ITEM 1. BUSINESS
Introduction
We are an exploration stage company. We currently have no business revenue and our assets primarily consist of cash and mineral and joint venture rights. There can be no assurance that we will generate revenues in the future, or that we will be able to operate profitably in the future, if at all. We have incurred net losses in each fiscal year since inception of our operations. Our company has never declared bankruptcy, it has never been in receivership, and it has never been involved in any legal action or proceedings.
Due to the current Uranium price market has declined significantly over the year, we have assessed that the forecast long term uranium price is expected to be lower than the estimated costs for development extraction on the Juniper property and it is not economically feasible to continue with the exploration and drilling work at the present time. Our current plan is to re- negotiate with the vendor of the Juniper property on the expected required expenditures amount over the next few years. During the current fiscal year ended July 31, 2008, we have also acquired from American Nuclear Fuels LLC, a Colorado company, 3,700 acres in the Uravan Uranium belt referred to the Uravan-Beck property. We intend to explore, develop, and mine uranium and vanadium from this property
Prior to our determination to focus on becoming a mineral exploration company we focused our initial operations on the production and distribution of educational team sports exercise videos and Internet based software.
Corporate History
Our company was incorporated in the State of Nevada on March 23, 2006. Effective January 23, 2007, we changed our name from “Hoopsoft Development Corp.” to “Yellowcake Mining Inc.” The address of our principal executive office is 598 - 999 Canada Place, Vancouver BC Canada V6E 3Z3. Our common stock is quoted on the OTC Bulletin Board under the symbol “YCKM”.
Also on January 23, 2007, we effected a 30 for one forward stock split of our authorized, issued and outstanding common stock. As a result, our authorized capital increased from 25,000,000 shares of common stock with a par value of $0.001 to 750,000,000 shares of common stock with a par value of $0.001.
Mineral Properties
We hold an interest in two groups of mineral properties, as described below:
1.
Juniper Ridge property, Wyoming
2.
Uravan-Beck property, Colorado
We are an exploration stage company. Our properties are presently in the exploration stage. We do not have any commercially viable reserves on any of our properties. There is no assurance that a commercially viable mineral deposit exists on any of our mineral properties. Further exploration will be required before a final evaluation as to the economic and legal feasibility of mining of any of our properties is determined. There is no assurance that further exploration will result in a final evaluation that a commercially viable mineral deposit exists on any of our mineral properties.
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Juniper Ridge
We hold an option to earn up to an 80% interest in the Juniper Ridge claims pursuant to our March 14, 2007 agreement with Strathmore. The Juniper Ridge claims are located in the Poison Basin uranium district in the south central area of Wyoming, close to the Colorado border. The total acreage of the property is 4,660 acres and over 2,000 historical drill holes have been drilled on the project to verify the resource. One area of interest within the Juniper Ridge project is the Browns Park Formation which is hundreds of feet thick. The roughly 2,000 historical drill holes have been drilled between 100 and 300 feet in depth, and have shown an average grade of between 0.05% and 0.20% .
On April 21, 2008 we amended our operating agreement with Strathmore Resources (US) Ltd. The amendments are contained in a Limited Liability Company Operating Agreement, dated effective December 31, 2007.
The following terms have been amended:
Yellowcake will contribute exploration and development costs totaling a minimum of $8 million, subject to a $500,000 annual minimum, as outlined in the following schedule:
$764,518 not later than May 1, 2008, which had been incurred;
a minimum of $300,000 not later than September 1, 2008;
a minimum of $500,000 not later than December 31, 2009
the balance of the $8 million, as agreed by both parties based on the availability of financing, but in any case, not later than December 31, 2012.
On October 12, 2008, the Company received a Memorandum of Understanding from Strathmore which has proposed to amend the annual commitment of expenditures from $300,000 and $500,000 for 2008 and 2009 respectively to $100,000 per year for 2008 and 2009, with the total commitment of remaining at $8,000,000 no later than December 31, 2012. The Company has responded to the suggested amendment and it is working with Strathmore to reach acceptable terms by both parties ‘
Uravan-Beck
On October 3, 2007, we entered into a letter of intent with American Nuclear Fuels (Colorado) LLC to acquire an interest in certain uranium properties located in Gateway, Colorado owned by Beck Mining Enterprises LLC, BeckWorth Corporation, Bedrock Development LLC, Eagle Venture Group LLC and Bruce Beck.
On December 28, 2007 we entered into a master option agreement with American Nuclear Fuels (Colorado) LLC, as well as six lease and option agreements with individual claimholders, to purchase 185 mining claims, approximating 4,793 acres, in the Uravan uranium belt, Montrose County, Colorado, referred to as the Uravan-Beck property in exchange for total payments of $5,968,750 in cash and the issuance of a total of 2,765,625 shares of our common stock, payable and issuable over five years.
As of July 31, 2008, we have issued 482,143 common shares and paid $1,089,193 in cash pursuant to the terms and conditions of this agreement.
Under the option agreements, Yellowcake has the exclusive right to access, explore and develop the properties. All future production from the property will be subject to a 3.5% royalty based on the contained metal value of ore after deduction of mining, transport and processing costs.
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Termination of Interests
On April 30, 2008 we announced that an agreement has been reached with Strathmore Minerals Corp. and Strathmore Resources (US) Ltd. to amend our Juniper Ridge Wyoming Joint Venture in Wyoming and terminate our interests in the Sky, Jeep and Conoco Files projects (also known as the Texas Database project), as of April 21, 2008.
We amended the structure of our joint venture with Strathmore at their request. We did this at the request of our joint venture partner, Strathmore, who wanted to restructure our arrangement for tax planning purposes. During the transition to the LLC, we renegotiated our arrangements with Strathmore regarding the Juniper Ridge Project and released our options regarding the Jeep and Sky properties because they had not proven to be a likely or viable mineral resource following our initial geological assessments.
Sky
We held an option to earn up to a 60% interest in the Sky claims pursuant to our August 1, 2007 joint venture agreement with Strathmore Resources (US) Ltd. The Sky Project is situated on 1,033 Acres in Fremont County in Wyoming, roughly 25 miles east of the city of Riverton. On April 21, 2008, we entered into a termination agreement with Strathmore Resources (US) Ltd. terminating the option and joint venture agreement dated July 31, 2007 regarding the Sky Project. We have no further obligations under the option and joint venture agreements regarding the Sky Project.
Jeep
We held an option to earn up to a 60% interest in the Jeep claims pursuant to our August 1, 2007 joint venture agreement with Strathmore Resources (US) Ltd. The Jeep Project is in close proximity to the Sky project and is roughly 45 miles east of Riverton. On April 21, 2008, we entered into a termination agreement with Strathmore Resources (US) Ltd. terminating the option and joint venture agreement dated July 31, 2007 regarding the Jeep Project. We have no further obligations under the option and joint venture agreements regarding the Jeep Project.
Executive Offices and Resident Agent
Our executive and head office is located at 598 - 999 Canada Place, Vancouver, BC Canada V6C 3E1. We have an agreement for the use of this property, which is an agreement for services with CP Capital Group Ltd., which is incorporated by reference to this annual report. Pursuant to the agreement, we pay CP Capital Group Ltd. US $4,000 per month for the provision of the office and investor relations related services. We feel that the arrangement will be suitable for the next 12 months.
Our resident agent is The Nevada Agency and Trust Company. Their address is 50 West Liberty Street, Suite 880, Reno, Nevada 89501, Telephone (775) 322-0626, Fax (775) 322-5623, Resident Agent e-mail: corpserve@natco.org.
Reports to security holders
We file reports and other information with the SEC. This annual report on Form 10-K, historical information about our company and other information can be inspected and copied at the Public Reference Room of the SEC located at Room 1580, 100 F Street, N.E., Washington D.C. 20549. Copies of such materials, including copies of any portion of this annual report on Form 10-K, can be obtained from the Public Reference Room of the SEC at prescribed rates. You can call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room. Such materials may also be accessed electronically by means of the SEC’s home page on the Internet (http://www.sec.gov).
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ITEM 1A.
ITEM 1A. 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 company's common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. You could lose all or part of your investment due to any of these risks.
Risks Related to our Business
Our properties are in the exploration stage. There is no assurance that we can establish the existence of any mineral resource on any of our properties in commercially exploitable quantities. Until we can do so, we cannot earn any revenues from operations and if we do not do so we will lose all of the funds that we expend on exploration. If we do not discover any mineral resource in a commercially exploitable quantity, our business could fail.
A mineral reserve is defined by the Securities and Exchange Commission (‘SEC”) in its Industry Guide 7 (which can be viewed over the Internet at http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7) as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. The probability of an individual prospect ever having a "reserve" that meets the requirements of the Securities and Exchange Commission's Industry Guide 7 is extremely remote; in all probability our mineral resource property does not contain any 'reserve' and any funds that we spend on exploration will probably be lost.
Even if we do eventually discover a mineral reserve on one or more of our properties, there can be no assurance that we will be able to develop our properties into producing mines and extract those resources. Both mineral exploration and development involve a high degree of risk and few properties which are explored are ultimately developed into producing mines.
The commercial viability of an established mineral deposit will depend on a number of factors including, by way of example, the size, grade and other attributes of the mineral deposit, the proximity of the resource to infrastructure such as a smelter, roads and a point for shipping, government regulation and market prices. Most of these factors will be beyond our control, and any of them could increase costs and make extraction of any identified mineral resource unprofitable.
Mineral operations are subject to applicable law and government regulation. Even if we discover a mineral resource in a commercially exploitable quantity, these laws and regulations could restrict or prohibit the exploitation of that mineral resource. If we cannot exploit any mineral resource that we might discover on our properties, our business may fail.
Both mineral exploration and extraction require permits from various foreign, federal, state, provincial and local governmental authorities and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport, export, taxation, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. There can be no assurance that we will be able to obtain or maintain any of the permits required for the continued exploration of our mineral properties or for the construction and operation of a mine on our properties at economically viable costs. If we cannot accomplish these objectives, our business could fail.
We believe that we are in compliance with all material laws and regulations that currently apply to our activities but there can be no assurance that we can continue to remain in compliance. Current laws and regulations could be amended and we might not be able to comply with them, as amended. Further, there can be no assurance that we will be able to obtain or maintain all permits necessary for our future operations, or that we will be able to obtain them on reasonable terms. To the extent such approvals are required and are not obtained, we may be delayed or prohibited from proceeding with planned exploration or development of our mineral properties.
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As we undertake exploration of our mineral claims, we will be subject to compliance with government regulation that may increase the anticipated cost of our exploration program.
There are several governmental regulations that materially restrict mineral exploration. We will be subject to the laws of the State of Wyoming as we carry out our exploration program. We may be required to obtain additional work permits, post bonds and perform remediation work for any physical disturbance to the land in order to comply with these laws. While our planned exploration program budgets for regulatory compliance, there is a risk that new regulations could increase our costs of doing business and prevent us from carrying out our exploration program.
If we establish the existence of a mineral resource on any of our properties in a commercially exploitable quantity, we will require additional capital in order to develop the property into a producing mine. If we cannot raise this additional capital, we will not be able to exploit the resource and our business could fail.
If we do discover mineral resources in commercially exploitable quantities on any of our properties, we will be required to expend substantial sums of money to establish the extent of the resource, develop processes to extract it and develop extraction and processing facilities and infrastructure. Although we may derive substantial benefits from the discovery of a major deposit, there can be no assurance that such a resource will be large enough to justify commercial operations, nor can there be any assurance that we will be able to raise the funds required for development on a timely basis. If we cannot raise the necessary capital or complete the necessary facilities and infrastructure, our business may fail.
Mineral exploration and development is subject to extraordinary operating risks. We do not currently insure against these risks. In the event of a cave-in or similar occurrence, our liability may exceed our resources, which would have an adverse impact on our company.
Mineral exploration, development and production involve many risks. Our operations will be subject to all the hazards and risks inherent in the exploration for mineral resources and, if we discover a mineral resource in commercially exploitable quantity, our operations could be subject to all of the hazards and risks inherent in the development and production of resources, including liability for pollution, cave-ins or similar hazards against which we cannot insure or against which we may elect not to insure. Any such event could result in work stoppages and damage to property, including damage to the environment. We do not currently maintain any insurance coverage against these operating hazards. The payment of any liabilities that arise from any such occurrence would have a material adverse impact on our company.
Uranium prices are highly volatile. If a profitable market does not exist, we may have to cease operations.
Uranium prices have been highly volatile, and are affected by numerous international economic and political factors which Yellowcake has no control. The spot price of uranium ranged from $10.00 per pound to $138.00 per pound, to the current spot price of $48.00 at November 13, 2008 per pound. Uranium is primarily used for power generation in nuclear power plants, and the number of customers is somewhat limited in comparison to other global commodities. The price of uranium is affected by numerous factors beyond the Company’s control, including the demand for nuclear power, increased supplies from both existing and new uranium mines, sales of uranium from existing government stockpiles, and political and economic conditions. The Company’s long-term success is highly dependent upon the price of uranium, as the economic feasibility of any ore body discovered on its properties would in large part be determined by the prevailing market price of uranium. If a profitable market does not exist, the Company could have to cease operations. At the present time, we have estimated the development of exploration costs exceed our forecast long term Uranium price. We may not recover our investments from the existing properties.
The uranium exploration and mining industry is highly competitive.
The uranium industry is highly competitive, and we are required to compete with other corporations that may have greater resources than ours. Such corporations could outbid us for potential projects or produce minerals at lower costs which would have a negative effect on our operations.
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Because we may never earn revenues from our operations, our business may fail and then investors may lose all of their investment in our company.
We have no history of revenues from operations. We have yet to generate positive earnings and there can be no assurance that we will ever operate profitably. Our company has a limited operating history and is in the exploration stage. The success of our company is significantly dependent on the uncertain events of the discovery and exploitation of mineral reserves on our properties or selling the rights to exploit those mineral reserves. If our business plan is not successful and we are not able to operate profitably, then our stock may become worthless and investors may lose all of their investment in our company.
Prior to completion of our exploration stage, we anticipate that we will incur increased operating expenses without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from the exploration of our mineral claims in the future, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide no assurance that we will generate any revenues or ever achieve profitability. If we are unsuccessful in addressing these risks, our business will fail and investors may lose all of their investment in our company.
We have a history of losses and have a deficit, which raises substantial doubt about our ability to continue as a going concern.
We have not generated any revenues since our incorporation and we will continue to incur operating expenses without revenues until we are in commercial deployment. Our net loss from inception (March 23, 2006) to July 31, 2008 was $17,138,161. We had cash in the amount of $651,453 as of July 31, 2008 which is not expected to meet our planned cash requirements for the ensuing year. We cannot provide assurances that we will be able to successfully explore our properties and develop our business. These circumstances raise substantial doubt about our ability to continue as a going concern as described in an explanatory paragraph to our independent auditors’ report on our audited financial statements for the year ended July 31, 2008. Our audited financial statements for the year ended July 31, 2008 don’t include adjustments for this uncertainty. If we are unable to continue as a going concern, investors will likely lose all of their investments in our company.
Risks Related to our Common Stock
Sales of a substantial number of shares of our common stock into the public market by the Selling Shareholders may result in significant downward pressure on the price of our common stock and could affect the ability of our Shareholders 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 51,413,768 shares of common stock issued and outstanding as of November 13, 2008. When our registration statement is declared effective, the Selling Shareholders may be reselling up to 9,086,625 shares of our common stock, 6,131,625 of which are included in the number of our issued and outstanding common shares as of November 13, 2008, shown above.
Any significant downward pressure on the price of our common stock as the Selling Shareholders sell the shares of our common stock could encourage short sales by the Selling Shareholders or others. Any such short sales could place further downward pressure on the price of our common stock.
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Trading on the OTC Bulletin Board may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our Shareholders to resell their shares.
Our common stock is quoted on the OTC Bulletin Board service of the Financial Industry Regulatory Authority (FINRA). Trading in stock quoted on the OTC Bulletin Board is often thin and characterized by wide fluctuations in trading prices due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board is not a stock exchange, and trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or a stock exchange like the American Stock Exchange. Accordingly, our shareholders may have difficulty reselling any of their shares.
Our stock is a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations and FINRA’s sales practice requirements, which may limit a stockholder’s ability to buy and sell our stock.
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.
FINRA’s sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission (see above for a discussion of penny stock rules), FINRA rules require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable.
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ITEM 2.
ITEM 2. PROPERTIES
Description of Juniper Ridge Claims
The Juniper Ridge property consists of 128 unpatented lode mining claims, see Figure 2 below. The Property is located in central Wyoming lying along the south-western extent of the Gas Hills Uranium District. The 128 unpatented mining claims are located on public lands administered by the U.S. Bureau of Land Management, are contiguous and consist of the following claim names and numbers:
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Figure 1 Location of Juniper Ridge Property
Location, Access and History of Exploration of Juniper Ridge
The Juniper Ridge project is located in the Poison Basin uranium district in the south central area of Wyoming, close to the Colorado border. The total acreage of the property is 3,200 acres and over 2,000 historical drill holes have been drilled on the project to verify the resource. An area of interest within the Juniper Ridge project is the Browns Park Formation which is 100’s of feet thick.. The roughly 2,000 historical drill holes have been drilled between 100 and 300 feet in depth, and have shown an average grade of between 0.05% and 0.20% .
Mineralization
On the Juniper Ridge Property, mineralization occurs as tabular bodies in sandstone at depths from the surface to 300 feet down.
Uravan-Beck project
Location and description, Access to Property
Our Uravan-Beck project is located in New Mexico in Montrose County, Colorado. This locale is about 65 miles south of Grand Junction, Colorado, and situated astride state highway #141 and the adjacent Dolores River. The property consists of 2565 acres which area is shown on the Red Canyon and Roc Creek U.S. Geological Survey (USGS) topographic quadrangle maps. The property is transected by many old drill roads.
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Geology
The Uravan-Beck properties are located on either side of the highway and north-flowing Dolores River. On the west side of the river, our properties are underlain by the lower half of the Salt Wash which is host to lower “rim” uranium deposits. On the east side, our properties are underlain by a full section of Salt Wash and host both upper “rim”, middle “rim”, and lower “rim” uranium deposits as can be observed in the west-facing cliff face above the east side of the river.
Previous exploration and development history
Mr. Bruce Beck, Moab, Utah, former uranium miner and locator of the Company property, estimates 1700 old drill holes, perhaps dating from the 1960s, many forming clusters of close-proximity holes, are present in the project area. Thus far, about two dozen clusters, so-called ‘drill outs,’ have been found. Drill hole probing with portable scintillation equipment indicates local gamma response, equivalent uranium, at relatively shallow depth in these old holes.
General Electric Uranium Management Company (GEUMCO) acquired 23 claims in the Carpenter Flats area in 1977. From then to 1980 GEUMCO drilled 61 holes in the area, which we believe to be on our property
In 1981 a limited partnership of Wisconsin nuclear power utilities, the Dolores Bench Limited Partnership, Green Bay, Wisconsin, also known as the ‘Kewaunee group’, consisting of Wisconsin Public Service Corp., Madison Gas and Electric and Wisconsin Power and Light, acquired GEUMCO’s claims. The Kewaunee group formed in the mid-1970s to secure uranium reserves and maintain a long-term uranium concentrate supply capability. A company called Minerals Recovery Corp. (MRC), now defunct, was contracted to explore the Kewaunee group properties in the Uravan district and elsewhere.
MRC drilled 30 holes in 1982, 94 holes in 1983, and 84 holes in 1984 for a total of 27,368 feet in 208 holes on what is now our Uravan-Beck properties. The average drill depth for the program was 132 feet. We do not know of any reports of findings or results from that drilling.
Acquisition of previous drill information for the Return Mine area
In early 2008, the Company purchased the data base of the results of drilling for the 208 development drill holes completed by MRC as well as some information for the 61 exploration drill holes completed by GEUMCO on the property. The MRC holes were originally gamma-logged for uranium by Superior Logging, Naturita, Colorado, and the rock cuttings were chemically analyzed for V2O5. The drill pattern covers an area of about 1500 feet by 1500 feet.
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Figure 2 Location of Uravan-Beck Project
Competition
We are a mineral resource exploration company. We compete with other mineral resource exploration companies for financing and for the acquisition of new mineral properties. Many of the mineral resource exploration companies with whom we compete have greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford more geological expertise in the targeting and exploration of mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration. This competition could adversely impact on our ability to finance further exploration and to achieve the financing necessary for us to develop our mineral properties.
Compliance with Government Regulation
Our mineral claims in the State of Wyoming are comprised of non-patented lode mining claims located on federal land managed by the U.S. Bureau of Land Management. Mining activities on the claims must be carried out in accordance with a permit issued by the Bureau of Land Management. We are committed to complying with and are, to our knowledge, in compliance with, all governmental and environmental regulations applicable to our company and our properties. We do not currently own or operate any mines and are not required to comply with the requirements of these regulatory authorities. We cannot predict the extent to which these requirements will affect our company or our properties if we identify the existence of minerals in commercially exploitable quantities. In addition, future legislation and regulation could cause additional expense, capital expenditure, restrictions and delays in the exploration of our properties.
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Holding costs of the unpatented lode mining claims include a claim maintenance fee of $125.00 per claim payable to the Bureau of Land Management on or before September 1 of each calendar year and those for recording an affidavit and Notice of Intent to hold with the Office of the Clerk, Fremont County Wyoming. County filing fees for documents is $8.00 for the first page and $3.00 per page thereafter, with up to 10 sections of land noted per document. The above Bureau of Land Management maintenance fees will be due again before September 1, 2009, and each year thereafter, the affidavit and Notice of Intent fees will be due again before December 31, 2008, and each year thereafter, with both as modified by future legislation.
Research and Development Expenditures
We did not incur expenditures in research and development over the last fiscal year.
Employees
Currently, we do not have any employees other than our directors and officers. Our directors and certain contracted individuals play an important role in the running of our company. We do not expect any material changes in the number of employees over the next 12 month period. We do and will continue to outsource contract employment as needed.
We engage contractors from time to time to consult with us on specific corporate affairs or to perform specific tasks in connection with our exploration programs.
We retain consultants on the basis of ability and experience. Except as set forth above, neither we nor any person acting on our behalf has any preliminary agreement or understanding, nor do we contemplate any such, concerning any aspect of our operations pursuant to which any person would be hired, compensated or paid a finder’s fee.
Subsidiaries
We do not have any subsidiaries.
Intellectual Property
We do not own, either legally or beneficially, any patent or trademark.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
To the best of our knowledge, we are currently not a party to any legal or bankruptcy proceeding.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market information
Our common stock is quoted on the OTC Bulletin Board under the symbol “YCKM”. The following table shows the quarterly range of high and low bid information for our common stock over the fiscal quarters for the last two fiscal years as quoted on the OTC Bulletin Board. The bid prices represent quotations by dealers without adjustments for retail mark-ups, mark-downs or commissions and may not represent actual transactions. Investors should not rely on historical prices of our common stock as an indication of its future price performance. The last sale price of our common stock on November 12, 2008, was $0.065 per share.
Transfer Agent
Our transfer agent for our common stock is Rough Stock Transfer Inc. at 5700 West Plan Parkway, Suite 100, Plano, Texas 75096. Telephone (972) 381-2782.
Holders of Common Stock
As of November 13, 2008, we have 51,413,768 shares of our common stock outstanding.
Dividends
We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings, if any, to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
Since the end of our last quarter, we have issued the following securities:
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table is a summary of purchases made by or on behalf of our company or any "affiliated purchaser," of shares or other units of any class of the our equity securities that is registered by the issuer pursuant to section 12 of the Exchange Act.
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Table 1 ISSUER PURCHASES OF EQUITY SECURITIES
(a) (b) (c) (d)
Period
Total Number of
Shares (or Units)
Purchased
Average Price Paid
per Share (or Unit)
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs Maximum Number
(or Approximate
Dollar Value) of
Shares (or Units)
that May Yet Be
Purchased Under
the Plans or
Programs
Not Applicable
ITEM 6
ITEM 6 SELECTED FINANCIAL DATA
Not applicable.
ITEM 7
ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this annual report on Form 10-K.
Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
We are an exploration stage company. We have commenced very limited operations and we currently have no business revenue. Our assets consist of cash and cash equivalents, prepaid expenses, nominal equipment and mineral property interests. There can be no assurance that we will generate revenues in the future or that we will be able to operate profitably in the future, if at all. We have incurred net losses in each fiscal year since inception of our operations. Our company has never declared bankruptcy, it has never been in receivership, and it has never been involved in any legal action or proceedings.
Plan of Operations and Cash Requirements Over the Next Twelve Months
Current Status of Exploration Projects
At the Juniper Ridge Property, located in the Poison Basin Uranium District of south-central Wyoming, 73 lode mining claims were added to the project earlier this summer, bringing the total number there to 201 claims in addition to one State of Wyoming Mineral Lease. This addition increased the project to 4,793 acres in size from the previous 3,200 acres. Permitting activities at Juniper Ridge are ongoing with Strathmore Minerals Corp. having received permits to begin monitor well installation of six groundwater wells. Upon completion, pump tests will be performed to determine the hydrologic characteristics of possible aquifers, and to obtain samples to determine baseline water quality. We had initially scheduled the drilling and installation activities for spring 2009, in addition to plans for extensive exploration drilling to increase the extent of the known mineralization. We are currently reevaluating the drilling and installation activities program given the current economic condition of Uranium Vanadium market and our estimated exploration costs.
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At the Uravan-Beck Property, located in the Uravan district of Colorado, an extensive data base for the Return Mine has been acquired. This data includes over 400 drill holes, mine designs for an expanded mine, and economic models for the proposed mine. In the past year we drilled 6,508 feet and have plans to apply for drill permits to drill an additional 75,000 feet over the next 12 month period.. This drilling will verify the resource at the Return Mine and will verify mineralization at selected other known areas of unmined but known mineralization. Stewart Brothers Drilling of Milan New Mexico has been selected as the drilling contractor. JBR Environmental Consultants Inc. has been selected to obtain the drill permits for Yellowcake. Drilling has begun in August 2008 after we have made the reclamation bond for the drilling permit.
Anticipated Cash Requirements
We estimate that our total expenditures over the next 12 months will be approximately $1,609,000. Our plan of operations for the next 12 months is to complete the following objectives:
At July 31, 2008 we had cash available of $651,000 and account payable and accrued liabilities of $165,000. We would have approximately $486,000 available after paying off the liabilities. We will require additional funds to implement our growth strategy in exploration operations over the next 12 months ending July 31, 2009. These funds may be raised through equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our shares. If we need and are unable to obtain additional financing, we could be forced to scale down or cease operations and investors could lose their entire investment in our common stock. We may continue to be unprofitable.
Liquidity and Capital Resources
Our financial condition for the year ended July 31, 2008 and July 31, 2007 and the changes between those periods for the respective items are summarized as follows:
Working Capital
The decrease in our working capital was primarily due to costs associated with claim maintenance under the Strathmore agreement and the costs associated with the Beck properties.
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Cash Flows
Cash Used In Operating Activities
During the year ended July 31, 2008 we used net cash in operating activities in the amount of $2,260,167. The cash used in year ended July 31, 2008 by our operating activities is primarily represented by mineral property expenditures and payment of financing costs. Administrative expenses and investor relations net of interest income comprise the balance. For the prior year the cash used in operating activities is represented solely by administrative expenses.
Cash from Financing Activities
We received no net cash from financing activities during the year ended July 31, 2008 compared to $5,652,495 received during the year ended July 31, 2007. During the 2007, the net cash generated by financing activities is attributable to the private placement financings of our common stock that we have completed for the year.
Cash from Investing Activities
During the year ended July 31, 2008, we incurred a total of $1,426,707 in investing activities compared to $100,000 for the same period in 2007. The increase spending in investing was primarily due to the addition of Beck property. Pursuant to the agreement, we had paid an aggregate of $1,089,193 to the vendors of Beck. We also paid $130,400 to the State of Colorado as reclamation bond for the application of drilling permit for the Beck property. We have drilled about 40 holes in August 2008. We also incurred $107,114 in exploration advances to Strathmore.
Results of Operations
The following summary of our results of operations should be read in conjunction with our audited financial statements for the year ended July 31, 2008 which are included herein.
Our operating results for the year ended July 31, 2008, for the period from our inception on March 31, 2006 through to July 31, 2008 and the changes between those periods for the respective items are summarized as follows:
Revenues
We are presently in the exploration stage of our business, have not earned any revenues to date, and do not anticipate earning revenues, if ever, until such time as we discover commercially extractable quantities of uranium and enter into commercial production of our current claims, or any other mineral property we may acquire from time to time, under a joint venture agreement or other arrangement.
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Expenses
Consulting and management fees
Consulting and management fees represent fees paid to services paid to officers and directors and consultants, and the fair values of stock options expenses for stock options granted to these individuals. The Company recorded an aggregate amount of $787,828 for the year ended July 31, 2008 as compared to $2,370,719 in 2007. The Company had granted options to four officers and directors and consultants, the related stock options expense was recorded as part of management fees and consulting fees for the year ended July 31, 2007. During the current year ended July 31, 2008, two directors and three consultants had left and thus their related expenses were not recognized in the year.
General and administrative expense
General and administrative expense includes rent, travel, office supplies and office services. The increase in our general and administrative expenses for the year ended July 31, 2008 was due to costs incurred maintaining a corporate office for a full year.
Impairment of mineral interests
The write down represents the carrying value of mineral interest rights on the Juniper property. Based on our analysis, the forecast long term uranium price is expected to be lower than the estimated costs for development extraction on the Juniper property and it is not economically feasible to continue with the exploration and drilling work at the present time. As a result, we have written down the mineral interest in Juniper Ridge property to a nominal value, $1, as of the year ended July 31, 2008. If at such time in the future, management determines that the market price of Uranium supports mining this property, the Company will re-evaluate its interest. However, the Company will continue with its claim maintenance obligations.
Mineral property interests
Mineral property interests represent expenditures under the option agreement to earn an interest in the Juniper Ridge property, funds expended on the Texas data base and exploration expenses incurred under binding letters of intent to enter into option agreements on the Sky and Jeep properties.
Financing costs
Pursuant to the terms and conditions of the private placement, the Company agreed to use its best efforts to register the common shares issued in the private placements for resale by the purchasers within 180 days of issue. The Company also agreed, if the shares had not been registered by that date, to pay as a penalty to each purchaser an amount equal to 2% of the amount invested for each month that the shares remained unregistered, to a maximum of 6 months. As the Company did not complete the filing within the specified time period, we had accrued and recorded the amount as financing costs in 2007. No such financing costs were incurred during the year ended July 31, 2008.
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Professional fees
Professional fees include legal expenses in connection with major contracts and general corporate matters and audit expense for the year. The increase in legal and audit fees for the year ended July 31, 2008 was due expanded scope of operations. Our accounting and auditing expenses were incurred in connection with the preparation of our audited financial statements and unaudited interim financial statements. Our legal expenses represent amounts paid to legal counsel in connection with our corporate activities and the preparation or review of our reports and other disclosure filed with the SEC. Legal and audit expenses will be ongoing during fiscal 2009 as we are subject to the reporting obligations of the Securities Exchange Act of 1934, as amended, and BCSC Instrument 59-509.
Going Concern
The audited financial statements accompanying this report have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. Our company has not generated revenues since inception, has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon the continued financial support from its shareholders, the ability of our company to obtain necessary equity financing to achieve its operating objectives, confirmation of our company’s interests in the underlying properties, and the attainment of profitable operations. As at July 31, 2008, our company has accumulated losses of $17,138,161 of which $10,357,142 represents the write down on the Juniper property.
Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above, in their report on the annual financial statements for the year ended July 31, 2008, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors. The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders.
Recently Issued Accounting Standards
In June 2006, the Financial Accounting Standards Board (“FASB”) issued interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (FAS No. 109)” (“FIN 48”). This interpretation prescribes a recognition threshold and measurement attribute for tax positions taken or expected to be taken in a tax return. This interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The evaluation of a tax position in accordance with this interpretation is a two-step process. In the first step, recognition, the Company determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step addresses measurement of a tax position that meets the more-likely-than-not criteria. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and amounts recognized in the financial statements will generally result in a) an increase in a liability for income taxes payable or a reduction of an income tax refund receivable, b) a reduction in a deferred tax asset or an increase in a deferred tax liability or c) both a and b. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be de-recognized in the first subsequent financial reporting period in which that threshold is no longer met. Use of a valuation allowance as described in FAS No. 109 is not an appropriate substitute for the de-recognition of a tax position. The requirement to assess the need for a valuation allowance for deferred tax assets based on sufficiency of future taxable income is unchanged by this interpretation. This Interpretation is effective for fiscal years beginning after December 15, 2006.
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On August 1, 2007, the Company adopted FIN 48, regarding accounting for uncertainty in tax positions. The Company remains subject to examination of income tax filings in the United States and various state jurisdictions for periods since its inception in 2006. The Company has also determined that it is subject to examination in Canada for all prior periods due to the Company’s continued loss position in such jurisdictions. Material tax positions were examined under the more-likely-than-not guidance provided by FIN 48. If interest and penalties were to be assessed, the Company would charge interest to interest expense, and penalties to general and administrative expense.
As a result of the FIN 48 assessment, the Company concluded that it has not taken any uncertain tax positions on any of its open tax returns that would materially distort the Company’s financial statements. There was no material cumulative effect of adopting FIN 48 on the Company’s financial statements as of August 1, 2007.
In December 2007, the FASB issued SFAS 141R “Business Combinations” which is effective for fiscal years beginning after December 15, 2008. SFAS 141R, which will replace FAS 141, is applicable to business combinations consummated after the effective date of December 15, 2008. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The objective of SFAS No. 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.
In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115”. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities” applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157, “Fair Value Measurements”. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.
In December 2007, the FASB also issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB 51”. SFAS No. 160 will change the accounting and reporting for minority interests, which will be re-characterized as non-controlling interests and classified as a component of equity. SFAS No. 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008 and interim periods within those fiscal years. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.
In March 2008, the FASB issued SFAS 161 “Disclosures about Derivative Instruments and Hedging Activities - an amendment of SFAS 133. This Statement requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.
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Application of Critical Accounting Estimates
The financial statements of our company have been prepared in accordance with generally accepted accounting principles in the United States. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment.
The financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below:
Mineral Property and Exploration Costs
Exploration costs are expensed as incurred. Development costs are expensed until it has been established that a mineral deposit is commercially mineable and a production decision has been made by our company to implement a mining plan and develop a mine, at which point the costs subsequently incurred to develop the mine on the property prior to the start of mining operations are capitalized.
Our company capitalizes the cost of acquiring mineral property interests, including undeveloped mineral property interests, until the viability of the mineral interest is determined. Capitalized acquisition costs are expensed if it is determined that the mineral property has no future economic value. Exploration stage mineral interests represent interests in properties that are believed to potentially contain (i) other mineralized material such as measured, indicated or inferred resources with insufficient drill hole spacing to qualify as proven and probable mineral reserves and (ii) other mine-related or greenfield exploration potential that are not an immediate part of measured or indicated resources. Our company’s mineral rights are generally enforceable regardless of whether proven and probable reserves have been established. Our company has the ability and intent to renew mineral rights where the existing term is not sufficient to recover undeveloped mineral interests.
Capitalized amounts (including capitalized development costs) are also written down if future cash flows, including potential sales proceeds, related to the mineral property are estimated to be less than the property’s total carrying value. Management of our company reviews the carrying value of each mineral property periodically, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Reductions in the carrying value of a property would be recorded to the extent that the total carrying value of the mineral property exceeds its estimated fair value. No write downs of mineral property interests were recorded in the year ended July 31, 2007.
At July 31, 2008, we made the decision to write down our investment in the Juniper property to $1.00 due to management’s projected mid and long term uranium market pricing which we believe will be below the cost of production on these properties.
Asset Retirement Obligations
In accordance with Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations (''SFAS 143''), the fair value of an asset retirement cost, and corresponding liability, should be recorded as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic and rational method. Our company will record an asset retirement obligation to reflect its legal obligations related to future abandonment of its mineral interests using estimated expected cash flow associated with the obligation and discounting the amount using a credit-adjusted, risk-free interest rate. At least annually, our company will reassess the obligation to determine whether a change in any estimated obligation is necessary. Our company will evaluate whether there are indicators that suggest the estimated cash flows underlying the obligation have materially changed. Should those indicators suggest the estimated obligation has materially changed, our company will accordingly update its assessment. At July 31, 2007, our company had not undertaken any drilling activity on its properties had not incurred significant reclamation obligations. As such, no asset retirement obligation accrual was made in the July 31, 2008 and 2007 financial statements.
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Stock-based Compensation
Management has made significant assumptions and estimates determining the fair market value of stock-based compensation granted to employees and non-employees. These estimates have an effect on the stock-based compensation expense recognized and the additional paid-in capital and share capital balances on our company’s Balance Sheet. The value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. For non-employees, such amount is revalued on a quarterly basis. To date, substantially all of our stock option grants have been to directors and employees. Increases in our share price will likely result in increased stock option compensation expense. The Black-Scholes option-pricing model requires the input of subjective assumptions, including the expected term of the option award and stock price volatility. The expected term of options granted for the purposes of the Black-Scholes calculation is the term of the award since all grants are to non-employees. Because our company has only recently become a mineral exploration company, the expected volatility is based on comparable junior mineral exploration companies who granted similar term options. These estimates involve inherent uncertainties and the application of management judgment.
Purchase of Significant Equipment
We do not anticipate the purchase or sale of any plant or significant equipment during the next 12 months.
Personnel Plan
We do not anticipate any significant changes in the number of employees during the next 12 months.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
ITEM 7A
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
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ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
FINANCIAL STATEMENTS
(Expressed in United States Dollars)
JULY 31, 2008
BDO Dunwoody LLP 600 Cathedral Place
Chartered Accountants 925 West Georgia Street
Vancouver, BC, Canada V6C 3L2
Telephone: (604) 688-5421
Telefax: (604) 688-5132
E-mail: vancouver@bdo.ca
www.bdo.ca
Report of Independent Registered Public Accounting Firm
To the Directors and Stockholders of
Yellowcake Mining Inc.
(An Exploration Stage Company)
We have audited the accompanying balance sheets of Yellowcake Mining Inc. (An Exploration Stage Company) as of July 31, 2008 and 2007, and the related statements of operations, cash flows and changes in stockholders¡¯equity for the years then ended and for the period from inception (March 23, 2006) to July 31, 2008. 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 the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company¡¯s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the financial statements referred to above present fairly, in all material respects, the financial position of Yellowcake Mining Inc. at July 31, 2008 and 2007, and the results of its operations and its cash flows for the years then ended and for the period from inception (March 23, 2006) to July 31, 2008, in conformity with accounting principles generally accepted in the United States.
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 had an accumulated deficit of $17,138,161 at July 31, 2008 and incurred a net loss for the year then ended of $13,007,493. These conditions raise substantial doubt about the Company¡¯s ability to continue as a going concern. Management¡¯s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ BDO Dunwoody LLP
Chartered Accountants
Vancouver, Canada
November 10, 2008
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
BALANCE SHEETS
(Expressed in US dollars)
Nature of Operations and Ability to Continue as a Going Concern (Note 1)
The accompanying notes are an integral part of these financial statements.
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
(Expressed in US dollars)
The accompanying notes are an integral part of these financial statements.
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
(Expressed in US dollars)
Supplemental Disclosure with respect to Cash flows (Note 10)
The accompanying notes are an integral part of these financial statements.
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Period from March 23, 2006 (Date of Inception) to July 31, 2008
(Expressed in US dollars)
On January 23, 2007, the Company effected a 30:1 forward stock split of the authorized, issued and outstanding common stock (Note 5). All share and per share amounts have been retroactively adjusted for all periods presented.
The accompanying notes are an integral part of these financial statements.
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2008 (Expressed in US dollars)
1. NATURE OF OPERATIONS AND ABILITY TO CONTINUE AS A GOING CONCERN
The Company was incorporated in the State of Nevada on March 23, 2006 under the name Hoopsoft Development Corp. The Company entered into an agreement and plan of merger (the “Merger Agreement”) dated January 9, 2007 with Yellowcake Mining Inc., a Nevada corporation and wholly-owned subsidiary of Hoopsoft Development Corp., incorporated for the sole purpose of effecting the merger. Pursuant to the terms of the Merger Agreement, Yellowcake Mining Inc. merged with and into Hoopsoft Development Corp., with Hoopsoft Development Corp. carrying on as the surviving corporation under the name “Yellowcake Mining Inc.” The Company is an exploration stage Company, as defined by Statement of Financial Accounting Standard (“SFAS”) No.7 “Accounting and Reporting by Development Stage Enterprises”.
Initial operations included capital formation, organization, target market identification and marketing plans. Management was planning to develop downloadable videos and a website for educational and instructional use by young teens. In January, 2007 the Company changed its primary business to that of mineral exploration in Wyoming and Texas, USA (Note 3).
These financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. The Company has not generated revenues and has accumulated losses of $17,138,161 since inception and is unlikely to generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to achieve its operating objectives, confirmation of the Company’s interests in the underlying properties and the attainment of profitable operations. Management cannot provide assurances that such plans will occur. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These financial statements are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars.
Use of Estimates
The preparation of financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuations, asset impairment, stock based compensation and loss contingencies. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2008 (Expressed in US dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Basic and Diluted Loss Per Share
The Company computes its net loss per share in accordance with SFAS No. 128, “Earnings per Share”. SFAS No. 128 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. For the year ended July 31, 2008, potentially dilutive common shares relating to options and warrants outstanding totalling 5,055,000 (2007 - 5,555,000) were not included in the computation of loss per share because the effect was anti-dilutive.
Mineral Rights and Mineral Property Interests
Mineral rights includes the cost of advance minimum royalty payments, the cost of capitalized property leases, and the cost of property acquired either by cash payment, the issuance of term debt or common shares. Expenditures for exploration on specific properties with no proven reserves are written off as incurred. Mineral rights will be amortized against future revenues or charged to operations at the time the related property is determined to have impairment in value.
The Company also considers the provisions of EITF 04-02 “Whether Mineral Rights are Tangible or Intangible Assets” which concluded that mineral rights are tangible assets.
Asset retirement obligations
The Company records the fair value of the liability for closure and removal costs associated with the legal obligations upon retirement or removal of any tangible long-lived assets in accordance with Statements of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations". The initial recognition of any liability will be capitalized as part of the asset cost and depreciated over its estimated useful life. To date, the Company has not incurred any asset retirement obligations.
Impairment of long-lived assets
Long-lived assets are continually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the year ended July 31, 2008, the Company recognized an impairment of $10,357,142 in respect of one of its mineral properties (2007 - $Nil).
Foreign Currency Translation
The Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with SFAS No. 52 “Foreign Currency Translation”, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars. The Company has not, to the date of these financials statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes whereby deferred tax assets and liabilities are recognized for the future tax consequences of differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If it is determined that the realization of the future tax benefit is not more likely than not, the Company establishes a valuation allowance.
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2008 (Expressed in US dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock-based Compensation
The Company records stock-based compensation in accordance with SFAS No. 123R “Accounting for Stock- based Compensation” (“SFAS 123R”), and applied the recommendations of this standard using the modified prospective method. Under this application, the Company is required to record compensation expense, based on the fair value of the awards, for all awards granted after the date of the adoption and for the unvested portion of previously granted awards that remain outstanding as at the date of adoption. Prior to the adoption of SAFS 123R, the Company did not issue any compensation awards.
Recent Accounting Pronouncements
In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115”. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities” applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157, “Fair Value Measurements”. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The objective of SFAS No. 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.
In June 2006, the Financial Accounting Standards Board (“FASB”) issued interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (FAS No. 109)” (“FIN 48”). This interpretation prescribes a recognition threshold and measurement attribute for tax positions taken or expected to be taken in a tax return. This interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The evaluation of a tax position in accordance with this interpretation is a two-step process. In the first step, recognition, the Company determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step addresses measurement of a tax position that meets the more-likely-than-not criteria. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and amounts recognized in the financial statements will generally result in a) an increase in a liability for income taxes payable or a reduction of an income tax refund receivable, b) a reduction in a deferred tax asset or an increase in a deferred tax liability or c) both a and b. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be de-recognized in the first subsequent financial reporting period in which that threshold is no longer met. Use of a valuation allowance as described in FAS No. 109 is not an appropriate substitute for the de-recognition of a tax position. The requirement to assess the need for a valuation allowance for deferred tax assets based on sufficiency of future taxable income is unchanged by this interpretation. This Interpretation is effective for fiscal years beginning after December 15, 2006.
On August 1, 2007, the Company adopted FIN 48, regarding accounting for uncertainty in tax positions. The Company remains subject to examination of income tax filings in the United States and various state
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2008 (Expressed in US dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements (continued)
jurisdictions for periods since its inception in 2006. The Company has also determined that it is subject to examination in Canada for all prior periods due to the Company’s continued loss position in such jurisdictions. Material tax positions were examined under the more-likely-than-not guidance provided by FIN 48. If interest and penalties were to be assessed, the Company would charge interest to interest expense, and penalties to general and administrative expense.
As a result of the FIN 48 assessment, the Company concluded that it has not taken any uncertain tax positions on any of its open tax returns that would materially distort the Company’s financial statements. There was no material cumulative effect of adopting FIN 48 on the Company’s financial statements as of August 1, 2007.
In December 2007, the FASB issued SFAS 141R “Business Combinations” which is effective for fiscal years beginning after December 15, 2008. SFAS 141R, which will replace FAS 141, is applicable to business combinations consummated after the effective date of December 15, 2008. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations. In December 2007, the FASB also issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB 51”. SFAS No. 160 will change the accounting and reporting for minority interests, which will be re-characterized as non-controlling interests and classified as a component of equity. SFAS No. 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008 and interim periods within those fiscal years. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.
In March 2008, the FASB issued SFAS 161 “Disclosures about Derivative Instruments and Hedging Activities - an amendment of SFAS 133. This Statement requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.
3. MINERAL RIGHTS
Juniper Ridge
On March 14, 2007, the Company entered into an option and joint venture agreement with Strathmore Minerals Corp. (“Strathmore”) on the Baggs, Juniper Ridge Project properties located in Wyoming. The Company was granted sole and exclusive rights to earn-in an 80% interest in the properties. Under the terms of the original agreement, the Company must make cash payments of $500,000 in various stages as follows: $100,000 upon closing of the option agreement (paid) and $100,000 on each of the first (paid), second, third and fourth anniversary. The Company also issued 9,000,000 shares of common stock to Strathmore upon closing of the agreement (issued). The Company must also incur expenditures of $1,600,000 per year for a period of 5 years for a total commitment of $8,000,000. The Company will earn 40% of the optioned interest upon spending $4,000,000. The Company will earn the remaining 40% of the optioned interest by spending an additional $4,000,000 during the 5-year term and by paying a royalty of 3% on the optioned portion on all future production.
The Company will also finance the evaluation of the Strathmore Texas Database regarding uranium prospects in Texas by paying $25,000 on closing of the agreement (paid), spending $440,000 for a minimum of one year to finance the cost of evaluating the Texas Database, and incurring the first $500,000 in costs to acquire mining leases to any properties identified from the evaluation. Subsequently, the Company and Strathmore Minerals Corp. will be 50/50 partners in the development of the identified targets resulting from the database. Strathmore subsequently became a related party to the Company when its president was appointed a director of the Company. The president of Strathmore resigned as a director of the Company in January, 2008.
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2008 (Expressed in US dollars)
3. MINERAL RIGHTS (continued)
Juniper Ridge (continued)
In April 2008, the Company and Strathmore reached an agreement to amend certain terms of the option agreement. Pursuant to the terms of the amended agreement the joint operations have been restructured so that they are jointly owned by a Limited Liability Company (“LLC”). The Company maintains its option to earn up to an 80% interest in the LLC, Juniper Ridge Project. The Company‘s requirement to incur expenditures was amended to require $764,518 be spent not later than May 1, 2008 (incurred), a minimum of $300,000 not later than September 1, 2008, a minimum of $500,000 not later than December 31, 2009 and the balance of the $8,000,000 not later than December 31, 2012.
On October 12, 2008, the Company received a Memorandum of Understanding from Strathmore which has proposed to amend the annual commitment of expenditures from $300,000 and $500,000 for 2008 and 2009 respectively to $100,000 per year for 2008 and 2009, with the total commitment of remaining at $8,000,000 no later than December 31, 2012. The Company has responded to the suggested amendment and it is working with Strathmore to reach acceptable terms by both parties.
Jeep
The Company entered into an option and joint venture agreement with Strathmore Resources (US) Ltd., a related party under a common director, to explore, develop and mine the Jeep property located in Gas Hills, Freemont County, Wyoming. Under the agreement, the Company had sole and exclusive rights from Strathmore Resources (US) Ltd. to earn-in a 60% interest in the Jeep property in consideration of the Company’s incurring a total of $10,000,000 in expenditures on the Jeep property. The first expenditures in the amount of $250,000 was to be met on or before September 29, 2008, with additional expenditures of: $1,250,000 was to be expended during the twelve months ended September 29, 2009, $1,500,000 was to be expended during the twelve months ended September 29, 2010, $2,000,000 was to be expended during the twelve months ended September 29, 2011, $2,000,000 was to be expended during the twelve months ended September 29, 2012 and $3,000,000 was to be expended during the twelve months ended September 29, 2013. The option agreement was terminated on April 21, 2008.
Sky
The Company entered into an option and joint venture agreement with Strathmore Resources (US) Ltd., a related party under a common director, to explore, develop and mine the Sky property located in West Gas Hills, Freemont County, Wyoming. Under the agreement, the Company had sole and exclusive rights from Strathmore Resources to earn-in a 60% interest in the Sky property in consideration of the Company incurring a total of $7,500,000 in expenditures, over four years, on the Sky property. The first expenditures in the amount of $500,000 was to be met on or before September 29, 2008, with additional expenditures of: $2,000,000 was to be expended during the twelve months ended September 29, 2009, $2,000,000 was to be expended during the twelve months ended September 29, 2010 and $3,000,000 was to be expended during the twelve months ended September 29, 2011. The option agreement was terminated on April 21, 2008.
Beck
On December 28, 2007, the Company entered into a master option agreement with American Nuclear Fuels, as well as six lease and option agreements with individual claimholders, to purchase 185 mining claims, approximating 3,700 acres, in the Uravan uranium belt, Montrose County, Colorado, also known as the Beck Project, in exchange for total payments of $5,968,657 in cash and the issuance of 2,765,625 shares of the Company’s common stock, payable over 5 years as follows:
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2008 (Expressed in US dollars)
3. MINERAL RIGHTS (continued)
Beck
* As of July 31, 2008, the Company has made the required total cash payments of $1,089,193 and issued 482,143 common shares of the Company.
Pursuant to the terms and conditions of the option agreements, Yellowcake has the exclusive right to access, explore and develop the properties. All future production from the property will be subject to a 3.5% royalty based on the contained metal value of ore after deduction of mining, transport and processing costs.
Mineral rights are summarized as follows:
According to management of the Company, the forecast long term uranium price is expected to be lower than the estimated costs for development extraction on the Juniper property and it is not economically feasible to continue with the exploration and drilling work at the present time. As a result, management has written down the mineral interest in Juniper Ridge property to a nominal value, $1, as of the year ended July 31, 2008. If at such time in the future, management determines that the market price of Uranium supports mining this property, the Company will re-evaluate its interest. However, the Company will continue with its claim maintenance obligations.
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2008 (Expressed in US dollars)
3. MINERAL RIGHTS (continued)
Mineral properties expenditures are summarized as follows:
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2008 (Expressed in US dollars)
4. DUE FROM/TO STRATHMORE MINERALS CORP.
Amounts owing to/from Strathmore Minerals Corp. (“Strathmore”) are non-interest bearing and with no specified repayment terms. As of July 31, 2008, the Company has paid $107,114 in excess of the required exploration work performed.
5. COMMON STOCK
On January 23, 2007, the Company effected a 30:1 forward stock split of the authorized, issued and outstanding common stock. As a result, the authorized share capital increased from 25,000,000 shares of common stock with a par value of $0.001 per share to 750,000,000 shares of common stock with a par value of $0.001 per share. All share amounts have been retroactively adjusted for all periods presented.
Share issuances
On March 23, 2006 (inception), the Company issued 60,000,000 shares of its common stock to its Directors for cash of $2,000.
On July 25, 2006, the Company closed a private placement for 31,800,000 common shares for an aggregate price of $53,000.
On February 20, 2007, the Company completed a private placement consisting of 4,140,000 units at a price of $1.00 per unit for gross proceeds of $4,140,000. Each unit consisted of one common share and one-half of one common share purchase warrant, with each whole warrant entitling the holder to purchase one share at an exercise price of $1.50 per share for a period of two years.
On February 28, 2007, the Company completed a private placement consisting of 1,770,000 units at a price of $1.00 per unit for gross proceeds of $1,770,000. Each unit consisted of one common share and one-half of one common share purchase warrant, with each whole warrant entitling the holder to purchase one share at an exercise price of $1.50 per share for a period of two years.
The Company paid $221,575 and issued 221,625 shares as finders’ fees in connection with the private placements of February 20 and 28, 2007. Additional issuance costs totalled $35,930 in connection with these private placements. The shares issued as finders’ fees had a fair value of $94,731.
On March 14, 2007, the Company issued 9,000,000 common shares at a value of $10,157,143 to acquire an option to earn an 80% interest in a mineral property (Note 3), based on the average closing price around the date the letter of intent was signed and the transaction was announced.
On March 14, 2007, the Company redeemed and cancelled 56,000,000 common shares from a director for no consideration. The shares were ascribed a value of $56,000 based on the initial issuance.
On February 21, 2008, the Company issued 65,179 common shares, with a fair value of $0.65 per share, pursuant to a mineral property master option agreement (Note 4). The fair value was based on the quoted market price on the date of issuance.
On April 8, 2008, the Company issued 260,714 common shares, with a fair value of $0.50 per share, pursuant to a mineral property master option agreement (Note 4). The fair value was based on the quoted market price on the date of issuance.
On July 7, 2008, the Company issued 156,250 common shares, with a fair value of $0.40 per share, pursuant to a mineral property master option agreement (Note 4). The fair value was based on the quoted market price on the date of issuance.
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2008 (Expressed in US dollars)
5. COMMON STOCK (continued) Share purchase warrants
Share purchase warrant transactions are summarized as follows:
At July 31, 2008, the following share purchase warrants were outstanding and exercisable:
Stock Options
In May 2007, the Company adopted a stock option plan (the "Plan") to grant options to directors, officers, employees and consultants. Under the Plan the Company may grant options to acquire up to 5,000,000 common shares of the Company. Options granted can have a term up to ten years and an exercise price typically not less than the Company's closing stock price at the date of grant. Options vest as specified by the Board of Directors. Options granted to date vest 25% upon the grant date, and 25% at the end of each succeeding year for three years after grant. Options granted during the quarter ended April 30, 2007 were granted in contemplation of the adoption of the Plan.
As disclosed in Note 2, the Company adopted SFAS No.123R commencing on August 1, 2006. Effective with the adoption of SFAS No.123R, the Company has elected to use the Black-Scholes option pricing model to determine the fair value of stock options granted. Compensation expense for stock options granted to employees and non-employees is amortized over the contract services period or, if none exists, from the date of grant until the options vest. Compensation associated with unvested options granted to non-employees is re-measured on each balance sheet date using the Black-Scholes option pricing model.
The Company uses historical data to estimate option exercise, forfeiture and employee termination within the valuation model. For non-employees, the expected term of the options approximates the full term of the options. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The Company has not paid and does not anticipate paying dividends on its common stock; therefore, the expected dividend yield is assumed to be zero. In addition, SFAS No. 123R requires companies to utilize an estimated forfeiture rate when calculating the expense for the reporting period.
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2008 (Expressed in US dollars)
5. COMMON STOCK (continued)
Stock option transactions are summarized as follows:
At July 31, 2008, the following stock options were outstanding and exercisable:
The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on the Company’s closing stock price of $0.35 per share as of July 31, 2008, which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options vested and exercisable as of July 31, 2008 was $Nil. As of July 31, 2008, 800,000 (2007 - 650,000) outstanding options were vested and exercisable and the weighted average exercise price was $2.25 (2007 - $2.71) . The total intrinsic value of options exercised during the period ended July 31, 2008 was $Nil (2007 - $Nil).
The following table summarizes information regarding the non-vested stock purchase options outstanding as of July 31, 2008.
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2008 (Expressed in US dollars)
5. COMMON STOCK (continued)
Stock Options (continued)
At July 31, 2008, there was unamortized compensation expense of $766,082 relating to the outstanding unvested options. This unrecognized compensation cost is expected to be recognized over a weighted-average period of 4 years.
Total stock-based compensation is recorded in the Statement of Operations with corresponding additional paid- in capital recorded in stockholders' equity as follows:
Stock-based Compensation
The fair value of stock options granted during the year ended July 31, 2008 was $741,900 (July 31, 2007 - $5,500,840) which is being recognized over the option vesting periods. Total stock-based compensation recognized during the year ended July 31, 2008 was $787,828 (July 31, 2006 - $2,370,719) which has been recorded in the Statement of Operations as follows:
The following weighted average assumptions were used for the Black-Scholes valuation of stock options granted:
6. RELATED PARTY TRANSACTIONS
The Company paid or accrued management fees of $40,340 to a former officer of the Company (2007 - $9,000) and $154,545 to directors of the Company (2007 - $1,200). At July 31, 2008, included in accounts payable and accrued liabilities was $10,000 owed to a director for management fees. These transactions were in the normal course of operations and were measured at the exchange amount which represented the amount of consideration established and agreed to by the related parties.
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2008 (Expressed in US dollars)
7. SEGMENT INFORMATION
The Company operates in one business segment being the exploration of mineral property interests. Geographic information is as follows:
8. INCOME TAXES
The significant components of the Company's future income tax assets are as follows:
A reconciliation of income taxes at statutory rates with the reported taxes is as follows:
The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and this causes a change in management’s judgment about the recoverability of future tax assets, the impact of the change on the valuation allowance is reflected in current income. As management of the Company does not currently believe that it is more likely than not that the Company will receive the benefit of this asset, a valuation allowance equal to the future tax asset has been established at both July 31, 2008 and July 31, 2007.
The Company has available for deduction against future taxable income non-capital losses of approximately $1,124,000 in the United States. These losses, if not utilized, will expire through 2028.
YELLOWCAKE MINING INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2008 (Expressed in US dollars)
8. INCOME TAXES (continued)
The Company is in arrears on filing its statutory income tax returns. The Company expects to have net operating loss carry forwards to offset taxable income. Future income tax assets as of July 31, 2008 and 2007 consist primarily of the tax effect of net operating loss carry forwards and resource expenditures. The availability of these amounts is subject to examination in the United States and various state jurisdictions for periods since inception in 2006.
9. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents, receivables, accounts payable and accrued liabilities and due from/to Strathmore Minerals Corp. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values, unless otherwise noted. The Company is exposed to currency risk by incurring certain expenditures in currencies other than the Canadian dollar. The Company does not use derivative instruments to reduce this currency risk.
10. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
Significant non-cash transactions for the year ended July 31, 2008 consisted of:
i) The Company issued a total of 482,143 commons shares at fair-value of $235,223 pursuant to a mineral property master option agreement.
Non-cash investing and financing activities for the year ended July 31, 2007 were as follows:
i) The issuance of 9,000,000 common shares pursuant to an option and joint venture agreement wherein the Company acquired sole and exclusive rights to earn-in an 80% interest in the Juniper Ridge project located in Wyoming, USA. The fair value of the shares issued was estimated to be $10,157,143.
ii) The issuance of 221,625 common shares was for finders’ fees in connection with two private placements. The fair value of the shares was estimated to be $94,731.
11. ACCOUNTS PAYABLE AND ACCRUED LIABILTIES
Pursuant to the terms of private placements completed during the year ended July 31, 2007, the Company agreed to use its best efforts, within 180 days of closing, to register with the SEC common shares issued in connection with the two private placements. In the event the registration statements are not filed by the scheduled filing deadline or is not declared effective by the SEC, then as partial relief for the damages to any holder, the Company will pay as a liquidated damage to the holder an amount equal to 2% of the amount invested to a maximum of six months for each month that the shares remain unregistered.
During the year ended July 31, 2008, the Company paid $709,200 as a penalty to the private placement holders under the terms of the 2007 private placements. This amount was provided for within the financial statements for the year ended July 31, 2007.
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ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL MATTERS
We have engaged the firm of BDO Dunwoody LLP, as of June 1, 2007. During the last two fiscal years and subsequent interim periods preceding their engagement, BDO Dunwoody LLP was not consulted on any matter relating to accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures and remediation
As required by Rule 13(a)-15 under the Exchange Act, in connection with this annual report on Form 10- K, under the direction of our Chief Executive Officer, we have evaluated our disclosure controls and procedures as of July 31, 2008, and we have concluded our disclosure controls and procedures were ineffective as discussed in greater detail below. As of the date of this filing, we are in the process of remediating such material weaknesses in our internal controls and procedures.
It should be noted that while our management believes our disclosure controls and procedures provide a reasonable level of assurance, they do not expect that our disclosure controls and procedures or internal controls will prevent all error and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of internal control is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Limitations on Effectiveness of Controls
Our Chief Financial Officer does not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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Management’s annual report on internal control over financial reporting
Management is responsible for establishing and maintaining internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our management evaluated, under the supervision and with the participation of our Chief Executive Officer, the effectiveness of our internal control over financial reporting as of July 31, 2008.
Based on its evaluation under the framework in Internal Control-Integrated Framework , issued by the Committee of Sponsoring Organizations of the Treadway Commission, our management concluded that our internal control over financial reporting was not effective as of July 31, 2008, due to the existence of significant deficiencies constituting material weaknesses, as described in greater detail below. A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
This annual report does not include an attestation report of our company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our company’s independent registered public accounting firm pursuant to temporary rules of the SEC that permit our company to provide only management’s report in this annual report.
Material Weaknesses Identified
In connection with the preparation of our financial statements for the year ended July 31, 2008, certain significant deficiencies in internal control became evident to management that represent material weaknesses, including:
(i)
Our company's accounting personnel and management does not have sufficient technical accounting knowledge relating to accounting for options granted to directors and officers, and employees;
(ii)
Our company's accounting personnel and management does not have sufficient technical accounting knowledge relating to accounting for income taxes;
(iii)
Our company’s accounting personnel and management does not have sufficient technical knowledge in the preparation of financial statements and
(iv)
Insufficient corporate governance policies. Our corporate governance activities and processes are not always formally documented. Specifically, decisions made by the board to be carried out by management should be documented and communicated on a timely basis to reduce the likelihood of any misunderstanding regarding key decisions affecting our operations and management.
Actions Taken and in Progress to Remediate Material Weaknesses
We have implemented certain remediation measures and are in the process of designing and implementing additional remediation measures for the weaknesses described in this annual report. Such remediation activities include the following:
(i)
We have engaged a professional accounting firm to provide assistance in the review of stock based compensation expense calculation;
(ii)
We have engaged a professional accounting firm to assist in the accounting of income taxes;
(iii)
We have engaged a professional accounting firm to assist in the preparation of financial statements; and
(iv)
We will implement a policy to formally document all decisions made by the board on a timelier manner.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting during the fourth quarter of our fiscal year ended July 31, 2008 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
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Certificates
Certificates with respect to disclosure controls and procedures and internal control over financial reporting under Rules 13a-14(a) or 15d-14(a) of the Exchange Act are attached to this annual report on Form 10-K.
ITEM 9B
ITEM 9B OTHER INFORMATION
1.
On July 21, 2008 we announced that we have received the necessary permits from the Colorado Division of Reclamation, Mining and Safety and U.S. Bureau of Land Management to allow drilling on our +3,000 acre Uravan-Beck Property in Montrose County, CO.
2.
On September 18, 2008, our board of directors passed a resolution cancelling our company’s Bylaws in their entirety and adopting the Amended and Restated Bylaws attached to our current report on Form 8-K as Exhibit 3.1. The Amended and Restated Bylaws were amended to add Article IX “Transactions with Shareholders”. Section 1 and 2 provides that our company will not be governed by certain sections of the Nevada Private Corporations Act.
PART III
ITEM 10
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers, Promoters and Control Persons
As at the date of this report, our directors and executive officers, their ages, positions held, and duration of such, are as follows:
All directors of our company hold office until the next annual meeting of the Shareholders or until their successors have been elected and qualified. The executive officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors, executive officers and the executive officers of our operating subsidiaries, as well as the positions held, age and duration of appointment for such persons are as follows:
Name
Position Held with our Company
Age Date First
Elected or
Appointed
William Tafuri President, CEO, CFO, Secretary, Treasurer and Director January 16, 2007
H. Richard Klatt
Director February 9, 2007
Siegfried Muessig
Director December 3, 2007
James Malone Director December 3, 2007
Identification of certain significant employees
Name
Position Held with our Company
Age Date
Appointed
David McAdam Financial Consultant July 28, 2008
Family relationships
There are no family relationships with any of our other directors and officers.
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Business Experience
The following is a brief account of the education and business experience of our directors and executive officers during at least the past five years, indicating their business experience, principal occupations during the period, and the names and principal businesses of the organizations by which they were employed.
William Tafuri
Mr. Tafuri is a registered professional geologist. Mr. Tafuri has over thirty years of diverse mining experience in precious and base metals, including management positions for major international mining companies.
Since 2004, Mr. Tafuri has served as the Vice President and Director of Operations for Centrasia Mining Corp, company listed on the TSX-Venture Exchange (TSX-V: CTM). During this time he has managed exploration projects throughout the western USA and Central Asia.
Since 2001, Mr. Tafuri has served as a consultant providing geologist services. During this time he managed coal exploration projects in Wyoming for Norwest Corporation. Additionally, he served as a consultant to private investors, evaluating mining properties in Kazakhstan and the western United States.
Mr. Tafuri received a PhD in Geology from the University of Utah, Salt Lake City, Utah. He also received a Masters of Science degree in Geology and a Bachelors of Science degree in Geology at the University of Nevada, Reno, Nevada.
H. Richard Klatt
Mr. Klatt is a registered professional geologist. Mr. Klatt has developed and implemented exploration programs for precious and base metals, and other commodities for over 35 years in the United States, Canada, Mexico and Panama. From 2004 to 2006, Mr. Klatt served as a consultant providing mineral exploration geologist services. During this time he completed extensive lithology-logging for base and precious metals for a drill program at the south rim of the Bingham copper mine in Utah for Grand Central Silver Mines located in Carrollton, Texas. In mid-2006, he directed a 2,100 feet diamond drilling program for gold and cobalt in the Belt-Percell basin located in eastern Idaho, for Salmon River Resources of Vancouver, British Columbia. In mid-2006, he completed a 6,000 feet diamond drilling program for zinc in western Utah for Franconia Minerals Corp. located in Spokane, Washington. In early 2006, he directed a 6,000 m rotary drilling program for uranium in Western Colorado for U.S. Energy of Riverton, Wyoming. In early 2005, he researched opportunity for development of uranium resources in selected regions for Kennecott Exploration Company of Salt Lake City, Utah. In early 2004, he oversaw initial development drilling for vein-hosted base metals in the Zacatecas district, Zacatecas, Mexico, for Capstone Gold of Vancouver, British Columbia.
From 2000 to 2003, Mr. Klatt performed economic geology research. He pursued the study of the geology of platinum-group metals in anticipation of increasing future demand for these metals and subsequently assembled a comprehensive database of the geology of conventional and unconventional platinum-group metals and their global distribution that is self-published and sold in CD-ROM format as a guide for platinum-group exploration. Reviewed the geology of Mexico and identified exotic tectonostratigraphic terrains comprising Mexico that are permissive for discovery of gold and platinum and created a database of this information as a guide for exploration.
Mr. Klatt received a Bachelor of Science degree in Geology at the University of Illinois, Urbana, Illinois. He also completed course work in Carbonate Petrology at the University of Utah, Salt Lake City, Utah.
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Siegfried Muessig
Siegfried Muessig, PhD, has over 50 years of international experience in exploration, mining, and management. As vice president of Getty Mining Company he organized, staffed, and directed a worldwide exploration, acquisition, and mining organization of about 70 professionals. Before joining Getty, Mr. Muessig was Chief Geologist of U. S. Borax and was a mineral deposits geologist with the U. S. Geological Survey. Since the disbandment of Getty, he has been a senior advisor to major mining companies and as president of Crystal Exploration Inc. operated a diamond exploration program in the U.S. in joint venture with Dow Chemical and Ashton Mining Co. He is a past president of the Society of Economic Geologists, a Distinguished Member of the Society of Mining, Metallurgy, and Exploration (SME), a Fellow of the Geological Society of America and served on the Committee on Geology of the National Academy of Science. He is a Founding Member of the Division of Energy Minerals of the American Association of Petroleum Geologists, and served on the Uranium Advisory Committee of the American Mining Congress.
James Malone
James Malone has more than 39 years of experience in the nuclear power industry. Mr. Malone is Vice President, Nuclear Fuels for Exelon Generation since 1999. Mr. Malone is a member of the American Nuclear Society and is Past Chairman, Fuel Cycle Waste Management Division. Mr. Malone spent several years at SWUCO, Inc. as a SWU broker. Prior to SWUCO he was Manager of Economic Analysis at Yankee Atomic. Jim began his career in nuclear power as an engineer in the utility reactor core analysis section of the nuclear engineering department of United Nuclear Corporation. Mr. Malone received a B.S. in chemical engineering (nuclear), 1968 from Manhattan College, Bronx, New York and an M.B.A. in 1972 (Graduate School of Business Award for Academic Excellence) at the Iona College, New Rochelle, New York.
David McAdam
David McAdam has more than 25 years experience in various aspects of financial management and advisory services. Mr. McAdam was most recently the CFO of Eastern Platinum Limited a TSX, AIM, JSE listed platinum group metals mining company based in Vancouver. Prior to that Mr. McAdam had a 14 year career with Waste Management, Inc and its predecessor organizations, holding various roles including Assistant Corporate Controller and Vice President Operations - Recycling. Mr. McAdam began his professional career at Arthur Andersen & Co in 1983.
Involvement in Certain Legal Proceedings
Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:
1.
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;
2.
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
3.
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 his involvement in any type of business, securities or banking activities;
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4.
being the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;
5.
being found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; or
6.
being found by a court of competent jurisdiction (in a civil action), 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.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file.
Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that all filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with, with the exception of the following:
Name
Number of Late Reports Number of Transactions Not
Reported on a Timely Basis Failure to File
Requested Forms
William Tafuri
H. Richard Klatt
Siegfried Muessig
Nil
Nil
James Malone Nil
Nil
Nil
1 Mr. Tafuri and Mr. Klatt have not filed Form 4’s relating to the grant of stock options;
Mr. Muessig was late filing his Form 3;
Code of Ethics
We adopted a Code of Ethics applicable to all of our directors, officers, employees and consultants, which is a "code of ethics" as defined by applicable rules of the SEC. Our Code of Ethics is attached to this report. If we make any amendments to our Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of our Code of Ethics to our chief executive officer, chief financial officer, or certain other finance executives, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies in a current report on Form 8-K filed with the SEC.
Corporate Governance
We currently act with four directors consisting of William Tafuri, Richard Klatt, Sigfried Muessig and James Malone. We have determined that Sigfried Muessig and James Malone are independent directors as defined by Nasdaq Marketplace Rule 4200(a)(15).
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Transactions with Independent Directors
Other than as set out below, none of our independent directors entered into any transaction, relationship or arrangement, since the beginning of our year ended July 31, 2007, or in any currently proposed transaction, that was considered by our board of directors in determining whether the director maintained his independence in accordance with Nasdaq Marketplace Rule 4200(a)(15).
In consideration for acting as board members, we have agreed to reimburse Messrs. Muessig and Malone for out of pocket expenses incurred for attending board meetings. As additional consideration, we have granted to each of Messrs. Muessig and Malone, stock options to purchase up to 500,000 shares of the Company’s common stock exercisable at a price of $1.20 per share until December 3, 2012, which options vest according to the stock option agreement. The options are issued in accordance with the Company’s 2007 Stock Option Plan.
Audit Committee and Audit Committee Financial Expert
We have an audit committee and audit committee charter. Our audit committee is not independent as the term is used in Nasdaq Marketplace Rule 4200(a)(15), as amended and is presently comprised of H. Richard Klatt. A copy of our audit committee charter is attached to this Annual Report. The Audit Committee represents the Board of Directors in discharging its responsibility relating to the accounting, reporting and financial practices of the Company and its subsidiaries, and has general responsibility for oversight of internal controls, accounting and audit activities and legal compliance of the Company and its subsidiaries. However, the Audit Committee’s function is one of oversight only and shall not relieve the Company’s management of its responsibilities for preparing financial statements which accurately and fairly present the Company’s financial results and conditions or the responsibilities of the independent accountants relating to the audit or review of financial statements.
Currently we do not have a member in our Board of Directors who is considered as a “audit committee financial expert” as defined in SEC Release No. 33-8177 SEC. II(A)(4)(c).
Nominating Committee
We have nominating committee. Our nominating committee is presently comprised of H. Richard Klatt and Bill Tafuri. Neither director is independent as the term is used in Nasdaq Marketplace Rule 4200(a)(15). A copy of our nominating committee charter is an exhibit to this registration statement. The purpose of the Committee is to:
1.
Identify individuals qualified to become directors on the Board of the Company or any of its committees, consistent with criteria approved by the Board, and to select, or to recommend that the Board select, such director nominees, whether at the next annual meeting of the shareholders or otherwise.
2.
Periodically evaluate the qualifications and independence of each director on the Board or its various committees and recommend to the Board, as the Committee may deem appropriate, any recommended changes in the composition of the Board or any of its committees.
3.
Develop and recommend to the Board corporate governance principles applicable to the Company.
4.
Annually assess the performance of the Board.
5.
Take such other actions within the scope of this Charter as the Board may assign to the Committee from time to time or as the Committee deems necessary or appropriate.
The Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in Section VII below of this Charter.
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The basic responsibility of the directors of the Committee is to exercise their business judgment to act in what they reasonably believe to be in the best interests of the Company and its shareholders. In discharging that responsibility, the Committee should be entitled to rely on the honesty and integrity of the Company’s senior executives and its outside advisors and auditors, to the extent it deems necessary or appropriate.
Other Committees
All proceedings of our board of directors for the year ended July 31, 2008 were conducted by resolutions consented to in writing by our directors and filed with the minutes of the proceedings of the board of directors. Our company currently does not have compensation committees performing similar functions nor does our company have a written nominating or compensation charters. Our board of directors believes that it is not necessary to have such committees, at this time, because they can adequately perform the functions of such committees.
Our company does not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for directors. Our directors believe that, given the stage of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. Our company does not currently have any specific or minimum criteria for the election of nominees to the Board of Directors and we do not have any specific process or procedure for evaluating such nominees. Our board of directors will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment.
A shareholder who wishes to communicate with our board of directors may do so by directing a written request addressed to our President, Robert A. Rich, at the address appearing on the first page of this prospectus.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation
The particulars of compensation paid to the following persons:
our principal executive officer;
each of our two most highly compensated executive officers who were serving as executive officers at the end of the year ended July 31, 2008; and
up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the most recently completed financial year,
who we will collectively refer to as the named executive officers, for our year ended July 31, 2008, are set out in the following summary compensation table:
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Table 2 SUMMARY COMPENSATION TABLE
Name
and Principal
Position
Year
Salary
($)
Bonus
($)
Stock
Awards
($)
Option
Awards
($) (3)
Non-Equity
Incentive
Plan
Compensa-
tion
($) Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
All
Other
Compensa-
tion
($)
Total
($)
William
Tafuri
President,
CEO, CFO &
Secretary
Nil
Nil
Nil
Nil
Nil
Nil
414,798
476,560
Nil
Nil
Nil
Nil
Nil
Nil
414,798
476,560
David
McAdam1
NIL
Nil NIL
Nil NIL
Nil NIL
Nil NIL
Nil NIL
Nil NIL
Nil NIL
Nil
Hamish
Malkin 2
former CFO
Nil
Nil
Nil
Nil
Nil
Nil
Nil
125,190
Nil
Nil
Nil
Nil
40,340
9,000
40,340
134,190
Bijan Jiany3
former
Secretary,
Treasurer &
CFO(1)
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
David Heel4
former
President
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
(1) Mr. McAdam joined our company as a consultant on July 28, 2008 (2) Mr. Malkin resigned as a director and officer on April 2, 2008 (3) Mr. Jiany resigned as a director and officer on January 16, 2007 (4) Mr. Heel resigned as a director and officer on February 16, 2007
(5) The determination of value of option awards is based upon the Black-Scholes Option pricing model, details and assumptions of which are set out in Note 5 to our financial statements included in this Annual Report.
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive stock options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors from time to time. We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control.
Director Compensation Policy
The particulars of compensation paid to our directors for our year ended July 31, 2008, is set out in the following director compensation table:
Name
Fees Earned or
Paid in Cash
($)
Stock Awards
($)
Option
Awards
($)
Non-Equity
Incentive
Plan
Compensation
($) Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
All Other
Compensation
($)
Total
($)
(a) (b) (c) (d) (e) (f) (g) (h)
William Tafuri 49,870 Nil 414,798 Nil Nil Nil 464,668
H. Richard Klatt 104,675 Nil 414,798 Nil Nil Nil 519,473
Siegfried Muessig Nil Nil 204,768 Nil Nil Nil 204,768
James Malone Nil Nil 204,768 Nil Nil Nil 204,768
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During the fiscal year ended July 31, 2008, there were no standard or other arrangements pursuant to which any of our directors were compensated for services provided in their capacity as directors. During the year ended July 31, 2008, we granted 1,000,000 stock options to two of our four directors, exercisable at $1.20 per share until expiry in 2012. These stock options vest 25% on the date of grant with 25% vesting at the end of each succeeding year for three years after the grant.
We currently have no formal plan for compensating our directors for their services in their capacity as directors, although we may elect to issue additional stock options to such persons in the future. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director.
Employment Contracts
Other than as described below, we are not party to any employment contracts with our directors and officers.
On April 24, 2007, we entered into an Employment Agreement with Hamish Malkin. Pursuant to the Employment Agreement we have agreed to pay Mr. Malkin the sum of $3,000 per month and to grant Mr. Malkin 200,000 incentive stock options at an exercise price of $3.00 per share, exercisable for a period of 5 years. During the year ended July 31, 2008, the employment and stock options agreement with Hamish Malkin had been terminated.
2007 Stock Option Plan
On May 10, 2007, we established our 2007 Stock Option Plan (the “2007 Plan”). The purpose of the 2007 Plan is to enhance the long-term stockholder value of the Company by offering opportunities to our directors, officers, employees and eligible consultants and any entity that directly or indirectly is in control of or is controlled by the Company (a “Related Company”) to acquire and maintain stock ownership in the Company in order to give these persons the opportunity to participate in our growth and success, and to encourage them to remain in our service or a Related Company.
The 2007 Plan is administered by our Board of Directors or by a committee of two or more non-employee directors appointed by our Board of Directors (the "Plan Administrator"). Subject to the provisions of the 2007 Plan, the Plan Administrator has full and final authority to grant the awards of stock options and to determine the terms and conditions of the awards and the number of shares to be issued pursuant thereto. Options granted under the 2007 Plan may be either "incentive stock options," which qualify for special tax treatment under the Internal Revenue Code of 1986, as amended, (the "Code"), nonqualified stock options or restricted shares.
All of our employees and members of our Board of Directors are eligible to be granted options. Individuals who have rendered or are expected to render advisory or consulting services to us are also eligible to receive options. The maximum number of shares of our Common Stock with respect to which options or rights may be granted under the 2007 Plan to any participant is 5,000,000 shares.
The exact terms of the option granted are contained in an option agreement between us and the person to whom such option is granted. Eligible employees are not required to pay anything to receive options. The exercise price for incentive stock options must be no less than the fair market value of the Common Stock on the date of grant. The exercise price for nonqualified stock options is determined by the Plan Administrator in its sole and complete discretion. An option holder may exercise options from time to time, subject to vesting. Options will vest immediately upon death or disability of a participant and upon certain change of control events.
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The Plan Administrator may amend the 2007 Plan at any time and in any manner, subject to the following: (1) no recipient of any award may, without his or her consent, be deprived thereof or of any of his or her rights thereunder or with respect thereto as a result of such amendment or termination; and (2) any outstanding incentive stock option that is modified, extended, renewed, or otherwise altered must be treated in accordance with Section 424(h) of the Code.
All awards granted under the 2007 Plan expire 10 years from the date of grant, or such shorter period as is determined by the Plan Administrator. No option is exercisable by any person after such expiration. If an award expires, terminates or is cancelled, the shares of our Common Stock not purchased thereunder may again be available for issuance under the 2007 Plan.
We have not yet filed a registration statement under the Securities Act of 1933 to register the shares of our Common Stock reserved for issuance under the 2007 Plan.
Outstanding equity awards at fiscal year-end
Aggregated Options Exercised in the Year Ended July 31, 2008 and Year End Option Values
There were no stock options exercised during the year ended July 31, 2008.
Re-pricing of Options/SARS
We did not re-price any options previously granted during the year ended July 31, 2008.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Securities authorized for issuance under equity compensation plans
We adopted the 2007 Stock Option Plan on September 15, 2007 to provide incentive options to our directors, employees and consultants of our company.
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Security ownership of certain beneficial owners.
In the following table, we have determined the number and percentage of shares beneficially owned in accordance with Rule 13d-3 of the Exchange Act based on information provided to us by our controlling shareholder, executive officers and directors, and this information does not necessarily indicate beneficial ownership for any other purpose. In determining the number of shares of our common stock beneficially owned by a person and the percentage ownership of that person, we include any shares as to which the person has sole or shared voting power or investment power, as well as any shares subject to warrants or options held by that person that are currently exercisable or exercisable within 60 days.
1 Percentage of ownership is based on 51,413,768 common shares issued and outstanding as of November 13, 2008.
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2 Total includes 400,000 common shares and 250,000 stock options exercisable within 60 days.
3 Total includes 250,000 stock options exercisable within 60 days.
4 Total includes 250,000 stock options exercisable within 60 days.
5 Total includes 2,100,000 common shares and 250,000 stock options exercisable within 60 days.
6 Strathmore Minerals Corp. holds voting and dispositive power over these shares.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
None of the following parties has, since our date of incorporation, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us, other than as noted in this section:
(i)
Any of our directors or officers;
(ii)
Any person proposed as a nominee for election as a director;
(iii)
Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock;
(iv)
Any of our promoters; and
(v)
Any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the foregoing persons.
The Beck Properties
We have entered into joint venture agreements with Strathmore Minerals Corp. and its US subsidiary Strathmore Resources (US) Ltd. for the acquisition of our interests in the Jeep, Sky and Juniper Ridge Projects described above under “Description of Property”. Strathmore presently holds 9,000,000 shares of our common stock representing 17.7% of our issued and outstanding common stock. David Miller, a past member of our board of directors also serves as President, Chief Operating Officer and as a Director of Strathmore Minerals Corp. on October 3, 2007, we had entered into a letter of intent with American Nuclear Fuels (Colorado) LLC to acquire an interest in certain uranium properties located in Gateway, Colorado owned by Beck Mining Enterprises LLC, BeckWorth Corporation, Bedrock Development LLC, Eagle Venture Group LLC and Bruce Beck (collectively the “Vendors”). Pursuant to the LOI, on December 28, 2007 we entered into a master option agreement with American Nuclear Fuels, as well as six lease and option agreements with individual claimholders, to purchase 185 mining claims, approximating 3,700 acres, in the Uravan uranium belt, Montrose County, Colorado, also known as the Beck Project, in exchange for total payments of $5,968,657 in cash and the issuance of 2,765,625 shares of our common stock, payable over 5 years.
Under our option agreements relating to the Beck Properties, we have the exclusive right to access, explore and develop the properties. All future production from the property will be subject to a 3.5% royalty based on the contained metal value of ore after deduction of mining, transport and processing costs.
Amended Agreement with Strathmore Resources (US) Ltd.
On April 21, 2008, we completed agreements with Strathmore Minerals Corp. to amend our Juniper Ridge Joint Venture in Wyoming and terminate our option and joint venture agreement relating to the Sky, Jeep, and Conoco Files (database) projects. We have no further obligations under the option and joint venture agreements regarding Jeep and Sky and Conoco Files (database) projects.
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We will contribute exploration and development costs totaling a minimum of $8 million to the exploration and, if possible, development of the Juniper Ridge Project, subject to a $100,000 annual minimum, as outlined in the following schedule:
$764,518 not later than May 1, 2008 (incurred).
A minimum of $300,000 not later than September 1, 2008.
A minimum of $500,000 not later than December 31, 2009.
The balance of the $8 million, as agreed by both Parties based on the availability of financing, but in any case, not later than December 31, 2012.
On October 12, 2008, the Company received a Memorandum of Understanding from Strathmore which has proposed to amend the annual commitment of expenditures from $300,000 and $500,000 for 2008 and 2009 respectively to $100,000 per year for 2008 and 2009, with the total commitment remaining at $8,000,000 no later than December 31, 2012. The Company has responded to the suggested amendment and it is working with Strathmore to reach acceptable terms by both parties.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.
We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Audit Fees
For the period ended July 31, 2008 and July 31, 2007, the aggregate fees billed by BDO Dunwoody LLP for professional services rendered for the audit of our annual financial statements included in our annual report on Form 10-K were:
Year Ended
July 31, 2008
Year Ended
July 31, 2007
Audit Fees $40,860 $79,700
Audit Related Fees
-
-
Tax Fees -
-
All Other Fees -
-
Total $40,860 $79,700
Policy on Pre-Approval by Audit Committee of Services Performed by Independent Auditors
We do not use BDO Dunwoody LLP for financial information system design and implementation. These services, which include designing or implementing a system that aggregates source data underlying the financial statements or generates information that is significant to our financial statements, are provided internally or by other service providers. We do not engage BDO Dunwoody LLP to provide compliance outsourcing services.
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Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before BDO Dunwoody LLP is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
approved by our audit committee; or
entered into pursuant to pre-approval policies and procedures established by the board of directors, provided the policies and procedures are detailed as to the particular service, the board of directors is informed of each service, and such policies and procedures do not include delegation of the board of directors' responsibilities to management.
The board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.
The board of directors has considered the nature and amount of fees billed by BDO Dunwoody LLP and believes that the provision of services for activities unrelated to the audit is compatible with maintaining BDO Dunwoody LLP’s independence.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
Exhibits required by Item 601 of Regulation S-K:
Exhibit
Number
Description
3.1
Articles of Incorporation (attached as an exhibit to our Form SB-2 Registration Statement, filed on September 22, 2006)
3.2
Bylaws (attached as an exhibit to our Form SB-2 Registration Statement, filed on September 22, 2006)
3.3
Articles of Merger filed with the Secretary of State on January 12, 2007 and which is effective January 23, 2007 (attached as an exhibit to our current report on Form 8-K, filed on January 25, 2007)
3.4
Certificate of Change filed with the Secretary of State of Nevada on January 12, 2007 and which is effective January 23, 2007 (attached as an exhibit to our current report on Form 8-K, filed on January 25, 2007)
3.5
Amended and Restated Bylaws (attached as an exhibit to our current report on Form 8-K, filed on September 18, 2008)
5.1
Legal Opinion of Clark Wilson LLP (attached an exhibit to our Form S-1 filed on September 15, 2008)
10.1
Letter of intent between our company and Strathmore Minerals Corp. dated January 29, 2007 (attached as an exhibit to our current report on Form 8-K, filed on January 30, 2007)
10.2
Form of Overseas Subscription Agreement (attached as an exhibit to our current report on Form 8-K, filed on February 22, 2007)
10.3
Form of US Subscription Agreement (attached as an exhibit to our current report on Form 8-K, filed on February 22, 2007)
10.4
Option and Joint Venture Agreement dated March 14, 2007 between our company and Strathmore Minerals Corp. (attached as an exhibit to our current report on Form 8-K, filed on March 16, 2007)
10.5
Letter of Intent dated April 5, 2007 between our company and Strathmore Minerals Corp. (attached as an exhibit to our current report on Form 8-K, filed on April 10, 2007)
10.6
Letter of Intent dated April 12, 2007 between our company and Strathmore Minerals Corp. (attached as an exhibit to our current report on Form 8-K, filed on April 19, 2007)
10.7
Investor Relations Agreement with Carson Seabolt dated June 15, 2007 (attached as an exhibit to our current report on Form 8-K, filed on July 12, 2007)
10.8
Amended Letter of Intent with Strathmore Resources (US) Ltd. dated July 23, 2007 regarding the Jeep Project (attached as an exhibit to our current report on Form 8-K, filed on July 31, 2007)
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Exhibit
Number
Description
10.9 Amended Letter of Intent with Strathmore Resources (US) Ltd. dated July 23, 2007 regarding the Sky Project (attached as an exhibit to our current report on Form 8-K, filed on July 31, 2007
10.10 Stock Option Plan (attached as an exhibit to our current report on Form 8-K, filed on July 31, 2007)
10.11 Form of Master Agreement Concerning Lease and Option for Purchase and Sale of Mining Properties (Mining Claims, Montrose County, Colorado) (attached as an exhibit to our current report on Form 8- K filed on January 7, 2008)
10.12 Limited Liability Company Operating Agreement dated effective December 31, 2007 with Strathmore Resources (US) Ltd. (attached as an exhibit to our current report on Form 8-K, filed on May 1, 2008)
10.13 Jeep Project Termination Agreement dated April 21, 2008 with Strathmore Resources (US) Ltd. (attached as an exhibit to our current report on Form 8-K, filed on May 1, 2008)
10.14 Sky Project Termination Agreement dated April 21, 2008 with Strathmore Resources (US) Ltd. (attached as an exhibit to our current report on Form 8-K, filed on May 1, 2008)
14.1 Code of Ethics (attached as an exhibit to our annual report on Form 10-KSB, filed on November 14, 2007)
16.1 Letter on change in certifying accountant (attached as an exhibit to our current report on Form 8-K, filed on June 14, 2007 and amended on July 12, 2007)
31.1*
Section 302 Certification under Sarbanes-Oxley Act of 2002
32.1*
Section 906 Certification under Sarbanes-Oxley Act of 2002
99.1 Audit Committee Charter (attached as an exhibit to our annual report on Form 10-KSB, filed on November 14, 2007)
99.2 Nominating Committee Charter (attached as an exhibit to our annual report on Form 10-KSB, filed on November 14, 2007)
*filed herewith
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
YELLOWCAKE MINING INC.
By:
/s/ William J. Tafuri
William Tafuri
President, Chief Financial Officer, Secretary, Treasurer, and Director
(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)
Dated: November 13, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By:
/s/ William J. Tafuri
William Tafuri
President, Chief Financial Officer, Secretary, Treasurer, and Director
(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)
Dated: November 13, 2008
By:
/s/ H. Richard Klatt
H. Richard Klatt
Director
Dated: November 13, 2008
By:
/s/ Siegfried Muessig
Siegfried Muessig
Director
Dated: November 13, 2008
By:
/s/ James Malone
James Malone
Director
Dated: November 13, 2008