-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ThupZpAJSli99rOvggKWsRgoH2manjf8C1B+JxITdr64wW6X/xl3j1x2eZIKgMhc qVCthNp4o6Z5QgnuraggdQ== 0001199835-05-000578.txt : 20060928 0001199835-05-000578.hdr.sgml : 20060928 20051109130851 ACCESSION NUMBER: 0001199835-05-000578 CONFORMED SUBMISSION TYPE: SB-2/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20051109 DATE AS OF CHANGE: 20051206 FILER: COMPANY DATA: COMPANY CONFORMED NAME: URANIUM ENERGY CORP CENTRAL INDEX KEY: 0001334933 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS METAL ORES [1090] IRS NUMBER: 980399476 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-127185 FILM NUMBER: 051188901 BUSINESS ADDRESS: STREET 1: AUSTIN CENTER STREET 2: 701 BRAZOS, SUITE 500 PMB# CITY: AUSTIN STATE: TX ZIP: 78701 BUSINESS PHONE: 512-721-1022 MAIL ADDRESS: STREET 1: AUSTIN CENTER STREET 2: 701 BRAZOS, SUITE 500 PMB# CITY: AUSTIN STATE: TX ZIP: 78701 SB-2/A 1 uranium_sb2-2nd.txt URANIUM SB-2A 2ND AMENDED As Filed with the Securities and Exchange Commission on November 9, 2005 Registration No. 333-127185 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM SB-2/A Second Amended REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 URANIUM ENERGY CORP. ---------------------------------------------- (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER) Nevada 1090 98-0399476 - -------------------------------------------------------------------------------- (State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.) Austin Centre 701 Brazos, Suite 500 PMB# Austin, Texas 78701 Tel: (512) 721-1022 (ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES) AMIR ADNANI, CHIEF EXECUTIVE OFFICER 318 Homer Street, Suite 401, Vancouver, British Columbia, V6B 2V2 Tel: (604) 682-3585 (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE) COPIES TO: THE O'NEAL LAW FIRM, P.C. Attention: William D. O'Neal, Esq. 17100 E. Shea Boulevard, Suite 400-D Fountain Hills, Arizona 85268 Tel: (480) 812-5058 Fax: (480) 816-9241 1 Approximate date of proposed sale to the public: From time to time after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] 2
Title of Securities to be Amount to be Proposed maximum offering Proposed maximum aggregate Amount of Registered (1) registered price per share (3) offering registration price (US $) Fee (2) - -------------------------------------------------------------------------------------------------------------------- Common stock to be Offered 2,435,722 $0.50 $1,217,861 $143.34 for resale by selling stockholders - -------------------------------------------------------------------------------------------------------------------- Total Registration Fee $143.34
(1) In the event of a stock split, stock dividend, or similar transaction involving our common stock, the number of shares registered shall automatically be increased to cover the additional shares of common stock issuable pursuant to Rule 416 under the Securities Act of 1933, as amended. (2) Fee calculated in accordance with Rule 457(c) of the Securities Act. Estimated for the sole purpose of calculating the registration fee. (3) Fixed offering price was set by the selling shareholders until securities are quoted on the OTC Bulletin Board or other national exchange and thereafter at prevailing market prices or privately negotiated prices. There can be no assurance that our shares will be approved for trading on the OTC Bulletin Board. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON THE DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON THE DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING SHAREHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. , THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING SHAREHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. 3 SUBJECT TO COMPLETION, DATED NOVEMBER 8, 2005 URANIUM ENERGY CORP. A NEVADA CORPORATION RELATING TO THE RESALE OF UP TO 2,435,722 SHARES OF URANIUM ENERGY CORP. COMMON STOCK The prospectus and the registration statement, of which it is a part, are being filed with the SEC to satisfy our obligations to the recipients of certain shares of common stock (the "Selling Shareholders") of Uranium Energy Corp. Accordingly, the prospectus and the registration statement cover the resale by certain Selling Shareholders of 2,435,722 shares of our common stock which were issued from May 16, 2003 through the date of this registration statement in connection with private placements, debt settlements, and convertible debenture share conversions to foreign and U.S. investors. The sales price to the public was set by the selling shareholders at $0.50 per share for a total of $1,217,861. The price of $0.50 per share is a fixed price until the shares are listed on the OTC Bulletin Board or other national exchange, and thereafter at prevailing market prices or privately negotiated prices. There can be no assurance that our shares will be approved for trading on the OTC Bulletin Board. CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 8 OF THIS PROSPECTUS. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is November 8, 2005. Dealer Prospectus Delivery Obligation Until 90 days from the effective date of this Registration Statement, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. 4 TABLE OF CONTENTS PAGE NUMBER PROSPECTUS SUMMARY ...................................................... 6 RISK FACTORS ............................................................ 8 RISKS RELATED TO THIS OFFERING AND OUR COMMON STOCK ..................... 8 RISKS RELATING TO OUR BUSINESS .......................................... 8 FORWARD-LOOKING STATEMENTS .............................................. 14 USE OF PROCEEDS ......................................................... 15 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ................ 15 DIVIDEND POLICY ......................................................... 15 SECURITIES AUTHORIZED FOR ISSUANCE UNDER COMPENSATION PLANS ............. 15 MANAGEMENT'S DISCUSSION AND ANALYSIS .................................... 15 DESCRIPTION OF BUSINESS ................................................. 23 LEGAL PROCEEDINGS ....................................................... 28 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS ............ 28 EXECUTIVE COMPENSATION .................................................. 31 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .......................... 32 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .......... 33 DESCRIPTION OF COMMON STOCK ............................................. 34 PLAN OF DISTRIBUTION .................................................... 35 SELLING SHAREHOLDERS .................................................... 37 LEGAL MATTERS ........................................................... 40 EXPERTS ................................................................. 40 INTEREST OF NAMED EXPERTS ............................................... 40 DISCLOSURE OF SEC POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES ...................................................... 41 WHERE YOU CAN FIND MORE INFORMATION ..................................... 41 FINANCIAL INFORMATION ................................................... 42 INDEMNIFICATION OF DIRECTORS AND OFFICERS ............................... 56 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION ............................. 57 RECENT SALES OF UNREGISTERED SECURITIES ................................. 58 EXHIBITS ................................................................ 58 UNDERTAKINGS ............................................................ 59 SIGNATURES .............................................................. 60 5 ABOUT THIS PROSPECTUS This prospectus is part of a resale registration statement. The selling shareholders ("Selling Shareholders") may sell some or all of their shares in transactions from time to time. You should rely only on the information contained in this prospectus. We have not authorized anyone else to provide you with different information. If anyone provides you with different information, you should not rely upon it. You should assume that the information appearing in this prospectus, as well as the information we file with the Securities and Exchange Commission ("SEC") in this prospectus is accurate only as of the date of the documents containing the information. As used in this prospectus, the terms "we", "us", "our", the "Company", refer to "Uranium Energy Corp." All dollar amounts refer to United States dollars unless otherwise indicated. PROSPECTUS SUMMARY The following summary highlights selected information contained in this prospectus. This summary does not contain all the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the "Risk Factors" section, the financial statements and the notes to the financial statements. GENERAL Uranium Energy Corp. was originally incorporated under the laws of the State of Nevada on May 16, 2003, as Carlin Gold, Inc. On February 10, 2005, we filed a Certificate of Amendment with the Nevada Secretary of State changing our name to Uranium Energy Corp. We are currently engaged in the business of acquiring and exploring properties for the existence of uranium in the United States. Our executive offices are located at Austin Centre, 701 Brazos, Suite 500 PMB#, Austin, Texas 78701, and our telephone number is (512) 721-1022. OUR BUSINESS We are in the business of acquiring and exploring properties for the existence of uranium in the United States. The Company has access to historical exploration data that may provide indications of locations that may contain unknown quantities of uranium. These data consist chiefly of drill hole assay results, drill hole logs, studies, publicly published works, Company created work product, and maps, that help guide the Company's property acquisition strategy in the States of Utah, Colorado, Arizona, Wyoming, and Texas. None of the properties or leases acquired by the Company to date have any known, proven, or probable uranium reserves of any nature. The Company will be required to extensively explore its current leases and claims in order to determine if any uranium is existence. THE OFFERING The prospectus and the registration statement, of which it is a part, are being filed with the SEC to satisfy our obligations to the recipients of certain shares of common stock (the "Selling Shareholders") of Uranium Energy Corp. Accordingly, the prospectus and the registration statement cover the resale by 6 THE OFFERING - continued certain Selling Shareholders of 2,435,722 shares of our common stock which were issued from May 16, 2003, through September 16, 2005 in connection with private placements, debt settlements, and convertible debenture share conversions to foreign and American investors. The sales price to the public was set by the selling shareholders at $0.50 per share for a total of $1,217,861. The price of $0.50 per share is a fixed price until the shares are trading on the OTC Bulletin Board or other national exchange, and thereafter at prevailing market prices or privately negotiated prices. There can be no assurance that our shares will be approved for trading on the OTC Bulletin Board. See "Plan of Distribution" on page 35 for a further description of how the Selling Shareholders may dispose of the shares covered by this prospectus. NUMBER OF SHARES OUTSTANDING There were 12,135,722 shares of our common stock issued and outstanding as at November 8, 2005. USE OF PROCEEDS We will not receive any of the proceeds from the sale of the shares of our common stock being offered for sale by the Selling Shareholders. We will incur all costs associated with this prospectus and related registration statement. SUMMARY OF FINANCIAL INFORMATION The following summary financial information for the periods stated summarizes certain information from our financial statements included elsewhere in this prospectus. You should read this information in conjunction with Management's Plan of Operations and the financial statements and the related notes thereto included elsewhere in this prospectus. - --------------------------- ------------------------------ -------------------- Three Month Period Year Ended Income Statement Ended June 30, 2005 December 31, 2004 - --------------------------- ------------------------------ -------------------- Revenues $ 803 $ 166 - --------------------------- ------------------------------ -------------------- Net Income (Loss) (278,145) (128,170) - --------------------------- ------------------------------ -------------------- Net Income (Loss per Share) (0.03) (0.12) - --------------------------- ------------------------------ -------------------- Balance Sheet - --------------------------- ------------------------------ -------------------- Total Current Assets 432,414 407,883 - --------------------------- ------------------------------ -------------------- Total Current Liabilities 64,090 36,414 - --------------------------- ------------------------------ -------------------- Shareholders' Equity 368,324 371,469 - --------------------------- ------------------------------ -------------------- 7 RISK FACTORS An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this prospectus in evaluating our Company and its business before purchasing shares of our common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. The risks described below are all of the material risks that we are currently aware of that are facing our Company. You could lose all or part of your investment due to any of these risks. RISKS RELATED TO THIS OFFERING AND OUR COMMON STOCK SALES OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK INTO THE PUBLIC MARKET BY THE SELLING STOCKHOLDERS MAY RESULT IN SIGNIFICANT DOWNWARD PRESSURE ON THE PRICE OF OUR COMMON STOCK AND COULD AFFECT THE ABILITY OF OUR STOCKHOLDERS TO REALIZE THE CURRENT TRADING PRICE OF OUR COMMON STOCK. Sales of a substantial number of shares of our common stock in the public market could cause a reduction in the market price of our common stock. We had 12,135,722 shares of common stock issued and outstanding as of November 8, 2005. When this registration statement is declared effective, the Selling Stockholders will be able to resell up to 2,435,722 shares of our common stock. As a result, a substantial number of our shares of common stock may be issued and may be available for immediate resale, which could have an adverse effect on the price of our common stock. As a result of any such decreases in price of our common stock, purchasers who acquire shares from the Selling Stockholders may lose some or all of their investment. As of November 8, 2005, there are outstanding shares of our common stock that are restricted securities as that term is defined in Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"). Although the Securities Act and Rule 144 place certain prohibitions on the sale of restricted securities, restricted securities may be sold into the public market under certain conditions. Currently there are no shares of our common stock eligible for resale pursuant to Rule 144. Any significant downward pressure on the price of our common stock as the selling stockholders sell their shares of our common stock could encourage short sales by the selling stockholders or others. Any such short sales could place further downward pressure on the price of our common stock. RISKS RELATED TO OUR BUSINESS OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING HISTORY. In considering whether to invest in our common stock, you should consider that our inception was May 16, 2003 and, as a result, there is only limited historical financial and operating information available on which to base your evaluation of our performance. WE HAVE A HISTORY OF OPERATING LOSSES AND THERE CAN BE NO ASSURANCES WE WILL BE PROFITABLE IN THE FUTURE. 8 RISKS RELATED TO OUR BUSINESS - continued We have a history of operating losses, expect to continue to incur losses, and may never be profitable, and we must be considered to be in the development stage. Further, we have been dependent on sales of our equity securities and debt financing to meet our cash requirements. We have incurred losses totaling approximately ($128,170) from January 1, 2004 to December 31, 2004. As of December 31, 2004, we had an accumulated deficit of ($152,656). We have incurred further losses totaling approximately ($278,145) from January 1, 2005 to June 30, 2005. As of June 30, 2005, we had an accumulated deficit of ($430,801). Further, we do not expect positive cash flow from operations in the near term. There is no assurance that actual cash requirements will not exceed our estimates. In particular, additional capital may be required in the event that: - - the costs to acquire additional uranium exploration claims are more than we currently anticipate; - - exploration and or future potential mining costs for additional claims increase beyond our expectations; or - - we encounter greater costs associated with general and administrative expenses or offering costs. Our development of and participation in an increasingly larger number of uranium minerals exploration prospects has required and will continue to require substantial capital expenditures. The uncertainty and factors described throughout this section may impede our ability to economically discover, acquire, develop and/or exploit uranium prospects. As a result, we may not be able to achieve or sustain profitability or positive cash flows from operating activities in the future. WE HAVE RECEIVED A GOING CONCERN OPINION FROM OUR INDEPENDENT AUDITORS REPORT ACCOMPANYING OUR DECEMBER 31, 2004 FINANCIAL STATEMENTS. The independent auditor's report accompanying our December 31, 2004 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that the Company will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business. Our ability to continue as a going concern is dependent on raising additional capital to fund our operations and ultimately on generating future profitable operations. There can be no assurance that we will be able to raise sufficient additional capital or eventually have positive cash flow from operations to address all of our cash flow needs. If we are not able to find alternative sources of cash or generate positive cash flow from operations, our business and shareholders will be materially and adversely affected. WE WILL REQUIRE ADDITIONAL FUNDING IN THE FUTURE. Based upon our historical losses from operations, we will require additional funding in the future. If we cannot obtain capital through financings or otherwise, our ability to execute our development plans and achieve production levels will be greatly limited. Our current development plans require us to make capital expenditures for the exploration and development of our minerals exploration properties. Historically, we have funded our operations through the 9 RISKS RELATED TO OUR BUSINESS - continued issuance of equity and short-term debt financing arrangements. We may not be able to obtain additional financing on favorable terms, if at all. Our future cash flows and the availability of financing will be subject to a number of variables, including potential production and the market prices of uranium. Further, debt financing could lead to a diversion of cash flow to satisfy debt-servicing obligations and create restrictions on business operations. If we are unable to raise additional funds, it would have a material adverse effect upon our operations. As part of our growth strategy, we intend to acquire additional minerals exploration properties. Such acquisitions may pose substantial risks to our business, financial condition, and results of operations. In pursuing acquisitions, we will compete with other companies, many of which have greater financial and other resources to acquire attractive properties. Even if we are successful in acquiring additional properties, some of the properties may not produce revenues at anticipated levels, or failure to develop such prospects within specified time periods may cause the forfeiture of the lease in that prospect. There can be no assurance that we will be able to successfully integrate acquired properties, which could result in substantial costs and delays or other operational, technical, or financial problems. Further, acquisitions could disrupt ongoing business operations. If any of these events occur, it would have a material adverse effect upon our operations and results from operations. WE ARE A NEW ENTRANT INTO THE URANIUM MINERALS EXPLORATION AND DEVELOPMENT INDUSTRY WITHOUT PROFITABLE OPERATING HISTORY Since inception, our activities have been limited to organizational efforts, obtaining working capital and acquiring and developing a very limited number of properties. As a result, there is limited information regarding production or revenue generation. As a result, our future revenues may be limited. THE BUSINESS OF MINERALS EXPLORATION AND DEVELOPMENT IS SUBJECT TO MANY RISKS AND IF URANIUM IS FOUND IN ECONOMIC PRODUCTION QUANTITIES, THE POTENTIAL PROFITABILITY OF FUTURE POSSIBLE URANIUM MINING VENTURES DEPENDS UPON FACTORS BEYOND THE CONTROL OF OUR COMPANY The potential profitability of mining uranium properties if economic quantities of Uranium are found is dependent upon many factors and risks beyond our control, including, but not limited to: - - unanticipated ground and water conditions and adverse claims to water rights; - - geological problems; - - metallurgical and other processing problems; - - the occurrence of unusual weather or operating conditions and other force majeure events; - - lower than expected ore grades; - - accidents; 10 RISKS RELATED TO OUR BUSINESS - continued - - delays in the receipt of or failure to receive necessary government permits; - - delays in transportation; - - labor disputes; - - government permit restrictions and regulation restrictions; - - unavailability of materials and equipment; and - - the failure of equipment or processes to operate in accordance with specifications or expectations. The risks associated with exploration and development and if applicable, mining as described above could cause personal injury or death, environmental damage, delays in mining, monetary losses and possible legal liability. We are not currently engaged in mining operations because we are in the exploration phase and have not yet any proved uranium reserves. We do not presently carry property and liability insurance. Cost effective insurance contains exclusions and limitations on coverage and may be unavailable in some circumstances. THE URANIUM EXPLORATION AND MINING INDUSTRY IS HIGHLY COMPETITIVE AND THERE IS NO ASSURANCE THAT WE WILL BE SUCCESSFUL IN ACQUIRING THE LEASES. The uranium exploration and mining industry is intensely competitive, and we compete with other companies that have greater resources. Many of these companies not only explore for and produce uranium, but also market uranium and other products on a regional, national or worldwide basis. These companies may be able to pay more for productive uranium properties and exploratory prospects or define, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit. In addition, these companies may have a greater ability to continue exploration activities during periods of low uranium market prices. Our larger competitors may be able to absorb the burden of present and future federal, state, local and other laws and regulations more easily than we can, which would adversely affect our competitive position. Our ability to acquire additional properties and to discover productive prospects in the future will be dependent upon our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. In addition, because we have fewer financial and human resources than many companies in our industry, we may be at a disadvantage in bidding for exploratory prospects and producing uranium properties. THE MARKETABILITY OF NATURAL RESOURCES WILL BE AFFECTED BY NUMEROUS FACTORS BEYOND OUR CONTROL WHICH MAY RESULT IN US NOT RECEIVING AN ADEQUATE RETURN ON INVESTED CAPITAL TO BE PROFITABLE OR VIABLE. The marketability of natural resources which may be acquired or discovered by us will be affected by numerous factors beyond our control. These factors include macroeconomic factors, market fluctuations in commodity pricing and demand, the proximity and capacity of natural resource markets and processing equipment, governmental regulations, land tenure, land use, regulation concerning the importing and exporting of uranium and environmental protection regulations. The exact effect of these factors cannot be accurately predicted, but the 11 RISKS RELATED TO OUR BUSINESS - continued combination of these factors may result in us not receiving an adequate return on invested capital to be profitable or viable. URANIUM MINING OPERATIONS ARE SUBJECT TO COMPREHENSIVE REGULATION, WHICH MAY CAUSE SUBSTANTIAL DELAYS OR REQUIRE CAPITAL OUTLAYS IN EXCESS OF THOSE ANTICIPATED, CAUSING AN ADVERSE EFFECT ON OUR COMPANY. If economic quantities of uranium are found on any lease owned by the Company in sufficient quantities to warrant uranium mining operations, such mining operations are subject to federal, state, and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Uranium mining operations are also subject to federal, state, and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of mining methods and equipment. Various permits from government bodies are required for mining operations to be conducted; no assurance can be given that such permits will be received. Environmental standards imposed by federal, provincial, or local authorities may be changed and any such changes may have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus resulting in an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages which we may elect not to insure against due to prohibitive premium costs and other reasons. To date we have not been required to spend material amounts on compliance with environmental regulations. However, we may be required to do so in future and this may affect our ability to expand or maintain our operations. URANIUM MINERALS EXPLORATION AND DEVELOPMENT AND MINING ACTIVITIES ARE SUBJECT TO CERTAIN ENVIRONMENTAL REGULATIONS WHICH MAY PREVENT OR DELAY THE COMMENCEMENT OR CONTINUANCE OF OUR OPERATIONS. Uranium minerals exploration and development and future potential uranium mining operations are or will be subject to stringent federal, state, provincial, and local laws and regulations relating to improving or maintaining environmental quality. Our global operations are also subject to many environmental protection laws. Environmental laws often require parties to pay for remedial action or to pay damages regardless of fault. Environmental laws also often impose liability with respect to divested or terminated operations, even if the operations were terminated or divested of many years ago. Future potential uranium mining operations and current exploration activities are or will be subject to extensive laws and regulations governing prospecting, development, production, exports, taxes, labor standards, occupational health, waste disposal, protection and remediation of the environment, protection of endangered and protected species, mine safety, toxic substances and other matters. Uranium mining is also subject to risks and liabilities associated with pollution of the environment and disposal of waste products occurring as a result of mineral exploration and production. Compliance with these laws and regulations will impose substantial costs on us and will subject us to significant potential liabilities. Costs associated with environmental liabilities and compliance are expected to increase with the increasing scale and scope of operations and we expect these costs may increase in the future. 12 RISKS RELATED TO OUR BUSINESS - continued We believe that our operations comply, in all material respects, with all applicable environmental regulations. However, we are not fully insured against at the current date against possible environmental risks. ANY CHANGE TO GOVERNMENT REGULATION/ADMINISTRATIVE PRACTICES MAY HAVE A NEGATIVE IMPACT ON OUR ABILITY TO OPERATE AND OUR PROFITABILITY. The laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the United States or any other applicable jurisdiction, may be changed, applied or interpreted in a manner which will fundamentally alter our ability to carry on business. The actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect on us. Any or all of these situations may have a negative impact on our ability to operate and/or our profitably. WE MAY BE UNABLE TO RETAIN KEY EMPLOYEES OR CONSULTANTS OR RECRUIT ADDITIONAL QUALIFIED PERSONNEL. Our extremely limited personnel means that we would be required to spend significant sums of money to locate and train new employees in the event any of our employees resign or terminate their employment with us for any reason. Due to our limited operating history and financial resources, we are entirely dependent on the continued service of Amir Adnani, Chief Executive Officer, Grant Atkins, Chief Financial Officer and Randall Reneau, Chief Exploration Officer. Further, we do not have key man life insurance on any of these individuals. We may not have the financial resources to hire a replacement if any of our officers were to die. The loss of service of any of these employees could therefore significantly and adversely affect our operations. OUR OFFICERS AND DIRECTORS MAY BE SUBJECT TO CONFLICTS OF INTEREST. Our officers and directors serve only part time and are subject to conflicts of interest. Each of our executive officers and directors serves only on a part time basis. Each devotes part of his working time to other business endeavors, including consulting relationships with other corporate entities, and has responsibilities to these other entities. Such conflicts include deciding how much time to devote to our affairs, as well as what business opportunities should be presented to the Company. Because of these relationships, our officers and directors will be subject to conflicts of interest. ADDITIONAL ISSUANCES OF EQUITY SECURITIES MAY RESULT IN DILUTION TO OUR EXISTING STOCKHOLDERS. Our Articles of Incorporation authorize the issuance of 75,000,000 shares of common stock. Common stock is our only authorized class of stock. The board of directors has the authority to issue additional shares of our capital stock to provide additional financing in the future and the issuance of any such shares may result in a reduction of the book value or market price of the outstanding shares of our common stock. If we do issue any such additional shares, such issuance will also cause a reduction in the proportionate ownership and voting power of all other stockholders. As a result of such dilution, if you acquire shares of our common stock from the Selling Shareholders, your proportionate ownership interest and voting power will be decreased accordingly. Further, any such issuance could result in a change of control. 13 RISKS RELATED TO OUR BUSINESS - continued OUR COMMON STOCK IS CLASSIFIED AS A "PENNY STOCK" UNDER SEC RULES WHICH LIMITS THE MARKET FOR OUR COMMON STOCK. Because our stock is not traded on a stock exchange or on the NASDAQ National Market or the NASDAQ Small Cap Market, and because the market price of the common stock is less than $5 per share, the common stock is classified as a "penny stock." SEC Rule 15g-9 under the Exchange Act imposes additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as an "established customer" or an "accredited investor." This includes the requirement that a broker-dealer must make a determination that investments in penny stocks are suitable for the customer and must make special disclosures to the customers concerning the risk of penny stocks. Many broker-dealers decline to participate in penny stock transactions because of the extra requirements imposed on penny stock transactions. Application of the penny stock rules to our common stock reduces the market liquidity of our shares, which in turn affects the ability of holders of our common stock to resell the shares they purchase, and they may not be able to resell at prices at or above the prices they paid. NEVADA LAW AND OUR ARTICLES OF INCORPORATION MAY PROTECT OUR DIRECTORS FROM CERTAIN TYPES OF LAWSUITS. Nevada law provides that our officers and directors will not be liable to us or our stockholders for monetary damages for all but certain types of conduct as officers and directors. Our Bylaws permit us broad indemnification powers to all persons against all damages incurred in connection with our business to the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing stockholders from recovering damages against our officers and directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require us to use our limited assets to defend our officers and directors against claims, including claims arising out of their negligence, poor judgment, or other circumstances. FORWARD-LOOKING STATEMENTS This prospectus contains "forward-looking statements," as that term is used in federal securities laws, about our financial condition, results of operations and business. These statements include, among others: o statements concerning the benefits that we expect will result from our business activities and certain transactions that we have completed, such as increased revenues, decreased expenses and avoided expenses and expenditures; and o statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. These statements may be made expressly in this document or with documents that we will file with the SEC. You can find many of these statements by looking for words such as "believes," "expects," "anticipates," "estimates" or similar expressions used in this prospectus. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. We caution you not to put undue reliance on these statements, which speak only as 14 FORWARD-LOOKING STATEMENTS - continued of the date of this Prospectus. Further, the information contained in this prospectus is a statement of our present intention and is based on present facts and assumptions, and may change at any time and without notice, based on changes in such facts or assumptions. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. The safe harbor for forward-looking statements provided in the Private Securities Litigation Reform Act of 1995 does not apply to the offering made in this prospectus. USE OF PROCEEDS The shares of common stock offered hereby are being registered for the account of the Selling Shareholders named in this prospectus. As a result, all proceeds from the sales of the common stock will go to the Selling Shareholders and we will not receive any proceeds from the resale of the common stock by the selling stockholders. We will, however, incur all costs associated with this prospectus and related registration statement. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock is not listed on any exchange and there is no public trading market for the common stock. As of November 8, 2005, we had 56 shareholders of record. DIVIDEND POLICY No dividends have ever been declared by the Board of Directors on our common stock. Our losses do not currently indicate the ability to pay any cash dividends, and we do not indicate the intention of paying cash dividends on our common stock now or in the foreseeable future. SECURITIES AUTHORIZED FOR ISSUANCE UNDER COMPENSATION PLANS We have no equity compensation plan. MANAGEMENT'S DISCUSSION AND ANALYSIS The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this registration statement. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this registration statement, particularly in the section entitled "Risk Factors" beginning on page 8 of this registration statement. Our audited financial statements are stated in United 15 MANAGEMENT'S DISCUSSION AND ANALYSIS - continued States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. PLAN OF OPERATION 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. The Company has no proved reserves of any kind at the current date of this registration statement. We currently have interests in 4,333 acres of mineral properties that have been either leased or staked, which we intend to explore for economic deposits of uranium. These properties consist of eight claim blocks, located in the States of Arizona, Colorado, Utah, and Texas. Each of these properties has been the subject of historical exploration by other mining companies, and provides indications that uranium may exist in economic concentrations. The Company has access to historical exploration data that may provide indications of locations that may contain unknown quantities of uranium. These data consist chiefly of drill hole assay results, drill hole logs, studies, publicly published works, Company created work product, and maps, that help guide the Company's property acquisition strategy. The basis for management's belief that there may be indications that uranium may exist in economic concentrations on the Company's leased and claimed properties are based as follows with specific reference to each state where the Company has leased or claimed exploration property interests. The basis of information in each state pertains to prior exploration conducted by other companies, or management information and work product derived from various reports, maps, radioactive rock samples, exploratory drill logs, state organization reports, consultants, geological study, and other exploratory information. Colorado Claims acquired by the Company in Colorado have historical production tonnages and grades published in the Colorado Geological Survey, Bulletin 40 - "Radioactive Mineral Occurrences of Colorado". Additionally, a third party consulting miner/engineer was utilized by the Company for his first hand knowledge of the Colorado properties acquired. Also, the Company's Chief Geologist previously evaluated and acquired a portion of the claims currently owned by the Company (the Carnotite Mine) while consulting for another company, International Texas Industries, Inc. The Company confirms that at the current date, its Colorado located claims contain no uranium reserves and require extensive exploration by the Company. Utah The Company's Utah property (Crain Lease) was the subject of prior exploration drilling conducted by Pioneer-Uravan, Inc. and Truchas Limited in the 1970's to search for uranium indications. The Company has acquired gamma drill log interpretation worksheets1 from work previously conducted by Pioneer-Uravan, Inc. In addition, drill hole location maps have been obtained from work conducted for Pioneer-Uravan, Inc. and Truchas Limited. Further assay reports on core samples from exploration drilling previously conducted by Pioneer-Uravan, Inc. as verified by that company's commissioned assay report have also been obtained, as well as certain drill indicated uranium findings that provide the basis for preliminary reserve information as previously conducted and defined in a Truchas Limited summary and report (1979). The Company confirms that at the 16 MANAGEMENT'S DISCUSSION AND ANALYSIS - continued current date, its Utah located claims contain no uranium reserves that it has independently verified, and require extensive exploration by the Company. 1A gamma drill log interpretation worksheet is work product created from a listing of sensory information created at routine intervals that forms the output or log of a uranium testing technique used when exploring depths of the earth beneath the surface through exploratory drilling. Arizona All of the Company's Arizona Claims were previously the subject of exploration drilling for the incidence of Uranium by companies such as Noranda, Inc., Uranerz Energy Corp., Homestake Mining Co., and Oklahoma Public Services. The Company has acquired a 1979 Oklahoma Public Services ("OPS") geologic report contiguous to Company claims (Artillery Peak) that indicates the possibility of incidence of uranium. OPS drilling continued on to the Company's claims as evidenced by drill holes verified on the ground, and such drill cuttings were found to be radioactive. Close spaced developmental drilling is indicated on Company claims located at Artillery Peak. Uranium mineralization is well documented in this area by a number of publications including, "Artillery Peak Orientation Study", Mohave County, AZ, U.S. Dept. of Energy contract No. W-7405-ENG-48, "Geology of Uraniferous Tertiary Rocks in the Artillery Peak-Date Creek Basin", West-Central Arizona, USGS, Denver, Colorado, "Reported Occurrences of Uranium in Miscellaneous Sedimentary Formations, Diatremes and Pipes and Veins", State of Arizona publication, and "Major Uranium Discovery in Volcaniclastic Sedimentary, Basin and Range Province", Yavapai County, Arizona, J.E. Sherborne, Jr. (AAPG-1979). Other claims staked by the Company (Ester Basin, Crow Canyon and Dry Mountain) in Arizona were staked on known uranium occurrences as shown on Arizona State publication, "Occurrences of Uranium in Miscellaneous Sedimentary Formations, Diatremes and Pipes and Veins". Additionally, these claims were previously drilled by companies including Homestake Mining Co., Uranerz Energy Corp., and Noranda, Inc. in the 1970's uranium boom. Company management has confirmed prior claim ownership as verified with the United States Department of Interior - Bureau of Land Management. In addition, ground surveys completed by the Company have located various previous drill locations and radioactive anomalies as evidenced in ground and drill cuttings. The Company confirms that at the current date, its Arizona located claims contain no uranium reserves, and require extensive exploration by the Company. Texas The Company currently owns two (2) leases located in a South Texas uranium trend that have been the subject of substantial historical exploration by Wold Nuclear Corporation in the 1970's and 1980's, and constitute some of the Company's most prospective exploration targets. Wold Nuclear was a private uranium exploration company based in Casper, Wyoming and owned by former Wyoming U.S. Congressman, John S. Wold. Wold Nuclear, discovered a number of large uranium deposits in Wyoming which were later acquired and put into production by major uranium production companies. Wold Nuclear's Texas operations were a joint exploration venture with Cotter Corporation. Uranium Energy Corp.'s current chief geologist was employed by Wold Nuclear as district and chief geologist of its Texas based operations. 17 MANAGEMENT'S DISCUSSION AND ANALYSIS - continued Wold Nuclear's previous work conducted on and around the Uranium Energy Corp. exploration targets located in South Texas (Zavala County) is in a certain formation that was not the focus of uranium exploration in previous uranium booms (the "New Formation") (formation is not provided for competitive reasons). The New Formation represents a new "out of traditional trend" host rock for possible uranium mineralization. The Company has acquired a number of drill hole gamma logs, as well as one drill core whose chemical analysis supports the indication of uranium, along with lease and drill hole location maps. Insufficient drilling in past exploration programs to did not quantify any reserves for Wold Nuclear. However, a portion of rock within the New Formation has been identified with grades to 0.11% chemical U308. The expected mineralized area comprising the New Formation has been defined in geological area by Company work product. The New Formation host rock is up to 250' thick and has the potential for uranium deposits similar to Wyoming's Powder River Basin. To date, the Company has acquired two leases (473.06 gross acres) in an area where previous drilling and coring indicated ore grade uranium mineralization. Of the two leases acquired comprising 473.06 gross acres, the 323.38 acre Anne Knickerbocker McCulloch Lease in the Carrizo prospect area of Zavala County has now been 100% leased, including surface and minerals. The Company has full access to surface and minerals. These leases are "paid up" meaning no annual rental or advance royalty payments are due. The adjacent 149.68 acre Anne Knickerbocker McCulloch Lease tract is now 50% leased including the surface. This 50% interest gives the Company surface and mineral access to continue exploration and development of the property without cost to the non-owned interest owners. The Company can develop it's 50% mineral interest (149.68 acres) with or without the additional 50% unleased interest being in agreement or participating in such exploration or development. If the non Company owned 50% mineral interest owners elect not to lease to the Company, they will be carried as a non-participating mineral owner partners in the Company's mineral exploration program and be paid pro-rata royalties on production after the Company has recouped 100% of expenditures incurred in exploring and developing potential minerals on the property. In the State of Texas, minerals exploration have precedence over surface developments. Exploration Work Programs - Arizona and Colorado Our Chief Exploration Officer, Randall Reneau, based on historical data previously outlined and Company work product, has developed exploration programs unique to each state and claim block with the intent of proving or disproving the existence of uranium on these prospects. In order to carry out these exploration programs, $204,500 and approximately 12 months will be required, according to the exploration budget and schedule recommended by the Company's Chief Exploration Officer, Mr. Reneau, a Certified Professional Geologist. The Company believes it currently has capital required to complete Phase I exploration costs. The Company's ability to pay for Phase I exploration costs is not expected to be impacted by possible further property acquisitions. Additional capital for possible future uranium exploration property related acquisitions will be funded through additional offerings of debt and equity on an as required basis. The total cost of expected Phase II exploration on all mineral properties contemplated at this time is equal to $125,000 including contingency cost allowance. Additional costs for Phase II exploration work and for further lease and land acquisitions are expected to be funded by future financings from debt and equity sources. 18 MANAGEMENT'S DISCUSSION AND ANALYSIS - continued Phase I Work Programs - Arizona and Colorado The work program that has been recommended for the mineral properties is dependent on the nature of the exploration conducted prior to our acquisition. The intended Phase I work programs will be on the following claims located in both Arizona and Colorado: o Artillery Peak, Arizona o Ester Basin, Arizona o Gunsight Canyon, Arizona o Dry Mountain, Arizona o Raven Mine, Colorado o Triangulation-Whitney Mines, Colorado o Carnotite Mine, Colorado During Phase I work programs on these particular mineral claims, the Company plans to review and analyze all historical exploration data available to the Company in its current possession, and to probe existing drill holes with gamma probes, with a strategy that attempts to confirm historical drill results and plan for future development. Costs have been estimated at $14,500 per claim block. Phase I Work Programs - South Texas Leases We currently own two (2) leases located in a known and established South Texas uranium trend that have been the subject of substantial historical exploration by World Nuclear Corporation in the 1970's and 1980's, and constitute the Company's most prospective exploration targets. The Company plans to review all historical exploration data and to probe historical drill holes, at an estimated cost of $30,000. Included in Phase I for these particular leases will also include 9,450 feet of new drilling, at an estimated cost of $94,500. A further $5,000 cost has been estimated for mobilization and demobilization, as well as $2,500 for surface remediation. The total cost of Phase I exploration on all mineral properties contemplated at this time is equal to $204,500. Phase II Work Programs - The purpose of Phase I exploration work on the Artillery Peak, Ester Basin, and Dry Mountain claims in Arizona is chiefly to determine which areas require new drilling. Once the drill targets have been established, an estimated 7,500 feet of drilling is planned for all three properties, at an estimated cost of $75,000. The drill program will be allocated as follows: 3,000 feet at Artillery Peak; 1,500 feet at Ester Basin; 3,000 feet at Dry Mountain. These drill cores must then be logged at an estimated cost of $15,000. A further $2,500 per property has been estimated for mobilization of drill equipment and again for demobilization, as well as $2,500 per property for surface remediation. The total cost of Phase II exploration on all mineral properties contemplated at this time is equal to $125,000 including contingency cost allowance. Additional costs for Phase II exploration work and for further lease and land acquisitions are expected to be funded by future financings from debt and equity sources. The 19 MANAGEMENT'S DISCUSSION AND ANALYSIS - continued Company expects minimal effect on our ability to proceed with Phase II exploration should they be required in conjunction with further lease and land acquisitions as the amounts projected for Phase II exploration costs are not substantial in relation to budgeted total annual capital and operating expense expenditures. If however, additional land and lease expenditures during the next twelve months create a lack of capital for Phase II exploration costs beyond that anticipated in relation to available capital, the Company may not be in a financial position to conduct Phase II exploration if required. In all cases, results from Phase I of exploration on the Company's properties will determine whether the Company proceeds to Phase II of the exploration program, or discontinues exploration on the property. Phase II costs, if any, will be incurred in the subsequent 12-month period, and would require additional financing. We will require additional funding to implement our plan of operations beyond Phase I work programs. We anticipate that these funds primarily will be raised through equity and debt financing sources. If we raise additional funds through the issuance of equity or convertible debt securities, it will result in the dilution in the equity ownership of investors in our common stock. Further, such securities might have rights, preferences or privileges senior to our common stock. There can be no assurance that additional financing will be available upon acceptable terms, if at all. If adequate funds are not available or are not available on acceptable terms, we may be unable to take advantage of prospective new opportunities or acquisitions, which could significantly and materially restrict our operations. We do not expect to purchase any significant equipment or increase significantly the number of our employees during the next 12 months. Our current business strategy is to obtain resources under contract where possible because management believes that this strategy, at its current level of development, provides the best services available in the circumstances, leads to lower overall costs, and provides the best flexibility for our business operations. RESULTS OF OPERATIONS Our net loss for fiscal year ended December 31, 2004 was approximately ($128,170). During fiscal year ended December 31, 2004, we recorded interest income of $166. During the fiscal year ended December 31, 2004, we recorded operating expenses of $128,336, consisting primarily of (i) $57,112 in exploratory expenses; (ii) $12,175 in general and administrative expenses; (iii) $31,943 in management fees; and $27,106 in professional fees. General and administrative expenses generally include corporate overhead, financial and administrative contracted services and consulting costs. FOR THE PERIOD FROM JANUARY 1, 2005 TO JUNE 30, 2005 Our net loss for six month period ending June 30, 2005 was approximately ($278,145). During the six month period ending June 30, 2005, we recorded interest income of $803. During the six month period ending June 30, 2005, we recorded operating expenses of $278,948, consisting primarily of (i) $156,615 in exploratory expenses; (ii) $40,210 in general and administrative expenses; (iii) $55,052 in management 20 MANAGEMENT'S DISCUSSION AND ANALYSIS - continued fees; and $27,071 in professional fees. General and administrative expenses generally include corporate overhead, financial and administrative contracted services and consulting costs. LIQUIDITY AND CAPITAL RESOURCES For the period ended June 30, 2005, net cash flows used in operating activities was $(277,155) compared to the fiscal year ended December 31, 2004, whereby net cash flow used in operating activities was $(100,896). For the period ending June 30, 2005, net cash flows used in investing activities was $NIL compared to the fiscal year ended December 31, 2004, whereby net cash flows used in investing activities was $NIL. For the period ending June 30, 2005, net cash flow from financing activities was $300,338 compared to the fiscal year ended December 31, 2004, whereby net cash flow from financing activities was $506,820 pertaining primarily to the differential in the proceeds received on the sale of our common stock. At June 30, 2005, our current assets were $432,414, current liabilities were $64,090, resulting in a working capital surplus of $368,324. We expect that working capital requirements will continue to be funded through a combination of our existing funds, sources of debt, and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business. Existing working capital and anticipated cash flow are expected to be adequate to fund our operations over the next twelve months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) uranium exploration operating activities, (ii) possible future reserve definition, (iii) possible future mining initiatives on current and future properties, and (iv) future possible property acquisitions. We intend to finance these expenses with further issuances of securities, and debt issuances. We expect we will need to raise additional capital to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations. 21 MANAGEMENT'S DISCUSSION AND ANALYSIS - continued MATERIAL COMMITMENTS We have an ongoing commitment to pay the costs of registration pursuant to this registration statement, and management believes it has the capital resources to meet legal and administrative costs relating to this initiative. PURCHASE OF SIGNIFICANT EQUIPMENT We do not intend to purchase any significant equipment during the next twelve months. RECENT ACCOUNTING PRONOUNCEMENTS Recent accounting pronouncements In December 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary Assets, an amendment of APB Opinion No. 29, Accounting for Non-monetary Transactions ("SFAS 153") SFAS 153 requires that exchanges of non-monetary assets are to be measured based on fair value and eliminates the exception for exchanges of non-monetary, similar productive assets, and adds an exemption for non-monetary exchanges that do not have commercial substance. This statement eliminates the exception to fair value for exchanges of similar productive assets and replaces it with a general exception for exchange transactions that do not have commercial substance, defined as transactions that are not expected to result in significant changes in the cash flows of the reporting entity. SFAS 153 will be effective for fiscal periods beginning after June 15, 2005. For non-monetary transactions entered into after June 15, 2005, the Company will adopt the revised standard, but given the nature of transactions relevant to the Company's business operations, we do not expect that the revised policy will have a material impact on the Company's financial condition or results of operations at the current date. In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. A key provision of this statement is the requirement of a public entity to measure the cost of employee services received in exchange for an award of equity instruments (including stock options) based on the grant date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award (i.e., the requisite service period or vesting period). The Statement eliminates the ability to account for share-based compensation transactions under the intrinsic-value method utilizing APB Opinion No. 25, Accounting for Stock Issued to Employees, and generally requires that such transactions are accounted for using the fair-value method. This standard becomes effective for the Company for its first annual or interim period ended on or after December 15, 2005. The Company will adopt SFAS 123R no later than the beginning of the Company's fourth quarter ending December 31, 2005. Management is currently evaluating the potential impact that the adoption of SFAS 123R will have on the Company's financial position and results of operations in the future, but as at the date of this registration statement, the Company has no stock option plan in effect whereunder SFAS No. 123R could impact the Company's current financial position or current results of operations. However the Company may adopt a stock option plan in the future and grant options thereunder or enter into other share base compensation transactions. Until such time as such future potential transactions are undertaken, the potential impact is not determinable. 22 DESCRIPTION OF BUSINESS CORPORATE HISTORY Uranium Energy Corp. was incorporated under the laws of the State of Nevada on May 16, 2003. Please note that throughout this report, and unless otherwise noted, the words "we," "our," "us," the "Company," or "Uranium Energy," refers to Uranium Energy Corp. CURRENT BUSINESS OPERATIONS Uranium Energy Corp. is a resource company specializing in acquisition and development of mineral exploration properties in North America. Our strategy is to acquire properties that are thought to contain economic quantities of uranium ore and have undergone some degree of uranium exploration but have not yet been mined. We plan an aggressive acquisition strategy for the next 12 to 24 months to build uranium resources of 50 million pounds. To date, we have acquired interests in 4,333 acres of leased or staked mineral properties, consisting of claim blocks located in the States of Arizona, Colorado, Utah, and Texas. By our second year of operation, we have plans to acquire approximately 12,500 further acres of mineral properties subject to adequate funding being acquired consisting of further claim blocks located in the State of Texas. Other mineral property acquisitions are contemplated in the States of interest that include Arizona, Utah, Colorado, Texas, and Wyoming. These potential acquisition properties have not yet been specifically identified. COMPETITION We operate in a highly competitive industry, competing with other mining and exploration companies, and institutional and individual investors, which are actively seeking uranium minerals exploration properties throughout the world together with the equipment, labor and materials required to exploit such properties. Many of our competitors have financial resources, staff and facilities substantially greater than ours. The principal area of competition is encountered in the financial ability to cost effectively acquire prime minerals exploration prospects and then exploit such prospects. Competition for the acquisition of uranium minerals exploration properties is intense, with many properties available in a competitive bidding process in which we may lack technological information or expertise available to other bidders. Therefore, we may not be successful in acquiring and developing profitable properties in the face of this competition. No assurance can be given that a sufficient number of suitable uranium minerals exploration properties will be available for acquisition and development. MINERALS EXPLORATION REGULATION Our minerals exploration activities are, or will be, subject to extensive laws and regulations governing prospecting, development, production, exports, taxes, labor standards, occupational health, waste disposal, protection and remediation of the environment, protection of endangered and protected species, mine safety, toxic substances and other matters. minerals exploration is also subject to risks and liabilities associated with pollution of the environment and disposal of waste products occurring as a result of mineral exploration and production. Compliance with these laws and regulations may impose substantial costs on us and will subject us to significant potential liabilities. Changes in these 23 DESCRIPTION OF BUSINESS - continued regulations could require us to expend significant resources to comply with new laws or regulations or changes to current requirements and could have a material adverse effect on our Company. Exploration and production activities are subject to certain environmental regulations which may prevent or delay the commencement or continuance of our operations. In general, our exploration and production activities are subject to certain federal, state and local laws and regulations relating to environmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuance of a given operation. Compliance with these laws and regulations has not had a material effect on our operations or financial condition to date. Specifically, we are subject to legislation regarding emissions into the environment, water discharges and storage and disposition of hazardous wastes. In addition, legislation has been enacted which requires well and facility sites to be abandoned and reclaimed to the satisfaction of state authorities. However, such laws and regulations are frequently changed and we are unable to predict the ultimate cost of compliance. Generally, environmental requirements do not appear to affect us any differently or to any greater or lesser extent than other companies in the industry and our current operations have not expanded to a point where either compliance or cost of compliance with environmental regulation is a significant issue for the Company. Nil costs have been incurred to date with respect to compliance with environmental laws, and costs are only expected to increase with the increasing scale and scope of exploration operations, especially with the advent of Phase II exploration costs outlined in "Management's Discussion and Analysis". Minerals exploration operations are subject to comprehensive regulation which may cause substantial delays or require capital outlays in excess of those anticipated causing an adverse effect on our company. Minerals exploration operations are subject to federal, state, and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Minerals exploration operations are also subject to federal, state, and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment. Various permits from government bodies are required for drilling operations to be conducted; no assurance can be given that such permits will be received. Environmental standards imposed by federal, state, or local authorities may be changed and any such changes may have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages which we may elect not to insure against due to prohibitive premium costs and other reasons. To date we have not been required to spend material amounts on compliance with environmental regulations. However, we may be required to do so in future and this may affect our ability to expand or maintain our operations. Environmental regulation is discussed in further detail in the following section. ENVIRONMENTAL REGULATION Our activities will be subject to existing federal, state and local laws and regulations governing environmental quality and pollution control. Our operations will be subject to stringent environmental regulation by state and federal authorities including the Environmental Protection Agency ("EPA"). Such regulation can increase the cost of such activities. In most instances, the regulatory requirements relate to water and air pollution control measures. 24 DESCRIPTION OF BUSINESS - continued WASTE DISPOSAL The Resource Conservation and Recovery Act ("RCRA"), and comparable state statutes, affect Minerals exploration and production activities by imposing regulations on the generation, transportation, treatment, storage, disposal and cleanup of "hazardous wastes" and on the disposal of non-hazardous wastes. Under the auspices of the EPA, the individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. CERCLA The federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") imposes joint and several liability for costs of investigation and remediation and for natural resource damages, without regard to fault or the legality of the original conduct, on certain classes of persons with respect to the release into the environment of substances designated under CERCLA as hazardous substances ("Hazardous Substances"). These classes of persons or potentially responsible parties include the current and certain past owners and operators of a facility or property where there is or has been a release or threat of release of a Hazardous Substance and persons who disposed of or arranged for the disposal of the Hazardous Substances found at such a facility. CERCLA also authorizes the EPA and, in some cases, third parties to take actions in response to threats to the public health or the environment and to seek to recover the costs of such action. We may also in the future become an owner of facilities on which Hazardous Substances have been released by previous owners or operators. We may in the future be responsible under CERCLA for all or part of the costs to clean up facilities or property at which such substances have been released and for natural resource damages. AIR EMISSIONS Our operations are subject to local, state and federal regulations for the control of emissions of air pollution. Major sources of air pollutants are subject to more stringent, federally imposed permitting requirements. Administrative enforcement actions for failure to comply strictly with air pollution regulations or permits are generally resolved by payment of monetary fines and correction of any identified deficiencies. Alternatively, regulatory agencies could require us to forego construction, modification or operation of certain air emission sources. CLEAN WATER ACT The Clean Water Act ("CWA") imposes restrictions and strict controls regarding the discharge of wastes, including mineral processing wastes, into waters of the United States, a term broadly defined. Permits must be obtained to discharge pollutants into federal waters. The CWA provides for civil, criminal and administrative penalties for unauthorized discharges of hazardous substances and other pollutants. It imposes substantial potential liability for the costs of removal or remediation associated with discharges of oil or hazardous substances. State laws governing discharges to water also provide varying civil, criminal and administrative penalties and impose liabilities in the case of a discharge of petroleum or it derivatives, or other hazardous substances, into state waters. In addition, the EPA has promulgated regulations that may require us to obtain permits to discharge storm water runoff. In the event of an unauthorized discharge of wastes, we may be liable for penalties and costs. Management believes that we are in substantial compliance with current applicable environmental laws and regulations. 25 DESCRIPTION OF BUSINESS - continued MINERAL EXPLORATION COSTS Mineral property acquisition, exploration and development costs are expensed as incurred until such time as economic reserves are quantified. To date we have not established any proven or probable reserves on its mineral property interests. Estimated future removal and site restoration costs are provided over the life of proven reserves on a units-of-production basis. Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards. The charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred. RESEARCH AND DEVELOPMENT ACTIVITIES No research and development expenditures have been incurred, either on our account or sponsored by customers for the past three years. EMPLOYEES We do not employ any persons on a full-time or on a part-time basis. Amir Adnani is our President and Chief Executive Officer, Grant Atkins is our Chief Financial Officer, and Randall Reneau is our Chief Exploration Officer. These individuals are primarily responsible for all our day-to-day operations. Other services are provided by outsourcing and consultant and special purpose contracts. MINERALS EXPLORATION PROPERTIES The Company is participating in its mineral properties in the States of Arizona and Colorado by way of quitclaim deed. The properties were staked and claimed by the Company and registered with the United States Bureau of Land Management ("BLM"). There are a total of six claim blocks deeded to the Company in this manner in Arizona, and a further three claim blocks in Colorado. The Company has unfettered surface access, and complete mineral rights to an unlimited depth below surface. The deeds are in effect for five years, and carry renewable five-year terms for an indefinite period, provided that the annual processing fees are in good standing with the BLM. The claims were entered into between November 4, 2004 and April 21, 2005, corresponding to initial terms of expiry between November 4, 2009 and April 21, 2010. Annual processing fees to be paid to the BLM vary from county to county but are relatively nominal. The Company will also be required to remediate the land upon termination of the deed - bringing the land back into the state it was originally in prior to the commencement of our exploration activities. These costs are not determinable at this time. In the States of Wyoming, Utah and Texas, the Company is participating in its mineral properties by way of property lease directly from the owners of the land/mineral rights. At present, the Company has executed one lease in Utah, one lease in Wyoming, and six leases on two lease blocks in Texas. These leases give the Company similar access and privileges as described above, however with some important differences. Although the Company will have access to the surface, the mineral rights below surface are restricted to uranium only, with any other minerals, including, for example, petroleum, reverting to the lessor. The lease terms are for five years, and include five-year renewal periods. After the 26 DESCRIPTION OF BUSINESS - continued expiration of the second five-year term, the Company must renegotiate the terms of a new lease. Royalty payments must be made to the lessor in event that the Company extracts uranium ore from the properties in the amount of 6.25% of the gross revenue so generated. We have the following interests in these mineral properties under lease: State Claim / Lease Name County Interest Claims Acres Arizona Dry Mountain Graham 100% 28 560.00 Arizona Esther Basin Mohave 100% 10 200.00 Arizona Gunsight Canyon Mohave 100% 20 400.00 Arizona Artillery Peak 1 Mohave 100% 19 380.00 Arizona Artillery Peak 2 Mohave 100% 32 640.00 -------------------------- Subtotal 109 2,180.00 Colorado Carnotite Fremont 100% 18 360.00 Colorado Raven Mine Group Montrose 100% 22 440.00 Colorado Triangulation / Whitney mines Montrose 100% 12 240.00 -------------------------- Subtotal 52 1,040.00 Utah Crain - Lease San Juan 100% 640.00 Texas Anne Knickerbocker McCulloch - Lease Zavala 100%1 323.38 Texas Anne Knickerbocker McCulloch - Lease Zavala 50%1 149.68 -------------------------- Subtotal 473.06 - -------------------------------------------------------------------------------------------------------------- TOTAL: Claims / Acres 161 4,333.06 ==============================================================================================================
1 The 323.38 acre Anne Knickerbocker McCulloch Lease in Zavala County has now been 100% leased, including surface and minerals. The Company has full access to surface and minerals. These leases are "paid up" meaning no annual rental or advance royalty payments are due. The adjacent 149.68 acre Anne Knickerbocker McCulloch Lease tract is now 50% leased including the surface. This 50% interest gives the Company surface and mineral access to continue exploration and development of the property without cost to the non-owned interest owners. The Company can develop it's 50% mineral interest (149.68 acres) with or without the additional 50% unleased interest being in agreement or participating in such exploration or development. If the non Company owned 50% mineral interest owners elect not to lease to the Company, they will be carried as a non-participating mineral owner partners in the Company's mineral exploration program and be paid pro-rata royalties on production after the Company has recouped 100% of expenditures incurred in exploring and developing potential minerals on the property. In the State of Texas, minerals exploration have precedence over surface developments. 27 DESCRIPTION OF BUSINESS - continued These properties do not have any indicated or inferred minerals or reserves. We plan to conduct exploration programs on these properties with the intent to prove or disprove the existence of economic concentrations of uranium. Since inception, we have not established any proven or probable reserves on its mineral property interests. On October 11, 2005, we entered into a Mineral Asset Option Agreement (the "Option") with Brad A. Moore giving us the option to acquire certain uranium leases from Mr. Moore in the State of Texas. In consideration for the Option, we have paid Mr. Moore a cash payment of $50,000 and issued to his direction 500,000 shares of our restricted common stock which are not subject to this Registration Statement. The Option, if exercised will require the further issuance of 1,500,000 restricted common shares in 500,000 share installments over the three, six month intervals following the effective date of the Option (October 11, 2005), and a further payment of $150,000 on April 11, 2006. Title to the properties to be acquired will transfer upon payment of all stock and cash as are required under the Option, the timing of which may be accelerated at the Company's discretion. During the Option term, the Company has the right as operator to conduct or otherwise direct the all exploration on the properties to be acquired. EXECUTIVE OFFICES Our principal office space is rented on a month to month basis and is located at Austin Centre, 701 Brazos, Suite 500 PMB#, Austin, Texas 78701. The office space costs approximately $183 per month. The Company also has a one year lease ending on April 30, 2006 for field offices located at Pioneer Business Center, 341 East "E" Street, Suite 135b, Casper, Wyoming 82601. The office space costs approximately $350 per month. LEGAL PROCEEDINGS We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS All of our directors hold office until the next annual general meeting of the shareholders or until their successors are elected and qualified. Our officers are appointed by our board of directors and hold office until their earlier death, retirement, resignation or removal. 28 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS - continued Our directors and executive officers, their ages, positions held are as follows: NAME AGE POSITION WITH THE COMPANY - ------------------ --- ------------------------ Amir Adnani 27 President/Chief Executive Officer and Director Grant Atkins 45 Treasurer/Chief Financial Officer, and Director Randall Reneau 56 Chief Exploration Officer, and Director Johnathan Lindsay 29 Secretary D. Bruce Horton 60 Director Steve Jewett 66 Director Alan Lindsay 55 Director BUSINESS EXPERIENCE The following is a brief account of the education and business experience of each director, executive officer and key employee during at least the past five years, indicating each person's principal occupation during the period, and the name and principal business of the organization by which he or she was employed. Amir Adnani has been our Chief Executive Officer, President and Director since January 24, 2005. Mr. Adnani is an entrepreneur with an extensive background in business development and marketing. He founded and has been, for the last five years, president of Blender Media Inc., a Vancouver based company that provides strategic marketing and financial communications services to public companies and investors in mineral exploration, mining, and energy sectors. He has many contacts throughout the minerals exploration and financial communities. Mr. Adnani holds a Bachelor of Science degree from the University of British Columbia. Grant Atkins has been Chief Financial Officer and a Director since January 24, 2005. Mr. Atkins is also Chief Executive Officer, President, and Director of Lexington Resources, Inc. For the past ten years, Mr. Atkins has been self-employed and has acted as a financial and project coordination consultant to clients in government and private industry. He has extensive multi-industry experience in the fields of finance, administration and business development. Mr. Atkins received a Bachelor of Commerce degree from the University of British Columbia. Randall Reneau has been our Chief Exploration Officer since January 24, 2005. Mr. Reneau is registered as a Certified Professional Geologist with over 30 years of experience in mineral exploration and project management in the United States, Mexico, Brazil and West Africa. Mr. Reneau has significant experience exploring for uranium in the United States, specifically in Texas, Arizona, New Mexico and Wyoming, the states known to hold the largest uranium reserves. He extensively explored these states while employed in a senior position for Conoco Uranium, a subsidiary of Conoco Ltd., and World Nuclear Corporation, a 29 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS - continued privately-held company. For the past 10 years, he has been an independent contractor, performing geology services for mining and exploration companies internationally. He obtained his M.S. in Environmental Engineering from Kennedy-Western University, Boise, Idaho, and a B.A. in Geology from Central Washington University. Johnathan Lindsay has been Secretary to Uranium Energy Corp. (formerly Carlin Gold Inc.) since its inception, where he was responsible for organizing initial financing for the Company. In 1997, Mr. Lindsay worked with the Investor Relations Group and for National Media, two North American public sector marketing firms. While there, he developed relationships with key personnel in the resource and finance sectors. Following his position with National Media, he studied marketing from 1998-99 at the British Columbia Institute of Technology. From 1999 to 2004, Mr. Lindsay was employed by Alan Lindsay and Associates as VP Marketing and Corporate Secretary. Since 2004, Mr. Lindsay is currently the president of Ocean Tower Productions, a privately-held film production company. Ocean Tower currently has films in various stages of production. Steve Jewett has been a director and member of our Audit Committee since January 24, 2005. Since 1978, Mr. Jewett has been the owner of Stephen Jewett - Chartered Accountants. During his career, Mr. Jewett was auditor of several public companies. Mr. Jewett received his degree as a Chartered Accountant from the Institute of Chartered Accountants of British Columbia and is the audit committee's financial expert. D. Bruce Horton has been a director and member of our Audit Committee since January 24, 2005. During the past five years, Mr. Horton has been active in the financial arena in both the private and public sectors as an accountant and financial management consultant with an emphasis on corporate financial reporting, financing and tax planning. Mr. Horton has specialized in corporate management, re-organization, merger and acquisition, international tax structuring, and public and private financing for over thirty years. From 1972 through 1986, Mr. Horton was a partner in a public accounting firm. In 1986, Mr. Horton co-founded the Clearly Canadian Beverage Corporation, of which he was a director and chief financial officer until 1997. Alan Lindsay has been a director since May 16, 2003. Mr. Lindsay has extensive experience and expertise in the mining and biomedical fields. From 2000 to the present, he has been the Chairman, President and CEO of MIV Therapeutics Inc., a publicly-listed biomedical company focused on biocompatible coating technology for stents and medical devices, and was also a co-founder of GeneMax Pharmaceuticals, a biotech company with a novel cancer treatment technology discovered at the University of British Columbia. Mr. Lindsay was the founder of AZCO Mining Inc. and served as Chairman, President and CEO of AZCO from 1992 to 2000. During his term, AZCO obtained listings on both the Toronto and American Stock Exchanges. AZCO developed the Sanchez copper deposit and Piedras Verdes copper deposits with a combined SX-EW oxide copper resource of 3.25 billion pounds of copper. Mr. Lindsay negotiated a business transaction with Phelps Dodge Corporation that led to the sale of the Sanchez deposit for $55 million and a joint venture on the Piedras Verdes deposit. Amir Adnani, Grant Atkins, Alan Lindsay, Johnathan Lindsay, and Randall Reneau may be deemed to be organizers of the Company based upon their activities in founding and organizing the business of the Company. 30 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS - continued FAMILY RELATIONSHIPS The Secretary of our Company, Johnathan Lindsay, is the son of Alan Lindsay, a director of our Company; otherwise, there are no other family relationships among our directors or officers. INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS During the past five years, none of our directors, executive officers or persons that may be deemed promoters is or have been involved in any legal proceeding concerning (i) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (ii) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (iii) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction permanently or temporarily enjoining, barring, suspending or otherwise limiting involvement in any type of business, securities or banking activity; or (iv) being found by a court, the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law (and the judgment has not been reversed, suspended or vacated). EXECUTIVE COMPENSATION During the last fiscal year, none of the directors of our Company were compensated for their roles as directors. Directors of our Company may be reimbursed for any out-of-pocket expenses incurred by them on behalf of our Company. Certain officers are paid for services provided to the Company as indicated below. We presently have no pension, health, annuity, insurance, profit sharing or similar benefit plans. From June 30, 2004 and as formalized in a letter agreement dated December 1, 2004, Randall Reneau has had a services agreement with us, whereby he may perform geological consulting services for us in exchange for $350 per diem plus expenses. In the year ended December 31, 2004, Mr. Reneau has invoiced us, and has been compensated, in the amount of $12,506. Mr. Reneau has received compensation in the approximate amount of $47,026 for the six month period ended June 30, 2005. Mr. Amir Adnani, the Company's President, has accrued compensation in the amount of $4,000 for fiscal year 2004 and $24,000 during the six month period ended June 30, 2005. Mr. Johnathan Lindsay, the Company's Secretary, has accrued compensation in the amount of $25,171 for fiscal year 2004 and approximately $14,542 during the six month period ended June 30, 2005. We do not have formal employment agreements with Mr. Adnani, Mr. Lindsay, or Mr. Atkins. Executive compensation is subject to change concurrent with our compensation policy. 31 EXECUTIVE COMPENSATION - continued SUMMARY COMPENSATION TABLE None of our executive officers received an annual salary and bonus that exceeded $100,000 during the fiscal year ending December 31, 2004. The following table sets forth the compensation received by officers and directors of the Company during 2004. ANNUAL COMPENSATION LONG TERM COMPENSATION NAME AND FISCAL SALARY OTHER SECURITIES PRINCIPAL POSITION YEAR UNDERLYING OPTIONS Amir Adnani 2004 $4,000 0 0 President and Chief Executive Officer Grant Atkins 2004 0 0 0 Chief Financial Officer Randall Reneau 2004 0 $12,506 0 Chief Exploration Officer Johnathan Lindsay 2004 25,171 0 0 Secretary EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS CONSULTATION AGREEMENT From June 30, 2004 and as formalized in a letter agreement dated December 1, 2004, Randall Reneau has had a services agreement with us, whereby he may perform geological consulting services for us in exchange for $350 per diem plus expenses. In the year ended December 31, 2004, Mr. Reneau has invoiced us, and has been compensated, in the amount of $12,506. COMPENSATION OF DIRECTORS Generally, our Directors do not receive salaries or fees for serving as directors, nor do they receive any compensation for attending meetings of the Board of Directors. Directors are entitled to reimbursement of expenses incurred in attending meetings or for direct expenses incurred in duties and actions for the sole benefit of our Company. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None 32 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of November 8, 2005, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock and by each of our current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated. - --------------------------------- ------------- -------------- --------------- Name and Address of Beneficial Number of Nature Percentage Owner Shares Owned of Ownership Ownership - --------------------------------- ------------- -------------- --------------- Amir 635,334 Direct 5.46% Adnani 2302-930 Cambie Street Vancouver, B.C. V6B 5X6 - --------------------------------- ------------- -------------- --------------- Randall 500,000 Direct 4.30% Reneau 9302 Mystic Oak Trail Austin, TX 78750 - --------------------------------- ------------- -------------- -------------- D. Bruce 33,334 Direct 0.29% Horton 2443 Alder Street Vancouver, B.C. V6H 4A4 - --------------------------------- ------------- -------------- --------------- Alan 870,858 Direct 7.48% Lindsay 2701-1500 Hornby Street Vancouver, B.C. V6Z 2R1 - --------------------------------- ------------- -------------- --------------- Isaiah Capital 1,823,333 Direct 15.67% Trust 28-30 The Parade St. Heller, Jersey Channel Islands JE4 8XY - --------------------------------- ------------- -------------- --------------- Golden West 3,750,000 Direct 32.23% Investments P.O. Box 97 Leeward Highway Provenciales Turks & Caicos Islands, BWI - --------------------------------- ------------- -------------- --------------- 33 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - continued - --------------------------------- ------------- -------------- --------------- Name and Address of Beneficial Number of Nature Percentage Owner Shares Owned of Ownership Ownership - --------------------------------- ------------- -------------- --------------- Ethny 950,000 Direct 8.16% Lindsay 201 Villa Pax, Ocean Way, Umhlanga Rocks, Republic of South Africa, 4320 - --------------------------------- ------------- -------------- --------------- James 727,667 Direct 6.25% Davidson 455 Barstow Road, Prince Frederick, Maryland, USA, 20678 - --------------------------------- ------------- -------------- --------------- Johnathan Lindsay 265,574 Direct 2.28% T13-1501 Howe Street Vancouver, B.C. V6Z 2P8 - --------------------------------- ------------- -------------- --------------- TOTAL 9,556,100 82.13% - --------------------------------- ------------- -------------- --------------- CHANGES IN CONTROL We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change in control of our Company. DESCRIPTION OF COMMON STOCK We are authorized to issue 75,000,000 common shares with a par value of $0.001. As of November 8, 2005 we had 12,135,722 common shares outstanding. Upon liquidation, dissolution or winding up of the corporation, the holders of common stock are entitled to share ratably in all net assets available for distribution to common stockholders after payment to creditors. The common stock is not convertible or redeemable and has no preemptive, subscription or conversion rights. Each outstanding share of common stock is entitled to one vote on all matters submitted to a vote of stockholders. There are no cumulative voting rights. The holders of outstanding shares of common stock are entitled to receive dividends out of assets legally available therefore at such times and in such amounts as our board of directors may from time to time determine. Holders of common stock will share equally on a per share basis in any dividend declared by 34 DESCRIPTION OF COMMON STOCK - continued the board of directors. We have not paid any dividends on our common stock and do not anticipate paying any cash dividends on such stock in the foreseeable future. In the event of a merger or consolidation, all holders of common stock will be entitled to receive the same per share consideration. PLAN OF DISTRIBUTION The Selling Shareholders of the common stock of Uranium Energy Corp., and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of Common Stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The sales price to the public has been determined by the shareholders to be $0.50 per share. The price of $0.50 per share is a fixed price until the securities are listed on the OTC Bulletin Board or other national exchange, and thereafter at prevailing market prices or privately negotiated prices. There can be no assurance that our shares will be approved for trading on the OTC Bulletin Board. The Selling Shareholders may use any one or more of the following methods when selling shares: - - ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; - - block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; - - purchases by a broker-dealer as principal and resale by the broker-dealer for its account; - - an exchange distribution in accordance with the rules of the applicable exchange; - - privately negotiated transactions; - - settlement of short sales entered into after the date of this prospectus; - - broker-dealers may agree with the Selling Shareholders to sell a specified number of such shares at a stipulated price per share; - - a combination of any such methods of sale; - - through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; or - - any other method permitted pursuant to applicable law. The Selling Shareholders may also sell shares under Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"), if available, rather than under this prospectus. 35 PLAN OF DISTRIBUTION - continued Broker-dealers engaged by the Selling Shareholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Shareholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. Each Selling Shareholders does not expect these commissions and discounts relating to their sale of shares to exceed what is customary in the types of transactions involved. In connection with the sale of our common stock or interests therein, the Selling Shareholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The Selling Shareholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The Selling Shareholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). The Selling Shareholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Shareholder has informed us that it does not have any agreement or understanding, directly or indirectly, with any person to distribute the common stock. We are required to pay certain fees and expenses incurred by us incident to the registration of the shares. We have agreed to indemnify the Selling Shareholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. Because the Selling Shareholders may be deemed to be "underwriters" within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. Currently there are no shares of our common stock eligible for resale pursuant to Rule 144.Each Selling Shareholders has advised us that they have not entered into any agreements, understandings or arrangements with any underwriter or broker-dealer regarding the sale of the resale shares. There is no underwriter or coordinating broker acting in connection with the proposed sale of the resale shares by the Selling Shareholders. The resale shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with. Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to our common stock for a period of two business days prior to the commencement of the distribution. In addition, the 36 PLAN OF DISTRIBUTION - continued Selling Shareholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of our common stock by the Selling Shareholders or any other person. We will make copies of this prospectus available to the Selling Shareholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale. SELLING SHAREHOLDERS The Selling Shareholders may offer and sell, from time to time, any or all of the common stock registered pursuant to this Registration Statement. Because the Selling Shareholders may offer all or only some portion of the 2,435,722 shares of common stock to be registered, no estimate can be given as to the amount or percentage of these shares of common stock that will be held by the selling stockholders upon termination of the offering. The following table sets forth certain information regarding the beneficial ownership of shares of common stock by the Selling Shareholders as of November 8, 2005, and the number of shares of common stock covered by this prospectus. The number of shares in the table represents an estimate of the number of shares of common stock to be offered by the selling stockholder. None of the Selling Shareholders is a broker-dealer, or an affiliate of a broker-dealer to our knowledge.
- ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Selling Shareholders Shares of Common Shares of Common Shares of Common Percentage of Percentage of Stock Owned Prior to Stock to be Stock Owned After Common Stock Common Stock Offering Offered for Sale the Offering Owned Before the Owned After the Offering Offering - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- James Davidson 727,667 102,667 625,000 6.30% 6.44% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Isaiah Capital Trust (1) 1,823,333 23,333 1,800,000 15.02% 18.56% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ---------------- Donna Cuthbert 2,000 2,000 0 0.02% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Len Cuthbert 2,000 2,000 0 0.02% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Rosalind Lindsey 2,000 2,000 0 0.02% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Thomas O'Neill Management Corp. (2) 2,000 2,000 0 0.02% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Joyce Wyssen 125,000 0 125,000 1.03% 1.29% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- 37 SELLING SHAREHOLDERS - continued - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Selling Shareholders Shares of Common Shares of Common Shares of Common Percentage of Percentage of Stock Owned Prior to Stock to be Stock Owned After Common Stock Common Stock Offering Offered for Sale the Offering Owned Before the Owned After the Offering Offering - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Andrea Boyce 2,000 2,000 0 0.02% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Elizabeth Bayback 3,334 3,334 0 0.03% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Michael Bayback 303,334 303,334 0 2.50% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- George Duggan 1,667 1,667 0 0.01% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Jim Yates 10,000 10,000 0 0.08% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Amir Adnani 635,334 135,334 500,000 5.46% 5.15% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Kian Ehsan 32,000 32,000 0 0.26% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Parisa Ehsan 2,000 2,000 0 0.02% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Glynn Fisher 3,500 3,500 0 0.03% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Jean-Claude Doucet 2,000 2,000 0 0.02% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Alan Lindsey 870,858 370,858 500,000 7.18% 5.15% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Johnathan Lindsey 265,574 15,574 250,000 2.19% 2.58% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Oliver Lindsey 2,000 2,000 0 0.02% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Dennis Corin 1,000 1,000 0 0.01% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Wayne Livingstone 2,000 2,000 0 0.02% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Kersti Livingstone 2,000 2,000 0 0.02% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Ron Saperstein 2,000 2,000 0 0.02% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- James Paterson 667 667 0 0.01% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Carey Whitehead 1,926 1,926 0 0.02% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Deborah Price 667 667 0 0.01% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- John Martin 2,020 2,020 0 0.02% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Darren Mann 2,500 2,500 0 0.02% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Newport Capital Corp. (3) 100,001 100,001 0 0.82% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Verona Capital International (4) 166,667 166,667 0 1.37% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Alexander W. Cox 333,334 333,334 0 2.75% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Princeton Estate Company, Inc., BVI 33,334 33,334 0 0.27% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- 38 SELLING SHAREHOLDERS - continued - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Selling Shareholders Shares of Common Shares of Common Shares of Common Percentage of Percentage of Stock Owned Prior to Stock to be Stock Owned After Common Stock Common Stock Offering Offered for Sale the Offering Owned Before the Owned After the Offering Offering - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Ethny Lindsey 950,000 0 950,000 7.83% 9.79% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Canon Bryan 50,000 0 50,000 0.41% 0.52% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Michael Levy 16,667 16,667 0 0.14% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Randall P. Reneau 500,000 0 500,000 4.12% 5.15% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Leonard Garcia 150,000 0 150,000 1.24% 1.55% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Bradley N. Scharfe 16,667 16,667 0 0.14% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- D. Bruce Horton 33,334 33,334 0 0.27% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Bryan M. Dear 33,334 33,334 0 0.27% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Matthew Cicci 33,334 33,334 0 0.27% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- James Dow 33,334 33,334 0 0.27% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Jenirob Company, Ltd. (6) 33,334 33,334 0 0.27% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Michael Cassidy 33,334 33,334 0 0.27% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Golden West Investments (7) 3,750,000 0 3,750,000 30.90% 38.66% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Marcus Johnson 16,667 16,667 0 0.14% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Frank Sticht 50,000 50,000 0 0.41% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Peter Jessop 40,000 40,000 0 0.33% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Doug Casey 200,000 200,000 0 1.65% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Brien F. Lundin 50,000 50,000 0 0.41% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Dr. Sherwin Mohammadnabi 50,000 50,000 0 0.41% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Freddy Abnousi 120,000 120,000 0 0.99% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Mehrangiz Talaifar 10,000 10,000 0 0.08% 0.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Brad Moore 250,000 0 250,000 2.06% 2.58% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- Clyde Yancy 250,000 0 250,000 2.06% 2.58% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ ----------------- TOTAL 12,135,722 2,435,722 9,700,000 100.00% 100.00% - ---------------------------------- -------------------- ------------------ -------------------- ------------------ -----------------
* = less than 1% 39 SELLING SHAREHOLDERS - continued (1) Isaiah Capital Trust is a trust account held for the benefit of Sandra Corin, the sole beneficiary, and is managed by Equity Trust. (2) Thomas O'Neill Management Corp. is controlled by Thomas O'Neill, its sole officer, director and shareholder. (3) Newport Capital Corp. is controlled by Brent Pierce, its president and director, and its sole shareholder Regulus Advisor Limited, as trustee for Emerald Trust. (4) Verona Capital International is controlled by Philippe Mast, its sole officer and director. (5) Princeton Estate Company, Inc. BVI is controlled by Todd Moore, its sole officer and director. (6) Jenirob Company, Ltd. is controlled by Philippe Mast, its sole officer and director. (7) Golden West Investments is controlled by Barry Dempsey for Cockburn Directors Ltd. and its sole shareholder, Rising Sun Capital Corp. We will require the Selling Shareholders to suspend the sales of the securities offered by this prospectus upon the occurrence of any event that makes any statement in this prospectus or the related registration statement untrue in any material respect or that requires the changing of statements in these documents in order to make statements in those documents not misleading. LEGAL MATERS The validity of the common stock offered by this prospectus has been passed upon by The O'Neal Law Firm, P.C. EXPERTS The consolidated financial statements of Uranium Energy included in this registration statement have been audited by Dale Matheson Carr-Hilton LaBonte, to the extent and for the period set forth in their report appearing elsewhere in the registration statement, and are included in reliance upon such reports given upon the authority of said firms as experts in auditing and accounting. INTEREST OF NAMED EXPERTS AND COUNSEL No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency basis or had, or is to receive, in connection with the offering, a substantial interest, directly or indirectly, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents, subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer or employee. 40 DISCLOSURE OF SEC POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES Our Bylaws provide that directors and officers shall be indemnified by us to the fullest extent authorized by the Nevada General Corporation Law, against all expenses and liabilities reasonably incurred in connection with services for us or on our behalf. The bylaws also authorize the board of directors to indemnify any other person who we have the power to indemnify under the Nevada General Corporation Law, and indemnification for such a person may be greater or different from that provided in the bylaws. Insofar as indemnification for liabilities arising under the Securities Act might be permitted to directors, officers or persons controlling our Company under the provisions described above, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. WHERE YOU CAN FIND MORE INFORMATION We are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy any document we file at the Commission's Public Reference Room at100 F Street, N.E.,Washington, D.C. 20549 You may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. You can also obtain copies of our Commission filings by going to the Commission's website at http://www.sec.gov. We have filed with the Securities and Exchange Commission a registration statement on Form SB-2, under the Securities Act with respect to the securities offered under this prospectus. This prospectus, which forms a part of that registration statement, does not contain all information included in the registration statement. Certain information is omitted and you should refer to the registration statement and its exhibits. With respect to references made in this prospectus to any contract or other document of Lexington Resources, Inc., the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract or document. No finder, dealer, sales person or other person has been authorized to give any information or to make any representation in connection with this offering other than those contained in this prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by Uranium Energy Corp.. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby by anyone in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this prospectus nor any sale made hereunder shall, under any circumstances, create any implication that the information contained herein is correct as of any time subsequent to the date of this prospectus. 41 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS URANIUM ENERGY CORP. (formerly Carlin Gold Inc.) (an exploration stage company) FINANCIAL STATEMENTS JUNE 30, 2005 (UNAUDITED) AND DECEMBER 31, 2004 AND 2003 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ....................43 BALANCE SHEETS .............................................................44 STATEMENTS OF OPERATIONS ...................................................45 STATEMENT OF STOCKHOLDERS' EQUITY ..........................................46 STATEMENTS OF CASH FLOWS ...................................................47 NOTES TO FINANCIAL STATEMENTS ..............................................48 42 (LETTER HEAD GRAPHIC OMITTED] REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Uranium Energy Corp. (Formerly Carlin Gold Inc.) We have audited the balance sheets of Uranium Energy Corp. (formerly Carlin Gold Inc.), (an exploration stage company) as at December 31, 2004 and 2003 and the statements of operations, stockholders' equity and cash flows for the year ended December 31, 2004 and the period from May 16, 2003 (inception) to December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2004 and 2003 and the results of its operations and its cash flows and the changes in stockholders' equity for the year ended December 31, 2004 and the period from May 16, 2003 (inception) to December 31, 2003 in accordance with United States Generally Accepted Accounting Principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has reported significant losses since inception from operations and requires additional financing to meet its obligations and fund the costs of its operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in this regard are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Dale Matheson Carr-Hilton LaBonte ------------------------------------ CHARTERED ACCOUNTANTS Vancouver, B.C. May 31, 2005 43 URANIUM ENERGY CORPORATION (formerly Carlin Gold Inc.) (an exploration stage company) BALANCE SHEETS June 30, December December 2005 31, 2004 31, 2003 ----------- ---------- ---------- (Unaudited) ASSETS ------- CURRENT ASSETS Cash and short-term investments $429,453 $406,270 $ 346 Other current assets 2,961 1,613 32 ----------- ---------- ---------- $432,414 $407,883 $ 378 =========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) ------------------------------------------------- CURRENT LIABILITIES Accounts payable and accrued liabilities $ 31,193 $ 28,855 $ -- ----------- ---------- ---------- Convertible debenture (Note 4) -- -- 10,000 Due to related parties (Note 8) 32,897 7,559 14,864 ----------- ---------- ---------- 64,090 36,414 24,864 ----------- ---------- ---------- STOCKHOLDERS' EQUITY (DEFICIENCY) Capital Stock (Note 5) Common stock $0.001 par value: 75,000,000 shares authorized 11,435,722 shares issued and outstanding (2004 - 10,885,772; 2003 - nil) 11,435 10,886 -- ----------- ---------- ---------- Additional paid-in capital 787,690 513,239 -- ----------- ---------- ---------- Deficit accumulated during the exploration stage (430,801) (152,656) (24,486) ----------- ---------- ---------- 368,324 371,469 (24,486) ----------- ---------- ---------- $432,414 $ 407,883 $ 378 =========== ========== ========== The accompanying notes are an integral part of these financial statements. 44 URANIUM ENERGY CORPORATION (formerly Carlin Gold Inc.) STATEMENTS OF OPERATIONS
For the Six For the Period For the Period Month Period For the Year From May 16, 2003 From May 16, 2003 Ended Ended (inception) to (inception) to June 30, 2005 December 31, 2004 December 31, 2003 June 30, 2005 (Unaudited) (Note 1) (Unaudited) -------------- ------------------ ------------------ ------------------ REVENUES $ 803 $ 166 $ -- $ 969 -------------- ------------------ ------------------ ------------------ EXPENSES Exploration expense 156,615 57,112 1,054 214,781 General and administrative 40,210 12,175 1,524 53,909 Management fees 55,052 31,943 12,658 99,653 Professional fees 27,071 27,106 9,250 63,427 -------------- ------------------ ------------------ ------------------ 278,948 128,336 24,486 431,770 NET LOSS FOR THE PERIOD $ (278,145) $ (128,170) $ (24,486) $ (430,801 ============== ================== ================== ================== BASIC NET LOSS PER SHARE $ (0.03) $ (0.12) $ (0.00) ============== ================== ================== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 11,133,728 1,070,596 -- ============== ================== ==================
The accompanying notes are an integral part of these financial statements. 45 URANIUM ENERGY CORPORATION (formerly Carlin Gold Inc.) (an exploration stage company) STATEMENT OF STOCKHOLDERS' EQUITY For the period from May 16, 2003 (inception) to June 30, 2005 (unaudited)
Deficit Accumulated Additional During Total Common stock Paid-in Exploration Stockholders' Date Shares Amount Capital Stage Equity - ------------------------------------------- ------------ ---------- ---------- --------- ------------ -------------- May 16, 2003 -- $ -- $ -- $ -- $ -- ------------ ---------- ---------- --------- ------------ -------------- Net loss for the period -- -- -- (24,486) (24,486) ------------ ---------- ---------- --------- ------------ -------------- Balance - December 31, 2003 -- -- -- (24,486) (24,486) Shares issued for cash at $0.002 per share July 27, 2004 1,050,000 1,050 1,050 -- 2,100 Shares issued for cash at $0.30 per share Aug 23, 2004 156,782 157 46,881 -- 47,038 Shares issued on conversion of debenture at $0.30 per share (Note 4) Aug 23, 2004 23,333 23 6,977 -- 7,000 Shares issued on settlement of debts at $0.30 per share (Note 8) Aug 23, 2004 53,098 53 15,876 -- 15,929 Shares issued for cash at $0.002 per share Oct 7, 2004 to Dec 7, 2004 6,650,000 6,650 6,650 -- 13,300 Shares issued on conversion of debenture at $0.002 per share (Note 4) Dec 7, 2004 1,500,000 1,500 1,500 -- 3,000 Shares issued for cash at $0.30 per share Dec 31, 2004 1,452,509 1,453 434,305 -- 435,758 Net loss for the period -- -- -- (128,170) (128,170) ------------ ---------- ---------- --------- ------------ -------------- Balance - December 31, 2004 10,885,722 10,886 513,239 (152,656) 371,469 ------------ ---------- ---------- --------- ------------ -------------- Shares issued for cash at $0.50 per share Mar 7, 2005 90,000 90 44,910 -- 45,000 Shares issued for cash at $0.50 per share Mar 28, 2005 200,000 200 99,800 -- 100,000 Shares issued for cash at $0.50 per share Apr 1, 2005 80,000 80 39,920 -- 40,000 Shares issued for cash at $0.50 per share Apr 28, 2005 170,000 170 84,830 -- 85,000 Shares issued for cash at $0.50 per share May 7, 2005 10,000 10 4,990 -- 5,000 ------------ ---------- ---------- --------- ------------ -------------- Net loss for the period (unaudited) -- -- -- -- (278,145) (278,145) ------------ ---------- ---------- --------- ------------ -------------- Balance - June 30, 2005 (unaudited) 11,435,722 $ 11,436 $ 787,689 $ (430,801) $ 368,324 ============================================= ============ ========== ========== ========= ============ ==============
The accompanying notes are an integral part of these financial statements. 46 URANIUM ENERGY CORPORATION (formerly Carlin Gold Inc.) (an exploration stage company) STATEMENTS OF CASH FLOW
For the Period For the Period For the Six From May 16, From May 16, Month Period For the Year 2003 2003 Ended Ended (inception) to (inception) to June 30, 2005 December 31, 2004 December 31, 2003 June 30, 2005 -------------- ------------------ ------------------ --------------- (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period $(278,145) $ (128,170) $ (24,486) $ (430,801) Adjustments to reconcile net loss to net cash from operating activities: Non-cash exploration expenses -- -- 10,000 10,000 Non-cash exploration recoveries -- -- (20,000) (20,000) Other current assets (1,348) (1,581) (32) (2,961) Accounts payable and accrued liabilities 2,338 28,855 -- 31,193 -------------- ------------------ ------------------ --------------- NET CASH FLOWS USED IN OPERATING ACTIVITIES (277,155) (100,896) (34,518) (412,569) -------------- ------------------ ------------------ --------------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of shares for cash 275,000 498,196 -- 773,196 Convertible debenture proceeds -- -- 20,000 20,000 Advances from related parties 25,338 8,624 14,864 48,826 -------------- ------------------ ------------------ --------------- NET CASH FLOWS FROM FINANCING ACTIVITIES 300,338 506,820 34,864 842,022 -------------- ------------------ ------------------ --------------- INCREASE IN CASH AND CASH EQUIVALENTS 23,183 405,924 346 429,453 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 406,270 346 -- -- -------------- ------------------ ------------------ --------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 429,453 $ 406,270 $ 346 $ 429,453 ============== ================== ================== =============== CASH AND CASH EQUIVALENTS ARE MADE UP AS FOLLOWS: Cash in bank $ 198,486 $ 276,104 $ 346 $ 198,486 Short term investments 230,967 130,166 -- 230,967 -------------- ------------------ ------------------ --------------- $ 429,453 $ 406,270 $ 346 $ 429,453 ============== ================== ================== =============== SUPPLEMENTAL DISCLOSURES: Interest paid $ -- $ -- $ -- $ -- ============== ================== ================== =============== Taxes paid $ -- $ -- $ -- $ -- ============== ================== ================== ===============
The accompanying notes are an integral part of these financial statements. 47 URANIUM ENERGY CORPORATION (formerly Carlin Gold Inc.) (an exploration stage company) NOTES TO FINANCIAL STATEMENTS 1: NATURE OF OPERATIONS AND BASIS OF PRESENTATION Uranium Energy Corp. (the "Company") was incorporated on May 16, 2003 in the State of Nevada as Carlin Gold, Inc. The Company is an exploration stage company that was originally organized to explore and develop precious metals in the United States. During 2004, the Company changed its business direction from the exploration of precious metals to the exclusive focus on the exploration and development of for uranium deposits in the United States and internationally. Due to the change in the Company's core business direction, the Company is in the process of disposing of its 18 mineral property claims in the State of Nevada. In addition, the Company commenced a reorganization, including a reverse stock split by the issuance of 1 new share for each 2 outstanding shares of the Company's common stock and the raising of further capital for its new operating directives (refer to Notes 3 and 9). On January 24, 2005, the Company approved a special resolution to change the name of the Company from Carlin Gold, Inc. to Uranium Energy Corp. Since November 1, 2004, the Company has acquired mineral leases for the purposes of exploring for economic deposits of uranium in the States of Arizona, Texas, Colorado, and Utah. To date, interests in approximately 4,333 acres of mineral properties have been staked or leased by the Company. Going Concern The Company commenced operations on May 16, 2003 and has not realized any significant revenues since inception. As at June 30, 2005, the Company has an accumulated deficit of $430,801 (December 31, 2004 - $152,656). The Company is in the exploration stage of its mineral property development and to date has not yet established any known mineral reserves on any of its existing properties. The ability of the Company to continue as a going concern is dependent on raising capital to fund its planned mineral exploration work and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company's ability to continue as a going concern. The Company intends to continue to fund its initial operations by way of private placements and advances from related parties as may be required. To date the Company has completed private placements for total proceeds of $773,196 on the issuance of shares of the Company's common stock. 48 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization The Company was incorporated on May 16, 2003 in the State of Nevada. The Company's fiscal year end is December 31 and the initial period is from May 16, 2003 (inception) to December 31, 2003. Basis of Presentation These financial statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting principles. Cash and Cash Equivalent The Company considers all highly liquid instruments with an original maturity of three months or less at the time of issuance to be cash equivalents. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Significant areas requiring management's estimates and assumptions are determining the fair value of shares of common stock and convertible debentures. Mineral Property Costs Mineral property acquisition, exploration and development costs are expensed as incurred until such time as economic reserves are quantified. To date the Company has not established any proven or probable reserves on its mineral property interests Estimated future removal and site restoration costs are provided over the life of proven reserves on a units-of-production basis. Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards. The charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred. Asset Retirement Obligations The Company has adopted the provisions of SFAS No. 143 "Accounting for Asset Retirement Obligations," which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets. The adoption of this standard has had no effect on the Company's financial position or results of operations. To June 30, 2005 any potential costs relating to the ultimate disposition of the Company's mineral property interests have not yet been determinable. 49 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Financial Instruments The fair values of cash and cash equivalents, other current assets, accounts payable and accrued liabilities, convertible debentures and amounts due to related parties were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. The Company's operations and financing activities are conducted primarily in United States dollars, and as a result the Company is not subject to significant exposure to market risks from changes in foreign currency rates. Management does not believe the Company is exposed to significant credit risk and accordingly does not manage credit risk directly. Loss per Common Share Basic loss per share includes no dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive earnings per share reflects the potential dilution of securities that could share in the earnings of the Company. The convertible debentures were not included in the calculation of weighted average number of shares outstanding because the effect would be anti-dilutive. Income Taxes The Company follows the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances. Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. As at June 30, 2005, December 31, 2004 and 2003 the Company had net operating loss carryforwards; however, due to the uncertainty of realization, the Company has provided a full valuation allowance for the deferred tax assets resulting from these loss carryforwards. Stock-based Compensation The Company has not adopted a stock option plan and has not granted any stock options to date. Accordingly no stock-based compensation has been recorded to date. Recent accounting pronouncements In March 2004, the FASB issued EITF No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments ("EITF 03-1"). The objective of EITF 03-1 is to provide guidance for identifying impaired investments. EITD 03-1 also provides new disclosure requirements for investments that are deemed to be temporarily impaired. In October 2004, the FASB delayed the recognition and measurement provisions of EITF 03-1 until implementation guidance is issued. The disclosure requirements are effective for annual periods ending after June 15, 2004, and remain in effect. The adoption of EITF 03-1 did not have a material impact on the Company's financial condition or results of operations. 50 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued In December 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary Assets, an amendment of APB Opinion No. 29, Accounting for Non-monetary Transactions ("SFAS 153") SFAS 153 requires that exchanges of non-monetary assets are to be measured based on fair value and eliminates the exception for exchanges of non-monetary, similar productive assets, and adds an exemption for non-monetary exchanges that do not have commercial substance. SFAS 153 will be effective for fiscal periods beginning after June 15, 2005. Management does not believe that the adoption of this standard will have a material impact on the Company's financial condition or results of operations. In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. A key provision of this statement is the requirement of a public entity to measure the cost of employee services received in exchange for an award of equity instruments (including stock options) based on the grant date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award (i.e., the requisite service period or vesting period). This standard becomes effective for the Company for its first annual or interim period ended on or after December 15, 2005. The Company will adopt SFAS 123R no later than the beginning of the Company's fourth quarter ending December 31, 2005. Management is currently evaluating the potential impact that the adoption of SFAS 123R will have on the Company's financial position and results of operations. NOTE 3: MINERAL EXPLORATION PROPERTIES Precious Metals Exploration During 2003, the Company acquired 50 mineral claims in Elko County, Nevada, for consideration of $10,000 which was paid by a shareholder on behalf of the Company and formed part of the consideration received by the Company in connection with the Convertible Debenture (refer to Note 4). In connection with this acquisition, the Company granted a gold and silver production royalty to this shareholder in the amount of $36,000 for the first three years of production, $50,000 for subsequent years of production, plus a 4% net smelter royalty. No amount was recorded in connection with the granting of these royalties as the fair value was not readily determinable nor considered material given the preliminary exploration stage of the property. These mineral claims were acquired for the purpose of exploring for mineable reserves of precious metals. A total of $5,006 was spent on initial exploration in 2004 ($10,354 in 2003) on these claims. The results of preliminary exploration were unfavorable and accordingly during 2003, 32 of the mineral claims were sold to the aforementioned shareholder in settlement of $20,000 of the Convertible Debenture (refer to Note 4). The $20,000 settlement was recorded as reduction of exploration expenses in 2003. During 2004, management determined that its 18 remaining mineral claims had nominal value, and a decision was made to abandon or dispose of the remaining 18 mineral claims commensurate with the reorganization initiatives pursued by the Company. During July, 2005, the Company disposed of these remaining mineral claims to the Isaiah Capital Trust for no further consideration and accordingly no gain or loss on disposal has been recorded. Uranium Exploration During 2004, the Company changed its focus from precious metals exploration in the State of Nevada to the exploration for economic reserves of uranium throughout the United States and internationally. The Company changed its name from Carlin Gold, Inc. to Uranium Energy Corp. on January 24, 2005. 51 NOTE 3: MINERAL EXPLORATION PROPERTIES - continued Since November 1, 2004, and further to the reorganization of the Company's business direction, the Company has been acquiring mineral leases for the purposes of exploring for economic deposits of uranium in the State of Arizona. As of December 31, 2004, four claim blocks in Arizona comprising 1,540 acres of mineral properties, have been staked or leased by the Company. A total of $11,649 has been expended to acquire these mineral claims. During the first six months of 2005, six further uranium exploration mineral properties totaling 2,623 acres have been acquired in the States of Arizona, Colorado, Texas and Utah as well as a 50% interest in 149 acres in the State of Texas for aggregate costs of $72,087. To date, a total of 4,183 acres of mineral properties have been staked or leased by the Company in the States of Arizona, Colorado, Texas and Utah and an additional 50% interest in 150 acres in the State of Texas. The Company has interests in 4,333 gross acres for the purposes of uranium exploration. The Company's work plan calls for the acquisition of further uranium exploration properties in Texas, Arizona, Utah, Colorado, and Wyoming. The Company has developed detailed exploration programs for each claim block area of interest based on historical data derived from past uranium exploration by other companies, with a mandate to prove or disprove the existence of uranium resources. The Company has budgeted approximately $200,000 during the next 12 months for the purposes of further property acquisitions and exploration. NOTE 4: CONVERTIBLE DEBENTURE On October 22, 2003, Isaiah Capital Trust ("Lender"), a shareholder of the Company, was issued a convertible debenture for $30,000 owing by the Company in connection with the acquisition of precious metals exploration properties in Elko County, Nevada (refer to Note 3) and other amounts advanced to the Company. The principal amount was due and payable on June 1, 2004. The debenture bore interest at the rate of 3% per annum and was secured by 50 mineral property claims located in the State of Nevada, then deeded to the Company. The Lender had the right to convert all or any portion of the indebtedness at any time after April 1, 2004 into common stock of the Company at a price of $0.10 per common share. The borrower had the option to adjust the conversion price commensurate with any material change in the value or prospects of the Company, including but not limited to, merger, acquisition, disposition of assets, reclassification of conversion securities, or dilution. On December 12, 2003, the terms of the convertible debenture were modified by an Amended And Restated Convertible Debenture after the Lender, on December 9, 2003, purchased 32 of the 50 mineral claims previously acquired by the Company for a $20,000 reduction in the original debenture which was recorded as a reduction in exploration expenses in 2003 (refer to Note 3). The Amended And Restated Convertible Debenture was in the principal amount of $10,000 and carried similar terms to the original convertible debenture. On August 23, 2004, in conjunction with the Company's changed business direction from the exploration of precious metals to the exclusive focus on the exploration and development of uranium deposits in the United States and internationally, the parties to the Amended And Restated Convertible Debenture agreed to extend the debenture's term from June 1, 2004 to December 31, 2004, and waive interest accruing under the terms of the revised debenture upon 52 NOTE 4: CONVERTIBLE DEBENTURE - continued conversion. The parties also agreed to modify the terms of conversion according to the prevailing private placement rate of $0.30 per share for 70% of the debenture's stated amount and $0.002 per share for 30% of the debenture's stated amount. The Lender then elected to convert $7,000 of the principal amount outstanding resulting in the issuance of 23,333 shares of the Company's common stock. On December 7, 2004, the Lender elected to convert the remaining amount outstanding under the Amended And Restated Convertible Debenture in the amount of $3,000, which was converted at the rate of $0.002 per share resulting in the issuance of 1,500,000 shares of the Company's common stock. There was no intrinsic value to the original conversion feature of this convertible debenture and accordingly, no beneficial conversion feature value was recorded. Further, as at the time of the modification of the terms of the Convertible Debenture, the Company had no material assets, was commencing a reorganization of the Company of which the modification was a component and there was no market for trading in shares of the Company's common stock. As a result, management determined that any fair value resulting from the modification of the terms of the convertible debenture was not material. Accordingly no amount was recorded in connection with the modification of the terms of the convertible debenture. NOTE 5: CAPITAL STOCK The Company's capitalization is 75,000,000 authorized common shares with a par value of $0.001 per share. On January 24, 2005, a majority of shareholders and the directors of the Company approved a special resolution to undertake a reverse stock split of the common stock of the Company on a 1 new share for 2 old shares basis. The par value and the number of authorized but unissued shares of the Company's common stock was not changed as a result of the reverse stock split. Effective January 24, 2005 the then issued and outstanding common shares of the Company became 10,885,722. All references in these financial statements to number of commons shares, price per share and weighted average number of common shares outstanding prior to the reverse stock split have been adjusted to record the effect of the reverse stock split on a retroactive basis. Effective July 27, 2004 the Company issued 1,050,000 shares of common stock to the original founders of the Company at a price of $0.002 per share for total proceeds of $2,100 and effective August 23, 2004, the Company issued 233,213 shares of common stock at $0.30 per share for total proceeds of $69,967 in connection with the Company's original precious metal exploration program of which 53,098 shares were issued on settlement of amounts owing to related parties in the aggregate amount of $15,929, and 23,333 shares were issued on the conversion of debentures in the aggregate amount of $7,000 as described in Note 4. On December 7, 2004, the Company issued 8,150,000 shares of common stock to the Company's new management team, consultants and stakeholders in connection with the reorganization and change of business direction of the Company as described in Note 1 at a price of $0.002 per share for total proceeds of $16,300 of which 53 NOTE 5: CAPITAL STOCK - continued 1,500,000 shares were issued on the conversion of debentures in the aggregate amount of $3,000 as described in Note 4. On December 31, 2004, the Company issued 1,452,509 shares of common stock in connection with private placements of common stock at a price of $0.30 per share for total proceeds of $435,758 to fund the Company's intended uranium exploration program. During 2005, the Company issued 550,000 shares of common stock in connection with private placements of common stock at a price of $0.50 per share for total proceeds of $275,000. NOTE 6: STOCK OPTION PLAN As of June 30, 2005, December 31, 2004 and 2003, the Company did not have a stock option plan in place and consequently has not granted any stock options and has not recorded any stock-based compensation in connection with a stock option plan. NOTE 7: INCOME TAXES There were no significant temporary differences between the Company's tax and financial bases, except for the Company's net operating loss carryforwards amounting to approximately $431,000 at June 30, 2005 (December 31, 2004 - $153,000; December 31, 2003 - $24,000) which may be available to offset future taxable income. These carryforwards will begin to expire, if not utilized, commencing in 2023. The realization of the benefits from these deferred tax assets appears uncertain due to the Company's limited operating history. Accordingly, a valuation allowance has been recorded which offsets the deferred tax assets at the end of the year. NOTE 8: DUE TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS During the period ended December 31, 2003, the Company had transactions with certain officers and directors of the Company as follows: management fees incurred - $12,658; cash advances to the Company - $3,792; cash advances repaid by the Company - $8,062. As at December 31, 2003 $14,864 is owing to these related parties. During the year ended December 31, 2004, the Company had transactions with certain officers and directors of the Company as follows: management fees incurred - $31,943; geological services incurred - $12,506; cash advances to the Company - $2,128; settlement of amounts owing by the issuance of share of common stock at $0.30 per share - $15,929; cash advances repaid by the Company - $46,136. As at December 31, 2004, $8,486 is owing to these related parties of which $927 has been included in accounts payable. During the period ended June 30, 2005, the Company had transactions with certain officers and directors of the Company as follows: management fees incurred - $38,542; geological services incurred - $47,026; cash advances repaid by the Company - $61,157. As at June 30, 2005, $32,897 is owing to these related parties. 54 NOTE 8: DUE TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS - continued Amounts owing to related parties are unsecured, non-interest bearing and without specific terms of repayment. NOTE 9: SUBSEQUENT EVENTS The Company is currently completing a prospectus and registration statement with the Securities and Exchange Commission in the United States that covers the resale by certain selling shareholders of 2,435,722 shares of common stock which were issued from August 23, 2004 through September 16, 2005 in connection with private placements. On September 16, 2005, the Company issued 200,000 shares of common stock in connection with a private placement of common stock at a price of $0.50 per share for total proceeds of $100,000 to a current shareholder of the Company to fund the Company's intended uranium exploration program. On October 11, 2005, the Company entered into a Mineral Asset Option Agreement (the "Option") granting us the option to acquire certain uranium leases in the State of Texas. In consideration for the Option, the Company made a cash payment of $50,000 and issued 500,000 shares of restricted common stock. The Option, if exercised will require the further issuance of 1,500,000 shares of restricted common stock in 500,000 share installments due six, twelve, and eighteen months from the effective date of the Option, and a further payment of $150,000 on April 11, 2006. Title to the properties to be acquired will transfer upon payment of all stock and cash as are required under the Option, the timing of which may be accelerated at the Company's discretion. During the Option term, the Company has the right as operator to conduct or otherwise direct the all exploration on the properties to be acquired. 55 PART II - INFORMATION NOT REQUIRED IN PROSPECTUS INDEMNIFICATION OF DIRECTORS AND OFFICERS Nevada Revised Statute Section 78.7502 provides that: (i) a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful; (ii) a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper; and (iii) to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding, or in defense of any claim, issue or matter therein, the corporation shall indemnify him against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense. Nevada Revise Statute Section 78.751 provides that we may make any discretionary indemnification only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made: (a) by our stockholders; (b) by our board of directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding; (c) if a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent legal counsel in a written opinion; 56 INDEMNIFICATION OF DIRECTORS AND OFFICERS - continued (d) if a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion; or (e) by court order. Our Certificate of Incorporation and Articles provide that no director or officer shall e personally liable to our Company, any of our stockholders or any other for damages for breach of fiduciary du y as a director or officer involving any act or omission of such director or officer unless such acts or omissions involve intentional misconduct, fraud or a knowing violation of law, or the payment of dividends in violation of the General Corporate Law of Nevada. Further, our Bylaws provide that we shall, to the fullest and broadest extent permitted y law, indemnify all persons whom we may indemnify pursuant thereto. We may, but shall not be obligated to, maintain insurance, at our expense, to protect ourselves and any other person against any liability, cost or expense. We shall not indemnify persons seeking indemnity in connection with any threatened, pending or completed action, suit or proceeding voluntarily brought or threatened by such person unless such action, suit or proceeding has been authorized by a majority of the entire Board of Directors. Insofar as indemnification for liabilities arising under the Securities Act might be permitted to directors, officers or persons controlling our Company under the provisions described above, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the estimated expenses in connection with this registration: SEC Registration Fees $ 143 Printing and Engraving Fees (1) $ 500 Accounting Fees and Expenses (1) $ 2,000 Legal Fees and Expenses (1) $17,000 Edgarization and Filing Fees (1) $3,000 Transfer Agent Fees and Expenses (1) $ 1,500 Miscellaneous $ 1,000 ---------- Total (1) $25,143 (1) We have estimated these amounts. 57 RECENT SALES OF UNREGISTERED SECURITIES During the past three years, we have sold unregistered securities in private placement offerings, issued stock in exchange for debts or pursuant to contractual agreements as set forth below. From May 16, 2003, through the date of this registration statement we issued 12,135,722 shares of our common stock to 56 individual and corporate investors, including our officers and directors, for aggregate proceeds of $899,125. 9,700,000 of these shares were issued at $0.002 per share to certain founders, officers, management, and directors. 1,685,722 of these shares were issued at $0.30 per share to other investors. From January 1, 2005, to the date of this registration statement, a further 750,000 shares were issued at $0.50 per share to other investors. On October 11, 2005, we issued an aggregate of 500,000 shares of our common stock to Brad A. Moore and his designate Clyde Yancy, each receiving 250,000 shares of common stock, as partial payment pursuant to a Mineral Asset Option Agreement between us and Mr. Moore dated October 11, 2005. We relied upon Regulation S with respect to the issuance of 9,749,719 shares of our common stock to 44 foreign investors, and Regulation D of the Securities Act of 1933, as amended (the "Act") with respect to the issuance of 2,386,003 shares of our common stock to 12 U.S. investors. Our officers and directors determined the sophistication of our investors, with 11 being determined as non-accredited investors and 45 being determined as accredited investors. Each investor completed a subscription agreement whereby the investors certified that they were purchasing the shares for their own accounts, with investment intent. This offering was not accompanied by general advertisement or general solicitation and the shares were issued with a Rule 144 restrictive legend. EXHIBITS Exhibit Number Description - -------------- ------------------------------- 3.1 Articles of Incorporation (1) 3.2 Bylaws (1) 3.3 Audit Committee Charter (1) 3.4 Ethics Charter (1) 4.1 Reneau Consulting Agreement 4.2 Mineral Asset Option Agreement 5.1 Opinion and Consent of Counsel 23.1 Consent of Independent Auditor (1) Incorporated by reference from Form SB-2 filed August 4, 2005. 58 UNDERTAKINGS With regard to the securities of the registrant being registered pursuant to Rule 415 under the Securities Act the registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and (iii) To include any additional or changed material information on the plan of distribution. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. Insofar as indemnification for liabilities arising under the Securities Act might be permitted to directors, officers or persons controlling our Company under the provisions described above, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. 59 SIGNATURES In accordance with the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and has authorized this registration statement to be signed on its behalf by the undersigned in the city of Vancouver, British Columbia on November 8, 2005. URANIUM ENERGY CORP. By: /s/Amir Adnani -------------------------- Amir Adnani, President In accordance with the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Date: November 8, 2005 /s/ AMIR ADNANI ------------------------------- Amir Adnani, President, Chief Executive Officer, and Chairman of the Board of Directors Date: November 8, 2005 /s/ GRANT ATKINS ------------------------------- Grant Atkins, Chief Financial Officer, Principal Accounting Officer and Director Date: November 8, 2005 /s/ STEVE JEWETT ------------------------------- Steve Jewett, Director Date: November 8, 2005 /s/ D. BRUCE HORTON ------------------------------- D. Bruce Horton, Director Date: November 8, 2005 /s/ ALAN LINDSAY ------------------------------- Alan Lindsay, Director 60 EX-4 3 exhibit_4-1.txt RENEAU CONSULTING AGREEMENT Exhibit 4.1 Reneau Consulting Agreement [GRAPHIC OMITTED] Austin Centre, 701 Brazos Suite 500, PMB# Austin, TX 78701 Toll Free: (877) 676-7183 Tel: (512) 721-1022 Fax: (512) 721-1023 DATE: December 1, 2004 Attention: Randy Reneau 9302 Mystic Oaks Trail Austin, Texas 78750 RE: ENGAGEMENT FOR PROFESSIONAL SERVICES Dear Mr. Reneau ("Consultant"): As per our preliminary discussion regarding the provision of business analysis services for Uranium Energy Corp, (the "Company") please see the terms of service and the preliminary scope of work enclosed. If you are in agreement with the terms herein, please execute a copy of this letter and return it to our offices. Contract of Work Randall Reneau of Austin Texas shall offer exploration & business services to the Company on an ongoing full time basis. It is hereby proposed to enter into contract for such services with Uranium Energy Corp. as delineated below, and to be modified as necessary on an ongoing basis by the parties hereto beyond that specifically addressed in this letter. Confidentiality All documents, materials, conversations developed by the Consultant for the Company are the private property of the Company. Consultant agrees not to disclose any such materials to any third party unless in the normal course of business for the Company's direct benefit without the Company's express written consent. Materials produced as a result of this contract of work are the property of Uranium Energy Corp. Scope of Work Randall Reneau agrees not to perform any services without prior disclosure of the estimated scope of work to Uranium Energy Corp. If, at any time, during performance of services, it is estimated that the preliminary scope of work will be exceeded materially, notification must be made to Uranium Energy Corp. Consultant agrees to provide timely and ongoing disclosure of work conducted. Completion of work is subject to the availability of the resources provided by the Company to Randall Reneau and such budgets and resources shall be defined for any period of work. 1 Professional Fees and Expenses Fees for professional services rendered are charged at the rate of $350 USD per day. Professional expenses paid on behalf of Uranium Energy Corp. by Randall Reneau will be reimbursed to Randall Reneau on the last day of each month. Randall Reneau will hold monthly budget operating monies in trust for Uranium Energy Corp. with Randall Reneau acting as the trustee for normally budgeted disbursements agreed upon in advance by the parties hereto Randall Reneau will invoice the Company for fees and expenses bi-monthly. Settlement is due upon receipt of invoice. Office Space While working under contract for Uranium Energy Corp., Consultant will work out of the Reneau & Associates office space. Remuneration is to be included in the $350.00 USD per day fee. At such time as additional space is required, the parties shall agree on office space locations, costs and budgets for additional location(s) of work. Termination of Services There will be a 30 day written notice for termination of services provided by the party seeking to end professional relations. Scope of Work Geological Exploration. Consultant will act as an exploration officer for Uranium Energy Corp., exploring potential uranium properties on behalf of Uranium Energy Corp. Land Acquisition Negotiations Consultant will negotiate on behalf of Uranium Energy Corp. regarding the purchase or lease of potential uranium type properties. Data Research Consultant will research the appropriate data and give his best opinion to Uranium Energy Corp., regarding potential uranium exploration. Retain Services Consultant will retain any services he deems necessary for uranium exploration on behalf of Uranium Energy Corp after consulting with and receiving approval from Uranium Energy Corp. Sign on behalf of Company After approval of contract from Uranium Energy Corp., Randall Reneau is provided with the authority to sign contracts on behalf of Uranium Energy Corp. where necessary. 2 Geological Reports Randall Reneau will write geological reports regarding the properties he explores on behalf of Uranium Energy Corp. Sincerely, Uranium Energy Corp. /s/ AMIR ADNANI - ----------------------------------- Amir Adnani, President and Director ACCEPTED AND AGREED this 1st day of December, 2004 /s/ RANDALL RENEAU - ---------------------------------- Randall Reneau/Reneau & Associates 3 EX-4 4 exhibit_4-2.txt MINERAL ASSET OPTION AGREEMENT Exhibit 4.2 Mineral Asset Option Agreement MINERAL ASSETS OPTION AGREEMENT Between: BRAD A. MOORE And: URANIUM ENERGY CORP. Uranium Energy Corp. Suite 401, 318 Homer Street, Vancouver, British Columbia, Canada, V6B 2V2 MINERAL ASSETS OPTION AGREEMENT THIS MINERAL ASSETS OPTION AGREEMENT is made and dated for reference effective as of the 11th day of October, 2005 - (the "Effective Date"), as fully executed on this _____ day of October, 2005. BETWEEN: BRAD A. MOORE, businessperson, having an address for notice and delivery located at 1005 East Oak, Cushing, Oklahoma, U.S.A., 74023, AND THE OPTIONOR'S ASSOCIATES AND AFFILIATES, as the case may be (the "Optionor"); OF THE FIRST PART AND: URANIUM ENERGY CORP., a company incorporated under the laws of the State of Nevada, U.S.A, and having an address for notice and delivery located at Suite 401, 318 Homer Street, Vancouver, British Columbia, Canada, V6B 2V2 (the "Optionee"); OF THE SECOND PART (the Optionor and the Optionee being hereinafter singularly also referred to as a "Party" and collectively referred to as the "Parties" as the context so requires). 1 WHEREAS: A. Brad A. Moore and his associates or affiliates, as the case may be (collectively, the "Optionor" herein), own or are in the process of acquiring various drill proven reserves and leases in Texas and, in particular, however, without limitation, being comprised of: (i) the Optionor's current 100% legal, registered and beneficial ownership in and to the Weesatche project, comprised of four leases totaling m/l 593.46 acres, located in Goliad County; which the Optionor has represented to the Optionee has total proven and probable reserves reported of 5,200,000 pounds; and (ii) the Optionor's current intention to acquire the Caldena project, totaling approximately 300 acres, located in Duval County; which the Optionor has represented to the Optionee has total proven and probable reserves of 1,200,000 pounds; together with such other leases or interests which the Optionor may acquire within the Caldena deposit area from August 11, 2005 moving forward (collectively, the "Assets" herein), and which mineral property interests comprising the Assets are more particularly described in Schedule "A" which is attached hereto and which forms a material part hereof;. B. The Optionee is a reporting company incorporated under the laws of the State of Nevada, U.S.A., and is in the business of seeking, acquiring and developing mineral resource property interests of merit; C. In accordance with the terms and conditions of a certain "letter of intent", dated for reference August 11, 2005 (the "Letter of Intent"), as entered into between the Optionor and the Optionee, the parties thereto agreed to use their best efforts to initiate, complete and enter into a formal agreement whereby the Optionor would grant an option to the Optionee (the "Option") to acquire an undivided 100% legal, beneficial and registerable interest in and to the mineral property interests comprising the Assets in accordance with the terms and conditions of the Letter of Intent; a copy of which Letter of Intent being attached hereto as Schedule "B" and which forms a material part hereof, and the terms and conditions of the Letter of Intent setting forth the Parties general intentions herein; and D. The Parties hereto have agreed to enter into this agreement (the "Agreement") which formalizes and replaces, in its entirety, the Letter of Intent, as contemplated and required by the terms of the Letter of Intent, and which clarifies their respective duties and obligations in connection with the within granting by the Optionor to the Optionee to acquire an undivided 100% legal, beneficial and registerable interest in and to the mineral property interests comprising the Assets as a consequence thereof; NOW THEREFORE THIS AGREEMENT WITNESSETH that, in consideration of the mutual covenants and provisos herein contained, THE PARTIES HERETO AGREE AS FOLLOWS: 2 Article 1 DEFINITIONS, SCHEDULES AND INTERPRETATION 1.1 Definitions. For the purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, the following words and phrases shall have the following meanings: (a) "Agreement" means this Mineral Assets Option Agreement as entered into between the Parties hereto, together with any amendments thereto and any Schedules as attached thereto; (b) "Arbitration Rules" means American Arbitration Rules, as amended from time to time, as set forth in Article "16" hereinbelow; (c) "Assets" has the meaning ascribed to it in recital "A." hereinabove; and which mineral property interests comprising the Assets are particularly described in Schedule "A" which is attached hereto together with any other claim or interests of the Parties hereto which are incorporated into the Assets by the terms of this Agreement; (d) "Assets Documentation" means any and all technical records and other factual engineering data and information relating to the mineral property interests comprising the Assets and including, without limitation, all plans, maps, agreements and records which are in the possession or control of any Party hereto; (e) "Assets Rights" means all mineral licenses and all prioritized and protocoled applications for exploration licenses, permits, easements, rights-of-way, certificates, exclusive prospecting orders and other approvals obtained by either of the Parties either before or after the Effective Date of this Agreement and necessary for the exploration and development of any of the mineral property interests comprising the Assets; (f) "Cash Payments" has the meaning ascribed to it in section "2.2" hereinbelow; (g) "Closing" has the meaning ascribed to it in section "6.1" hereinbelow and includes, without limitation, the closing of each of the transactions contemplated hereby which shall occur after the conditions precedent set out in Article "5" hereinbelow have been satisfied in their entirety; (h) "Closing Date" has the meaning ascribed to it in section "6.1" hereinbelow; (i) "Confidential Information" has the meaning ascribed to it in section "14.1" hereinbelow; (j) "Consultants" has the meaning ascribed to it in section "2.2" hereinbelow; (k) "Consulting Arrangements" has the meaning ascribed to it in section "2.2" hereinbelow; (l) "Defaulting Party" and "Non-Defaulting Party" have the meanings ascribed to them in section "17.1" hereinbelow; (m) "Disposing Party" has the meaning ascribed to it in section "10.3" hereinbelow; (n) "Effective Date" has the meaning ascribed to in on the front page of this Agreement; (o) "Escrow Agent" means Lang Michener LLP, Lawyers - Patent & Trade Mark Agents, or such other mutually agreeable escrow agent as may be selected by the Parties hereto either prior to or after the Effective Date and who agrees to be bound by the terms and conditions of this Agreement; (p) "Holding" has the meaning ascribed to it in section "10.3" hereinbelow; (q) "Indemnified Parties" and "Indemnified Party" have the meanings ascribed to them in section "18.1" hereinbelow; 3 Article 1 DEFINITIONS, SCHEDULES AND INTERPRETATION - continued (r) "Letter of Intent" has the meaning ascribed to it in recital "C." hereinabove; and a copy of which Letter of Intent is attached hereto as Schedule "B" and forms a material part hereof; (s) "Management Committee" means a committee formed pursuant to Article "9" hereinbelow; (t) "Option" has the meaning ascribed to it in section "2.1" hereinbelow as effected in the manner as set forth in Article "2" hereinbelow; (u) "Option Cash Payment" has the meaning ascribed to it in section "2.2" hereinbelow; (v) "Option Period" has the meaning ascribed to it in section "2.1" hereinbelow; (w) "Option Share" has the meaning ascribed to it in section "2.2" hereinbelow; (x) "Option Share Issuance" has the meaning ascribed to it in section "2.2" hereinbelow; (y) "Operator" means, initially, the Optionee, together with that person, company or companies acting as such pursuant to this Agreement, and otherwise shall be such party or parties as is determined by the Management Committee; (z) "Optionee" means Uranium Energy Corp., a company incorporated pursuant to the laws of the State of Nevada, U.S.A.,, or any successor company, however formed, whether as a result of merger, amalgamation or other action; (aa) "Optionor" means Brad A. Moore and his associates or affiliates, as the case may; (ab) "Party" or "Parties" means the Optionor and/or the Optionee hereto, together with their respective successors and permitted assigns as the context so requires; (ac) "person" or "persons" means an individual, corporation, partnership, party, trust, fund, association and any other organized group of persons and the personal or other legal representative of a person to whom the context can apply according to law; (ad) "Programs" means plans, including budgets, for every kind of work done or in respect of the Assets by or under the direction of or on behalf of or for the benefit of a Party, and, without limiting the generality of the foregoing, includes exploration and development work, assessment work, geophysical, geochemical and geological surveying, studies and mapping, investigating, drilling, designing, examining, equipping, improving, surveying, shaft sinking, raising, cross-cutting and drifting, searching for, digging, trucking, sampling, working and procuring product, surveying and bringing any mineral property interests comprising the Assets to lease or patent, reporting, and all other work usually considered to be prospecting, exploration, development and mining work; (ae) "Regulatory Approval" means the acceptance for filing of the transactions contemplated by this Agreement by the Regulatory Authorities; 4 Article 1 DEFINITIONS, SCHEDULES AND INTERPRETATION - continued (af) "Regulatory Authorities" means such regulatory bodies and agencies who have jurisdiction over the affairs of any of the Parties hereto and including, without limitation, all Regulatory Authorities from whom any such authorization, approval or other action is required to be obtained or to be made in connection with the transactions contemplated by this Agreement; (ag) "Securities Act" means the United States Securities Act of 1933, as amended, together with any Rules and Regulations promulgated thereunder; (ah) "Subject Removal Date" has the meaning ascribed to it in section "5.1" hereinbelow; (ai) "subsidiary" means any company or companies of which more than 50% of the outstanding shares carrying votes at all times (provided that the ownership of such shares confers the right at all times to elect at least a majority of the board of directors of such company or companies) are for the time being owned by or held for a company and/or any other company in like relation to the company, and includes any company in like relation to the subsidiary; and (aj) "Transfer Documents" has the meaning as set forth in section "7.2" hereinbelow. 1.2 Schedules. For the purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, the following shall represent the Schedules which are attached to this Agreement and which form a material part hereof: Schedule Description Schedule "A": Assets; and Schedule "B": Letter of Intent. 1.3 Interpretation. For the purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, section or other subdivision of this Agreement; (b) the headings are for convenience only and do not form a part of this Agreement nor are they intended to interpret, define or limit the scope or extent of this or any provision of this Agreement; (c) any reference to an entity shall include and shall be deemed to be a reference to any entity that is a permitted successor to such entity; and (d) words in the singular include the plural and words in the masculine gender include the feminine and neuter genders, and vice versa. 5 Article 2 GRANT, MAINTENANCE, EXERCISE AND TERMINATION OF THE OPTION 2.1 Grant of the Option. Subject to the terms and conditions hereof and based upon the representations, warranties and covenants contained in Articles "3" and "4" hereinbelow and the prior satisfaction of the conditions precedent which are set forth in Article "5" hereinbelow, the Optionor hereby agrees to give and grant to the Optionee the sole and exclusive right and option to acquire an undivided 100% legal, beneficial and registerable interest in and to the mineral property interests comprising the Assets (again, the "Option") and, in order to maintain the Option in good standing and in full force and effect, the Optionee hereby agrees to exercise the Option on or before the Closing Date (as hereinafter defined) (and which period in time from the Effective Date herein to the Closing Date is referred to as the "Option Period") for each of the Cash Payments (as hereinafter defined), Share Issuances (as hereinafter defined), Consulting Arrangements (as hereinafter defined) and maintenance payments to be paid and incurred in accordance with section "2.2" hereinbelow. 2.2 Consideration for and maintenance of the Option. In order to keep the right and Option granted to the Optionee in respect of the Assets in good standing and in force and effect during the Option Period the Optionee shall be obligated to pay and issue the following Cash Payments (as hereinafter defined), Share Issuances (as hereinafter defined), Consulting Arrangements (as hereinafter defined) and maintenance payments to and for the order of the Optionor and the mineral property interests comprising the Assets in the following manner: (a) Option Cash Payments: pay to the order and direction of the Optionor the following Option cash payments (each an "Option Cash Payment") in the aggregate of U.S. $200,000.00 during the Option Period in the following manner: (i) an initial Option Cash Payment of U.S. $50,000.00 within five business days of the date of the Effective Date of this Agreement; the receipt and sufficiency of which initial Option Cash Payment being hereby acknowledged by the Optionor; and (ii) the final Option Cash Payment of U.S. $150,000.00 on the date which is the earlier of: (A) the date which is six months from the Effective Date; and (B) the date that the Optionee's common shares are first listed, posed and called for trading on a recognized stock exchange or over-the-counter market in North America (the "Initial Listing Date"); (b) Option Share Issuances: issue to the order and direction of the Optionor prior to and at the end of the Option Period an aggregate of 2,000,000 common shares in the share capital of the Optionee (each an "Option Share"), at a deemed issuance price of U.S. $0.50 per Share (and each such issuance being an "Option Share Issuance" hereunder), in the following manner in this instance: (i) an initial Option Share Issuance of an initial 500,000 of the Option Shares within five business days of the date of the Effective Date of this Agreement; the receipt and sufficiency of which initial Option Cash Issuance being hereby acknowledged by the Optionor; 6 Article 2 GRANT, MAINTENANCE, EXERCISE AND TERMINATION OF THE OPTION - continued. (ii) an additional Option Share Issuance of an additional 500,000 of the Option Shares on or before six months from the Effective Date; (iii) a further Option Share Issuance of a further 500,000 of the Option Shares on or before one year from the Effective Date; and (iv) the final Option Share Issuance of the final 500,000 of the Option Shares on or before 18 months from the Effective Date; (c) Consulting Arrangements: in conjunction with or shortly after the execution of this Agreement; however, to take effective only upon the Initial Listing Date hereof; the Optionee will use its reasonably commercial efforts to enter into industry standard forms of proposed consulting arrangements (collectively, the "Consulting Arrangements") with each of the Optionor and Mr. Clyde Yancy (collectively, the "Consultants" herein) therein providing for, without limitation, the provision of certain consulting services to be provided by the Consultants to the Optionee in connection with the exploration, development and expansion of the Assets in consideration of, among other matters, the provision of the monthly payment by the Optionee to each of the Consultants of U.S. $10,000.00 together with entitlement for the Consultants to participate in the Optionee's then incentive stock option plan subject, at all times, to the final determination of the Board of Directors of the Optionee in each such instance; and (d) Maintenance payments: pay, or cause to be paid, to or on the Optionor's behalf as the Optionee may determine, in the Optionee's sole and absolute discretion, all underlying option, regulatory and governmental payments and assessment work required to keep the mineral property interests comprising the Assets and any underlying option agreements respecting any of the mineral property interests comprising the Assets in goodstanding during the Option Period of this Agreement. 2.3 Resale restrictions and legending of Share certificates. The Optionor hereby acknowledges and agrees that the Optionee makes no representations as to any resale or other restriction affecting the Option Shares and that it is presently contemplated that the Option Shares will be issued by the Optionee to the Optionor in reliance upon the registration and prospectus exemptions contained in certain sections of the United States Securities Act of 1933 (the "Securities Act") which will impose a trading restriction in the United States on the Shares for a period of at least 12 months from the Closing Date (as hereinafter determined). In addition, the Optionor hereby also acknowledges and agrees that the within obligation of the Optionee to issue the Option Shares pursuant to section "2.2" hereinabove will be subject to the Optionee being satisfied that an exemption from applicable registration and prospectus requirements is available under the Securities Act and all applicable securities laws, in respect of each of the Optionor and the Option Shares, and that the Optionee shall be relieved of any obligation whatsoever to purchase the Assets and to issue Option Shares in respect of the Optionor where the Optionee reasonably determines that a suitable exemption is not available to it. 7 Article 2 GRANT, MAINTENANCE, EXERCISE AND TERMINATION OF THE OPTION - continued. The Optionor hereby also acknowledges and understands that neither the sale of the Option Shares which the Optionor is acquiring nor any of the Option Shares themselves have been registered under the Securities Act or any state securities laws, and, furthermore, that the Option Shares must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available. The Optionor also acknowledges and understands that the certificates representing the Option Shares will be stamped with the following legend (or substantially equivalent language) restricting transfer in the following manner if such restriction is required by the Regulatory Authorities: "The securities represented by this certificate have not been registered under the United States Securities Act of 1933, as amended, or the laws of any state, and have been issued pursuant to an exemption from registration pertaining to such securities and pursuant to a representation by the security holder named hereon that said securities have been acquired for purposes of investment and not for purposes of distribution. These securities may not be offered, sold, transferred, pledged or hypothecated in the absence of registration, or the availability of an exemption from such registration. Furthermore, no offer, sale, transfer, pledge or hypothecation is to take place without the prior written approval of counsel to the company being affixed to this certificate. The stock transfer agent has been ordered to effectuate transfers only in accordance with the above instructions."; and the Optionor hereby consents to the Optionee making a notation on its records or giving instructions to any transfer agent of the Optionee in order to implement the restrictions on transfer set forth and described hereinabove. The Optionor also acknowledges and understands that: (a) the Option Shares are restricted securities within the meaning of "Rule 144" promulgated under the Securities Act; (b) the exemption from registration under Rule 144 will not be available in any event for at least one year from the date of issuance of the Option Shares to the Optionor, and even then will not be available unless (i) a public trading market then exists for the common stock of the Optionee, (ii) adequate information concerning the Optionee is then available to the public and (iii) other terms and conditions of Rule 144 are complied with; and (c) any sale of the Option Shares may be made by the Optionor only in limited amounts in accordance with such terms and conditions. 2.4 Standstill provisions. In consideration of the Optionee's within agreement to purchase the Assets and to enter into the terms and conditions of this Agreement, the Optionor hereby undertakes for itself, and for each of the Optionor's respective agents and advisors, that they will not until the earlier of the Closing Date (as hereinafter defined) or the termination of this Agreement approach or consider any other potential purchasers, or make, invite, entertain or accept any offer or proposal for the proposed sale of any mineral property interests comprising the Assets or, for that matter, disclose any of the terms of this Agreement, without the Optionee's prior written consent. In this regard the Optionor hereby acknowledges that the foregoing restrictions are important to the business of the Optionee and that a breach by the Optionor of any of the covenants herein contained would result in irreparable harm and significant damage to the Optionee that would not be adequately compensated for by monetary award. Accordingly, the Optionor hereby agrees that, in the event of 8 Article 2 GRANT, MAINTENANCE, EXERCISE AND TERMINATION OF THE OPTION - continued. any such breach, in addition to being entitled as a matter of right to apply to a Court of competent equitable jurisdiction for relief by way of restraining order, injunction, decree or otherwise as may be appropriate to ensure compliance with the provisions hereof, the Optionor will also be liable to the Optionee, as liquidated damages, for an amount equal to the amount received and earned by any such Party as a result of and with respect to any such breach. The Optionor also acknowledges and agrees that if any of the aforesaid restrictions, activities, obligations or periods are considered by a Court of competent jurisdiction as being unreasonable, they agree that said Court shall have authority to limit such restrictions, activities or periods as the Court deems proper in the circumstances. 2.5 Termination of the Option. The Option shall terminate upon 30-calendar days' prior written notice being first being provided by the Optionor to the Optionee: (a) if the Optionee fails to make any of the required Cash Payments to the Optionor in accordance with paragraph "2.2(a)" hereinabove during the Option Period and prior to the time periods and the Closing Date as specified in paragraph "2.2(a)" hereinabove; or (b) if the Optionee fails to make any of the required Share Issuances to the Optionor in accordance with paragraph "2.2(b)" hereinabove during the Option Period and prior to the time periods and the Closing Date as specified in paragraph "2.2(b)" hereinabove; or (c) if the Optionee fails to enter into the proposed Consulting Arrangements with the Consultants prior to the Initial Listing Date in accordance with paragraph "2.2(c)" hereinabove and prior to the Closing Date as specified in paragraph "2.2(c)" hereinabove; or (d) if the Optionee fails to pay, or cause to be paid, to or on the Optionor's behalf as the Optionee may determine, in the Optionee's sole and absolute discretion, all underlying option, regulatory and governmental payments and assessment work required to keep the mineral property interests comprising the Assets and any underlying option agreements respecting any of the mineral property interests comprising the Assets in goodstanding in accordance with paragraph "2.2(d)" hereinabove. 2.6 Termination by the Optionee of the Option. Prior to the exercise of the Option the Optionee may terminate the Option by providing a notice of termination to the Optionor in writing of its desire to do so at least 30 calendar days prior to its decision to do so. After such 30-calendar days' period the Optionee shall have no further obligations, financial or otherwise, under this Agreement, except that the provisions of section "2.8" hereinbelow shall become immediately applicable to the Optionee upon providing the said notice of termination to the Optionor. 2.7 No interest in the Assets upon termination of the Option. If the Option is so terminated in accordance with either of sections "2.5" or "2.6" hereinabove the Optionee shall have no interest in and to any of the mineral property interests comprising the Assets, and all Cash Payments, Share Issuances and Consulting Arrangement and maintenance payments made, or caused to be made, or incurred by the Optionee to or on behalf of the Optionor or any of the mineral property interests comprising the Assets under this Agreement, shall then be non-refundable by the Optionor to the Optionee for which the Optionee shall have no recourse, and the provisions of section "2.8" hereinbelow shall become immediately applicable to the Optionee. 9 Article 2 GRANT, MAINTENANCE, EXERCISE AND TERMINATION OF THE OPTION - continued. 2.8 Obligations on termination of the Option. If the Option is terminated otherwise than upon the exercise thereof pursuant to this Article, then the Optionee shall: (a) leave in good standing for a period of at least 60 calendar days from the termination of the Option those mineral property interests comprising the Assets that are in good standing on the date thereof; (b) cause to be delivered to the Optionor the Transfer Documents (as hereinafter defined) and a bill of sale in recordable form whereby the Optionee's entire right, title and interest in and to the mineral property interests comprising the Assets has been transferred to the Optionor free and clear of all liens or charges arising from the Optionee's activities on the mineral property interests comprising the Assets to the date thereof; and (c) deliver at no cost to the Optionor within 30 calendar days of such termination copies of all reports, maps, assay results and other relevant technical data compiled by or in the possession of the Optionee with respect to the mineral property interests comprising the Assets and not theretofore already furnished to the Optionor. 2.9 Deemed exercise of the Option. At such time as the Optionee has entered into each of the Consulting Arrangements and made each of the required Cash Payments, Share Issuances and maintenance payments in accordance with section "2.2" hereinabove, within the Option Period and the time periods as specified in section "2.2", then the Option shall be deemed to have been exercised by the Optionee, and the Optionee shall have thereby, in accordance with the terms and conditions of this Agreement and without any further act required on its behalf, acquired an undivided 100% legal, beneficial and registerable interest in and to the mineral property interests comprising the Assets. Article 3 REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE OPTIONOR 3.1 General representations, warranties and covenants by the Optionor. In order to induce the Optionee to enter into and consummate this Agreement, the Optionor hereby represents to, warrants to and covenants with the Optionee, with the intent that the Optionee will rely thereon in entering into this Agreement and in concluding the transactions contemplated herein, that, to the best of the knowledge, information and belief of the Optionor, after having made due inquiry: (a) the Optionor is qualified to do business in those jurisdictions where it is necessary to fulfill the Optionor's obligations under this Agreement, and the Optionor has the full power and authority to enter into this Agreement and any agreement or instrument referred to or contemplated by this Agreement; (b) the Optionor has the requisite power, authority and capacity to fulfill the Optionor's obligations under this Agreement; 10 Article 3 REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE OPTIONOR - continued. (c) the execution and delivery of this Agreement and the agreements contemplated hereby have been duly authorized by all necessary action on the Optionor's part; (d) this Agreement constitutes a legal, valid and binding obligation of the Optionor enforceable against the Optionor in accordance with its terms, except as enforcement may be limited by laws of general application affecting the rights of creditors; (e) prior to the Subject Removal Date (as hereinafter defined) the Optionor will have obtained all authorizations, approvals, including Regulatory Approval, or waivers that may be necessary or desirable in connection with the transactions contemplated in this Agreement, and other actions by, and have made all filings with, any and all Regulatory Authorities from whom any such authorization, approval or other action is required to be obtained or to be made in connection with the transactions contemplated herein, and all such authorizations, approvals and other actions will be in full force and effect, and all such filings will have been accepted by the Optionor who will be in compliance with, and have not committed any breach of, any securities laws, regulations or policies of any Regulatory Authority to which either the Optionor or any of the mineral property interests comprising the Assets may be subject; (f) except for Regulatory Approval of this Agreement by the appropriate Regulatory Authorities, there are no other consents, approvals or conditions precedent to the performance of this Agreement which have not been obtained; (g) the Optionor is not in breach of any laws, ordinances, statutes, regulations, by-laws, orders or decrees to which the Optionor is subject or which apply to the Optionor; (h) no proceedings are pending for, and the Optionor is unaware of, any basis for the institution of any proceedings leading to the placing of the Optionor in bankruptcy or subject to any other laws governing the affairs of insolvent persons; (i) the Optionor has not received, nor has the Optionor requested or does the Optionor require to receive, any offering memorandum or similar document describing the business and affairs of the Optionee in order to assist the Optionor in entering into this Agreement and in consummating the transactions contemplated herein; (j) the Optionor is resident in the jurisdiction as set forth on the front page of this Agreement, and that all negotiations and other acts in furtherance of the execution and delivery of this Agreement by the Optionor in connection with the transactions contemplated herein have taken place and will take place solely in such jurisdiction or the State of Nevada, U.S.A.; (k) except as otherwise provided for herein, the Optionor has not retained, employed or introduced any broker, finder or other person who would be entitled to a brokerage commission or finder's fee arising out of the transactions contemplated hereby; 11 Article 3 REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE OPTIONOR - continued. (l) the Optionor is not, nor until or at each Closing Date (as hereinafter defined) will the Optionor be, in breach of any provision or condition of, nor has the Optionor done or omitted to do anything that, with or without the giving of notice or lapse or both, would constitute a breach of any provision or condition of, or give rise to any right to terminate or cancel or accelerate the maturity of any payment under, any deed of trust, contract, certificate, consent, permit, license or other instrument to which the Optionor is a party, by which the Optionor is bound or from which the Optionor derives benefit, any judgment, decree, order, rule or regulation of any court or governmental authority to which the Optionor is subject, or any statute or regulation applicable to the Optionor, to an extent that, in the aggregate, has a material adverse affect on either the Optionor or on any of the mineral property interests comprising the Assets; (m) the Optionor will give to the Optionee, within at least five calendar days prior to the Closing Date (as hereinafter defined), by written notice, particulars of: (i) each occurrence within the Optionor's knowledge after the Effective Date of this Agreement that, if it had occurred before the Effective Date, would have been contrary to any of the Optionor's representations or warranties contained herein; and (ii) each occurrence or omission within the Optionor's knowledge after the Effective Date that constitutes a breach of any of the Optionor's covenants contained in this Agreement; (n) the making of this Agreement and the completion of the transactions contemplated hereby and the performance of and compliance with the terms hereof does not and will not: (i) conflict with or result in a breach of or violate any of the terms, conditions or provisions of any law, judgment, order, injunction, decree, regulation or ruling of any court or governmental authority, domestic or foreign, to which the Optionor is subject, or constitute or result in a default under any agreement, contract or commitment to which the Optionor is a party; (ii) give to any party the right of termination, cancellation or acceleration in or with respect to any agreement, contract or commitment to which the Optionor is a party; (iii) give to any government or governmental authority, or any municipality or any subdivision thereof, including any governmental department, commission, bureau, board or administration agency, any right of termination, cancellation or suspension of, or constitute a breach of or result in a default under, any permit, license, control or authority issued to the Optionor which is necessary or desirable in connection with the conduct and operations of the Optionor's business and the ownership or leasing of the Optionor's business assets; or 12 Article 3 REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE OPTIONOR - continued. (iv) constitute a default by the Optionor, or any event which, with the giving of notice or lapse of time or both, might constitute an event of default, under any agreement, contract, indenture or other instrument relating to any indebtedness of the Optionor which would give any party to that agreement, contract, indenture or other instrument the right to accelerate the maturity for the payment of any amount payable under that agreement, contract, indenture or other instrument; (o) neither this Agreement nor any other document, certificate or statement furnished to the Optionee by or on behalf of the Optionor in connection with the transactions contemplated hereby knowingly or negligently contains any untrue or incomplete statement of material fact or omits to state a material fact necessary in order to make the statements therein not misleading which would likely affect the decision of the Optionee to enter into this Agreement; and (p) the Optionor is not aware of any fact or circumstance which has not been disclosed to the Optionee which should be disclosed in order to prevent the representations, warranties and covenants contained in this section from being misleading or which would likely affect the decision of the Optionee to enter into this Agreement. 3.2 Representations, warranties and covenants by the Optionor respecting the Assets. In order to induce the Optionee to enter into and consummate this Agreement, the Optionee hereby also represents to, warrants to and covenants with the Optionee, with the intent that the Optionee will also rely thereon in entering into this Agreement and in concluding the transactions contemplated herein, that, to the best of the knowledge, information and belief of the Optionor, after having made due inquiry: (a) the Optionor is the legal and beneficial owner of all of the mineral property interests comprising the Assets; the particulars of which mineral property interests comprising the Assets being more particularly described in Schedule "A" which is attached hereto; (b) the Optionor is authorized to hold the right to explore and develop each of the mineral property interests comprising the Assets and all Assets Rights held by the Optionor in and to the mineral property interests comprising the Assets; (c) the Optionor holds all of the mineral property interests comprising the Assets free and clear of all liens, charges and claims of others; (d) no other person, firm or corporation has any written or oral agreement, option, understanding or commitment, or any right or privilege capable of becoming an agreement, for the purchase from the Optionor of any interest in and to any of the mineral property interests comprising the Assets; 13 Article 3 REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE OPTIONOR - continued. (e) the mineral property interests comprising the Assets have been duly and validly located and recorded in a good and minerlike manner pursuant to applicable mining laws; (f) all permits and licenses covering the mineral property interests comprising the Assets have been duly and validly issued pursuant to applicable mining laws and are in good standing by the proper doing and filing of assessment work and the payment of all fees, taxes and rentals in accordance with the requirements of applicable mining laws and the performance of all other actions necessary in that regard; (g) where appropriate, the Optionor has insured the mineral property interests comprising the Assets against loss or damage on a replacement cost basis; (h) all conditions on and relating to the mineral property interests comprising the Assets and the operations conducted thereon by or on behalf of the Optionor are in compliance with all applicable laws, regulations or orders and including, without limitation, all laws relating to environmental matters, waste disposal and storage and reclamation; (i) there are no outstanding orders or directions relating to environmental matters requiring any work, repairs, construction or capital expenditures with respect to any of the mineral property interests comprising the Assets and the conduct of the operations related thereto, nor has the Optionor received any notice of same; (j) there is no adverse claim or challenge against or to the ownership of or title to any of the mineral property interests comprising the Assets or which may impede the development of any of the mineral interests comprising the Assets, nor, to the best of the knowledge, information and belief of the Optionor, after having made due inquiry, is there any basis for any potential claim or challenge, and, to the best of the knowledge, information and belief of the Optionor, after having made due inquiry, no person has any royalty, net profits or other interests whatsoever in any production from any of the mineral property interests comprising the Assets; (k) there are no actions, suits, proceedings or investigations (whether or not purportedly against or on behalf of the Optionor), pending or threatened, which may affect, without limitation, the rights of the Optionor to transfer any interest in and to the mineral property interests comprising the Assets to the Optionee at law or in equity, or before or by any federal, state, provincial, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, and, without limitation, there are no claims or potential claims under any relevant family relations legislation or other equivalent legislation affecting any of the mineral property interests comprising the Assets. In addition, the Optionor is not now aware of any existing ground on which any such action, suit or proceeding might be commenced with any reasonable likelihood of success; 14 Article 3 REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE OPTIONOR - continued. (l) the Optionor has delivered to the Optionee all Assets Documentation in the Optionor's possession or control relating to the mineral property interests comprising the Assets together with copies of all permits, permit applications and applications for exploration and exploitation rights respecting any of the mineral property interests comprising the Assets; (m) the Optionee will also deliver, or caused to be delivered, to the Optionee as soon as conveniently possible after the Effective Date, however, prior to the Subject Removal Date (as hereinafter defined), an independent geological report respecting the mineral property interests comprising the Assets, together with, if required, a title opinion or opinions respecting the mineral property interests comprising the Assets, all as addressed to the Optionee and prepared in accordance with applicable rules and policies, together with such other documentation as the Optionee may require in order to seek and obtain Regulatory Approval for each of the transactions contemplated by this Agreement; and (n) the Optionor is not aware of any fact or circumstance which has not been disclosed to the Optionee which should be disclosed in order to prevent the representations and warranties contained in this section from being misleading or which would likely affect the decision of the Optionee to enter into this Agreement. 3.3 Continuity of the representations, warranties and covenants by the Optionor. The representations, warranties and covenants by the Optionor contained in this Article "3", or in any certificates or documents delivered pursuant to the provisions of this Agreement or in connection with the transactions contemplated hereby, will be true at and as of the Closing Date (as hereinafter defined) as though such representations, warranties and covenants were made at and as of such time. Notwithstanding any investigations or inquiries made by the Optionee or by the Optionee's professional advisors prior to the Closing Date, or the waiver of any condition by the Optionee, the representations, warranties and covenants of the Optionor contained in this Article "3" shall survive the Closing Date and shall continue in full force and effect for a period of two years from the Closing Date; provided, however, that the Optionor shall not be responsible for the breach of any representation, warranty or covenant of the Optionor contained herein caused by any act or omission of the Optionee prior to the Effective Date hereof of which the Optionor was unaware or as a result of any action taken by the Optionee after the Effective Date. In the event that any of the said representations, warranties or covenants are found by a court of competent jurisdiction to be incorrect and such incorrectness results in any loss or damage sustained directly or indirectly by the Optionee, then the Optionor will pay the amount of such loss or damage to the Optionee within 30 calendar days of receiving notice of judgment therefore; provided, however, that the Optionee will not be entitled to make any claim unless the loss or damage suffered may exceed the amount of U.S. $1,000. 15 Article 4 WARRANTIES, REPRESENTATIONS AND COVENANTS BY THE OPTIONEE 4.1 Warranties, representations and covenants by the Optionee. In order to induce the Optionor to enter into and consummate this Agreement, the Optionee hereby warrants to, represents to and covenants with the Optionor, with the intent that the Optionor will rely thereon in entering into this Agreement and in concluding the transactions contemplated herein, that, to the best of the knowledge, information and belief of the Optionee, after having made due inquiry: (a) the Optionee is a corporation duly incorporated under the laws of the State of Nevada, U.S.A., is validly existing and is in good standing with respect to all statutory filings required by the Nevada Revised Statutes; (b) the Optionee is qualified to do business in those jurisdictions where it is necessary to fulfill the Optionee's obligations under this Agreement, and the Optionee has the full power and authority to enter into this Agreement and any agreement or instrument referred to or contemplated by this Agreement; (c) the execution and delivery of this Agreement and the agreements contemplated hereby has been duly authorized by all necessary corporate action on the Optionee's part; (d) prior to the Subject Removal Date (as hereinafter defined) the Optionee will have obtained all authorizations, approvals, including Regulatory Approval, or waivers that may be necessary or desirable in connection with the transactions contemplated in this Agreement, and other actions by, and have made all filings with, any and all Regulatory Authorities from whom any such authorization, approval or other action is required to be obtained or to be made in connection with the transactions contemplated herein, and all such authorizations, approvals and other actions will be in full force and effect, and all such filings will have been accepted by the Optionee who will be in compliance with, and have not committed any breach of, any securities laws, regulations or policies of any Regulatory Authority to which the Optionee may be subject; (e) except for Regulatory Approval of this Agreement by the appropriate Regulatory Authorities, there are no other consents, approvals or conditions precedent to the performance of this Agreement which have not been obtained; (f) this Agreement constitutes a legal, valid and binding obligation of the Optionee enforceable against the Optionee in accordance with its terms, except as enforcement may be limited by laws of general application affecting the rights of creditors; (g) no proceedings are pending for, and the Optionee is unaware of, any basis for the institution of any proceedings leading to the dissolution or winding up of the Optionee or the placing of the Optionee in bankruptcy or subject to any other laws governing the affairs of insolvent companies; 16 Article 4 WARRANTIES, REPRESENTATIONS AND COVENANTS BY THE OPTIONEE - continued. (h) there is no basis for and there are no actions, suits, judgments, investigations or proceedings outstanding or pending or, to the best of the knowledge, information and belief of the Optionee, after making due inquiry, threatened against or affecting the Optionee at law or in equity or before or by any federal, state, municipal or other governmental department, commission, board, bureau or agency; (i) the Optionee is not in breach of any laws, ordinances, statutes, regulations, by-laws, orders or decrees to which the Optionee is subject or which apply to the Optionee; (j) the Optionee will save the Optionor harmless in respect of all claims, liabilities and expenses arising out of the Optionee's activities on any of the mineral property interests comprising the Assets; (k) the Optionee will do all work on the Assets in a good and minerlike fashion and in accordance with all applicable laws, regulations, orders and ordinances of any governmental authority; (l) the Optionee is not in breach of any provision or condition of, nor has the Optionee done or omitted anything that, with or without the giving of notice or lapse or both, would constitute a breach of any provision or condition of, or give rise to any right to terminate or cancel or accelerate the maturity of any payment under, any deed of trust, contract, certificate, consent, permit, license or other instrument to which the Optionee is a party, by which the Optionee is bound or from which the Optionee derives benefit, any judgment, decree, order, rule or regulation of any court or governmental authority to which the Optionee is subject, or any statute or regulation applicable to the Optionee, to an extent that, in the aggregate, has a material adverse affect on the Optionee; (m) the Optionee will give to the Optionor, within at least five calendar days prior to the Closing Date (as hereinafter defined), by written notice, particulars of: (i) each occurrence within the Optionee's knowledge after the Effective Date of this Agreement that, if it had occurred before the Effective Date, would have been contrary to any of the Optionee's representations or warranties contained herein; and (ii) each occurrence or omission within the Optionee's knowledge after the Effective Date that constitutes a breach of any of the Optionee's covenants contained in this Agreement; 17 Article 4 WARRANTIES, REPRESENTATIONS AND COVENANTS BY THE OPTIONEE - continued. (n) the making of this Agreement and the completion of the transactions contemplated hereby and the performance of and compliance with the terms hereof does not and will not: (i) conflict with or result in a breach of or violate any of the terms, conditions or provisions of the incorporation documents of the Optionee; (ii) conflict with or result in a breach of or violate any of the terms, conditions or provisions of any law, judgment, order, injunction, decree, regulation or ruling of any court or governmental authority, domestic or foreign, to which the Optionee is subject, or constitute or result in a default under any agreement, contract or commitment to which the Optionee is a party; (iii) give to any party the right of termination, cancellation or acceleration in or with respect to any agreement, contract or commitment to which the Optionee is a party; (iv) give to any government or governmental authority, or any municipality or any subdivision thereof, including any governmental department, commission, bureau, board or administration agency, any right of termination, cancellation or suspension of, or constitute a breach of or result in a default under, any permit, license, control or authority issued to the Optionee which is necessary or desirable in connection with the conduct and operations of the Optionee's business and the ownership or leasing of the Optionee's business assets; or (v) constitute a default by the Optionee or any event which, with the giving of notice or lapse of time or both, might constitute an event of default, under any agreement, contract, indenture or other instrument relating to any indebtedness of the Optionee which would give any party to that agreement, contract, indenture or other instrument the right to accelerate the maturity for the payment of any amount payable under that agreement, contract, indenture or other instrument; (o) neither this Agreement nor any other document, certificate or statement furnished to the Optionor by or on behalf of the Optionee in connection with the transactions contemplated hereby knowingly or negligently contains any untrue or incomplete statement of material fact or omits to state a material fact necessary in order to make the statements therein not misleading; and (p) the Optionee is not aware of any fact or circumstance which has not been disclosed to the Optionor which should be disclosed in order to prevent the representations, warranties and covenants contained in this section from being misleading or which would likely affect the decision of the Optionor to enter into this Agreement. 18 Article 4 WARRANTIES, REPRESENTATIONS AND COVENANTS BY THE OPTIONEE - continued. 4.2 Continuity of the representations, warranties and covenants by the Optionee. The representations, warranties and covenants of the Optionee contained in this Article "4", or in any certificates or documents delivered pursuant to the provisions of this Agreement or in connection with the transactions contemplated hereby, will be true at and as of the Closing Date (as hereinafter defined) as though such representations, warranties and covenants were made at and as of such time. Notwithstanding any investigations or inquiries made by the Optionor or by the Optionor's professional advisors prior to the Closing Date, or the waiver of any condition by the Optionor, the representations, warranties and covenants of the Optionee contained in this Article "4" shall survive the Closing Date and shall continue in full force and effect for a period of two years from the Closing Date; provided, however, that the Optionee shall not be responsible for the breach of any representation, warranty or covenant of the Optionee contained herein caused by any act or omission of the Optionor prior to the Effective Date hereof of which the Optionee was unaware or as a result of any action taken by the Optionor after the Effective Date. In the event that any of the said representations, warranties or covenants are found by a court of competent jurisdiction to be incorrect and such incorrectness results in any loss or damage sustained directly or indirectly by the Optionor, then the Optionee will pay the amount of such loss or damage to the Optionor within 30 calendar days of receiving notice of judgment therefore; provided, however, that the Optionor will not be entitled to make any claim unless the loss or damage suffered may exceed the amount of U.S. $1,000. Article 5 CONDITIONS PRECEDENT TO CLOSING 5.1 Parties' conditions precedent prior to the Closing Date. All of the rights, duties and obligations of each of the Parties hereto under this Agreement are subject to the following conditions precedent for the exclusive benefit of each of the Parties fulfilled in all material aspects in the reasonable opinion of each of the Parties or to be waived by each or any of the Parties, as the case may be, as soon as possible after the Effective Date, however, unless specifically indicated as otherwise, not later than one year after the Effective Date and not late than 60 calendar days prior to the Closing Date (as hereinafter defined; and such date being the "Subject Removal Date" herein): (a) receipt of all necessary approvals, including Regulatory Approval, from all Regulatory Authorities having jurisdiction over the Parties hereto and the transactions contemplated by this Agreement, to the terms and conditions of and the transactions contemplated by this Agreement; and (b) if required, shareholders of the Optionee passing an ordinary resolution or, where required, a special resolution, approving the terms and conditions of this Agreement and all of the transactions contemplated hereby or, in the alternative, shareholders of the Optionee holding 100% of the issued shares of the Optionee providing written consent resolutions evidencing their approval to the terms and conditions of this Agreement and all of the transactions contemplated hereby. 5.2 Parties' waiver of conditions precedent. The conditions precedent set forth in section "5.1" hereinabove are for the exclusive benefit of each of the Parties hereto and may be waived by each or any of the Parties in writing and in whole or in part at any time, however, not later than the Subject Removal Date. 19 Article 5 CONDITIONS PRECEDENT TO CLOSING- continued. 5.3 The Optionor's conditions precedent. The rights, duties and obligations of the Optionor under this Agreement are also subject to the following conditions precedent for the exclusive benefit of the Optionor fulfilled in all material aspects in the reasonable opinion of the Optionor or to be waived by the Optionor as soon as possible after the Effective Date, however, unless specifically indicated as otherwise, not later than 10 calendar days prior to the Subject Removal Date: (a) the representations, warranties and covenants of the Optionee contained herein shall be true and correct as of and on the Subject Removal Date; (b) the Optionee shall have complied with all warranties, representations, covenants and agreements herein agreed to be performed or caused to be performed by the Optionee on or before the Subject Removal Date; (c) the Optionee will have obtained all authorizations, approvals, including Regulatory Approval, or waivers that may be necessary or desirable in connection with the transactions contemplated in this Agreement, and other actions by, and have made all filings with, any and all Regulatory Authorities from whom any such authorization, approval or other action is required to be obtained or to be made in connection with the transactions contemplated herein, and all such authorizations, approvals and other actions will be in full force and effect, and all such filings will have been accepted by the Optionee who will be in compliance with, and have not committed any breach of, any securities laws, regulations or policies of any Regulatory Authority to which the Optionee may be subject; (d) all matters which, in the opinion of counsel for the Optionor, are material in connection with the transactions contemplated by this Agreement shall be subject to the favourable opinion of such counsel, and all relevant records and information shall be supplied to such counsel for that purpose; (e) no material loss or destruction of or damage to the Optionee shall have occurred since the Effective Date; (f) no action or proceeding at law or in equity shall be pending or threatened by any person, company, firm, governmental authority, regulatory body or agency to enjoin or prohibit: (i) the purchase or transfer of any interest in and to the mineral property interests comprising the Assets as contemplated by this Agreement or the right of the Optionor to dispose of any interest in and to any of the mineral property interests comprising the Assets; or (ii) the right of the Optionee to conduct the Optionee's operations and carry on, in the normal course, the Optionee's business and operations as the Optionee has carried on in the past; 20 Article 5 CONDITIONS PRECEDENT TO CLOSING - continued. (g) the delivery to the Optionor by the Optionee, on a confidential basis, of the following documentation and information: (i) a copy of all material contracts, agreements, reports and title information of any nature respecting the Optionee and each of its subsidiaries, if any; and (ii) details of any lawsuits, claims or potential claims relating to the Optionee or to any of the Optionee's subsidiaries, if any, of which the Optionee is aware and the Optionor is unaware; (h) the Optionee will, for a period of not less than five calendar days during the period commencing on the Effective Date and continuing until not later than 30 calendar days prior to the Subject Removal Date, during normal business hours: (i) make available for inspection by the respective solicitors, auditors and representatives of the Optionor, at such location as is appropriate, all of the Optionee's and each of the Optionee's subsidiaries', if any, books, records, contracts, documents, correspondence and other written materials, and afford such persons every reasonable opportunity to make copies thereof and take extracts therefrom at the sole cost of the Optionor; provided such persons do not unduly interfere in the respective operations of the Optionee or any of the Optionee's subsidiaries, if any; (ii) authorize and permit such persons at the risk and the sole cost of the Optionor, and only if such persons do not unduly interfere in the respective operations of the Optionee and each of the Optionee's subsidiaries, if any, to attend at all of their respective places of business and operations to observe the conduct of their respective businesses and operations, inspect their respective properties and assets and make physical counts of their respective inventories, shipments and deliveries; and (iii) require the Optionee's and each of the Optionee's subsidiaries', if any, respective management personnel to respond to all reasonable inquiries concerning the Optionee's and each of the Optionee's subsidiaries', if any, respective business assets or the conduct of their respective businesses relating to their respective liabilities and obligations; and (i) the completion by the Optionor and by the Optionor's professional advisors of a thorough due diligence and operations review of the respective businesses and operations of the Optionee and each of the Optionee's subsidiaries, if any, to the sole and absolute satisfaction of the Optionor. 5.4 The Optionor's waiver of conditions precedent. The conditions precedent set forth in section "5.3" hereinabove are for the exclusive benefit of the Optionor and may be waived by the Optionor in writing and in whole or in part at any time after the Effective Date, however, unless specifically indicated as otherwise, not later than 10 calendar days prior to the Subject Removal Date. 21 Article 5 CONDITIONS PRECEDENT TO CLOSING - continued. 5.5 The Optionee's conditions precedent. The rights, duties and obligations of the Optionee under this Agreement are also subject to the following conditions precedent for the exclusive benefit of the Optionee fulfilled in all material aspects in the reasonable opinion of the Optionee or to be waived by the Optionee as soon as possible after the Effective Date, however, unless specifically indicated as otherwise, not later than 10 calendar days prior to the Subject Removal Date: (a) the representations, warranties and covenants of the Optionor contained herein shall be true and correct as of and on the Subject Removal Date; (b) the Optionor shall have complied with all warranties, representations, covenants and agreements herein agreed to be performed or caused to be performed by the Optionor on or before the Subject Removal Date; (c) the Optionor will have obtained all authorizations, approvals, including Regulatory Approval, or waivers that may be necessary or desirable in connection with the transactions contemplated in this Agreement, and other actions by, and have made all filings with, any and all Regulatory Authorities from whom any such authorization, approval or other action is required to be obtained or to be made in connection with the transactions contemplated herein, and all such authorizations, approvals and other actions will be in full force and effect, and all such filings will have been accepted by the Optionor who will be in compliance with, and have not committed any breach of, any securities laws, regulations or policies of any Regulatory Authority to which the Optionor may be subject; (d) all matters which, in the opinion of counsel for the Optionee, are material in connection with the transactions contemplated by this Agreement shall be subject to the favourable opinion of such counsel, and all relevant records and information shall be supplied to such counsel for that purpose; (e) no material loss or destruction of or damage to any of the mineral property interests comprising the Assets shall have occurred since the Effective Date; (f) no action or proceeding at law or in equity shall be pending or threatened by any person, company, firm, governmental authority, regulatory body or agency to enjoin or prohibit: (i) the sale or transfer of any interest in and to the mineral property interests comprising the Assets as contemplated by this Agreement or the right of the Optionee to acquire any interest in and to any of the mineral property interests comprising the Assets; or (ii) the right of the Optionee to conduct the Optionee's operations and carry on, in the normal course, the Optionee's business and operations as the Optionee has carried on in the past; 22 Article 5 CONDITIONS PRECEDENT TO CLOSING - continued. (g) the delivery to the Optionee by the Optionor, on a confidential basis, of all Assets Documentation and including, without limitation,: (i) a copy of all material contracts, agreements, reports and title information of any nature respecting any of the mineral interests comprising the Assets; and (ii) details of any lawsuits, claims or potential claims relating to any of the mineral interests comprising the Assets of which the Optionor is aware and the Optionee is unaware; (h) the delivery by the Optionor to the Optionee of an opinion of counsel for the Optionor, in a form satisfactory to the Optionee's counsel, acting reasonably, dated as at the date of delivery, to the effect that: (i) the Optionor is the legal and beneficial owner of all of the mineral property interests comprising the Assets prior to the completion of the transactions contemplated by this Agreement; (ii) the Optionor holds the right to explore and develop each of the mineral property interests comprising the Assets and all Assets Rights held by the Optionor in and to the mineral property interests comprising the Assets; (iii) the Optionor holds all of the mineral property interests comprising the Assets free and clear of all liens, charges and claims of others; (iv) the mineral property interests comprising the Assets have been duly and validly located and recorded in a good and minerlike manner pursuant to all applicable laws and are in good standing; (v) based on actual knowledge and belief, such counsel knows of no adverse claim or challenge against or to the ownership of or title to any of the mineral property interests comprising the Assets or which may impede the Assets' development, and, based on actual knowledge and belief, such counsel is not aware of any basis for any potential claim or challenge, and, based on actual knowledge and belief, such counsel knows of no outstanding agreements or options to acquire or purchase any portion of any of the mineral property interests comprising the Assets, and no person has any royalty, net profits or other interest whatsoever in any production from any of the mineral property interests comprising the Assets; 23 Article 5 CONDITIONS PRECEDENT TO CLOSING - continued. (vi) based on actual knowledge and belief, such counsel knows of no claims, judgments, actions, suits, litigation, proceedings or investigations, actual, pending or threatened, against the Optionor which might materially affect any of the mineral property interests comprising the Assets or which could result in any material liability to either the Optionor or to any of the mineral property interests comprising the Assets; and (vii) as to all other legal matters of a like nature pertaining to the Optionor and the mineral property interests comprising the Assets and to the transactions contemplated hereby as the Optionee or the Optionee's counsel may reasonably require; and (i) the completion by the Optionee and by the Optionee's professional advisors of a thorough due diligence and operations review of the mineral property interests comprising the Assets, of the business and operations of the Optionor and of the transferability of the mineral property interests comprising the Assets as contemplated by this Agreement, to the sole and absolute satisfaction of the Optionee. 5.6 Optionee's waiver of conditions precedent. The conditions precedent set forth in section "5.5" hereinabove are for the exclusive benefit of the Optionee and may be waived by the Optionee in writing and in whole or in part at any after the Effective Date, however, unless specifically indicated as otherwise, not later than 10 calendar days prior to the Subject Removal Date. Article 6 CLOSING AND EVENTS OF CLOSING 6.1 Closing and Closing Date. Subject to the prior and due and complete exercise of by the Optionee of the Option in accordance with Article "2" hereinabove, the closing (the "Closing") of the within purchase and delivery of an undivided 100% interest in and to the mineral property interests comprising the Assets, as contemplated in the manner as set forth in Article "2" hereinabove, together with all of the transactions contemplated by this Agreement, shall occur on the day which is five business days following the due and complete exercise of the Option by the Optionee in accordance with Article "2" hereinabove (the "Closing Date"), or on such earlier or later Closing Date as may be agreed to in advance and in writing by each of the Parties hereto, and will be closed at the offices of Lang Michener LLP, Lawyers - Patent & Trade Mark Agents, located at 1500 Royal Centre, 1055 West Georgia Street, Vancouver, British Columbia, Canada, V6E 4N7, counsel for the Optionee herein, at 2:00 p.m. (Vancouver time) on the Closing Date. 6.2 Latest Closing Date. If the Closing Date in respect of the due and complete exercise of the Option by the Optionee has not occurred within 19 months from the Effective Date then this Agreement will be terminated and unenforceable unless the Parties hereto agree in writing to grant an extension of such Closing Date. 24 Article 6 CLOSING AND EVENTS OF CLOSING - continued. 6.3 Documents to be delivered by the Optionor prior to the Closing Date. Subject to the prior and due and complete exercise of by the Optionee of the Option in accordance with Article "2" hereinabove, and not later than five calendar days prior to the Closing Date and in addition to the documentation which is required by the agreements and conditions precedent which are set forth in Articles "2" and "5" hereinabove, the Optionor shall also execute and deliver, or cause to be delivered, to the Escrow Agent all such other documents, resolutions and instruments as may be necessary, in the opinion of counsel for the Optionee, acting reasonably, to complete all of the transactions contemplated by this Agreement and including, without limitation, the necessary transfer of an undivided 100% legal, beneficial and registerable interest in and to the mineral property interests comprising the Assets to the Optionee (or, at the sole and absolute discretion of the Optionee, to such other entity or subsidiary as may be determined by the Optionee prior to the Closing Date) free and clear of all liens, charges and encumbrances, and in particular including, but not being limited to, the following materials: (a) all documentation as may be necessary and as may be required by the counsel for the Optionee, acting reasonably, to ensure that an undivided 100% legal, beneficial and registerable interest in and to the mineral property interests comprising the Assets has have been duly transferred, assigned and is registerable in the name of and for the benefit of the Optionee (or, at the sole and absolute discretion of the Optionee, to such other entity or subsidiary as may be determined by the Optionee) under all applicable laws; (b) all necessary deeds, conveyances, bills of sale, assurances, transfers, assignments and consents, including all necessary consents and approvals, and any other documents necessary or reasonably required to effectively transfer an undivided 100% legal, beneficial and registerable interest in and to the mineral property interests comprising the Assets to the Optionee (or, at the sole and absolute discretion of the Optionee, to such other entity or subsidiary as may be determined by the Optionee) with good and marketable title, free and clear of all mortgages, liens, charges, pledges, claims, security interests or encumbrances whatsoever; (c) all necessary consents and approvals in writing to the completion of the transactions contemplated herein and including, without limitation, Regulatory Approval from all Regulatory Authorities having jurisdiction over either the Optionor or any of the mineral property interests comprising the Assets; (d) a certificate of an authorized officer of the Optionor, dated as at the Closing Date, acceptable in form to counsel for the Optionee, acting reasonably, certifying that the representations, warranties, covenants and agreements of the Optionor contained in this Agreement are true and correct in all respects as of the Closing Date as if made by the Optionor on the Closing Date; (e) an opinion of counsel for the Optionor, dated as at the Closing Date and addressed to the Optionee and the Optionee's counsel, in form and substance satisfactory to the Optionee's counsel, acting reasonably, to the effect that: 25 Article 6 CLOSING AND EVENTS OF CLOSING - continued. (i) the Optionor is the beneficial owner of all of the mineral property interests comprising the Assets prior to the completion of the transactions contemplated by this Agreement; (ii) the Optionor holds the right to explore and develop each of the mineral property interests comprising the Assets and all Assets Rights held by the Optionor in and to the mineral property interests comprising the Assets; (iii) the Optionor holds all of the mineral property interests comprising the Assets free and clear of all liens, charges and claims of others; (iv) the mineral property interests comprising the Assets have been duly and validly located and recorded in a good and minerlike manner pursuant to all applicable laws and are in good standing as of the Closing Date; (v) all necessary steps have been taken by the Optionor to permit the transfer of an undivided 100% legal, beneficial and registerable interest in and to the mineral property interests comprising the Assets to the Optionee (or, at the sole and absolute discretion of the Optionee, to such other entity or subsidiary as may be determined by the Optionee) with good and marketable title, free and clear of all mortgages, liens, charges, pledges, claims, security interests or encumbrances whatsoever; (vi) based on actual knowledge and belief, such counsel knows of no adverse claim or challenge against or to the ownership of or title to any of the mineral property interests comprising the Assets or which may impede the Assets' development, and, based on actual knowledge and belief, such counsel is not aware of any basis for any potential claim or challenge, and, based on actual knowledge and belief, such counsel knows of no outstanding agreements or options to acquire or purchase any portion of any of the mineral property interests comprising the Assets, and no person has any royalty, net profits or other interest whatsoever in any production from any of the mineral property interests comprising the Assets; (vii) based on actual knowledge and belief, such counsel knows of no claims, judgments, actions, suits, litigation, proceedings or investigations, actual, pending or threatened, against the Optionor which might materially affect any of the mineral property interests comprising the Assets or which could result in any material liability to either the Optionor or to any of the mineral property interests comprising the Assets; and 26 Article 6 CLOSING AND EVENTS OF CLOSING - continued. (viii) as to all other legal matters of a like nature pertaining to the Optionor and the mineral property interests comprising the Assets and to the transactions contemplated hereby as the Optionee or the Optionee's counsel may reasonably require; (f) any remaining Assets Documentation; and (g) all such other documents and instruments as the Optionee and the Optionee's counsel may reasonably require. 6.4 Documents to be delivered by the Optionee prior to the Closing Date. Subject to the prior and due and complete exercise of by the Optionee of the Option in accordance with Article "2" hereinabove, and not later than five calendar days prior to the Closing Date and in addition to the documentation which is required by the agreements and conditions precedent which are set forth in Articles "2" and "5" hereinabove, the Optionee shall also execute and deliver, or cause to be delivered, to the Escrow Agent all such other documents, resolutions and instruments as are necessary, in the opinion of counsel for the Optionor, acting reasonably, to complete all of the transactions contemplated by this Agreement and including, without limitation, each of the Cash Payments, Share Issuances, Consulting Arrangements and maintenance payments hereunder, and effectively accepting the transfer to the Optionee (or, at the sole and absolute discretion of the Optionee, to such other entity or subsidiary as may be determined by the Optionee prior to the Closing Date) of an undivided 100% legal, beneficial and registerable interest in and to the mineral property interests comprising the Assets free and clear of all liens, charges and encumbrances, and in particular including, but not being limited to, the following materials: (a) a Closing agenda; (b) if required, a certified copy of an ordinary resolution or, where required, a special resolution, of the shareholders of the Optionee approving the terms and conditions of this Agreement and all of the transactions contemplated hereby or, in the alternative, shareholders of the Optionee holding 100% of the issued shares of the Optionee providing written consent resolutions evidencing their approval to the terms and conditions of this Agreement and all of the transactions contemplated hereby; (c) a certified copy of the resolutions of the directors of the Optionee providing for the approval of the terms and conditions of this Agreement and all of the transactions contemplated hereby; (d) all necessary consents and approvals in writing to the completion of the transactions contemplated herein and including, without limitation, Regulatory Approval from all Regulatory Authorities having jurisdiction over the Optionee; (e) a certificate of an officer of the Optionee, dated as at the Closing Date, acceptable in form to counsel for the Optionor, acting reasonably, certifying that the representations, warranties, covenants and agreements of the Optionee contained in this Agreement are true and correct in all respects as of the Closing Date as if made by the Optionee on the Closing Date; and 27 Article 6 CLOSING AND EVENTS OF CLOSING - continued. (f) all such other documents and instruments as the Optionor and the Optionor's counsel may reasonably require. Article 7 APPOINTMENT OF ESCROW AGENT AND TRANSFER DOCUMENTS 7.1 Appointment of Escrow Agent. The Parties hereto hereby acknowledge and appoint the Escrow Agent as escrow agent herein. 7.2 Escrow of Transfer Documents. Subject to and in accordance with the terms and conditions hereof and the requirements of Articles "2", "5" and "6" hereinabove, and without in any manner limiting the obligations of each of the Parties hereto as contained therein and hereinabove, it is hereby acknowledged and confirmed by the Parties hereto that each of the Parties will execute, deliver, or cause to be delivered, all such documentation as may be required by the requirements of Articles "2", "5" and "6" hereinabove (herein, collectively, the "Transfer Documents") and deposit the same with the Escrow Agent, or with such other mutually agreeable escrow agent, together with a copy of this Agreement, there to be held in escrow for release by the Escrow Agent to the Parties in accordance with the strict terms and provisions of Articles "2" and "6" hereinabove. 7.3 Resignation of Escrow Agent. The Escrow Agent may resign from its duties and responsibilities if it gives each of the Parties hereto three calendar days' written notice in advance. Upon receipt of notice of the Escrow Agent's intention to resign the Parties shall, within three calendar days, select a replacement escrow agent and jointly advise the Escrow Agent in writing to deliver the Transfer Documents to the replacement escrow agent. If the Parties fail to agree on a replacement escrow agent within three calendar days of such notice, the replacement escrow agent shall be selected by a Judge of the Supreme Court of the Province of British Columbia upon application by any Party hereto. The Escrow Agent shall continue to be bound by this Agreement until the replacement escrow agent has been selected and the Escrow Agent receives and complies with the joint instructions of the Parties to deliver the Transfer Documents to the replacement escrow agent. The Parties agree to enter into an escrow agreement substantially in the same form of this Agreement with the replacement escrow agent. 7.4 Instructions to Escrow Agent. Instructions given to the Escrow Agent pursuant to this Agreement shall be given by duly authorized signatories of the respective Parties hereto. 7.5 No other duties or obligations. The Escrow Agent shall have no duties or obligations other than those specifically set forth in this Article. 7.6 No obligation to take legal action. The Escrow Agent shall not be obligated to take any legal action hereunder which might, in its judgment, involve any expense or liability unless it shall have been furnished with a reasonable indemnity by all of the Parties hereto together with such other third parties as the Escrow Agent may require in its sole and absolute discretion. 7.7 Not bound to any other agreements. The Escrow Agent is not bound in any way by any other contract or agreement between the Parties hereto whether or not it has knowledge thereof or of its terms and conditions and its only duty, 28 Article 7 APPOINTMENT OF ESCROW AGENT AND TRANSFER DOCUMENTS - continued liability and responsibility shall be to hold and deal with the Transfer Documents as herein directed. 7.8 Notice. The Escrow Agent shall be entitled to assume that any notice and evidence received by it pursuant to these instructions from anyone has been duly executed by the Party by whom it purports to have been signed and that the text of any notice and evidence is accurate and the truth. The Escrow Agent shall not be obliged to inquire into the sufficiency or authority of the text or any signatures appearing on such notice or evidence. 7.9 Indemnity. The Parties hereto, jointly and severally, covenant and agree to indemnify the Escrow Agent and to hold it harmless against any loss, liability or expense incurred, without negligence or bad faith on its part, arising out of or in connection with the administration of its duties hereunder and including, without limitation, the costs and expenses of defending itself against any claim or liability arising therefrom. 7.10 Not required to take any action. In the event of any disagreement between any of the Parties hereto to these instructions or between them or either or any of them and any other person resulting in adverse claims or demands being made in connection with the Transfer Documents, or in the event that the Escrow Agent should take action hereunder, it may, at its option, refuse to comply with any claims or demands on it, or refuse to take any other action hereunder, so long as such disagreement continues or such doubt exists and, in any such event, it shall not be or become liable in any way or to any person for its failure or refusal to act and it shall be entitled to continue so to refrain from acting until: (a) the rights of all Parties shall have been fully and finally adjudicated by a court of competent jurisdiction; or (b) all differences shall have been adjusted and all doubt resolved by agreement among all of the interested persons and it shall have been notified thereof in writing signed by all such persons. Article 8 THE OPERATOR 8.1 Optionee as initial Operator. Subject to the determination of the Management Committee in accordance with Article "9" hereinbelow, and subject to the terms of any completed assignment or transfer of any Holding (as hereinafter determined) of the Optionee in accordance with Article "10" hereinbelow, prior to the due and complete exercise of the Option the Optionee or, at the Optionee's option and in the Optionee's sole and absolute discretion, the Optionee's respective associate, nominee or such other unrelated entity as the Optionee may determine, will act as the Operator of the Assets under this Agreement. The Operator may resign as the Operator at any time by giving 30 calendar days' prior written notice to the Parties hereto and, within such 30-day period, the Management Committee may appoint another party who covenants to act as the Operator of the Assets upon such terms as the Management Committee shall agree. 8.2 Subsequent Operator. After the execution of this Agreement and prior to the due and complete exercise of the Option if the Operator is not the Optionee the Operator shall, prior to being appointed to act as the Operator, enter into a 29 Article 8 THE OPERATOR - continued written agreement to assume the obligations of the Operator hereunder and to be bound by the terms and conditions of this Agreement as the Operator. 8.3 Powers and authority. After the execution of this Agreement and prior to the due and complete exercise of the Option, and subject to the control and direction of the Management Committee, the Operator shall have the full right, power and authority to do everything necessary or desirable in connection with the exploration and development of the mineral property interests comprising the Assets and to determine the manner of operation of the Assets as a mine and including, without limitation, the right, power and authority to: (a) regulate access to the mineral property interests comprising the Assets subject only to the right of each of the Parties hereto to have access to the mineral property interests comprising the Assets at all reasonable times for the purpose of inspecting work being done thereon, but at their own risk and expense; and (b) employ and engage such employees, agents and independent contractors as the Operator may consider necessary or advisable to carry out the Operator's duties and obligations hereunder and, in this connection, to delegate any of the Operator's powers and rights to perform the Operator's duties and obligations hereunder; however, the Operator shall not enter into contractual relationships with an associated party except on terms which are commercially competitive. 8.4 Duties and obligations. After the execution of this Agreement and prior to the due and complete exercise of the Option the Operator shall have such duties and obligations as the Management Committee may from time to time determine and including, without limitation, the following duties and obligations: (a) to implement Programs; (b) to manage, direct and control all exploration, development and producing operations in and under the mineral property interests comprising the Assets in a prudent and workmanlike manner and in compliance with all applicable laws, rules, orders and regulations; (c) to prepare and deliver to the Parties during periods of active field work, and during the Option Period only, monthly progress reports of the work in progress and comprehensive annual reports on or before March 31st of every year covering the activities hereunder and the results obtained during the calendar year ending on the December 31st immediately preceding; (d) subject to the terms and conditions of this Agreement, to keep the mineral property interests comprising the Assets in good standing free of liens, charges and encumbrances of every character arising from operations, (except liens for taxes not yet due, other inchoate liens and liens contested in good faith by the Operator), and to proceed with all diligence to contest or discharge any such lien that is filed; (e) to maintain true and correct books, accounts and records of operations hereunder; 30 Article 8 THE OPERATOR - continued (f) to permit the Parties, at their own expense, to inspect, take abstracts from or audit any or all of the records and accounts during normal business hours; (g) to obtain and maintain, or cause any contractor engaged hereunder to obtain and maintain, during any period in which active work is carried out hereunder, adequate insurance; (h) to permit the Parties or their respective representatives so appointed, at their own expense and risk, access to the mineral property interests comprising the Assets and all data derived from carrying out work thereon; (i) to arrange for and maintain worker's compensation or equivalent coverage for all eligible employees engaged by the Operator in accordance with local statutory requirements; (j) to perform the Operator's duties and obligations in a manner consistent with good exploration and mining practices; and (k) to transact, undertake and perform all transactions, contracts, employments, purchases, operations, negotiations with third parties and any other matter or thing undertaken on behalf of the Parties or the mineral interests property comprising the Assets in the Operator's name. Article 9 THE MANAGEMENT COMMITTEE 9.1 Establishment. During the Option Period only, and as soon as is practicable after the Effective Date of this Agreement, the Parties hereto shall establish a Management Committee consisting of two members and an alternate member of each Party. Each Party shall designate in writing to the other Party the names of its members and alternate member of the Management Committee. 9.2 Alternate members. A Party may from time to time revoke in writing the appointment of its members to the Management Committee and appoint in writing others in their place. A Party may from time to time in writing appoint one alternate member for any member theretofore appointed by such Party. Alternate members may attend meetings of the Management Committee and, in the absence of a member, the alternate member may vote and otherwise act in the place and stead of the member. Whenever any member or alternate member votes or acts the member's votes or actions shall, for all purposes of this Agreement, be considered the actions of the Party whom that member represents. The Parties shall give written notice to each other from time to time as to the names, addresses and telephone numbers of their respective members and alternate members on the Management Committee. 9.3 Meetings. Meetings of the Management Committee shall be held at such times as the Parties hereto deem appropriate but, in any event, not less than once each month. A meeting of the Management Committee may take place by means of conference telephone or other communications facility by which means the members and alternate members of both Parties participating in the meeting can hear each other. The members participating in a meeting in accordance with this section shall be deemed to be present at the meeting and shall be counted in the quorum therefore and be entitled to speak and vote thereat. 31 Article 9 THE MANAGEMENT COMMITTEE - continued 9.4 Notice and place for meetings. Meetings of the Management Committee shall be called by the Operator by giving not less than ten calendar days' prior notice in writing to each of the Parties hereto, and all meetings shall be held at such place and time as shall be designated by the Operator unless otherwise agreed to by each of the Parties hereto. 9.5 Reporting. The Operator shall consult freely with the Management Committee and the members thereof and keep them fully advised of the present and prospective operations and plans and shall furnish the Management Committee with semi-annual reports relating to the status of the mineral interests comprising the Assets together with timely current reports and information on any material results relating to the mineral property interests comprising the Assets. 9.6 Voting. Voting by the Management Committee may be conducted by verbal, written, telex or telecopier ballot. 9.7 Quorum. Except as hereinafter provided, a quorum of any meeting of the Management Committee shall consist of one member of each Party, one alternate member of each Party or one member of one Party and one alternate member of the other Party. If a quorum is not present within 30 minutes after the time fixed for holding any such meeting, the meeting shall be adjourned to the same day in the next week (unless such day is a non-business day in which case it shall be adjourned to the next following business day thereafter) at the same time and place. At the adjourned meeting the members or alternate members present in person (which may include only one person) shall form a quorum and may transact the business for which the meeting was originally convened. 9.8 Votes by members. Prior to the exercise of the Option the Optionee's member (or alternate member in the absence of a member) of the Management Committee shall have two votes and the Optionor's member (or alternate member in the absence of a member) of the Management Committee shall have one vote at each duly constituted meeting in respect of every matter which is thereat brought before the Management Committee for consideration or approval. 9.9 Majority. All decisions of the Management Committee shall be by the affirmative vote of a majority of the votes entitled to be cast by members in attendance at each such meeting. 9.10 Powers. The Management Committee shall, without limiting any of its powers as specified elsewhere in this Agreement, have the exclusive right, power and authority to: (a) appoint a new Operator or joint Operator; (b) determine the terms of engagement of the Operator, including any remuneration payable to the Operator; and (c) approve or reject the abandonment or disposition of any part of the mineral interests comprising the Assets. 9.11 Arbitration. In the case of an equality of votes on any question or matter which cannot to be resolved, other than the exercise by the Optionee of the Option, such question or matter shall be submitted to arbitration pursuant to the terms of Article "16" hereinbelow. 9.12 Material and data at meetings. There shall be included with a notice of meeting such material and data as may be reasonably required to enable the 32 Article 9 THE MANAGEMENT COMMITTEE - continued members of the Management Committee to determine the position they should take in respect of any vote or election to be made at such meeting. 9.13 Termination of the Management Committee. It is hereby acknowledged and agreed that upon the due and complete exercise of the Option by the Optionee in accordance with Article "2" hereinabove, and in conjunction with the corresponding completion of the transfer to the Optionee (or, at the sole and absolute discretion of the Optionee, to such other entity or subsidiary as may be determined by the Optionee prior to the Closing Date) of an undivided 100% legal, beneficial and registerable interest in and to the mineral property interests comprising the Assets in accordance with Articles "5" and "6" hereinabove, the Management Committee will be deemed, without any further act, to be disbanded and of no further force and effect. Article 10 POWER TO CHARGE AND ASSIGNMENT AND RIGHT OF FIRST REFUSAL 10.1 Power to charge. At any time prior to the exercise of the Option by the Optionee the Optionee may grant mortgages, charges or liens (each of which is herein called a "mortgage") of and upon the interest of the Optionee in and to any of the mineral property interests comprising the Assets, upon any mill or other fixed assets located thereon and on any or all of the tangible personal Assets located on or used in connection with any of the mineral property interests comprising the Assets, to secure only the financing of development of any of the mineral property interests comprising the Assets; provided that, unless otherwise agreed to by the Optionor, it shall be a term of each mortgage that the mortgagee or any person acquiring title to any mineral property interest comprising the Assets, or to any mill or other fixed assets or tangible personal Assets located on or used in connection with any mineral property interest comprising the Assets upon enforcement of the mortgage, shall hold the same subject to the rights of the Optionor hereunder as if the mortgagee or any such person had executed this Agreement as party of the first part. 10.2 Assignment. Save and except as otherwise provided for hereinabove and in this Article, no Party may sell, assign, pledge, mortgage or otherwise encumber all or any part of its interest herein or to any of the mineral property interests comprising the Assets without the prior written consent of the other Party hereto; provided, however, that any Party hereto may at anytime, and at its sole and absolute discretion and without the prior approval of the other Party, assign and transfer its interest herein or to any of the mineral property interests comprising the Assets to any wholly-owned subsidiary subject, at all times, to the requirement that any such subsidiary remain wholly owned by the Party hereto failing which any such interest must be immediately transferred back to such Party hereto; and, provided further, that any transfer of all or any part of a Party's interest herein or to any of the mineral property interests comprising the Assets to its wholly owned subsidiary shall be accompanied by the written agreement of any such subsidiary to assume the obligations of such Party hereunder and to be bound by the terms and conditions hereof. 10.3 Right of first refusal. At any time both prior to and after the exercise of the Option by the Optionee in accordance with the terms of this Agreement each Party (hereinafter called the "Disposing Party") hereby grants to the other Party a right of first refusal to acquire all or any portion of any interest herein or to any of the mineral property interests comprising the Assets which the Disposing Party desires to dispose of (hereinafter called, collectively, the 33 Article 10 POWER TO CHARGE AND ASSIGNMENT AND RIGHT OF FIRST REFUSAL - continued "Holding"). If a Disposing Party receives a bona fide offer to purchase from, or where a sale is solicited by the Disposing Party, then upon settling the proposed terms thereof with a third party for the purchase or sale of the Holding, the Disposing Party shall forthwith offer to sell the Holding to the other Party. The offer to sell to the non-Disposing Party (or Parties as the case may be) shall be on the same terms and conditions and of equivalent dollar value as those contained in the offer to the third party; provided, however, that should the Parties fail to agree upon a determination of the equivalent dollar value for any such offer, such equivalent dollar value shall be determined finally by arbitration under the provisions of Article "16" hereinbelow. The other Party shall be entitled to elect, by notice to the Disposing Party within 30 calendar days from the date of receipt of the offer to sell, to acquire the Holding, on the same terms and conditions as those set forth in the offer to the third party. If the other Party does not exercise its right to acquire the Holding as aforesaid, the Disposing Party may, for a period of 60 calendar days following the last date upon which the other Party could have made the election hereinabove, dispose of the Holding, but only on the same terms and conditions as set forth in that offer. Any transfer of all or any part of a Disposing Party's interest herein or to any of the mineral property interests comprising the Assets shall be accompanied by the written agreement of any such transferee to assume the obligations of such Disposing Party hereunder and to be bound by the terms and conditions hereof. Article 11 REGISTRATION, PARTITION AND TENANCY 11.1 Registration. Upon the request of the Optionee the Optionor shall assist the Optionee to record this Agreement with the appropriate mining recorder and, when required, the Optionor shall further provide the Optionee with such recordable documents as the Optionee and its counsel shall require to record its due interest in respect of the mineral property interests comprising the Assets. 11.2 Partition. No Party owning a partitionable interest in any to any of the mineral property interests comprising the Assets shall, during the term of this Agreement, exercise any right to apply for any partition of any portion of the mineral property interests comprising the Assets or for the sale thereof in lieu of partition. 11.3 Tenancy. Any interests of the Optionee and Optionor in and to any of the mineral property interests comprising the Assets shall be held as tenants in common and not as joint tenants. Article 12 DUE DILIGENCE INVESTIGATION 12.1 Due Diligence. Each of the Parties hereto shall forthwith conduct such further due diligence examination of the other Parties hereto as it deems appropriate. 12.2 Confidentiality. Each Party may in a reasonable manner carry out such investigations and due diligence as to the other Parties hereto, at all times subject to the confidentiality provisions of Articles "14" and "15" hereinbelow, as each Party deems necessary. In that regard the Parties agree that each shall have full and complete access to, if and where applicable, the other Parties' 34 Article 12 DUE DILIGENCE INVESTIGATION - continued respective books, records, financial statements and other documents, articles of incorporation, by-laws, minutes of Board of Directors' meetings and its committees, investment agreements, material contracts and as well as such other documents and materials as the Parties hereto, or their respective solicitors, may deem reasonable and necessary to conduct an adequate due diligence investigation of each Party and its respective operations and financial condition prior to the Closing. Article 13 NON-DISCLOSURE 13.1 Non-disclosure. Subject to the provisions of section "13.3" hereinbelow, the Parties hereto, for themselves and, if and where applicable, their officers, directors, shareholders, consultants, employees and agents, agree that they each will not disseminate or disclose, or knowingly allow, permit or cause others to disseminate or disclose to third parties who are not subject to express or implied covenants of confidentiality, without the other Parties' express written consent, either: (i) the fact or existence of this Agreement or discussions and/or negotiations between them involving, inter alia, possible business transactions; (ii) the possible substance or content of those discussions; (iii) the possible terms and conditions of any proposed transaction; (iv) any statements or representations (whether verbal or written) made by either Party in the course of or in connection with those discussions; or (v) any written material generated by or on behalf of any Party and such contacts, other than such disclosure as may be required under applicable securities legislation or regulations, pursuant to any order of a court or on a "need to know" basis to each of the Parties' respective professional advisors. 13.2 Documentation. Any document or written material generated by either Party hereto in the course of, or in connection with, the due diligence investigations conducted pursuant to this Agreement shall be marked "Confidential" and shall be treated by each Party as a trade secret of the other Parties. Upon termination of this Agreement prior to Closing all copies of any and all documents obtained by any Party from any other Party herein, whether or not marked "Confidential", shall be returned to the other Parties forthwith. 13.3 Public announcements. Notwithstanding the provisions of this Article, the Parties hereto agree to make such public announcements of this Agreement promptly upon its execution in accordance with the requirements of applicable securities legislation and regulations. Article 14 PROPRIETARY INFORMATION 14.1 Confidential Information. Each Party hereto acknowledges that any and all information which a Party may obtain from, or have disclosed to it, about the other Parties constitutes valuable trade secrets and proprietary confidential information of the other Parties (collectively, the "Confidential Information"). No such Confidential Information shall be published by any Party without the prior written consent of the other Parties hereto; however, such consent in respect of the reporting of factual data shall not be unreasonably withheld and shall not be withheld in respect of information required to be publicly disclosed pursuant to applicable securities or corporation laws. Furthermore, each Party hereto undertakes not to disclose the Confidential Information to any third party without the prior written approval of the other Parties hereto and 35 Article 14 PROPRIETARY INFORMATION - continued to ensure that any third party to which the Confidential Information is disclosed shall execute an agreement and undertaking on the same terms as contained herein. 14.2 Impact of breach of confidentiality. The Parties hereto acknowledge and agree that the Confidential Information is important to the respective businesses of each of the Parties and that, in the event of disclosure of the Confidential Information, except as authorized hereunder, the damage to each of the Parties hereto, or to either of them, may be irreparable. For the purposes of the foregoing sections the Parties recognize and hereby agree that a breach by any of the Parties of any of the covenants therein contained would result in irreparable harm and significant damage to each of the other Parties that would not be adequately compensated for by monetary award. Accordingly, the Parties agree that in the event of any such breach, in addition to being entitled as a matter of right to apply to a court of competent equitable jurisdiction for relief by way of restraining order, injunction, decree or otherwise as may be appropriate to ensure compliance with the provisions hereof, any such Party will also be liable to the other Parties, as liquidated damages, for an amount equal to the amount received and earned by such Party as a result of and with respect to any such breach. The Parties also acknowledge and agree that if any of the aforesaid restrictions, activities, obligations or periods are considered by a court of competent jurisdiction as being unreasonable, the Parties agree that said court shall have authority to limit such restrictions, activities or periods as the court deems proper in the circumstances. In addition, the Parties further acknowledge and agree that all restrictions or obligations in this Agreement are necessary and fundamental to the protection of the respective businesses of each of the Parties and are reasonable and valid, and all defenses to the strict enforcement thereof by either of the Parties are hereby waived by the other Parties. Article 15 FORCE MAJEURE 15.1 Events. If any Party hereto is at any time prevented or delayed in complying with any provisions of this Agreement by reason of strikes, walk-outs, labour shortages, power shortages, fires, wars, acts of God, earthquakes, storms, floods, explosions, accidents, protests or demonstrations by environmental lobbyists or native rights groups, delays in transportation, breakdown of machinery, inability to obtain necessary materials in the open market, unavailability of equipment, governmental regulations restricting normal operations, shipping delays or any other reason or reasons beyond the control of that Party, then the time limited for the performance by that Party of its respective obligations hereunder shall be extended by a period of time equal in length to the period of each such prevention or delay. 15.2 Notice. A Party shall, within seven calendar days, give notice to the other Parties of each event of force majeure under section "15.1" hereinabove and, upon cessation of such event, shall furnish the other Parties with notice of that event together with particulars of the number of days by which the obligations of that Party hereunder have been extended by virtue of such event of force majeure and all preceding events of force majeure. 36 Article 16 ARBITRATION 16.1 Matters for Arbitration. The Parties hereto agree that all questions or matters in dispute with respect to this Agreement shall be submitted to arbitration pursuant to the terms hereof. 16.2 Notice. It shall be a condition precedent to the right of any Party to submit any matter to arbitration pursuant to the provisions hereof that any Party intending to refer any matter to arbitration shall have given not less than 10-calendar days' prior written notice of its intention to do so to the other Party together with particulars of the matter in dispute. On the expiration of such 10 calendar days the Party who gave such notice may proceed to refer the dispute to arbitration as provided in section "16.3" hereinbelow. 16.3 Appointments. The Party desiring arbitration shall appoint one arbitrator, and shall notify the other Party of such appointment, and the other Party shall, within 10 calendar days after receiving such notice, appoint an arbitrator, and the two arbitrators so named, before proceeding to act, shall, within 10 calendar days of the appointment of the last appointed arbitrator, unanimously agree on the appointment of a third arbitrator, to act with them and be chairperson of the arbitration herein provided for. If the other Party shall fail to appoint an arbitrator within 10 calendar days after receiving notice of the appointment of the first arbitrator, or if the two arbitrators appointed by the Parties shall be unable to agree on the appointment of the chairperson, the chairperson shall be appointed under the provisions of the Arbitration Rules. Except as specifically otherwise provided in this section, the arbitration herein provided for shall be conducted in accordance with such Arbitration Rules. The chairperson, or in the case where only one arbitrator is appointed, the single arbitrator, shall fix a time and place in Vancouver, British Columbia, Canada, for the purpose of hearing the evidence and representations of the Parties, and such arbitrator shall preside over the arbitration and determine all questions of procedure not provided for under such Arbitration Rules or this section. After hearing any evidence and representations that the Parties may submit, the single arbitrator, or the arbitrators, as the case may be, shall make an award and reduce the same to writing, and deliver one copy thereof to each of the Parties. The expense of the arbitration shall be paid as specified in the award. 16.4 Award. The Parties hereto agree that the award of a majority of the arbitrators, or in the case of a single arbitrator, of such arbitrator, shall be final and binding upon each of them. Article 17 DEFAULT AND TERMINATION 17.1 Default. The Parties hereto agree that if any Party hereto is in default with respect to any of the provisions of this Agreement (herein called the "Defaulting Party"), the non-defaulting Party (herein called the "Non-Defaulting Party") shall give notice to the Defaulting Party designating such default, and within 10 calendar days after its receipt of such notice, the Defaulting Party shall either: (a) cure such default, or commence proceedings to cure such default and prosecute the same to completion without undue delay; or 37 Article 17 DEFAULT AND TERMINATION - continued (b) give the Non-Defaulting Party notice that it denies that such default has occurred and that it is submitting the question to arbitration as herein provided. 17.2 Arbitration. If arbitration is sought a Party shall not be deemed in default until the matter shall have been determined finally by appropriate arbitration under the provisions of Article "16" hereinabove. 17.3 Curing the Default. If: (a) the default is not so cured or the Defaulting Party does not commence or diligently proceed to cure the default; or (b) arbitration is not so sought; or (c) the Defaulting Party is found in arbitration proceedings to be in default, and fails to cure it within five calendar days after the rendering of the arbitration award, the Non-Defaulting Party may, by written notice given to the Defaulting Party at any time while the default continues, terminate the interest of the Defaulting Party in and to this Agreement. 17.4 Termination. In addition to the foregoing it is hereby acknowledged and agreed by the Parties hereto that this Agreement will be immediately terminated in the event that: (a) the Option is terminated in accordance with Article "2" hereinabove; (b) either of the Parties hereto has either not satisfied or waived each of their respective conditions precedent prior to the Subject Removal Date in accordance with the provisions of Article "5" hereinabove; (c) either of the Parties hereto has failed to deliver, or caused to be delivered, any of their respective materials required to be delivered in accordance with Articles "5" and "6" hereinabove prior to each of the Subject Removal Date and the Closing Date in accordance with the provisions of Articles "5" and "6" hereinabove; (d) either of the Parties hereto has not provided a satisfactory report on its respective due diligence as contemplated in accordance with Articles "5" and "6" hereinabove; (e) the Closing Date in respect of the due and complete exercise of the Option by the Optionee has not occurred within 19 months from the Effective Date; or (f) by agreement in writing by each of the Parties hereto; and in such event this Agreement will be terminated and be of no further force and effect other than the obligations under Articles "2", "13" and "14" hereinabove. 38 Article 18 INDEMNIFICATION AND LEGAL PROCEEDINGS 18.1 Indemnification. Each Party hereto agrees to indemnify and save the other Parties, their respective Affiliates and their respective directors, officers, employees and agents (collectively, the "Indemnified Parties" and, individually, as an "Indemnified Party") harmless from and against any and all losses, claims, actions, suits, proceedings, damages, liabilities or expenses of whatsoever nature or kind, including any investigation expenses incurred by any Indemnified Party, to which an Indemnified Party may become subject by reason of the terms and conditions of this Agreement. This indemnity will not apply in respect of an Indemnified Party in the event and to the extent that a court of competent jurisdiction in a final judgment shall determine that the Indemnified Party was grossly negligent or guilty of willful misconduct. The Parties hereto agree to waive any right they might have of first requiring the Indemnified Party to proceed against or enforce any other right, power, remedy, security or claim payment from any other person before claiming this indemnity. In case any action is brought against an Indemnified Party in respect of which indemnity may be sought against any Party hereto, the Indemnified Party will give the affected Party prompt written notice of any such action of which the Indemnified Party has knowledge and the affected Party will undertake the investigation and defense thereof on behalf of the Indemnified Party, including the prompt employment of counsel acceptable to the Indemnified Parties affected and the payment of all expenses. Failure by the Indemnified Party to so notify shall not relieve the affected Party of its obligation of indemnification hereunder unless (and only to the extent that) such failure results in a forfeiture by the affected Party of any substantive rights or defenses. No admission of liability and no settlement of any action shall be made without the affected Party's consent and the consent of the Indemnified Parties affected, such consent not to be unreasonable withheld. Notwithstanding that the affected Party will undertake the investigation and defense of any action, an Indemnified Party will have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel will be at the expense of the Indemnified Party unless: (a) employment of such counsel has been authorized by the affected Party; (b) the affected Party has not assumed the defense of the action within a reasonable period of time after receiving notice of the action; (c) the named parties to any such action include that the affected Party and the Indemnified Party shall have been advised by counsel that there may be a conflict of interest between the affected Party and the Indemnified Party; or (d) there are one or more legal defenses available to the Indemnified Party which are different from or in addition to those available to the affected Party. If for any reason other than the gross negligence or bad faith of the Indemnified Parties (or any of them) being the primary cause of the loss claim, damage, liability, cost or expense, the foregoing indemnification is unavailable to the Indemnified Parties (or any of them) or insufficient to hold them harmless, the affected Party shall contribute to the amount paid or payable by the Indemnified Parties as a result of any and all such losses, claim, damages or liabilities in such proportion as is appropriate to reflect not only the relative benefits received by the affected Party on the one hand and the Indemnified Parties on the other, but also the relative fault of the Parties and 39 Article 18 INDEMNIFICATION AND LEGAL PROCEEDINGS - continued other equitable considerations which may be relevant. Notwithstanding the foregoing, the affected Party shall in any event contribute to the amount paid or payable by the Indemnified Parties as a result of the loss, claim, damage, liability, cost or expense (other than a loss, claim, damage, liability, cost or expenses, the primary cause of which is the gross negligence or bad faith of the Indemnified Parties or any of them), any excess of such amount over the amount of the fees actually received by the Indemnified Parties hereunder. 18.2 Legal proceedings. The Parties hereto agrees that if: (a) any legal proceedings shall be brought against either of them by any governmental commission or regulatory authority or any stock exchange; or (b) an entity having regulatory authority, either domestic or foreign, shall investigate either of them; and personnel of either Party shall be required to testify in connection therewith or shall be required to respond to procedures designed to discover information regarding the terms and conditions of this Agreement, such Party shall have the right to employ its own counsel in connection therewith and the affected Party will pay to such Party a per diem amount for their services based on its normal hourly or daily rate together with such disbursements and reasonable out-of-pocket expenses as may be incurred in connection therewith, including fees and disbursements of counsel incurred in connection with such testimony or participation. Article 19 NOTICE 19.1 Notice. Each notice, demand or other communication required or permitted to be given under this Agreement shall be in writing and shall be sent by prepaid registered mail deposited in a post office addressed to the Party entitled to receive the same, or delivered to such Party, at the address for such Party specified above. The date of receipt of such notice, demand or other communication shall be the date of delivery thereof if delivered or, if given by registered mail as aforesaid, shall be deemed conclusively to be the third calendar day after the same shall have been so mailed, except in the case of interruption of postal services for any reason whatsoever, in which case the date of receipt shall be the date on which the notice, demand or other communication is actually received by the addressee. 19.2 Change of Address. Either Party may at any time and from time to time notify the other Parties in writing of a change of address and the new address to which notice shall be given to it thereafter until further change. Article 20 GENERAL PROVISIONS 20.1 Entire agreement. This Agreement constitutes the entire agreement to date between the Parties hereto and supersedes every previous agreement, communication, expectation, negotiation, representation or understanding, whether oral or written, express or implied, statutory or otherwise, between the Parties hereto with respect to the subject matter of this Agreement and including, without limitation, the Letter of Intent. 40 Article 20 GENERAL PROVISIONS - continued 20.2 Enurement. This Agreement will enure to the benefit of and will be binding upon the Parties hereto and their respective heirs, executors, administrators and assigns. 20.3 Schedules. The Schedules to this Agreement are hereby incorporated by reference into this Agreement in their entirety. 20.4 Time of the essence. Time will be of the essence of this Agreement. 20.5 Representation and costs. It is hereby acknowledged by each of the Parties hereto that Lang Michener LLP, Lawyers - Patent & Trade Mark Agents, act solely for the Optionee, and, correspondingly, that the Optionor has been required by each of Lang Michener LLP and the Optionee to obtain independent legal advice with respect to its review and execution of this Agreement. In addition, it is hereby further acknowledged and agreed by the Parties hereto that Lang Michener LLP, and certain or all of its principal owners or associates, from time to time, may have both an economic or shareholding interest in and to the Purchaser and/or a fiduciary duty to the same arising from either a directorship, officership or similar relationship arising out of the request of the Optionee for certain of such persons to act in a similar capacity while acting for the Optionee as counsel. Correspondingly, and even where, as a result of this Agreement, the consent of each Party hereto to the role and capacity of Lang Michener LLP, and its principal owners and associates, as the case may be, is deemed to have been received, where any conflict or perceived conflict may arise, or be seen to arise, as a result of any such capacity or representation, each Party hereto acknowledges and agrees to, once more, obtain independent legal advice in respect of any such conflict or perceived conflict and, consequent thereon, Lang Michener LLP, together with any such principal owners or associates, as the case may be, shall be at liberty at any time to resign any such position if it or any Party hereto is in any way affected or uncomfortable with any such capacity or representation. Each Party to this Agreement will also bear and pay its own costs, legal and otherwise, in connection with its respective preparation, review and execution of this Agreement and, in particular, that the costs involved in the preparation of this Agreement, and all documentation necessarily incidental thereto, by Lang Michener LLP, shall be at the cost of the Optionee. 20.6 Applicable law. The situs of this Agreement is Vancouver, British Columbia, Canada, and for all purposes this Agreement will be governed exclusively by and construed and enforced in accordance with the laws and Courts prevailing in the Province of British Columbia, Canada. 20.7 Further assurances. The Parties hereto hereby, jointly and severally, covenant and agree to forthwith, upon request, execute and deliver, or cause to be executed and delivered, such further and other deeds, documents, assurances and instructions as may be required by the Parties hereto or their respective counsel in order to carry out the true nature and intent of this Agreement. 20.8 Currency. Unless otherwise stipulated, all payments required to be made pursuant to the provisions of this Agreement and all money amount references contained herein are in lawful currency of the United States. 20.9 Severability and construction. Each Article, section, paragraph, term and provision of this Agreement, and any portion thereof, shall be considered severable, and if, for any reason, any portion of this Agreement is determined to be invalid, contrary to or in conflict with any applicable present or future law, rule or regulation in a final unappealable ruling issued by any court, 41 Article 20 GENERAL PROVISIONS - continued agency or tribunal with valid jurisdiction in a proceeding to any of the Parties hereto is a party, that ruling shall not impair the operation of, or have any other effect upon, such other portions of this Agreement as may remain otherwise intelligible (all of which shall remain binding on the Parties and continue to be given full force and agreement as of the date upon which the ruling becomes final). 20.10 Captions. The captions, section numbers and Article numbers appearing in this Agreement are inserted for convenience of reference only and shall in no way define, limit, construe or describe the scope or intent of this Agreement nor in any way affect this Agreement. 20.11 Counterparts. This Agreement may be signed by the Parties hereto in as many counterparts as may be necessary and, if required, by facsimile, each of which so signed being deemed to be an original, and such counterparts together shall constitute one and the same instrument and notwithstanding the date of execution will be deemed to bear the Effective Date as set forth on the front page of this Agreement. 20.12 No partnership or agency. The Parties hereto have not created a partnership and nothing contained in this Agreement shall in any manner whatsoever constitute any Party the partner, agent or legal representative of any other Party, nor create any fiduciary relationship between them for any purpose whatsoever. No Party shall have any authority to act for, or to assume any obligations or responsibility on behalf of, any other party except as may be, from time to time, agreed upon in writing between the Parties or as otherwise expressly provided. 20.13 Consents and waivers. No consent or waiver expressed or implied by either Party hereto in respect of any breach or default by any other Party in the performance by such other of its obligations hereunder shall: (a) be valid unless it is in writing and stated to be a consent or waiver pursuant to this section; (b) be relied upon as a consent to or waiver of any other breach or default of the same or any other obligation; (c) constitute a general waiver under this Agreement; or (d) eliminate or modify the need for a specific consent or waiver pursuant to this section in any other or subsequent instance. IN WITNESS WHEREOF each of the Parties hereto have hereunto set their respective hands and seals in the presence of their duly authorized signatories effective as of the Effective Date as set forth in the front page of this Agreement. SIGNED, SEALED and DELIVERED by BRAD A. MOORE, - ------------- the Optionor herein, in the presence of: 42 Witness Signature Witness Address Witness Name and Occupation The CORPORATE SEAL of URANIUM ENERGY CORP., - -------------------- the Optionee herein, was hereunto affixed in the presence of: (C/S) Authorized Signatory /s/ Amir Adnani - ---------------- Amir Adnani 43 Schedule A This is Schedule "A" to that certain Mineral Assets Option Agreement between Brad A. Moore and Uranium Energy Corp. dated for reference effective on October 11, 2005. Assets Refer to the materials attached hereto. End of Schedule A {Draft #1 for discussion purposes only on 11/10/05} -- Mineral Assets Option Agreement -- -- Uranium Energy Corp. -- 1055690.1 -- Mineral Assets Option Agreement -- -- Uranium Energy Corp. -- 1055690.1 Schedule B This is Schedule "B" to that certain Mineral Assets Option Agreement between Brad A. Moore and Uranium Energy Corp. dated for reference effective on October 11, 2005. Letter of Intent Refer to the materials attached hereto. 44 URANIUM ENERGY CORP. 318 Homer Street, Suite 401, Vancouver, British Columbia, Canada, V6B 2V2 Phone: (604) 682-9775 and Fax: (604) 682-3591 ------------------------------------------------------------------------------- August 5, 2005 M. BRAD A. MOORE 1005 East Oak, Cushing, Oklahoma, U.S.A., 74023 Attention: Mr. Moore Dear Sir: Re: Option to acquire a 100% interest in certain Assets of the Optionor Mr. Brad A. Moore and his associates or affiliates (collectively, the "Optionor") own or are in the process of acquiring various drill proven reserves and leases in Texas and, in particular, however, without limitation, being comprised of: (i) the Optionor's current 100% legal, registered and beneficial ownership in and to the Weesatche project, comprised of four leases totaling m/l 593.46 acres, located in Goliad County; which the Optionor has represented to Uranium Energy Corp. (the "Optionee") has total proven and probable reserves reported of 5,200,000 pounds; and (ii) the Optionor's current intention to acquire the Caldena project, totaling approximately 300 acres, located in Duval County; which the Optionor has represented to the Optionee has total proven and probable reserves of 1,200,000 pounds; together with such other leases or interests which the Optionor may acquire within the Caldena deposit area from the Acceptance Date (as hereinafter defined and determined) moving forward (collectively, the "Assets"). The purpose of this letter is to summarize the mutual intentions and understandings of the Optionor and the Optionee regarding, among other things, the proposed granting by the Optionor to the Optionee of an option to acquire an undivided 100% legal, beneficial and registerable interest in and to the Assets herein (the "Option"). This letter is a "letter of intent" which summarizes the basis upon which the parties are prepared to negotiate with a view to entering into a binding Option or other form of agreement. This letter, however, does not create a contract or impose obligations on the parties other than as set forth in sections 4, 5 and 6 below provided that it is acknowledged that this letter supersedes and replaces all prior agreements or understandings between the parties hereto. It is acknowledged that the Optionee has been provided with certain information which describes the business, assets, financial and operating history and condition and prospects of the Optionor and its Assets (such information is herein referred to, collectively, as the "Disclosure Information"). The transaction summarized in this letter assumes that the Disclosure Information is accurate and complete in all material respects and that the Optionee is relying on such Disclosure Information as a condition of its providing and entering into this letter with the Optionor with respect to its proposed Option. 1. Summary of the Option and transaction 1.1 Option: In order to keep the right and Option granted to the Optionee in respect of the Assets in good standing and in force and effect during the Option period hereof (the "Option Period"); the Option Period commencing on the acceptance date of this letter by the Optionor (the "Acceptance Date") and terminating on the date which is the earlier of (i) 18 months from the Effective Date hereof (as hereinafter defined and determined) and (ii) 12 months from the date that the Optionee's common shares are first listed, posted and called for trading on a recognized stock exchange or over-the-counter market in North America (the "Initial Listing Date"); the Optionee shall be obligated to provide the following cash payments to the Optionor (each being a "Option Cash Payment") to provide the following common share issuances from treasury to the Optionor 45 (each being an Option Share Issuance") and to provide for the following consulting agreements and/or arrangements in respect of the Optionor (each being a "Consulting Arrangement") in the following manner prior to the end of the Option Period in this instance as follows: (a) Non-Refundable Cash Payments: pay to the order and direction of the Optionor the following Option Cash Payments in the aggregate of U.S. $200,000.00 during the Option Period in the following manner: (i) an initial Non-Refundable Cash Payment of U.S. $50,000.00 on the day of the due and complete execution of a definitive Agreement (as herein defined and determined) setting out in detail the terms and conditions of the Option arising herefrom (the "Effective Date"); and (ii) the final Non-Refundable Cash Payment of U.S. $150,000.00 on the date which is set the earlier of (i) six months from the Acceptance Date the and (ii) the Initial Leasing Date; (b) Option Share Issuance: issue to the order and direction of the Optionor prior to and at the end of the Option Period an aggregate of 2,000,000 common shares in the share capital of the Optionee (each a "Share") at a deemed issuance price of U.S. $0.50 per Share, in the following manner in this instance; (i) an initial Option Share Issuance of an initial 500,000 of the Shares upon the Effective Date: (ii) an additional Option Share Issuance of an additional 500,000 of the Shares on or before six months from the Effective Date; (iii) a further Option Share Issuance of a further 500,000 of the Shares on or before one year from the Effective Date; and (iv) the final Option Share Issuance of 500,000 of the Shares on or before 18 months from the Effective Date. In this regard the Optionor acknowledges that the Shares, when issued, will be issued by the Optionee to the Optionor in reliance upon the registration and prospectus exemptions contained in certain sections of the United States Securities Act of 1933, as amended, which will impose a trading restriction in the United States on the Shares for a period of at least 12 months from their respective date of issuance; and (c) Consulting Agreements: in conjunction with the execution of a definitive Agreement (as hereafter defined and determined); however, to take effective only upon the Initial Listing Date hereof,; the Optionee will use its reasonably commercial efforts to enter into industry standard forms of proposed Consulting Arrangements with each of the Optionor and Mr. Clyde Yancy (collectively, the "Consultants" herein) therein providing for, without limitation, the provision of certain consulting services to be provided by the Consultants to the Optionee in connection with the exploration, development and expansion of the Assets in consideration of, among other matters, the provision of the monthly payment by the Optionee to each of the Consultants of US $10,000.00 together with the entitlement for the Consultants to participate in the Optionee's then incentive stock option plan 46 subject, at all times, to the final determination of the Board of Directors or the Optionee in each such instance. 1.2 Termination of Option: The Option shall terminate upon 10-calendar days' prior written notice being first being provided by the Optionor to the Optionee: (a) if the Optionee fails to make any of the required Optional Cash Payments to the Optionor in accordance with paragraph 1.1(a) hereinabove within the time periods specified in paragraph 1.1(a); or (b) if the Optionee fails to make the required Share Issuance in accordance with paragraph 1.1(b) hereinabove within the time period specified in paragraph 1.1(b). (c) if the Optionee fails to enter into acceptable Consulting Arrangements with the Consultants in accordance with paragraph 1.1(c) hereinabove within the time period specified in paragraph 1.1(c) 1.3 Right of Optionee to terminate Option: Prior to the exercise of the Option the Optionee may terminate the Option by providing a notice of termination to the Optionor in writing of its desire to do so at least five calendar days prior to its decision to do so. After such five-calendar days' period the Optionee shall have no further obligations, financial or otherwise, under this letter, except that the provisions of section 1.5 hereinbelow shall become immediately applicable to the Optionee upon providing such notice of termination to the Optionor. 1.4 Termination of Option and no interest acquired in the Assets: If the Option is so terminated in accordance with either of sections 1.2 or 1.3 hereinabove then the Optionee shall have no right, entitlement or interest, legally or equitably, in and to any of the Assets, and all Option Cash Payments, Option Share Issuances and any consideration provided under the proposed Consulting Arrangements theretofore made to the Optionor and the Consultants by the Optionee shall be non-refundable for which the Optionee shall have no recourse whatsoever. 1.5 Obligations upon termination of the Option: If the Option is terminated otherwise than upon the exercise thereof, then the Optionee shall: (a) leave in good standing for a period of at least 60 calendar days from the termination of the Option those interests comprising the Assets that are in good standing on the date thereof; and (b) deliver at no cost to the Optionor within 60 calendar days of such termination copies of all reports, maps, assay results and other relevant technical data compiled by or in the possession of the Optionee with respect to the interests comprising the Assets and not theretofore already furnished to the Optionor. 1.6 Deemed exercise of Option: At such time as the Optionee has made each of the required Option Cash Payments and Option Share Issuance in accordance with section 1.1 hereinabove, within the Option Period and the time periods as specified in section 1.1, then the Option shall be deemed to have been exercised by the Optionee, and the Optionee shall have thereby, in accordance with the terms and conditions of this letter and without any further act required on its behalf, acquired an undivided 100% legal, beneficial and registerable interest in and to the interests comprising the Assets. 47 2. Due diligence investigations 2.1 From the Acceptance Date and for a period of 60 calendar days from the Acceptance Date (such period in time being the "Optionee's Due Diligence Period" herein) the Optionee all and any due diligence investigations in respect of the Optionor and its Assets as the Optionee may consider necessary, in its sole and absolute decision, from time to time, in order to determine whether it is advisable to enter into a definitive Agreement (as herein defined and determined) setting out in detail the terms and conditions of the Option arising herefrom. For purposes of such investigations the Optionor will give to the Optionee and its agents and representatives as soon as reasonably practicable after the Acceptance Date hereof full access to its Assets and all books, records, financial and operating data and other information concerning the Assets as the Optionee and its agents and representatives may reasonably request. If, at any time during the Optionee's Due Diligence Period, the Optionee determines that it is not satisfied, in its sole discretion, with the results of such investigations, it may elect not to proceed with the transactions contemplated hereby. In such instance the Optionee will notify the Optionor of such fact and thereupon this letter will terminate and the parties hereto will have not further obligations hereunder except the obligations set forth in section 4 below. 3. Negotiation and execution of definitive Agreement 3.1 While the Optionee is conducting the due diligence investigations described in section 2 above the Optionor and the Optionee will negotiate in good faith to complete and execute a definitive agreement and related documentation (collectively, the "Agreement") setting out in detail the terms and conditions of the Option arising herefrom; such definitive Agreement to be entered into on or before the final day of the Optionee's Due Diligence Period herein. The Agreement will incorporate the terms and conditions set out in this letter together with all other reasonable terms and conditions as the parties or their legal advisors consider necessary or desirable, including standard representations, warranties and covenants, indemnities from the parties relating to such representations, warrants and covenants, and conditions to closing. In particular, and without limiting the generality of the foregoing, the parties shall structure the Option and negotiate the Agreement in a manner which is tax advantageous to each of the parties hereto. If each of the Optionor and the Optionee are satisfied with the results of their due diligence investigations, it is intended that negotiations of the terms of the Agreement and execution of the Agreement will be effective on the Effective Date hereof; provided, however, that it is hereby acknowledged that the Agreement may be subject to the prior acceptance of the respective shareholders of parties hereto and such regulatory authorities as may have jurisdiction over the affairs of the parties hereto. 4. Transaction costs 4.1 Each of the parties will be responsible for all costs (including, but not limited to, legal fees and expenses) incurred by it in connection with the transactions contemplated hereby. The obligations of the parties under this section 4 will survive the termination of this letter. 5. Confidentiality agreements 5.1 As soon as reasonably practicable after the Acceptance Date and prior to the end of the Optionee's Due Diligence Period the Optionor and the Optionee will use their best efforts to prevent public disclosure or knowledge of the transaction contemplated hereby, without the prior approval of the other, and will maintain the confidentiality of the negotiations regarding such transaction. The foregoing will not restrict or otherwise affect the right of 48 any such party to make or permit any disclosure: (a) which, in its opinion, is reasonably necessary or desirable for it to carry out and give full effect to the terms, provisions and intent hereof and the transaction contemplated hereby; (b) to consultants, legal advisors, financial institutions, business associates and others provided such disclosure is not intended for broad dissemination to the public; (c) in the case of the Optionee, which the legal advisors for the Optionee advise is required or advisable to ensure compliance with applicable securities laws and regulations; or (d) as may be required by law. 6. Exclusive dealing 6.1 As an inducement to the Optionee to proceed with the due diligence investigations described in section 2 above and to proceed with the preparation of the Agreement, the Optionor hereby agrees with the Optionee to deal exclusively and in confidence with the Optionee in respect of the matters set out herein and to take no action, directly or indirectly, which would impair the ability of the Optionor to complete the transactions contemplated hereby and, without limitation, hereby agrees and undertakes that, unless consented to in writing by the Optionee, it will not at any time prior to the earlier of the end of the Optionee's Due Diligence Period or the termination of the Option, if applicable, enter into, negotiate, solicit or knowingly encourage or participate in, any negotiations or discussions relating to any disposition of all or any interest in and to any of its Assets. 7. Assignment 7.1 Notwithstanding anything else contained herein, it is acknowledged that the Optionee may assign its rights and obligations herein with respect to the Option or any portion thereof to any other entity, by way of any arrangement including, without limitation, an additional option or joint venture in respect of the development of the Assets, and in such instance the Agreement contemplated by section 3 herein would be negotiated and entered into between the Optionee and such entity. 8. General 8.1 Obligations: Other than the obligations set forth in sections 4, 5 and 6 above, the parties will not be obligated in any manner with respect to the transaction contemplated hereby (including obligations to negotiate in good faith) unless and until the Agreement is executed by the parties. 8.2 Proper law: This letter of intent will be governed by and construed in accordance with the laws of the State of Nevada. The parties submit to the jurisdiction of the courts of the State of Nevada with respect to any matters arising out of this letter of intent. 8.3 Counterparts: This letter of intent may be executed in any number of counterparts, by facsimile or otherwise, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same document. Please confirm that this letter accurately sets forth your understanding of the terms of the proposed transaction and the other matters discussed herein, by signing a copy of this letter below and returning it to us. Upon our receipt we confirm that we will immediately seek Board approval to the general terms of this letter and move forward with our due diligence 49 investigations respecting the Optionor and its Assets. As the terms and conditions respecting our proposed offer to acquire an Option as set forth in this letter should not be disclosed to any third party without our prior written approval. In addition, and as we are now ready, willing and able to perform upon the terms contained herein we confirm that the offer contained in this letter is open for acceptance by the Optionor's acceptance of which our offer and the contents of this letter will be deemed null and void and of no further force and effect whatsoever. In the interim, and while we await the Optionor's response we remain, Yours very truly, RANDALL RENEAU -------------------- /s/ RANDALL RENEAU URANIUM ENERGY CORP. BRAD A. MOORE ----------------- /s/ BRAD A. MOORE Per: Authorized Signatory ACCEPTED on this 11th day of August, 2005, by the Optionor: BRAD A. MOORE End of Schedule B End of Mineral Assets Option Agreement 50 EX-5 5 exhibit_5-1.txt O'NEAL LEGAL OPINION EXHIBIT 5.1 Legal Opinion and Consent of Counsel THE O'NEAL LAW FIRM, P.C. 17100 East Shea Boulevard Suite 400-D Fountain Hills, Arizona 85268 480-812-5058 480-816-9241 (fax) OPINION OF COUNSEL AND CONSENT OF COUNSEL TO: Board of Directors Uranium Energy Corp. RE: Registration Statement on Form SB-2 Gentlemen: As counsel to Uranium Energy Corp., a Nevada corporation (the "Company"), we have participated in the preparation of the Company's Registration Statement on Form SB-2 filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, relating to the registration of 2,435,722 shares of the Company's $0.001 par value common stock on behalf of the Company's existing shareholders. As counsel to the Company, we have examined such corporate records, certificates and other documents of the Company, and made inquiries of such officers of the Company, as we have deemed necessary or appropriate for purposes of this opinion. We have also examined the applicable laws of the State of Nevada, provisions of the Nevada Constitution, and reported judicial decisions interpreting such laws. Based upon such examinations, we are of the opinion that the shares of the Company's common stock to be offered pursuant to the Registration Statement have been validly issued, fully paid and are non-assessable shares of the shares of the common stock of the Company. We hereby consent to the inclusion of this Opinion as an exhibit to the Registration Statement on Form SB-2 filed by the Company and the reference to our firm contained therein under "Legal Matters". Sincerely, /s/ THE O'NEAL LAW FIRM, P.C. - ----------------------------- Fountain Hills, Arizona DATED: November 8, 2005. EX-23 6 exhibit_23-1.txt AUDITOR CONSENT EXHIBIT 23.1 (Dale Matheson Carr-Hilton LaBonte Letter Head) November 8, 2005 U.S. Securities and Exchange Commission Division of Corporation Finance 450 Fifth Street. N.W. Washington, DC 20549 Re: Uranium Energy Corp. (Formerly Carlin Gold Inc.). - Form SB-2 Registration Statement 1st Amendment Dear Sirs: o As independent registered public accountants, we hereby consent to the inclusion or incorporation by reference in this Form SB-2 Registration Statement - - 2nd Amendment dated November 8, 2005, of the following: o Our report to the Stockholders and Board of Directors of Uranium Energy Corp. (Formerly Carlin Gold Inc.) dated May 31, 2005 on the financial statements of the Company as at December 31, 2004 and 2003 and for the year ended December 31, 2004 and the period from May 16, 2003 (inception) to December 31, 2003. In addition, we also consent to the reference to our firm as experts in accounting and auditing included in this Registration Statement. Yours truly, /s/Dale Matheson Carr-Hilton LaBonte - ------------------------------------ Dale Matheson Carr-Hilton LaBonte Chartered Accountants Vancouver, British Columbia CORRESP 7 filename7.txt THE O'NEAL LAW FIRM, P.C. 17100 East Shea Boulevard Suite 400-D Fountain Hills, Arizona 85268 (480) 812-5058 (Tel) (480) 816-9241 (Fax) November 8, 2005 Larry Spiregal Division of Corporate Finance Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Re: Uranium Energy, Inc. Amendment No. 1 to Form SB-2 Filed October 25, 2005 File No. 333-127185 Dear Mr. Spirgel: We are writing in response to your comment letter dated November 4, 2005 in connection with the above-referenced filing. The numbered responses below correspond to your numbered comments. 1. Selling Shareholders, page 38 - The Company received an additional subscription for 200,000 common shares in the capital of the Company at $0.50 per share pursuant to a U.S. Seed Capital Share Private Placement Subscription Agreement dated for reference September 14, 2005 between the Company and Michael Baybak. The Company received $100,000 as payment for the subscription on September 16, 2005. The Board of Directors of the Company accepted the subscription on September 16, 2005 and resolved pursuant to a consent resolution dated September 30, 2005 to issue 200,000 shares to Michael Baybak. The purpose of the issuance of shares and acceptance of the subscription was to further provide funding and working capital for the Company to advance its business concept. Michael Baybak has been a past investor to the Company and was interested in further investment. The Company relies on exemptions from registration set forth in Regulation D of the Securities Act. 2. Selling Shareholders, page 38 - According to the Agreement dated October 11, 2005 between Brad A. Moore and the Company, (the "Agreement") and pursuant to provision 2.2 (b) (i) of the same Agreement attached to the First Amended Registration Statement as Exhibit 4.2, that shares issuable shall be to "the order and direction of the Optionor". The "Optionor" in the Agreement is defined as "Brad A. Moore ... and the Optionor's Associates and Affiliates, as the case may be". As a result, the Company received a direction from the "Optionor" to issue the first 500,000 shares issuable under the Agreement in two equal denominations of 250,000 shares each to Brad Moore and Clyde Yancy. The information in the "Recent Sales of Unregistered Securities" section of the Second Amended Registration Statement of the Company dated November 8, 2005 includes additional detail that resolves the apparent contradiction in the selling shareholders table. Please do not hesitate to contact us if you have any further questions. Very truly yours, /s/William D. O'Neal - --------------------------- William D. O'Neal -----END PRIVACY-ENHANCED MESSAGE-----