restricted cash includes certificates of deposit issued to the Wyoming
Department of Environmental Quality, Land Quality Division, in lieu of a surety
bond. The certificates of deposit accrue interest at 3.5% per annum, are
automatically renewable and are protected by federal insurance up to $100,000.
In December 2006 the Company ceased exploration on the applicable property and
has applied for the release of the certificates of deposit which is expected in
the current fiscal year.
NOTE 4: AVAILABLE-FOR-SALE SECURITIES
________________________________________________________________________________
Available-for-sale securities consist of shares in a publicly traded company
listed on the NYSE Arca and Toronto Stock Exchanges. As of March 31, 2007 the
Company reported the available-for-sale securities at market value and
accordingly, recorded a $406,890 unrealized gain which has been reported as
other comprehensive income.
11
URANIUM ENERGY CORP.
(an exploration stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2007
(UNAUDITED)
________________________________________________________________________________
NOTE 5: PROPERTY AND EQUIPMENT
________________________________________________________________________________
March 31, 2007 December 31, 2006
(unaudited)
_________________________________________________________________________
Computer Equipment $ 55,485 $ 35,963
Furniture and Fixtures 27,499 14,373
Mining Equipment 120,780 110,690
Vehicles 113,714 63,714
_________________________________________________________________________
317,478 224,740
Less: accumulated depreciation (34,960) (19,736)
_________________________________________________________________________
$ 282,518 $ 205,004
_________________________________________________________________________
Effective August 24, 2006, the Company committed to spend approximately $140,000
on a logging truck which is currently under construction and was completed on
April 15, 2007. As of March 31, 2007, $50,000 has been paid towards this
commitment and has been included with mining equipment.
NOTE 6: MINERAL EXPLORATION PROPERTIES
________________________________________________________________________________
URANIUM EXPLORATION
Since November 1, 2004, the Company has been acquiring mineral leases for the
purpose of exploring for economic deposits of uranium in the states of Arizona,
Colorado, New Mexico, Texas, Utah, and Wyoming.
As of March 31, 2007, a total of 38,245 gross acres (35,139 net mineral acres)
of mineral properties have been staked or leased pursuant to option agreements
by the Company in the States of Arizona, Colorado, New Mexico, Texas, Utah, and
Wyoming for the purposes of uranium exploration for a total cost of $754,714.
These leases are subject to net royalty interests ranging from 2.0% to 15.25% As
of March 31, 2007, total annual lease payments of $164,294 are required to
maintain existing mineral leases.
WEESATCHE PROPERTY
On October 11, 2005, the Company entered into a Mineral Asset Option Agreement
(the "Moore Option") granting the Company the option to acquire certain mineral
property leases in the State of Texas for total consideration of $200,000 and
3,000,000 post-split restricted common shares at a fair value of $0.33 per
share. In consideration for the Option and its partial exercise over the option
term, the Company has made cash payments totaling $200,000 and issued 2,225,000
post-split shares of restricted common stock. The Option requires a further
issuance of 750,000 post-split shares of restricted common stock on or before
April 11, 2007 (issued subsequently). Upon completion of the terms of the Option
title to the leases will be transferred to the Company. 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.
AMBROSIA LAKE PROPERTY
On March 28, 2007 the Company entered into a letter option agreement (the
"Holley Option") granting the Company the option to acquire certain mineral
property leases, which are located in the States of Colorado, New Mexico, and
Utah, together with certain historical database records for total consideration
of $1,594,690. Under the terms of the Holley Option, and in order to maintain
its option to acquire the assets, the Company is required to make the following
option payments totaling $1,500,000 to the order and direction of the Holley
Option holders in the following manner:
12
URANIUM ENERGY CORP.
(an exploration stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2007
(UNAUDITED)
________________________________________________________________________________
NOTE 6: MINERAL EXPLORATION PROPERTIES (CONTINUED)
________________________________________________________________________________
AMBROSIA LAKE PROPERTY (CONTINUED)
(a) an initial payment of $25,000 on the execution date (paid);
(b) a payment of $100,000 on March 28, 2007 (paid);
(c) a payment of $475,000 on or before April 27, 2007 (paid subsequently);
(d) a further payment of $500,000 on or before April 27, 2008; and
(e) a final payment of $400,000 on or before April 27, 2009.
Upon execution of the Holley Option the Company also reimbursed the Holley
Option holders with approximately $95,000 in prior regulatory property payments.
In addition, the Company will be required to pay a royalty of 2% or 3% of the
gross proceeds received from the sale of any uranium or vanadium produced in
relation to any mineral claim covered under the Holley Option and, at any time
during the option period or thereafter, the Company may elect to purchase the
royalty interest at a base cost of $300,000 for each 1% interest it wishes to
acquire.
HISTORICAL MINING DATABASE
On January 2, 2007 the Company entered into an agreement to purchase a database
consisting of drilling, mapping and logging reports covering uranium and
associated metals prospects located primarily in New Mexico. Consideration for
the asset purchase was a one time cash payment of $20,000 (paid) and 50,000
stock options vesting as to 25,000 option shares upon the effective date of the
Agreement and the final 25,000 option shares vesting six months from the
effective date of the Agreement. Should the Company or any party related to the
Company acquire any mineral property interest within the prospects covered by
the database, the Company will be obligated to pay an overriding royalty of 1%
or 2% on lands with and without an underlying royalty interest respectively. The
$68,500 fair value of the vested options was recorded as mineral property
expenditures during the period.
For the three months ended March 31, 2007, Mineral property expenditures on a
regional basis are as follows:
Three months Ended Three months Ended
March 31, 2007 March 31, 2006
_____________________________________________________________________________
(unaudited) (unaudited)
ARIZONA
General acquisition and land
work costs $ - $ -
COLORADO
General acquisition and land
work costs 35,844 -
NEW MEXICO
General acquisition and land
work costs 77,828 6,606
Acquisition and land work for
Ambrosia Lake 185,634 -
Historical mining database
acquisition 88,500 -
TEXAS
General acquisition and land
work costs 28,963 22,203
Acquisition and land work
for Weesatche 3,663 161,221
Exploration and drilling for
Weesatche 770,990 17,915
UTAH
General acquisition and land
work costs 3,995 -
WYOMING
General acquisition and land
work costs 30,787 30,343
_____________________________________________________________________________
$1,226,204 $ 238,288
_____________________________________________________________________________
13
URANIUM ENERGY CORP.
(an exploration stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2007
(UNAUDITED)
________________________________________________________________________________
NOTE 7: CAPITAL STOCK
________________________________________________________________________________
SHARE CAPITAL
The Company's capitalization at December 31, 2006 was 750,000,000 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
effective on February 1, 2006.
2007 SHARE TRANSACTIONS
On January 3, 2007 the Company completed a private placement in the amount of
200,000 Units at a subscription price of $2.50 for gross proceeds to the Company
of $500,000, of which $250,000 was received in the prior fiscal year. Each Unit
is comprised of one common share and one-half warrant of one non-transferable
share purchase warrant of the Company. Each whole warrant entitles the holder to
purchase an additional common share of the Company until the earlier of 18
months from the date of issuance of the Units or nine months from the effective
date of the Company's proposed registration statement and are exercisable at
$3.00 per share during this period.
In February 2007 the Company filed a Form SB-2 Registration Statement under the
Securities Act to register an aggregate of 8,100,000 shares, including the
5,400,000 common shares issued in the respective private placement offerings and
the 2,700,000 common shares underlying the respective warrants. Each of the
5,400,000 Units at a subscription price of $2.50 per Unit is comprised of one
common share and one-half warrant of one non-transferable share purchase warrant
of the Company. Each whole warrant entitles the holder to purchase an additional
common share of the Company until the earlier of 18 months from the date of
issuance of the Units or nine months from the effective date of the Company's
proposed registration statement and are exercisable at $3.00 per share during
this period. As of the date of these financial statements, the Registration
Statement has not been declared effective.
SHARE PURCHASE WARRANTS
During the three months ended March 31, 2007, 944,750 common stock purchase
warrants were exercised at prices ranging from $1.50 per share to $2.50 per
share for cumulative net proceeds of $2,061,876. Of the 944,750 warrants
exercised, shares were not issued for 246,000 share purchase warrants which were
exercised immediately prior to March 31, 2007 and consequently, net proceeds of
$615,000 were recorded as share proceeds received.
Additional paid-in capital has been increased for the $992,894 fair value of
2006 warrants issued for finders' fees in conjunction with a private placement.
The warrants were originally recorded as a separate component of stockholders'
equity and were fully exercised during the three months ended March 31, 2007.
A summary of the Company's common stock purchase warrants as of March 31, 2007
and changes during the period is presented below:
Weighted Weighted
average average
Number of exercise remaining
warrants price life (years)
______________________________________________________________________
Balance, December 31, 2006 5,133,500 $ 2.55 1.74
Issued 100,000 3.00 -
Exercised 944,750 - -
______________________________________________________________________
Balance, March 31, 2007 4,288,750 $ 2.64 1.83
======================================================================
The aggregate intrinsic value ("AIV") under the provisions of SFAS No. 123R of
the 500,000 compensation warrants previously issued to consultants as at March
31, 2007 was estimated at $2,345,000.
14
URANIUM ENERGY CORP.
(an exploration stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2007
(UNAUDITED)
________________________________________________________________________________
NOTE 7: CAPITAL STOCK (CONTINUED)
________________________________________________________________________________
DEFERRED COMPENSATION
On February 1, 2006, the Company issued 772,500 restricted common shares at a
price of $0.3333 per share for a value of $257,500 to a consultant in connection
with a one year 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. The $257,500 charge was
recorded as deferred compensation and is being expensed over a one year term.
Accordingly, the remaining $21,458 at December 31, 2006 has been expensed as
stock based consulting fees during the period.
On April 1, 2006 the Company entered into a twelve month Consulting Agreement
with EurXchange Consulting Ltd., to provide consulting services including
financial and investor public relations and related matters in the Federal
Republic of Germany. The Company paid approximately $370,000 (290,000 EUR) in
cash for current contract expenditures and issued 400,000 restricted common
shares of the Company at a price of $2.25 per share for a value of $900,000. The
$900,000 charge has been recorded as deferred compensation and is being expensed
over a one year period. Accordingly, the unamortized balance of $225,000 at
December 31, 2006 has been expensed as stock based consulting fees during the
period.
NOTE 8: 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. A majority of shareholders of the Company ratified
and approved the Stock Option Plan effective February 1, 2006. On April 10, 2006
the Company amended its 2005 Stock Option Plan whereby, subject to adjustment
from time to time as provided in Article 11.1, whereby the number of common
shares available for issuance under the Plan was increased from 3,500,000 shares
to 7,500,000 shares.
On January 2, 2007, a total of 565,000 stock options were granted to employees,
consultants, and officers at an exercise price of $3.30 per share. The term of
these options is ten years. The fair value of these options at the date of grant
of $1,548,100 was estimated using the Black-Scholes option pricing model with an
expected life of 5 years, a risk free interest rate of 5.22%, a dividend yield
of 0%, and an expected volatility of 113% and has been recorded as stock based
consulting fees, management fees, and wages and benefits in the period.
On January 2, 2007 the Company entered into an agreement to purchase a database
consisting of drilling, mapping and logging reports covering uranium and
associated metals prospects located primarily in New Mexico. Consideration for
the asset purchase was a one time cash payment of $20,000 (paid) and 50,000
stock options vesting as to 25,000 option shares upon the effective date of the
Agreement and the final 25,000 option shares vesting six months from the
effective date of the Agreement. The stock options have an exercise price of
$3.30 and are exercisable for a period of two years from the date of grant.
Should the Company or any party related to the Company acquire any mineral
property interest within the prospects covered by the database, the Company will
be obligated to pay an overriding royalty of 1% or 2% on lands with and without
an underlying royalty interest respectively. The fair value of these options at
the date of grant of $137,000 was estimated using the Black-Scholes option
pricing model with an expected life of 5 years, a risk free interest rate of
5.22%, a dividend yield of 0%, and an expected volatility of 113%. The vested
portion of the value of these options, being $68,500 been recorded as mineral
property expenditures in the period.
On March 30, 2007, a total of 415,000 stock options were granted to employees,
consultants, and officers at an exercise price of $5.70 per share. The term of
these options is ten years. The fair value of these options at the date of grant
of $845,488 was estimated using the Black-Scholes option pricing model with an
expected life of 5 years, a risk free interest rate of 5.26%, a dividend yield
of 0%, and an expected volatility of 116% and has been recorded as stock based
consulting fees, management fees, and wages and benefits in the period.
During the three months ended March 31, 2007, 495,000 stock options were
exercised at prices ranging from $0.33 per share to $1.00 per share for
cumulative net proceeds of $331,666.
15
URANIUM ENERGY CORP.
(an exploration stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2007
(UNAUDITED)
________________________________________________________________________________
NOTE 8: STOCK OPTION PLAN (CONTINUED)
________________________________________________________________________________
A summary of the Company's stock options as of March 31, 2007 and changes during
the period is presented below:
Weighted Weighted
average average
Number of exercise remaining
options price life (years)
______________________________________________________________________
Balance, December 31, 2006 4,072,500 $ 0.610 9.17
Issued 1,030,000 - -
Exercised (495,000) - -
______________________________________________________________________
Balance, March 31, 2007 4,607,500 $ 1.430 9.13
======================================================================
The AIV under the provisions of SFAS No. 123R of all outstanding options at
March 31, 2007 was estimated at $19,653,650. Additionally, the AIV of options
exercised during the three months ended March 31, 2007 was estimated at
$2,242,700.
NOTE 9: STOCK BASED COMPENSATION
________________________________________________________________________________
Stock based compensation for the three months ended March 31, 2007 includes the
following:
Three months Three months For the Period from
Ended Ended May 16, 2003 (inception)
March 31, 2007 March 31, 2006 to March 31, 2007
=================================================================================================================
(unaudited) (unaudited)
Consulting fees, stock based $ 666,083 $ 443,252 $ 6,016,058
Management fees, stock based 1,774,500 162,500 2,697,753
Wages and benefits, stock based 236,213 - 667,291
_________________________________________________________________________________________________________________
$ 2,676,796 $ 605,752 $ 9,381,102
_________________________________________________________________________________________________________________
NOTE 10: INCOME TAXES
________________________________________________________________________________
The Company has adopted FASB No. 109 for reporting purposes. As of December 31,
2006, the Company had net operating loss carry forwards of approximately
$11,775,000 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.
16
URANIUM ENERGY CORP.
(an exploration stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2007
(UNAUDITED)
________________________________________________________________________________
NOTE 11: DUE TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS
________________________________________________________________________________
During the three months ended March 31, 2007, the Company had transactions with
certain officers and directors of the Company as follows:
(a) incurred $139,559 in management fees and recorded an additional
$1,774,500 in stock based compensation expense (refer to Notes 8 and
9); and
(b) paid management bonuses of $225,581 accrued in the prior fiscal year.
All related party transactions involving provision of services or tangible
assets were recorded at the exchange amount, which is the value established and
agreed to by the related parties reflecting arms length consideration payable
for similar services or transfers.
NOTE 12 - COMMITMENTS
________________________________________________________________________________
On February 1, 2007 the Company entered into a Financial Consulting Agreement
for a 12 month term. The Consultant will: i) disseminate the Company's news
releases, investor packages, research reports and corporate and industry sector
materials; ii) promote investor awareness and manage financial public relations
to the investment community; and iii) arrange meetings with industry sector
analysts, stock brokers and portfolio managers. The Company will pay the
Consultant $6,500 and 2,500 restricted common shares per month. As of March 31,
2007 share issuances of 2,500 for February and March and accordingly, an accrual
$36,750 has been included in accounts payable based on the fair value of the
5,000 shares subsequently issued.
On March 28, 2007 the Company entered into a letter option agreement (the
"Holley Option") granting the Company the option to acquire certain mineral
property leases, which are located in the States of Colorado, New Mexico, and
Utah, together with certain historical database records for total consideration
of $1,594,690. Under the terms of the Holley Option, and in order to maintain
its option to acquire the assets, the Company is required to make the following
option price payments totaling $1,500,000 to the order and direction of the
Holley Option holders in the following manner:
(a) an initial payment of $25,000 on the execution date (paid);
(b) a payment of $100,000 on March 28, 2007 (paid);
(c) a payment of $475,000 on or before April 27, 2007 (paid);
(d) a further payment of $500,000 on or before April 27, 2008;
(e) a final payment of $400,000 on or before April 27, 2009.
Upon execution of the Holley Option the Company also reimbursed the Holley
Option holders with approximately $95,000 in prior regulatory property payments
having been made by the same. In addition, the Company will be required to pay a
royalty of 2% or 3% of the gross proceeds received from the sale of any Uranium
or Vanadium produced in relation to any mineral claim covered under the Holley
Option and, at any time during the option period or thereafter, the Company may
elect to purchase the royalty interest at a base cost of $300,000 for each 1%
interest it wishes to acquire.
On March 29, 2007 the Company entered into a six month consulting services
agreement valued at approximately (euro)300,178 ($411,694 US). The Consultant
will provide advice on public and investor relations related matters. Under the
terms of the agreement, the Company will pay a retainer of approximately
(euro)209,000 ($286,644 US, paid subsequent to March 31, 2007), and a final
installment of approximately (euro)91,178 ($125,050 US) due 90 days from the
date of the agreement.
The Company is committed to pay its key executives a total of approximately
$459,000 per year for management services. The Company is currently leasing
premises in New Mexico, Texas, and Wyoming with total monthly payments of
$7,153, with all agreements having a maximum term of one year.
17
URANIUM ENERGY CORP.
(an exploration stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2007
(UNAUDITED)
________________________________________________________________________________
NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION AND
NONCASH INVESTING AND FINANCING ACTIVITIES
________________________________________________________________________________
During the three month period ended March 31, 2007, the Company received the
333,333 High Plains Uranium ("HPU") shares pursuant to the July 27, 2006 option
agreement to sell its Cadena historical mining database. The HPU shares had a
recorded value of $235,040 based on the fair value on the date of the agreement,
and were reported as an agreement receivable as of December 31, 2006. On January
19, 2007 HPU completed a business combination agreement with Energy Metals Corp.
("EMC"), a Canadian based public company listed on the NYSE Arca and Toronto
Stock Exchanges. As a result, the 333,333 shares of HPU were exchanged on a
1:6.2 basis and the Company received 53,763 shares of EMC.
Three months Ended
March 31, 2007 March 31, 2006
_______________________________________________________________
Interest paid $ - $ -
Income taxes paid $ - $ -
===============================================================
NOTE 14: SUBSEQUENT EVENTS
________________________________________________________________________________
a) On April 2, 2007 the Company accepted the resignation of a Board member, in
conjunction with the acceptance of the appointment of a new Director on the
Board. The incoming Director will serve on the Audit, Compensation,
Corporate Governance and Ethics Committees.
b) On April 6, 2007 the Company entered into a twelve month consulting
services agreement at $10,000 per month. The consultant will provide
representation before the executive and legislative branches of the federal
government and state governments in addition to providing consulting
services on political matters.
c) On April 11, 2007 the Company issued the final 750,000 post-split
restricted common shares pursuant to the Moore Option (refer to Note 6). At
the time of issue, the shares had a value of $7.16 per share and $5,370,000
will be recorded in mineral property expenditures in the second quarter.
d) On April 25, 2007 the Company made a non-refundable Option Price Payment of
$475,000 pursuant to the Holley Option (refer to Notes 6 and 12).
e) On April 27, 2007, with a reference date of April 26, 2007, the Company
entered into a joint venture with Neutron Energy Inc. ("NEI"), a Wyoming
corporation, in connection with the exploration of a property covering
approximately 6,700 acres located in Cibola County, New Mexico (the
"Property") for uranium resources. In connection with the joint venture,
Cibola Resources LLC ("Cibola"), a limited liability company under the laws
of the State of Delaware, was formed to undertake the exploration
activities as contemplated by the parties.
NEI acquired a ten year mining lease (the "Lease") to the Property from La
Merced del Pueblo de Cebolleta ("Ceboletta"), a private entity that has the
authority over the natural resources of the Property, pursuant to a Mining
Lease and Agreement between Cebolleta and NEI effective April 6, 2007 (the
"Mining Lease Agreement"), and has contributed the Lease to Cibola. Terms
of the Lease provide for:
(i) initial payments of $3,000,000 (paid by NEI);
(ii) an additional cash payment of $2,000,000 six months from the effective
date of the Mining Lease Agreement (January 30, 2007);
(iii) every year after April 6, 2007 until uranium production begins, an
advance royalty of $500,000 (to be deducted from any royalties paid in
that same year);
(iv) a recoverable reserve payment of $1 per pound of recoverable uranium
reserves upon the completion of a feasibility study by an independent
mining engineering firm, which will be reduced by all prior payments
as described in clause (i) through (iii) above;
(v) a production royalty of between 4.50% and 8.0% depending upon the sale
price of uranium; and
18
URANIUM ENERGY CORP.
(an exploration stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2007
(UNAUDITED)
________________________________________________________________________________
NOTE 14: SUBSEQUENT EVENTS (CONTINUED)
________________________________________________________________________________
(vi) the funding of a $30,000 per year scholarship program.
The Company has reimbursed an aggregate of $1,470,000 to NEI (49%) of
the capital invested to date. As a result, NEI and the Company hold a
51% and 49% interest, respectively, in Cibola and the Company is
obligated to pay 49% of all future commitments under the terms of the
Lease.
f) Through May 11, 2007, a total of 338,750 warrants were exercised subsequent
to March 31, 2007 at $2.50 per share for total proceeds of $846,875.
g) Through May 11, 2007, a total of 210,000 options were exercised subsequent
to March 31, 2007 at $0.33 and $1.00 per share for total proceeds of
$203,333.
19
Statements made in this Form 10-QSB 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. Please note that throughout
this Quarterly Report, and unless otherwise noted, the words "we", "our" or the
"Company" refer to Uranium Energy Corp.
20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION OR PLAN OF OPERATION
GENERAL
Uranium Energy Corp. is a corporation organized under the laws of the State of
Nevada. After the effective date of our registration statement filed with the
Securities and Exchange Commission (December 5, 2005), we commenced trading on
the Over-the-Counter Bulletin Board under the symbol "URME:OB".
Please note that throughout this Quarterly Report, and unless otherwise noted,
the words "we," "our," "us," the "Company," or "Uranium Energy," refers to
Uranium Energy Corp.
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. As of the date of this
Quarterly Report, we have acquired interests in uranium exploration mineral
properties totaling 45,748.49 gross acres of leased ort staked mineral
properties, consisting of claim blocks located in the States Arizona, Colorado,
New Mexico, Texas, Utah, and Wyoming 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 15.25% net royalty interests. Each of these properties
has been the subject of historical exploration by other mining companies. Their
historical results indicate that further exploration for uranium is warranted.
Our view that our properties are prospective for mineral exploration is based on
either prior exploration conducted by other companies, or management information
and work products derived from various reports, maps, radioactive rock samples,
exploratory drill logs, state organization reports, consultants, geological
study, and other exploratory information.
Our principal mineral property is the Weesatche project in Goliad County, Texas.
The acreage and location of our mineral properties is summarized as follows:
GROSS ACRES NET ACRES(*)
Arizona 2,231.28 2,231.28
Colorado 4,338.60 4,338.60
New Mexico 25,616.76 18,723.26
Texas 4,491.81 4,223.80
Utah 2,226.94 2,226.94
Wyoming 6,843.10 6,843.10
Total: 45,748.49 38,586.98
(*) Certain of our interests in our mineral properties in Texas and New Mexico
are less than 100%. Accordingly, we have presented the acreage of our
mineral properties on a net acre basis.
21
During 2007 through the date of this Quarterly Report, we acquired an additional
19,875.18 net acres in the States of Colorado, New Mexico, Texas, and Utah for
an aggregate consideration of $2,797,546.
We plan to use our database of exploration data in order to target additional
exploration properties for acquisition. In 2007, we have plans to acquire
further acres of mineral properties consisting of claim blocks located in, but
not limited to the states of New Mexico, Texas and Wyoming. Our ability to
complete these acquisitions will be subject to our obtaining sufficient
financing and being able to conclude agreements with the property owners on
terms that are acceptable to us. Other mineral property acquisitions are
contemplated in the states of interest that include Arizona, Colorado, and Utah.
These potential acquisition properties have not yet been specifically
identified.
Our properties do not have any reserves. We plan to conduct exploration programs
on these properties with the objective of ascertaining whether any of our
properties contain economic concentrations of uranium that are prospective for
mining. As such, we are considered an exploration or exploratory stage company.
Since we are an exploration stage company, there is no assurance that a
commercially viable mineral deposit exists on any of our properties, and a great
deal of further exploration will be required before a final evaluation as to the
economic and legal feasibility for our future exploration is determined. We have
no known reserves of uranium or any other type of mineral. Since inception, we
have not established any proven or probable reserves on our mineral property
interests.
MINERALS EXPLORATION PROPERTIES
We are participating in our mineral properties in the States of Arizona,
Colorado, New Mexico, and Wyoming by way of mining claims and mineral leases.
Certain properties were staked and claimed by us and registered with the United
States Bureau of Land Management ("BLM"). Claim blocks acquired in this manner
exist in Arizona, Colorado, New Mexico and Wyoming. We have surface access and
complete mineral rights to an unlimited depth below surface. The claims are in
effect for an indefinite period provided the claims are kept in good standing
with the BLM and the counties. The claims were entered into between November 4,
2004 and February 27, 2007. Annual maintenance fees to be paid to the BLM are
relatively nominal. We will also be required to remediate the land upon release
of the claim - bringing the land back into the state it was originally, prior to
the commencement of our exploration activities. These costs are determined by
the BLM and bonded accordingly.
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 Quarterly Report, we have executed four leases 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 and associated fissionable minerals only, with any other minerals and
hydro carbons, including, for example, petroleum, retained by the lessor. The
lease terms are for five years, and include five-year renewal periods. After the
expiration of the second five-year term, the leases will be either held by
production or the leases will be terminated. Royalty payments must be made to
the lessor in event that we extract uranium ore from the properties. Royalty
payments vary from 6.25% to 15.25%, or based on a sliding scale tied to the
22
price of uranium. All royalties are based on the gross sales revenue less
certain charges and fees.
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 our
mineral property interests.
WEESATCHE, TEXAS LEASE
During 2007 through the date of this Quarterly report, we continued the initial
confirmation drilling at our 100% controlled Goliad project in Goliad County,
Texas (the "Goliad Lease"). Our drilling program consists of ongoing drilling in
order to confirm the existing 5,200,000 pounds of historically drill-indicative
resources on the property (as identified by Moore Energy Corporation during the
1980s) and extending historically identified mineralized trends.
As of the date of this Quarterly Report, current drilling is filling in gaps and
defining boundaries within the historically delineated ore bodies as originally
developed by Moore Energy Corporation in the 1980s based on 190,000 feet of
drilling in approximately 450 holes. To date, our drilling has concentrated in
the areas of the A and B Sand ore bodies, with a further total of 343 holes
drilled, consisting of 108,379 feet.
The objectives of the Goliad drilling program are two-fold: (1) Definition and
delineation drilling to confirm the inferred historic resource of 5.2 million
pounds eU3O8, and (2) to expand and extend the historically identified
mineralized trends. We plan to complete drilling of the A, B, C and D Sand
horizons on 100-foot centers, an approximate additional 300 holes.
AMBROSIA LAKE, NEW MEXICO LEASE
On March 28, 2007, we entered into an Option Agreement (the "Holley Option")
granting us the option to acquire certain mineral property leases, which are
located in the States of Colorado, New Mexico, and Utah, together with certain
historical database records for total consideration of $1,594,690. Under the
terms of the Holley Option, and in order to maintain its option to acquire the
assets, we are required to make the following option price payments totaling
$1,500,000 to the order and direction of the Holley Option holders in the
following manner:
(a) an initial payment of $25,000 on the execution date (paid);
(b) a payment of $100,000 on March 28, 2007 (paid);
(c) a payment of $475,000 on or before April 27, 2007 (paid);
(d) a further payment of $500,000 on or before April 27, 2008;
(e) a final payment of $400,000 on or before April 27, 2009.
Upon execution of the Holley Option, we also reimbursed the Holley Option
holders with approximately $95,000 in prior regulatory property payments having
been made by the same. In addition, we will be required to pay a royalty of 2%
or 3% of the gross proceeds received from the sale of any Uranium or Vanadium
produced in relation to any mineral claim covered under the Holley Option and,
at any time during the option period or thereafter, we may elect to purchase the
royalty interest at a base cost of $300,000 for each 1% royalty interest we wish
to acquire.
23
CIBOLA RESOURCES LLC
On April 27, 2007, we entered into a joint venture (the "Joint Venture") with
Neutron Energy Inc., a Wyoming corporation ("NEI") in connection with
exploration of property covering approximately 6,700 acres located in Cibola
County, New Mexico (the "Property") for uranium resources. In connection with
the Joint Venture, Cibola Resources LLC, a Delaware limited liability company
("Cibola"), was formed for purposes of undertaking exploration activities
contemplated by the Joint Venture.
On April 6, 2007, NEI and La Merced del Pueblo de Cebolleta, a private entity
that has authority over the natural resources of the Property ("Cebolleta"),
entered into a mining lease agreement (the "Mining Lease Agreement"), pursuant
to which NEI acquired the mining lease to the Property from Cebolleta (the
"Lease") for cash payments of $3,000,000. As of the date of this Quarterly
Report, we have reimbursed NEI an aggregate of $1,470,000. As a result, we have
a 49% equity interest in Cibola and NEI has a 51% equity interest in Cibola,
respectively. Subsequently, NEI contributed the Lease to Cibola Resources LLC.
Under terms of a Letter Agreement (the "Letter Agreement") between Cebolleta and
NEI, further payments to the order and direction of Cebolleta are required as
follows:
(a) $2,000,000 six months from the Effective Date of the Letter Agreement
(January 30, 2007);
(b) $500,000 representing an Advanced Royalty, every 12 months from the
effective date of the Letter Agreement until uranium production begins;
(to be deducted from any royalties paid in that same year);
(c) $1.00 per pound upon an independent mining engineering firm's
completion of a feasibility study, and all prior payments made to
Cebolleta will be credited to the Recoverable Reserve Payment;
(d) 4.50% to 8.00% Production Royalty Payments depending upon the uranium
sale price; and
(e) $30,000 per year towards a scholarship fund.
We are required to contribute 49% of the aforementioned payments in order to
retain our interest in the Joint Venture.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2007 COMPARED TO THREE MONTHS ENDED MARCH 31, 2006
Our net loss for the three months ended March 31, 2007 was approximately
($4,771,160) compared to a net loss of ($1,239,665) during the three months
ended March 31, 2006 (an increase of $3,531,495). During the three months ended
March 31, 2007, we generated revenue of $156,806 primarily from interest earned
on term and other deposits compared to revenue of $Nil during the three months
ended March 31, 2006.
During the three months ended March 31, 2007, we incurred expenses of
approximately $4,927,966 compared to $1,239,665 incurred during the three months
ended March 31, 2006 (an increase of $3,688,301). The operating expenses
incurred during the three months ended March 31, 2007 consisted of: (i)
stock-based compensation relating to the valuation of Stock Options granted to
our employees, consultants, and management of $2,676,796 (2006: $605,752); (ii)
mineral property expenditures of $1,226,204 (2006: $238,288); (iii) general and
administrative expenses of $551,490 (2006: $158,195); (iv) professional fees of
24
$190,451 (2006: $59,223); (v) management fees of $139,559 (2006: $178,207); (vi)
consulting fees of $128,242 (2006: $Nil); and (vii) depreciation of $15,224
(2006: $Nil).
Operating expenses incurred during the three months ended March 31, 2007
increased primarily due to the increase in stock based compensation and the
increase in exploration costs associated with the acquisition and development of
our uranium properties and related infrastructure. General and administrative
expenses incurred during the three months ended March 31, 2007 increased
primarily due to additional corporate marketing and increased business
operations relating to the number of uranium properties acquired. General and
administrative expenses generally include corporate overhead, financial and
administrative services, marketing, and travel costs.
Of the $4,927,966 incurred as operating expenses during the three months ended
March 31, 2007, an aggregate of $1,914,059 was incurred payable to certain
officers and directors of which $139,559 was recorded as management fees and
benefits, and $1,774,500 was recorded as stock based compensation representing
the estimated fair value of stock options granted during the period. As at March
31, 2007, there were no amounts due and owing to our directors and officers. We
also paid $225,581 in management fees and benefits incurred during the 2006
fiscal year and accrued as due to related parties at December 31, 2006.
Operating expenses incurred during the three months ended March 31, 2006 were
offset by income consisting of $156,806 (2006: $Nil) in interest earned on term
and other deposits resulting in a net loss of $4,771,160.
Our net loss during the three months ended March 31, 2007 was $4,771,160 or
$0.14 per share compared to a net loss of $1,239,665 or $0.06 per share during
the three months ended March 31, 2006. The weighted average number of shares
outstanding was 35,133,947 for the three months ended March 31, 2007 compared to
21,854,791 for the three months ended March 31, 2006.
LIQUIDITY AND CAPITAL RESOURCES
Our financial statements have been prepared assuming that we will continue as a
going concern and, accordingly, do not include adjustments relating to the
recoverability and realization of assets and classification of liabilities that
might be necessary should we be unable to continue in operation.
THREE MONTHS ENDED MARCH 31, 2007
As at March 31, 2007, our current assets were $14,892,638 and our current
liabilities were $521,687, which resulted in a working capital surplus of
$14,370,951. As at March 31, 2007, current assets were comprised of: (i)
$13,933,754 in cash and cash equivalents; (ii) $137,667 in restricted cash;
(iii) $641,930 in available-for-sale securities; (iv) $3,183 in interest and
accounts receivable; and (v) $176,104 in other current assets. As at March 31,
2007, current liabilities were comprised of $521,687 in accounts payable and
accrued liabilities.
As at March 31, 2007, our total assets were $15,175,156 comprised of $14,892,638
in current assets, and $282,518 in property and equipment. The increase in total
assets during the three months ended March 31, 2007 from fiscal year ended
December 31, 2006 was primarily due to the increase in cash and cash
equivalents, available-for-sale securities, and other current assets.
25
As at March 31, 2007, our total liabilities were $521,687 comprised of accounts
payable and accrued liabilities. The decrease in liabilities during the three
months ended March 31, 2007 from fiscal year ended December 31, 2006 was
primarily due to the decrease in amounts due to related parties.
Stockholders' equity increased from $13,665,652 for fiscal year ended December
31, 2006 to $14,653,469 for the three months ended March 31, 2007.
We have not generated positive cash flows from operating activities. For the
three months ended March 31, 2007, net cash flows used in operating activities
were $2,160,467, consisting primarily of a net loss of $4,771,160. Net cash
flows used in operating activities were adjusted by $2,676,796 to reconcile the
non-cash expense of stock based compensation and by $68,500 to reconcile
non-cash exploration expenses.
For the three months ended March 31, 2007, net cash flows used in investing
activities were $93,947 consisting primarily of the purchase of equipment.
For the three months ended March 31, 2007, net cash flows from financing
activities were $2,606,791 pertaining primarily to proceeds received from the
sale of our common stock.
We expect that working capital requirements will continue to be funded through a
combination of our existing funds, 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
During the three months ended March 31, 2007, we engaged in private placement
offerings under Regulation D and Regulation S of the Securities Act. Pursuant to
the terms of the private placements, we issued aggregate amounts of our
restricted common stock at subscription prices and under terms as follows:
On January 3, 2007, we closed private placement offerings in the aggregate
amount of 200,000 units (the "Unit(s)") at a subscription price of $2.50 per
Unit. Each Unit is comprised of one share of our restricted common stock and
one-half of one non-transferable common stock purchase warrant (the "Warrant"),
with each such resulting whole Warrant entitling the holder thereof to purchase
an additional share of our restricted common stock (the "Warrant Share") for the
period commencing upon the date of issuance of the Units and ending on the day
which is the earlier of: (i) eighteen months from the date of issuance of the
Units; or (ii) nine months from the effective date of a proposed registration
statement, if any, pursuant to which the Warrant Shares are to be registered
under the Securities Act, at an exercise price of $3.00 per Warrant Share. 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, our assets and net estimated worth. We issued Units to investors who are
non-U.S. residents. The investors executed subscription agreements and
acknowledged that the securities to be issued have not been registered under the
Securities Act, 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.
26
We filed a Form SB-2 Registration Statement under the United States Securities
Act of 1933, as amended, to register an aggregate of 8,100,000 shares, including
the 5,400,000 common shares issued in private placement offerings and 2,700,000
common shares underlying the respective Warrants. As of the date of this
Quarterly Report, the Registration Statement has not been declared effective.
Existing working capital and debt and equity funding 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 and the exercise of Stock Options and Warrants. 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.
MATERIAL COMMITMENTS
EPOCH FINANCIAL CONSULTING AGREEMENT
On February 1, 2007, we entered into a financial consulting agreement with Epoch
Financial Group, Inc. ("Epoch") for a twelve month term (the "Epoch Financial
Consulting Agreement"). In accordance with the terms and provisions of the Epoch
Financial Consulting Agreement: (i) Epoch will disseminate our news releases,
investor packages, research reports and corporate and industry sector materials;
ii) Epoch will promote investor awareness to the investment community; (iii)
Epoch will arrange meetings with industry sector analysts, stock brokers and
portfolio managers; and (iv) we will pay Epoch a monthly fee of $6,500 and issue
to Epoch an aggregate of 2,500 restricted common shares per month. See "Part II.
Other Information. Item 2. Changes in Securities and Use of Proceeds."
HOLLEY OPTION
On March 28, 2007, we entered into the Holley Option granting us the option to
acquire certain mineral property leases, which are located in the States of
Colorado, New Mexico, and Utah, together with certain historical database
records for total consideration of $1,594,690. Under the terms of the Holley
Option, and in order to maintain our option to acquire the assets, we are
required to make the following option price payments totaling $1,500,000 to the
order and direction of the Holley Option holders in the following manner:
(a) an initial payment of $25,000 on the execution date (paid);
(b) a payment of $100,000 on March 28, 2007 (paid);
(c) a payment of $475,000 on or before April 27, 2007 (paid);
(d) a further payment of $500,000 on or before April 27, 2008;
(e) a final payment of $400,000 on or before April 27, 2009.
27
Upon execution of the Holley Option, we also reimbursed the Holley Option
holders approximately $95,000 for prior regulatory property payments having been
made to the New Mexico Bureau of Land Management. In addition, we will be
required to pay a royalty of 2% or 3% of the gross proceeds received from the
sale of any Uranium or Vanadium produced in relation to any mineral claim
covered under the Holley Option and, at any time during the option period or
thereafter, we may elect to purchase the royalty interest at a base cost of
$300,000 for each 1% royalty interest it wishes to acquire.
EURXCHANGE CONSULTING AGREEMENT
On March 29, 2007, we entered into a consulting services agreement with
EurXchange Consulting Ltd. (the "Consultant") for a period of six months (the
"EurXchange Consulting Agreement"). In accordance with the terms and provisions
of the EurXchange Consulting Agreement: (i) EurXchange will provide advice on
public and investor relations related matters; (ii) we will pay a retainer of
approximately (euro)209,000 ($286,644 US, paid subsequent to March 31, 2007);
and (iii) we will pay a final installment of approximately (euro)91,178
($125,050 US) due ninety days from the date of execution of the EurXchange
Consulting Agreement.
CONSULTING AGREEMENT
On April 6, 2007 the Company entered into a twelve month consulting services
agreement valued at $10,000 per month. The consultant will provide
representation before the executive and legislative branches of the federal
government and state governments in addition to providing consulting services on
political matters.
LETTER AGREEMENT
In accordance with the terms and provisions of the Letter Agreement, further
payments to the order and direction of La Merced del Pueblo de Cebolleta are
required as follows:
(a) $2,000,000 six months from the Effective Date of the Letter Agreement
(January 30, 2007);
(b) $500,000 representing an Advanced Royalty, every 12 months from the
effective date of the Letter Agreement until uranium production begins;
(to be deducted from any royalties paid in that same year);
(c) $1.00 per pound upon an independent mining engineering firm's completion
of a feasibility study and all prior payments made to Cebolleta will be
credited to the Recoverable Reserve Payment;
(d) 4.50% to 8.00% Production Royalty Payments depending upon the uranium
sale price; and
(e) $30,000 per year towards a scholarship fund.
We are required to contribute 49% of the aforementioned payments in order to
retain our interest in the Joint Venture.
MANAGEMENT FEES
We are committed to pay our key executives a total of approximately $459,000 per
year for management services.
28
LEASE
We are currently leasing premises in New Mexico, Texas, and Wyoming for monthly
payments totaling $7,153. All office lease agreements having a maximum term of
one year.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Quarterly Report, we do not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to investors. The term "off-balance sheet
arrangement" generally means any transaction, agreement or other contractual
arrangement to which an entity unconsolidated with us is a party, under which we
have: (i) any obligation arising under a guaranteed contract, derivative
instrument or variable interest; or (ii) a retained or contingent interest in
assets transferred to such entity or similar arrangement that serves as credit,
liquidity or market risk support for such assets.
ITEM III. CONTROLS AND PROCEDURES
Our management is responsible for establishing and maintaining a system of
disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)
under the Exchange Act) that is designed to ensure that information required to
be disclosed by us in the reports that we file or submit under the Exchange Act
is recorded, processed, summarized and reported, within the time periods
specified in the Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the issuer's management, including its principal executive officer or
officers and principal financial officer or officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required
disclosure.
In accordance with Exchange Act Rules 13a-15 and 15d-15, an evaluation was
completed under the supervision and with the participation of our management,
including Mr. Amir Adnani, our Chief Executive Officer, and Mr. Pat Obara, our
Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures as of the end of the period covered by this
Quarterly Report. Based on that evaluation, our management including the Chief
Executive Officer and Chief Financial Officer, concluded that our disclosure
controls and procedures are effective, to provide reasonable assurance that
information required to be disclosed in our reports filed or submitted under the
Exchange Act is recorded, processed, summarized, and reported within the time
periods specified in the Commission's rules and forms. There have been no
changes to our internal controls over financial reporting (as defined in Rule
13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that occurred
during our three-month quarterly period ended March 31, 2007, that materially
affected, or were reasonably likely to materially affect, our internal controls
over financial reporting.
AUDIT COMMITTEE REPORT
The Board of Directors has established an audit committee. The members of the
audit committee are Mr. Alan Lindsay, Mr. Erik Essiger and Mr. Ivan Obolensky.
The three members of the audit committee are "independent" within the meaning of
29
Rule 10A-3 under the Exchange Act. The audit committee was reorganized in April
2007 and operates under a written charter adopted by our Board of Directors.
The audit committee has reviewed and discussed with management our unaudited
financial statements as of and for the three month period ended March 31, 2007.
The audit committee has also discussed with Dale Matheson Carr-Hilton LaBonte
LLP 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 LLP required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees, as amended, and
has discussed with Dale Matheson Carr-Hilton LaBonte LLP their independence.
Based on the reviews and discussions referred to above, the audit committee has
recommended to the Board of Directors that the unaudited financial statements
referred to above be included in our Quarterly Report on Form 10-QSB for the
three month period ended March 31, 2007 filed with the Securities and Exchange
Commission.
PART II. OTHER INFORMATION
ITEM 1. 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 Quarterly 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.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
PRIVATE PLACEMENT OFFERING
During the three months ended March 31, 2007, we engaged in a private placement
offering under Regulation D and Regulation S of the Securities Act. Pursuant to
the terms of the private placement, we issued aggregate amounts of our
restricted common stock at subscription prices and under terms as follows:
On January 3, 2007 we closed a private placement offering in the aggregate
amount of 200,000 units (the "Unit(s)") at a subscription price of $2.50 per
Unit. Each Unit is comprised of one share of our restricted common stock and
one-half of one non-transferable common stock purchase warrant (the "Warrant"),
with each such resulting whole Warrant entitling the holder thereof to purchase
an additional share of our restricted common stock (the "Warrant Share") for the
period commencing upon the date of issuance of the Units and ending on the day
which is the earlier of: (i) eighteen months from the date of issuance of the
Units; or (ii) nine months from the effective date of a proposed registration
statement, if any, pursuant to which the Warrant Shares are to be registered
under the Securities Act, at an exercise price of $3.00 per Warrant Share. 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, our assets and net estimated worth. We issued Units to investors who are
non-U.S. residents. The investors executed subscription agreements and
acknowledged that the securities to be issued have not been registered under the
30
Securities Act, 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.
We filed a Form SB-2 Registration Statement under the United States Securities
Act of 1933, as amended, to register an aggregate of 8,100,000 shares, including
5,400,000 common shares issued in private placement offerings and 2,700,000
common shares underlying the respective Warrants. The Registration Statement has
not been declared effective as of the date of this Quarterly report.
STOCK OPTIONS
During the three-month period ended March 31, 2007 and through the date of this
Quarterly Report, we issued an aggregate of 705,000 shares of our common stock
pursuant to the exercise of 705,000 Stock Options for aggregate proceeds of
$535,000. The shares of common stock were subject to S-8 registration
statements.
During the three-month period ended March 31, 2007 and through the date of this
Quarterly Report, we granted an aggregate of 1,030,000 Stock Options to certain
officers, directors, employees and consultants. Of the 1,030,000 Stock Options
granted, 615,000 Stock Options were granted at $3.30 per share, and 415,000
Stock Options were granted at $5.70 per share.
COMMON STOCK PURCHASE WARRANTS
During the three-month period ended March 31, 2007 and through the date of this
Quarterly Report, we issued an aggregate of 1,283,500 shares of our common stock
pursuant to the exercise of a total of 1,283,500 Common Stock Purchase Warrants
for aggregate proceeds of $2,908,750. The shares of common stock were subject to
S-8 registration statements.
MINERAL ASSET OPTION AGREEMENT
During the three-month period ended March 31, 2007 and through the date of this
Quarterly Report, we issued an aggregate of 750,000 shares of our restricted
common stock in accordance with the terms and provisions of a mineral asset
option agreement with Brad Moore ("Moore") dated October 11, 2005 (the "Mineral
Asset Option Agreement"). The 750,000 shares were issued on April 11, 2007 and
represented the final obligation due towards the completion of the Mineral Asset
Option Agreement. In accordance with the terms and provisions of the Mineral
Asset Option Agreement, title to the properties to be acquired will transfer
upon payment of all remaining stock required under the Option. During the Option
term, we had the right as operator to conduct or otherwise direct the all
exploration on the properties to be acquired.
EPOCH FINANCIAL GROUP, INC.
On February 1, 2007 the Company entered into the Epoch Financial Consulting
Agreement. In accordance with the terms and provisions of the Epoch Financial
Consulting Agreement, on April 7, 2007, we issued 7,500 shares of our restricted
common stock. The issuance of the 7,500 shares represented the outstanding share
issue commitment for February and March 2007 in addition to the obligation for
April 2007.
31
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No report required.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No report required.
ITEM 5. OTHER INFORMATION
RESIGNATION OF DIRECTORS/OFFICERS AND APPOINTMENT OF DIRECTORS/OFFICERS
Effective on April 2, 2007, our Board of Directors accepted the resignation of
D. Bruce Horton as one of our directors (the "Resignation") and, in conjunction
therewith, accepted the consent to act as one of our directors from Ivan
Obolensky (the "Appointment").
As a consequence of the Board's acceptance of the Resignation and Appointment,
the Board also, and again effective on April 2, 2007, appointed, and reappointed
where applicable, the following individuals to the following executive
positions:
INDIVIDUAL OFFICER POSITION WITH THE COMPANY
Alan P. Lindsay Chairman of the Board
Amir Adnani President, Chief Executive Officer and
Principal Executive Officer
Harry Anthony Chief Operating Officer
Pat Obara Secretary, Treasurer, Chief Financial Officer
and Principal Accounting Officer
The following represents a brief overview of the previous five-year employment
history of Mr. Obolensky.
IVAN OBOLENSKY. Mr. Obolensky has 40 years experience in the investment banking
business as a financial analyst, with specific expertise in the areas of defense
aerospace, oil and gas, nuclear power, metals and minerals, publishing and high
technology industries. He has been an executive of several investment banks,
including Sterling Grace & Co., Jesup, Josephthal & Co., Dominick and Dominick,
Inc., Middendorf Colgate, and CB Richard Ellis Mosley Hallgarten. Currently, Mr.
Obolensky is a Vice President of Shields & Company, an Investment Bank and
Member of the New York Stock Exchange.
Ivan Obolensky is a Registered Investment Advisor and a member of the New York
Society of Security Analysts. He has made frequent appearances as a guest on
CNBC, CNNfn, and Bloomberg TV. Mr. Obolensky is also a member of various
foundations and philanthropic organizations, and serves as Chairman and CEO of
the Soldiers' Sailors' Marines' and Airmen's Club in New York. He is a graduate
of Yale University and a retired Lieutenant (Junior Grade) in the U.S. Naval Air
Corps.
At present there are no employment arrangements between us and Mr. Obolensky.
32
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Reports on Form 8-K:
8-K Current Report Item 1.01 filed with the Securities and Exchange
Commission on May 4, 2007.
8-K Current Report Item 1.01 filed with the Securities and Exchange
Commission on April 12, 2007.
8-K Current Report Item 5.02 filed with the Securities and Exchange
Commission on April 4, 2007.
Exhibits:
31.1 Certification of Chief Executive Officer pursuant to Securities
Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
31.2 Certification of Chief Financial Officer pursuant to Securities
Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
32.1 Certification of Chief Executive Officer pursuant to Securities
Exchange Act of 1934 Rule 13a- 14(b) or 15d-14(b) and 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to Securities
Exchange Act of 1934 Rule 13a- 14(b) or 15d-14(b) and 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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: May 15, 2007 By: /s/ AMIR ADNANI
__________________________
Amir Adnani, President and
Chief Executive Officer
Dated: May 15, 2007 By: /s/ PAT OBARA
__________________________
Pat Obara, Chief Financial
Officer
33