UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended JUNE 30, 2007
[ ] Transition Report Under Section13 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 incorporation (I.R.S. Employer Identification
of organization) No.)
SUITE 230, 9801 ANDERSON MILL ROAD
AUSTIN, TEXAS 78750
________________________________________ __________
(Address of Principal Executive Offices) (Zip Code)
(512) 828-6980
___________________________
(Issuer's telephone number)
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. (check one) Yes [X] No
[ ]
Indicate by checkmark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). (check one) Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 37,612,088 SHARES OF COMMON STOCK AS
OF AUGUST 10, 2007.
Transitional Small Business Disclosure Format: (check one) Yes [ ] No [X]
____________
URANIUM ENERGY CORP.
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007
FORWARD-LOOKING STATEMENTS
This Form 10-QSB for the quarterly period ended June 30, 2007 contains
forward-looking statements that involve risks and uncertainties. Forward-looking
statements in this document include, among others, statements regarding our
capital needs, business plans and expectations. Such forward-looking statements
involve assumptions, risks and uncertainties regarding, among others, the
success of our business plan, availability of funds, government regulations,
operating costs, our ability to achieve significant revenues, our business model
and products and other factors. Any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements. In
some cases, you can identify forward-looking statements by terminology such as
"may", "will", "should", "expect", "plan", "intend", "anticipate", "believe",
"estimate", "predict", "potential" or "continue", the negative of such terms or
other comparable terminology. In evaluating these statements, you should
consider various factors, including the assumptions, risks and uncertainties set
forth in reports and other documents we have filed with or furnished to the SEC,
including, without limitation, our Form 10-KSB for the year ended December 31,
2006. These factors or any of them may cause our actual results to differ
materially from any forward-looking statement made in this document. While these
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment regarding future events, our
actual results will likely vary, sometimes materially, from any estimates,
predictions, projections, assumptions or other future performance suggested
herein. The forward-looking statements in this document are made as of the date
of this document and we do not intend or undertake to update any of the
forward-looking statements to conform these statements to actual results, except
as required by applicable law, including the securities laws of the United
States.
____________
URANIUM ENERGY CORP.
TABLE OF CONTENTS
PART 1. FINANCIAL INFORMATION.................................................4
Item 1. Financial Statements...............................................4
BALANCE SHEETS...........................................................5
STATEMENTS OF OPERATIONS.................................................6
STATEMENTS OF CASH FLOWS.................................................8
NOTES TO THE FINANCIAL STATEMENTS........................................9
Item 2. Management's Discussion and Analysis..............................17
Item III. Controls and Procedures.........................................26
PART II. OTHER INFORMATION...................................................27
Item 1. Legal Proceedings.................................................27
Item 2. Changes in Securities and Use of Proceeds.........................27
Item 3. Defaults Upon Senior Securities...................................28
Item 4. Submission of Matters to a Vote of Security Holders...............28
Item 5. Other Information.................................................28
Item 6. Exhibits and Reports on Form 8-K..................................30
SIGNATURES...................................................................31
____________
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
URANIUM ENERGY CORP.
(an exploration stage company)
FINANCIAL STATEMENTS
JUNE 30, 2007
(UNAUDITED)
URANIUM ENERGY CORP.
(an exploration stage company)
BALANCE SHEETS
(UNAUDITED)
______________________________________________________________________________________________________________________________
June 30, December 31,
2007 2006
______________________________________________________________________________________________________________________________
CURRENT ASSETS
Cash and cash equivalents $ 10,005,560 $ 13,581,377
Restricted cash (Note 3) 4,500 136,458
Available-for-sale securities (Note 4) 782,789 -
Accounts and interest receivable 13,026 20,020
Agreement receivable - 235,040
Other current assets 534,138 19,796
______________________________________________________________________________________________________________________________
11,340,013 13,992,691
PROPERTY AND EQUIPMENT (Note 6) 509,907 205,004
______________________________________________________________________________________________________________________________
$ 11,849,920 $ 14,197,695
==============================================================================================================================
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 592,485 $ 306,462
Due to related parties (Note 7) - 225,581
______________________________________________________________________________________________________________________________
592,485 532,043
______________________________________________________________________________________________________________________________
STOCKHOLDERS' EQUITY
Capital stock (Note 8)
Common stock $0.001 par value: 750,000,000 shares authorized
37,612,088 shares issued and outstanding
(December 31, 2006 - 34,371,088) 37,612 34,371
Additional paid-in capital 42,872,985 29,604,624
Common stock purchase warrants - 992,894
Common share and warrant proceeds - 250,000
Deferred compensation - (246,458)
Deficit accumulated during the exploration stage (32,200,911) (16,969,779)
Accumulated other comprehensive income 547,749 -
______________________________________________________________________________________________________________________________
11,257,435 13,665,652
______________________________________________________________________________________________________________________________
$ 11,849,920 $ 14,197,695
==============================================================================================================================
COMMITMENTS (Notes 5, 6 and 10)
The accompanying notes are an integral part of these financial statements.
URANIUM ENERGY CORP.
(an exploration stage company)
STATEMENTS OF OPERATIONS
(UNAUDITED)
____________________________________________________________________________________________________________________________________
For the Period
Three months Three months Six months Six months from May 16, 2003
Ended Ended Ended Ended (inception) to
June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006 June 30, 2007
____________________________________________________________________________________________________________________________________
EXPENSES
Consulting fees $ 71,998 $ - $ 200,240 $ - $ 908,795
Consulting fees - stock based 37,975 3,054,787 704,058 3,491,789 6,054,033
Depreciation 23,906 1,716 39,130 1,716 58,867
General and administrative 1,113,210 1,164,141 1,664,701 1,322,367 4,311,873
Interest and finance charges (Note 8) 116,396 - 116,396 - 116,396
Management fees 122,903 285,907 262,462 464,114 1,083,171
Management fees - stock based - 162,500 1,774,500 325,000 2,697,753
Mineral property expenditures (Note 5) 3,562,447 310,548 4,720,151 555,086 7,414,625
Mineral property expenditures
- stock based (Note 5) 5,471,750 1,186,250 5,540,250 1,186,250 8,595,679
Professional fees 76,896 78,041 267,347 137,264 692,951
Wages and benefits - stock based - - 236,212 - 667,290
____________________________________________________________________________________________________________________________________
10,597,481 6,243,890 15,525,447 7,483,586 32,601,433
LOSS BEFORE OTHER ITEMS (10,597,481) (6,243,890) (15,525,447) (7,483,586) (32,601,433)
____________________________________________________________________________________________________________________________________
INTEREST INCOME 126,047 13,172 282,853 13,172 359,347
OTHER INCOME 11,462 - 11,462 - 41,175
____________________________________________________________________________________________________________________________________
137,509 13,172 294,315 13,172 400,522
____________________________________________________________________________________________________________________________________
NET LOSS FOR THE PERIOD (10,459,972) (6,230,718) (15,231,132) (7,470,414) (32,200,911)
OTHER COMPREHENSIVE INCOME 547,749 - 547,749 - 547,749
____________________________________________________________________________________________________________________________________
TOTAL COMPREHENSIVE LOSS
FOR THE PERIOD $ (9,912,223) $ (6,230,718) $ (14,683,383) $ (7,470,414) $ (31,653,162)
====================================================================================================================================
BASIC AND DILUTED NET
LOSS PER SHARE $ (0.28) $ (0.24) $ (0.42) $ (0.31)
================================================================================================================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING,
BASIC AND DILUTED 37,214,497 25,866,734 36,179,971 23,874,921
================================================================================================================
The accompanying notes are an integral part of these financial statements.
URANIUM ENERGY, CORP.
(an exploration stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
_________________________________________________________________________________________________________________________________
Stock
Common Stock Additional Purchase Subscriptions Deferred
Shares Amount Paid-in Capital Warrants Received Compensation
_________________________________________________________________________________________________________________________________
Balance, December 31, 2006 34,371,088 $ 34,371 $ 29,604,624 $ 992,894 $ 250,000 $ (246,458)
Common stock
Issued for cash at $2.50 per share 200,000 200 499,800 - (250,000) -
Issued on the exercise of options 995,000 995 744,004 - - -
Issued on the exercise of warrants 1,283,500 1,284 3,900,361 (992,894) - -
Issued pursuant to mineral property
acquisitions 750,000 750 5,369,250 - - -
Issued pursuant to consulting service
agreements 12,500 12 74,713 - - -
Stock based compensation
- options issued for consulting
services - - 382,875 - - -
- options issued for management fees - - 1,774,500 - - -
- options issued for property
expenditures - - 170,250 - - -
- options issued wages and benefits - - 236,212 - - -
- warrants issued as penalties
pursuant
to private placement agreements - - 116,396 - - -
Amortization of deferred compensation - - - - - 246,458
Net loss for the period - - - - - -
Unrealized gain on available-for-sale
securities - - - - - -
_________________________________________________________________________________________________________________________________
Balance, June 30, 2007 37,612,088 $ 37,612 $ 42,872,985 $ - $ - $ -
=================================================================================================================================
__________________________________________________________________________________________
Accumulated
Other
Accumulated Comprehensive Stockholders'
Deficit Income Equity
__________________________________________________________________________________________
Balance, December 31, 2006 $(16,969,779) $ - $ 13,665,652
Common stock
Issued for cash at $2.50 per share - - 250,000
Issued on the exercise of options - - 744,999
Issued on the exercise of warrants - - 2,908,751
Issued pursuant to mineral property
acquisitions - - 5,370,000
Issued pursuant to consulting service
agreements - - 74,725
Stock based compensation
- options issued for consulting
services - - 382,875
- options issued for management fees - - 1,774,500
- options issued for property
expenditures - - 170,250
- options issued wages and benefits - - 236,212
- warrants issued as penalties
pursuant
to private placement agreements - - 116,396
Amortization of deferred compensation - - 246,458
Net loss for the period (15,231,132) - (15,231,132)
Unrealized gain on available-for-sale
securities - 547,749 547,749
__________________________________________________________________________________________
Balance, June 30, 2007 $(32,200,911) $ 547,749 $ 11,257,435
==========================================================================================
All share amounts have been restated to reflect the 2:1 reverse share
consolidation in January 2005 and the 1.5:1 forward share split as of the date
of record, February 28, 2006.
The accompanying notes are an integral part of these financial statements.
URANIUM ENERGY CORP.
(an exploration stage company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
___________________________________________________________________________________________________________________________________
For the Period
Six months Six months From May 16, 2003
Ended Ended (inception) to
June 30, 2007 June 30, 2006 June 30, 2007
___________________________________________________________________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (15,231,132) $ (7,470,414) $ (32,200,911)
Adjustments to reconcile net loss to net cash from operating activities:
Stock based compensation 2,714,770 3,816,789 9,419,076
Non-cash mineral property expenditures 5,540,250 1,186,250 8,595,679
Non-cash interest and finance charges 116,396 - 116,396
Depreciation 39,130 1,716 58,866
Changes in operating assets and liabilities:
Restricted cash 131,958 - (4,500)
Available-for-sale securities (235,040) - (235,040)
Accounts and interest receivable 6,994 - (13,026)
Agreement receivable 235,040 - -
Other current assets (514,342) (22,027) (513,611)
Accounts payable and accrued liabilities 286,023 47,325 580,958
Due to related parties (225,581) (208,832) -
___________________________________________________________________________________________________________________________________
NET CASH FLOWS USED IN OPERATING ACTIVITIES (7,135,534) (2,649,193) (14,196,113)
___________________________________________________________________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of shares for cash 3,903,750 6,607,800 25,080,146
Convertible debenture proceeds - - (329,700)
Financing charges - - 20,000
___________________________________________________________________________________________________________________________________
NET CASH FLOWS FROM FINANCING ACTIVITIES 3,903,750 6,607,800 24,770,446
___________________________________________________________________________________________________________________________________
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (344,033) (28,086) (568,773)
___________________________________________________________________________________________________________________________________
NET CASH FLOWS USED IN INVESTING ACTIVITIES (344,033) (28,086) (568,773)
___________________________________________________________________________________________________________________________________
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (3,575,817) 3,930,521 10,005,560
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 13,581,377 107,160 -
___________________________________________________________________________________________________________________________________
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 10,005,560 $ 4,037,681 $ 10,005,560
___________________________________________________________________________________________________________________________________
CASH AND CASH EQUIVALENTS CONSIST OF:
Cash in bank $ 199,680 $ 524,528 $ 199,680
Term deposits 9,805,880 3,513,153 9,805,880
___________________________________________________________________________________________________________________________________
$ 10,005,560 $ 4,037,681 $ 10,005,560
===================================================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION AND
NONCASH INVESTING AND FINANCING ACTIVITIES (Note 11)
The accompanying notes are an integral part of these financial statements.
URANIUM ENERGY, CORP.
(an exploration stage company)
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 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
and entered into joint venture agreements, 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 June 30, 2007, interests in
approximately 42,156 net acres of mineral properties have been staked or leased
by the Company, including 3,291 net acres (6,717 gross acres leased by Cibola
Resources LLC of which the Company holds a 49% interest).
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 June 30, 2007, the Company has an
accumulated deficit of $32,200,911. 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 net proceeds of $24,770,446 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 six
months ended June 30, 2007 are not necessarily indicative of the results that
may be expected for the year ending July 31, 2007.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
________________________________________________________________________________
USE OF ESTIMATES
The preparation of financial statements in conformity with the United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities at the
date of the financial statements and revenues and expenses during the period
reported. By their nature, these estimates are subject to measurement
uncertainty and the effect on the financial statements of changes in such
estimates in future periods could be significant. Actual results could differ
from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertain
Tax Positions". This Interpretation clarifies the accounting for uncertainty in
income taxes recognized in an enterprise's financial statements in accordance
with SFAS Statement No. 109, "Accounting for Income Taxes". This Interpretation
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. This Interpretation also provides guidance on
de-recognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. The Company has adopted this Interpretation
on January 1, 2007. There is no impact to the Company's financial position as a
result of this adoption.
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. The Company has adopted this
Interpretation on January 1, 2007. The impact to the Company's financial
position and results of operations as a result of this adoption is disclosed in
Note 8.
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 included 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
applied for the release of the certificates of deposit and on May 8, 2007, the
reclamation bond requirement was reduced to $4,500.
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 June 30, 2007 the
Company reported the available-for-sale securities at market value and
accordingly, recorded a $547,749 unrealized gain which has been reported as
other comprehensive income.
NOTE 5: 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 June 30, 2007, a total of 49,757 gross acres (42,156 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 $2,837,652,
excluding the fair value of non-cash compensation. The totals include 3,291 net
acres (6,717 gross acres leased by Cibola Resources LLC of which the Company
holds a 49% interest). These leases are subject to varying royalty interests,
some of which are indexed to the sale price of uranium. As of June 30, 2007,
total yearly recurring maintenance payments of $185,717 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 Moore Option and its partial exercise over the
option term, the Company has made cash payments totaling $200,000 and issued
3,000,000 post-split shares of restricted common stock, of which the final
750,000 post-split shares of restricted common stock were issued on April 11,
2007 (refer to Note 8). Upon completion of the terms of the Moore Option title
to the leases were transferred to the Company.
HOLLEY OPTION
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:
(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; 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 fees and 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.
CIBOLA RESOURCES LLC
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 6,717 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 ("Cebolleta"), 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:
(a) initial payments of $3,000,000 (paid by NEI);
(b) an additional cash payment of $2,000,000 six months from the effective
date of the Lease (due October 14, 2007);
(c) 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);
(d) 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 (a) through (c) above;
(e) a production royalty of between 4.50% and 8.0% depending upon the sale
price of uranium; and (f) 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. Additionally, the Company has
paid $117,729 in exploration costs on behalf of Cibola for a cumulative
contribution of $1,578,729. As an exploration stage company, Cibola has no
assets or liabilities as of June 30, 2007 and accordingly, all contributions
have been charged to loss from investment.
HISTORICAL MINING DATABASES
On November 28, 2006 the Company entered into an option agreement to purchase a
database covering prospects primarily in Wyoming and New Mexico. The agreement
called for a $25,000 payment at the date of execution (paid) and an additional
$25,000 prior to the end of the six month option period (paid). Additionally,
the Company issued 50,000 stock options with an estimated fair value of
$114,500, of which 25,000 options vested upon execution and the remaining 25,000
options vested at the end of the six month term. The agreement also calls for a
1% royalty on any mined substance produced on any mineral interest or claim
covered by the database. The $101,750 fair value of the options vesting on May
28, 2007 was recorded as mineral property expenditures during the period. The
fair value of these options was estimated using the Black-Scholes option pricing
model with an expected life of 5 years, a risk free interest rate of 5.24%, a
dividend yield of 0%, and an expected volatility of 95%.
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. The fair value of these options 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%.
For the six months ended June 30, 2007, mineral property expenditures on a
regional basis are as follows:
____________________________________________________________________________________________________________________________
Three months Three months Six months Six months
Ended Ended Ended Ended
June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006
____________________________________________________________________________________________________________________________
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
COLORADO
Acquisition and exploration costs $ 128,452 $ - $ 164,297 $ -
NEW MEXICO
Acquisition and exploration costs 1,985,695 2,289,682 26,288
TEXAS
Acquisition and exploration costs 1,271,187 2,054,250 378,933
UTAH
Acquisition and exploration costs 15,183 - 19,178 -
WYOMING
Acquisition and exploration costs 161,930 192,744 149,865
____________________________________________________________________________________________________________________________
3,562,447 310,548 4,720,151 555,086
____________________________________________________________________________________________________________________________
STOCK BASED EXPENDITURES
New Mexico - - 68,500 -
Texas 5,370,000 1,186,250 5,370,000 1,186,250
Wyoming 101,750 - 101,750 -
____________________________________________________________________________________________________________________________
5,471,750 1,186,250 5,540,250 1,186,250
____________________________________________________________________________________________________________________________
$ 9,034,197 $ 1,496,798 $ 10,260,401 $ 1,741,336
============================================================================================================================
NOTE 6: PROPERTY AND EQUIPMENT
________________________________________________________________________________
June 30, 2007 December 31, 2006
________________________________________________________________________________
(UNAUDITED)
Computer Equipment $ 91,762 $ 35,963
Furniture and Fixtures 41,763 14,373
Mining Equipment 120,780 110,690
Vehicles 314,468 63,714
________________________________________________________________________________
568,773 224,740
Less: accumulated depreciation (58,866) (19,736)
________________________________________________________________________________
$ 509,907 $ 205,004
================================================================================
Effective August 24, 2006, the Company committed to spend approximately $140,000
to acquire a PFN assay tool, and $120,000 to build a second logging truck which
is currently under construction. As of June 30, 2007, a total of $65,000 has
been paid towards these commitments and has been included with vehicles.
NOTE 7: DUE TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS
________________________________________________________________________________
During the six months ended June 30, 2007, the Company had transactions with
certain officers and directors of the Company as follows:
(a) incurred $262,462 in management fees and recorded an additional
$1,774,500 in stock based compensation expense (refer to Note 8);
(b) incurred $12,963 in furniture and fixtures acquisition costs, $22,323
in consulting fees, and $24,109 in rent and office administration
costs reimbursed to companies controlled by a direct family member of
a current officer;
(c) incurred $19,058 in consulting fees paid to a company controlled by a
direct family member of a current director;
(d) incurred $13,715 in website development and hosting fees paid to a
company controlled by a direct family member of a current officer;
(e) 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 8: CAPITAL STOCK
________________________________________________________________________________
SHARE CAPITAL
The Company's capitalization at June 30, 2007 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 later 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 later 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. The Registration Statement was declared effective on June 15, 2007.
On April 3, 2007 the Company issued 7,500 restricted common shares pursuant to a
financial consulting agreement (refer to Note 10). At the time of issuance, the
shares had a value of $7.35 per share and $55,125 was recorded as stock-based
consulting fees.
On April 11, 2007 the Company issued the final 750,000 post-split restricted
common shares pursuant to the Moore Option (refer to Note 5). At the time of
issuance, the shares had a value of $7.16 per share and $5,370,000 was recorded
in mineral property expenditures.
On June 14, 2007 the Company issued 5,000 restricted common shares pursuant to a
financial consulting agreement (refer to Note 10). At the time of issuance, the
shares had a value of $3.92 per share and $19,600 was recorded as stock-based
consulting fees.
SHARE PURCHASE WARRANTS
On June 15, 2007 the Company issued to certain investors an aggregate of 59,998
non-transferable common share purchase warrants to acquire an equivalent number
of common shares of the Company pursuant to the investors' respective December
22, 2006 private placement subscription agreements with the Company. These
warrants were issued as liquidated damages resulting from the Company's delay in
not having a registration statement respecting the investors' securities within
the Company declared effective by the SEC within four months from the original
date of issuance by the Company of the securities underlying the original
subscription agreements. This additional warrant issuance was provided for under
the terms of the original subscription agreements whereby 1/100 of an additional
warrant was issuable to each such investor for each $1.00 in aggregate
subscription price funds paid by the investor to the Company under the private
placement and in respect of each 30 day period (or partial period thereof) of
delay of the aforementioned registration statement effectiveness. Each resulting
warrant now entitles the holder thereof to purchase an additional share of the
Company's restricted common stock under the same terms as the original warrants
issued at the closing of the private placement in December of 2006. Under the
terms of the subscription agreements, the Company shall use its reasonable best
efforts to maintain the effectiveness of the registration statement for a period
of not less than nine months from the June 15, 2007 effective date. If the
Company fails to maintain the effectiveness of the registration statement for a
period of eight months from the initial deadline of April 22, 2007, additional
warrants may be issuable. As of June 30, 2007 the maximum number of warrants
issuable as liquidated damages through the eight month period expiring December
22, 2007 would be 360,000. The $116,396 fair value of the common share purchase
warrants was recorded as interest and finance charges during the period. The
fair value of these warrants was estimated using the Black-Scholes option
pricing model with an expected life of 1 year, a risk free interest rate of
5.25%, a dividend yield of 0%, and an expected volatility of 98%.
During the six months ended June 30, 2007, 1,283,500 common share purchase
warrants were exercised for total aggregate proceeds of $2,908,750.
Additional paid-in capital has been increased for the $992,894 fair value of
2006 warrants issued for finders' fees in conjunction with private placements.
The warrants were originally recorded as a separate component of stockholders'
equity and were fully exercised during the six months ended June 30, 2007.
A summary of the Company's common share purchase warrants as of June 30, 2007
and changes during the period is presented below:
____________________________________________________________________________________________________________________________
Weighted average
Number of Weighted average Remaining
warrants exercise price life (years)
____________________________________________________________________________________________________________________________
Balance, December 31, 2006 5,133,500 $ 2.55 1.74
Issued 159,998 3.00 1.00
Exercised (1,283,500) (2.27) (0.09)
____________________________________________________________________________________________________________________________
Balance, June 30, 2007 4,009,998 $ 2.66 1.78
============================================================================================================================
The aggregate intrinsic value ("AIV") under the provisions of SFAS No. 123R of
the 500,000 compensation warrants previously issued to consultants as at June
30, 2007 was estimated at $1,500,000.
STOCK OPTIONS
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 October 10, 2006 the Company ratified the 2006 Stock
Incentive Plan whereby, subject to adjustment from time to time as provided in
Article 18.1, the number of common shares available for issuance under the Plan
was increased to 10,000,000 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, has 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 $1,962,950 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%. The vested portion of the value of
these options, being $845,488, has been recorded as stock based consulting fees,
management fees, and wages and benefits in the period.
During the six months ended June 30, 2007, 995,000 stock options were exercised
for cumulative net proceeds of $745,000.
A summary of the Company's stock options as of June 30, 2007 and changes during
the period is presented below:
____________________________________________________________________________________________________________________________
Weighted average
Number of Weighted average Remaining
options exercise price life (years)
____________________________________________________________________________________________________________________________
Balance, December 31, 2006 4,072,500 $ 0.61 9.17
Issued 1,030,000 4.27 9.61
Exercised (995,000) (0.75) (8.93)
Cancelled (275,000) (0.64) (9.05)
____________________________________________________________________________________________________________________________
Balance, June 30, 2007 3,832,500 $ 1.44 8.90
============================================================================================================================
The AIV under the provisions of SFAS No. 123R of all outstanding options at June
30, 2007 was estimated at $10,338,333. Additionally, the AIV of options
exercised during the three months ended March 31, 2007 was estimated at
$4,676,250.
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 provided 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 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 to
provide 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 was recorded as deferred
compensation and 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 9: 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.
NOTE 10 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 June 30,
2007 share issuances of 2,500 for February through June have been issued, and
accordingly, a total expense of $74,725 has been included in stock-based
consulting fees based on the fair value of the 12,500 shares issued.
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 paid a retainer of approximately
(euro)209,000 ($286,644 US), and will pay a final installment of approximately
(euro)91,178 ($125,050 US) which was due 90 days from the date of the agreement.
On July 29, 2007 the Company and the consultant mutually agreed to terminate the
consulting services agreement and that no further monies or compensation is due
or payable.
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.
The Company is committed to pay its key executives a total of approximately
$402,000 per year for management services.
The Company is currently leasing office premises in New Mexico, Texas, and
Wyoming with total monthly payments of $10,941, with all agreements having a
maximum term of no more than two years.
NOTE 11 SUPPLEMENTAL CASH FLOW INFORMATION AND NONCASH INVESTING AND FINANCING
ACTIVITIES
________________________________________________________________________________
During the six month period ended June 30, 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.
________________________________________________________________________________
Six months Ended
June 30, 2007 June 30, 2006
________________________________________________________________________________
(UNAUDITED) (UNAUDITED)
Interest paid $ - $ -
Income taxes paid $ - $ -
________________________________________________________________________________
NOTE 12: SUBSEQUENT EVENTS
________________________________________________________________________________
(a) On July 23, 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
Committee.
(b) On July 29, 2007 the Company and a consultant mutually agreed to
terminate a consulting services agreement (refer to Note 10). Under
the terms of the Mutual Release and Indemnification Agreement, no
further monies or compensation is due or payable.
______________
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
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 56,499 gross acres (48,783 net mineral acres) of leased or
staked mineral properties, consisting of claim blocks located in the States of
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.
The totals include 3,291 net acres (6,717 gross acres leased by Cibola Resources
LLC of which the Company holds a 49% interest). These leases are subject to
varying royalty interests, some of which are indexed to the sale price of
uranium. 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 5,041.04 5,041.04
New Mexico 27,000.98 20,114.07
Texas 5,883.66 5,053.80
Utah 2,226.94 2,226.94
Wyoming 14,115.42 14,115.42
________________________________________________________________________________
56,499.32 48,782.55
________________________________________________________________________________
(*) 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.
During 2007 through the date of this Quarterly Report, we acquired an additional
37,712 gross acres (30,587 net acres) in the States of Colorado, New Mexico,
Texas, Utah and Wyoming for an aggregate consideration of $2,955,189.
We plan to use our database of exploration data in order to target additional
exploration properties for acquisition. In the remainder of 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, Texas, Utah 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 June 22, 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 New Mexico, Utah and Texas, we are participating in our mineral
properties by way of property lease directly from the owners of the land/mineral
rights. 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. These leases are subject to varying royalty
interests, some of which are indexed to the sale price of uranium at the time of
production. Royalty payments must be made to the lessor in the event that we
extract uranium ore from the properties. 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 existence of historically drill-indicative resources on the
property (as identified by Moore Energy Corporation during the 1980's) 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 394 holes
drilled, consisting of 126,964 feet.
HOLLEY OPTION
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.
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 6,717 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 June 30, 2007, 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.
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
(due October 14, 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. Through the date of this Quarterly
Report, the Company has paid $117,729 in exploration costs on behalf of Cibola
for a cumulative contribution of $1,578,729.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2007 COMPARED TO THREE MONTHS ENDED JUNE 30, 2006
Operating Expenses: Expenses of $10,597,481 during the three months ended June
30, 2007 increased $4,353,591 over the same period ended June 30, 2006.
Significant changes in expenses are outlined as follows:
o Consulting fees increased to $71,998 during the three months ended
June 30, 2007 from $Nil during the three months ended June 30, 2006,
due primarily to increased reliance on unrelated service providers as
the Company expands its operations.
o Consulting fees - stock based decreased to $37,975 during the three
months ended June 30, 2007 from $3,054,787 during the three months
ended June 30, 2006 due primarily to the limited number of options
granted or warrants issued as compensation to consultants during the
current period.
o Depreciation increased to $23,906 during the three months ended June
30, 2007 from $1,716 during the three months ended June 30, 2006 due
to significant investments in property and equipment during the
current fiscal year and last half of the prior fiscal year.
o General and administrative costs decreased to $1,113,210 during the
three months ended June 30, 2007 from $1,164,141 during the three
months ended June 30, 2007 due to the limited investor relations
charges which was partially offset by general expansion in operations
and personnel during the current fiscal year and last half of the
prior fiscal year.
o Interest and finance charges increased to $116,396 during the three
months ended June 30, 2007 from $Nil during the three months ended
June 30, 2006 due an expense realized on the issuance of penalty
warrants issued after delays in an SB-2 Registration Statement
becoming effective.
o Management fees decreased to $122,903 during the three months ended
June 30, 2007 from $285,907 during the three months ended June 30,
2006, due primarily to bonuses paid in the prior year, and a shift in
the current year towards unrelated service providers as the Company
expands its operations.
o Management fees - stock based decreased to $Nil during the three
months ended June 30, 2007 from $162,500 during the three months ended
June 30, 2006, as the Company did not issue any options or warrants as
compensation to management during the current period.
o Mineral property expenditures increased to $3,562,447 during the three
months ended June 30, 2007 from $310,548 during the three months ended
June 30, 2006, due primarily to expenditures relating to Cibola
Resources LLC, increased land work, and acquisition costs relating to
the Holley Option.
o Mineral property expenditures - stock based increased to $5,471,750
during the three months ended June 30, 2007 from $1,186,250 during the
three months ended June 30, 2006, due primarily to a $5,370,000
expense realized on the issuance of the remaining 750,000 restricted
common shares pursuant to the Moore Option agreement.
Other Revenues: Interest income increased to $126,047 during the three months
ended June 30, 2007 from $13,172 during the three months ended June 30, 2006 due
to significantly higher cash balances maintained throughout the current period.
Other income increased to $11,462 during the three months ended June 30, 2007
from $Nil during the three months ended June 30, 2006 as the Company did not
provide any third party consulting services during the comparative period.
Net Loss: The Company's net loss during the three months ended June 30, 2007 was
$10,459,972 or $0.28 per share compared to a net loss of $6,230,890 or $0.24 per
share during the three months ended June 30, 2006. The increase resulted
primarily from the significant increase in mineral property expenditures noted
above which was partially offset by the decrease in stock-based compensation
over the prior period.
SIX MONTHS ENDED JUNE 30, 2007 COMPARED TO SIX MONTHS ENDED JUNE 30, 2006
Operating Expenses: Expenses of $15,525,447 during the six months ended June 30,
2007 increased $8,041,861 over the same period ended June 30, 2006. Significant
changes in expenses are outlined as follows:
o Consulting fees increased to $200,240 during the six months ended June
30, 2007 from $Nil during the six months ended June 30, 2006, due
primarily to increased reliance on unrelated service providers as the
Company expands its operations.
o Consulting fees - stock based decreased to $704,058 during the six
months ended June 30, 2007 from $3,491,789 during the six months ended
June 30, 2006 due primarily to the reduction in the number of options
or warrants issued as compensation to consultants during the current
period.
o Depreciation increased to $39,130 during the six months ended June 30,
2007 from $1,716 during the six months ended June 30, 2006 due to
significant investments in property and equipment during the current
fiscal year and last half of the prior fiscal year.
o Interest and finance charges increased to $116,396 during the six
months ended June 30, 2007 from $Nil during the six months ended June
30, 2006 due to an expense realized on the issuance of penalty
warrants resulting from delays in an SB-2 Registration Statement
becoming effective.
o General and administrative costs increase to $1,664,701 during the six
months ended June 30, 2007 from $1,322,367 during the six months ended
June 30, 2006 due to the expansion in operations and personnel during
the current fiscal year and last half of the prior fiscal year.
o Management fees decreased to $262,462 during the six months ended June
30, 2007 from $464,114 during the six months ended June 30, 2006, due
primarily to bonuses paid in the prior year, and a shift in the
current year towards unrelated service providers as the Company
expands its operations.
o Management fees - stock based increased to $1,774,500 during the six
months ended June 30, 2007 from $325,000 during the six months ended
June 30, 2006 due to the high valuation of options issued as
compensation to management during the current period.
o Mineral property expenditures increased to $4,720,151 during the six
months ended June 30, 2007 from $555,086 during the six months ended
June 30, 2006, due primarily to expenditures relating to Cibola
Resources LLC, increased land work, and acquisition costs relating to
the Holley Option.
o Mineral property expenditures - stock based increased to $5,540,250
during the six months ended June 30, 2007 from $1,186,250 during the
six months ended June 30, 2006, due primarily to a $5,370,000 stock
based expense realized on the issuance of the final 750,000 restricted
common shares pursuant to the Moore Option agreement.
o Professional fees increased to $267,347 during the six months ended
June 30, 2007 from $137,264 during the six months ended June 30, 2007
due primarily to increases in audit and review costs, and increases in
counsel fees associated with the growth in the Company's operations.
o Wages and benefits - stock based increased to $236,212 during the six
months ended June 30, 2007 from $Nil during the six months ended June
30, 2006, as the Company did not issue any options or warrants as
compensation to employees during the comparative period.
Other Revenues: Interest income increased to $282,853 during the six months
ended June 30, 2007 from $13,172 during the six months ended June 30, 2006 due
to significantly higher cash balances maintained throughout the current period.
Other income increased to $11,462 during six three months ended June 30, 2007
from $Nil during the six months ended June 30, 2006. The Company was not
providing any third party consulting services during the comparative period.
Net Loss: The Company's net loss during the six months ended June 30, 2007 was
$15,231,132 or $0.42 per share compared to a net loss of $7,470,414 or $0.31 per
share during the six months ended June 30, 2006. The increase resulted primarily
from the significant increase in mineral property expenditures noted above.
TRANSACTIONS WITH OFFICERS AND DIRECTORS
Of the $15,525,447 incurred as operating expenses during the six months ended
June 30, 2007, an aggregate of $2,036,962 was incurred payable to certain
officers and directors of which $262,462 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. At June 30,
2007, there were no amounts due and owing to our directors and officers. The
Company 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.
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.
At June 30, 2007, the Company had $10,005,560 in cash. Generally, the Company
has financed its operations through the proceeds from the private placement of
equity securities and the exercise of stock options and warrants. The Company
used $3,575,817 net cash during the six months ended June 30, 2007.
OPERATING ACTIVITIES
Net cash used in operating activities during the six months ended June 30, 2007
was $7,135,534, compared to $2,649,193 in the corresponding period of 2006.
Significant operating expenditures during the current period included mineral
property expenditures, and general and administrative costs.
FINANCING ACTIVITIES
Net cash provided by financing activities during the six months ended June 30,
2007 was $3,903,750, compared to $6,607,800 in the corresponding period of 2006.
During the current period, the Company received net proceeds of $500,000 related
to a private placement financing completed on January 3, 2007, of which $250,000
had been received in the prior fiscal year. The Company also received net
proceeds of $2,908,750 from the exercise of warrants, and $745,000 from the
exercise of options during the period.
INVESTING ACTIVITIES
Net cash used in investing activities during the six months ended June 30, 2007
was $344,033, compared to $28,086 in the corresponding period of 2006.
Significant investing expenditures during the current period included purchases
of property and equipment.
STOCK OPTIONS AND WARRANTS
At June 30, 2007, the Company had 3,832,500 stock options and 4,009,998 share
purchase warrants outstanding. The outstanding stock options have a weighted
average exercise price of $1.44 per share. The outstanding warrants have a
weighted average exercise price of $2.66 per share. Accordingly, as of June 30,
2007, the outstanding options and warrants represented a total of 7,842,498
shares issuable for proceeds of approximately $16,200,000 if these options and
warrants were exercised in full. The exercise of these options and warrants is
completely at the discretion of the holders. There is no assurance that any of
these options or warrants will be exercised.
PLAN OF OPERATION AND FUNDING
During the six months ended June 30, 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 later 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.
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. The Registration Statement was
declared effective on June 15, 2007.
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.
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.
CONSULTING AGREEMENTS
On March 29, 2007, we entered into a consulting services agreement for a period
of six months (the "Consulting Agreement"). In accordance with the terms and
provisions of the Consulting Agreement: (i) the Consultant will provide advice
on public and investor relations related matters; (ii) we paid a retainer of
approximately (euro)209,000 ($286,644 US); 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 Consulting Agreement. On July 29, 2007 the Company and
the consultant mutually agreed to terminate the consulting services agreement.
Under the terms of the Mutual Release and Indemnification Agreement, no further
monies or compensation is due or payable.
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 April 14, 2007, the effective date of the
Letter Agreement;
(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 $402,000 per
year for management services.
LEASES
We are currently leasing office premises in New Mexico, Texas, and Wyoming for
monthly payments totaling $10,941. All office lease agreements having a maximum
term of no more than two years.
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.
CRITICAL ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with the United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities at the
date of the financial statements and revenues and expenses during the period
reported. By their nature, these estimates are subject to measurement
uncertainty and the effect on the financial statements of changes in such
estimates in future periods could be significant. Actual results could differ
from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertain
Tax Positions". This Interpretation clarifies the accounting for uncertainty in
income taxes recognized in an enterprise's financial statements in accordance
with SFAS Statement No. 109, "Accounting for Income Taxes". This Interpretation
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. This Interpretation also provides guidance on
de-recognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. The Company has adopted this Interpretation
on January 1, 2007. There is no impact to the Company's financial position as a
result of this adoption.
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. The Company has adopted this
Interpretation on January 1, 2007. The impact to the Company's financial
position and results of operations as a result of this adoption is disclosed in
Note 8.
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.
___________
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 June 30, 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. Erik Essiger, Mr. Ivan Obolensky and Mr. Vincent Della
Volpe. The three members of the audit committee are "independent" within the
meaning of Rule 10A-3 under the Exchange Act. The audit committee was
reorganized in July 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 June 30, 2007.
The audit committee has also discussed with Ernst & Young 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 Ernst &
Young LLP required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, as amended, and has discussed with Ernst &
Young 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 June 30, 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 six months ended June 30, 2007, and through the date of this
Quarterly Report, 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 share 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 later 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.
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 was
declared effective as of June 15, 2007.
STOCK OPTIONS
During the six months ended June 30, 2007 and through the date of this Quarterly
Report, we issued an aggregate of 995,000 shares of our common stock pursuant to
the exercise of 995,000 stock options for aggregate proceeds of $745,000. The
shares of common stock were subject to S-8 registration statements.
During the six months ended June 30, 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. All of the stock options granted
have a 10 year expiry period.
SHARE PURCHASE WARRANTS
During the six months ended June 30, 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 share purchase warrants
for aggregate proceeds of $2,908,750. The shares of common stock were subject to
SB-2 registration statements.
On June 15, 2007 we issued to certain investors an aggregate of 59,998
non-transferable common share purchase warrants to acquire an equivalent number
of common shares of the Company pursuant to the investors' respective December
22, 2006 private placement subscription agreements with us. These warrants were
issued as liquidated damages resulting from the Company's delay in not having a
registration statement respecting the investors' securities within the Company
declared effective by the SEC within four months from the original date of
issuance by the Company of the securities underlying the original subscription
agreements. This additional warrant issuance was provided for under the terms of
the original subscription agreements whereby 1/100 of an additional warrant was
issuable to each such investor for each $1.00 in aggregate subscription price
funds paid by the investor to the Company under the private placement and in
respect of each 30 day period (or partial period thereof) of delay of the
aforementioned registration statement effectiveness. Each resulting warrant now
entitles the holder thereof to purchase an additional share of our restricted
common stock under the same terms as the original warrants issued at the closing
of the private placement in December of 2006.
MINERAL ASSET OPTION AGREEMENT
During the six months ended June 30, 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 transferred upon
payment of all remaining stock required under the Option.
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 and on June 14, 2007, we issued an additional 5,000 shares of our
restricted common stock. The issuance of the 12,500 shares represented the share
issue commitment for February 2007 through June 2007.
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 and, in conjunction therewith, accepted
the consent to act as one of our directors from Ivan Obolensky.
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
______________________________________________________________________________
Effective on July 23, 2007, our Board of Directors accepted the resignation of
Randall R. Reneau as one of our directors and, in conjunction therewith,
accepted the consent to act as one of our directors from Vincent Della Volpe.
In addition, and again as a consequence our Board of Directors' recent
resignations and appointments, effective on July 23, 2007, our Board of
Directors also ratified the appointment of certain independent directors to each
of the Company's Audit Committee, Compensation Committee, Nominating and
Corporate Governance Committee and Ethics Committee, such that the director
members of each of such Committees are now as follows:
AUDIT COMMITTEE
Mr. Della Volpe
Mr. Essiger
Mr. Obolensky
COMPENSATION COMMITTEE
Mr. Essiger
Mr. Obolensky
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
Mr. Essiger
Mr. Obolensky
ETHICS COMMITTEE
Mr. Essiger
Mr. Obolensky
The following represents a brief overview of the previous five-year employment
history of Messrs. Obolensky and Della Volpe.
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.
VINCENT DELLA VOLPE
Mr. Della Volpe has served as a professional money manager for over 35 years,
including as a senior portfolio manager of pension funds for Honeywell
Corporation and senior vice president of the YMCA Retirement fund in New York.
Throughout his career, Mr. Della Volpe has particularly focused on the
management of energy and utility equity portfolios, and he also has experience
managing venture capital investments. Since September 2006, Mr. Della Volpe has
served as a Director of Gold Canyon Resources, Inc., a junior natural resources
company incorporated in British Columbia, Canada that is listed on the TSX
Venture Exchange. Mr. Della Volpe holds a Bachelor of Arts in Accounting and an
MBA in finance, both from Seton Hall University.
At present there are no employment arrangements between us and Mr. Della Volpe.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
REPORTS ON FORM 8-K:
________________________________________________________________________________
8-K Current Report Item 7.01 filed with the Securities and Exchange
Commission on June 8, 2007
8-K Current Report Item 9.01 filed with the Securities and Exchange
Commission on June 8, 2007
8-K Current Report Item 4.01 filed with the Securities and Exchange
Commission on June 8, 2007
8-K Current Report Item 9.01 filed with the Securities and Exchange
Commission on June 13, 2007
8-K Current Report Item 5.02 filed with the Securities and Exchange
Commission on July 27, 2007
________________________________________________________________________________
EXHIBIT DESCRIPTION OF EXHIBIT
________________________________________________________________________________
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 Certifications 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.
/s/ "Amir Adnani"
_________________________________________________
AMIR ADNANI
President, Chief Executive Officer and Principal
Executive Officer
Date: August 14, 2007
/s/ "Pat Obara"
_________________________________________________
PAT OBARA
Secretary, Treasurer, Chief Financial Officer,
Principal Accounting Officer
Date: August 14, 2007